MASTERS OF MANAGEMENT ENTREPRENEURSHIP IN ORGANISATION
ASSIGNMENT: BUSINESS PLAN
C innamon's FOR: MR. FRANKLIN STYNE IYADURAI MBA, BSc, (Ph.D. Candidate)
BY: SHANTHI RAMAYAH
ASIA e UNIVERSITY 2017
TABLE OF CONTENTS 1.0
Executive Summary ...................................................................................... 4
1.1 1.2 1.3
2.0
Business Objectives.......................... Objectives................................................ ............................................ ............................................ ................................... ............. 4 Mission Statement ............................................................. ................................................................................... ............................................ ........................ .. 4 Keys to Success ............................................... ..................................................................... ........................................... .......................................... ..................... 4
Company Summary ...................................................................................... 5
2.1 2.2 2.3
3.0
Ownership ............................................ .................................................................. ............................................ ............................................ ............................... ......... 5 Start-Up Plan ............................................................. .................................................................................... ............................................. ............................... ......... 5 Location and Facilities ........................................... ................................................................. ............................................ ................................... ............. 5
Product and Services .................................................................................... 6
3.1 3.2 3.3 3.4 3.5 3.6
4.0
Product and Service Description .................................... ......................................................... ............................................ ............................ ..... 6 Competitive Comparison................................. Comparison....................................................... ........................................... .......................................... .....................6 Sales Literature................................................ ...................................................................... ........................................... .......................................... .....................7 Sourcing and Fulfillment ............................. ................................................... ............................................ ............................................ ........................ .. 8 Technology........................................... ................................................................. ............................................ ............................................ ............................... ......... 8 Future Services ........................................ .............................................................. ............................................ ............................................. ............................ ..... 9
Market Analysis Summary .......................................................................... 9
4.1 4.2
Industry Analysis....................... Analysis............................................. ............................................ ........................................... .......................................... .....................9 Market Segments .................................................... .......................................................................... ............................................. ................................. .......... 10
4.2.1 4.2.2 4.2.3
4.3
Target Market Segment Strategy........................................... Strategy................................................................. ........................................ .................. 11
4.3.1
4.4
5.0
Market Needs ...................................................................................................................................... 10 Market Trends ..................................................................................................................................... 10 Market Growth .................................................................................................................................... 11 Main Competitors ............................................................... ................................................................. 12
Positioning............................................ .................................................................. ............................................ ............................................ ............................. ....... 12
Marketing Strategy and Implementation .................. ........................... ................... ................... ............ ... 12
5.1 5.2 5.3 5.4
Strategy Pyramid ......................................... ............................................................... ............................................ ............................................ ...................... 12 Value Proposition ...................................................... ............................................................................. ............................................. ............................. ....... 13 Competitive Edge ................................................... ......................................................................... ............................................ ................................. ........... 13 Marketing Strategy ........................................................ .............................................................................. ............................................. .......................... ... 13
5.4.1 5.4.2 5.4.3 5.4.4 5.4.5
5.5
Sales Strategy .......................................... ................................................................. ............................................ ............................................ .......................... ... 14
5.5.1 5.5.2
5.6
6.0 6.1 6.2 6.3 6.4
7.0 7.1 7.2 7.3
Positioning Statement ................................................................... ....................................................... 13 Pricing Strategy ................................................................................................................................... 13 Promotion Strategy ............................................................. ................................................................. 14 Distribution Pattern ............................................................................................................................. 14 Marketing Programs ............................................................................................................................ 14 Sales Forecast ...................................................................................................................................... 14 Sales Programs .................................................................................................................................... 15
Milestones ............................................ .................................................................. ............................................ ............................................ ............................. ....... 15
Management Summary .............................................................................. 16 Organizational Structure ............................................ .................................................................. ........................................... ............................. ........ 17 Management Team ............................................................ .................................................................................. ............................................ ...................... 17 Management Team Gaps ......................... ................................................ ............................................ ........................................... .......................... .... 17 Personnel Plan ......................................... ............................................................... ............................................ ............................................. .......................... ... 17
Financial Finan cial Plan ................................ ............... ................................. ................................. .................................. ............................. ............ 18 Important Assumptions .......................................... ................................................................ ............................................ ................................. ........... 18 Start-Up Costs ......................................... ............................................................... ............................................ ............................................. .......................... ... 18 Source and Use of Funds............................................ .................................................................. ........................................... ............................. ........ 19
7.4 7.5 7.6 7.7 7.8
8.0
Break-Even Analysis ..................................................................................................... 21 Projected Profit and Loss .............................................................................................. 22 Projected Cash Flow...................................................................................................... 23 Projected Balance Sheet ................................................................................................ 24 Business Ratios ............................................................................................................. 25
References .................................................................................................... 26
1.0 Executive Summary Cinnamon’s Grill is a new eating establishment that will provide moderate entrees. Will be a moderately priced 60 seat restaurant offering family style varieties of food and service. We will offer wide range of delicious authentic Indian grilled cuisine. Our menu perfectly combines the ancient traditions and authentic flavors of India and fuses it with a contemporary ethnic edge as well as our signature lamp chops. The restaurant will be family owned and operated by brothers Kishore and Gaurav. Together they have over 10 year’s collective years’ experience in the restaurant and catering industry. Sales projections assume 1700 customers per week resulting in weekly sales of just over RM19, 777, or RM1, 028,000 annually. This equates to around RM302 per square foot in sales annually which positions Cinnamon’s Grill as a highly desirable concept for ownership in a table service market where RM200 to RM325 per square foot is considered moderately profitable and therefore a good investment. Total startup costs will be RM363, 000, RM174, 000 of which will be contributed by the owners and the remainder will be secured by a proposed bank loan. 1.1
Business Objectives
Main objectives of the business plan for Restaurant are below: To be the premier Indian grill restaurant in Butterworth. To provide quality meals at reasonable prices with exemplary service ▪ ▪
1.2
Mission Statement
Provide with a unique combination of Indian tandoor/grilled food and relaxing dining experience accompanied by soft number of Indian instrument music – similar to dining at home. Our mission is to strive to achieve this goal by: by providing menu items incorporating quality ingredients at reasonable prices, and We will be mindful of the well-being of our customers and staff – treating each and every one with dignity and respect – just like we would at our own home! ▪
▪
1.3
Keys to Success ▪
▪ ▪
The restaurant’s unique theme and contemporary – there currently is not a competitor with a similar theme and the closest competitor with a similar target demographic is 20 km away. Product quality - Not only great food but great service. Location. - Convenience is essential to us; we need to be close to our market because we are not trying to get people to travel to reach us.
2.0 Company Summary Cinnamon’s Grill will be located at The Pacific Mall, Butterworth. The restaurant will be wholly owned and operated by Kishore and Kumar. The restaurant will serve a variety of delicious authentic Indian grilled cuisine and grilled meat includes a long list of all kinds of meat including chicken wings, lamb, chop, octopus, sausages, salmon, and many more. The restaurant will be open 6 days a week with hours a s follows:
2.1
Monday Tuesday Wednesday Thursday Friday Saturday
11:00 am – 11.30 pm 11:00 am – 11.30 pm 11:00 am – 11.30 pm 11:00 am – 11.30 pm Rest Day 11:00 am – Midnight
Sunday
11:00 am – 11.30 pm
Ownership
Will be owned by Kishore Dev. Kishore began his restaurant career at the age of 15 working in a quick-service foodservice operation and earned his way at college as a server and bartender. After earning his degree, he worked for a regional Grill chain restaurant and an independent fine dining restaurant. In these organizations he held the positions of F&B Assistant Manager and then Manager. With the high turnover of help for startup restaurants, we will rely on family to fill in where required until we are off the ground and making a profit. 2.2
Start-Up Plan
The cost to open the restaurant is RM363, 000. The majority of the expenses are in furniture fixtures and equipment totally RM110, 000. The location requires some buildout and renovation totally RM50, 000 and will require approximately 30 days to complete. The Dev brothers will sub-contract the work themselves. RM175, 000 of the start-up costs will be funded by the owners. The owner’s source of funds is a combination of liquid assets and marketable securities, primarily from their existing catering business. 2.3
Location and Facilities
The 2,500 square foot restaurant will be located in a The Pacific Mall, Prai, and the restaurant will feature a comfortable and open concept design. The restaurant is located in a major traffic area, at the intersection of Province Wellesley and Penang Bridge highway. The market has been carefully selected and tested for the necessary demographics and retail traffic necessary to meet the goals laid down for profitability. The busy Midtown commercial/residential location has been chosen based upon a successful demographic model and a traffic count
Province Wellesley has a population of over 99,804 according to Department of Statistic of Malaysia projection census 2017. The residential population in the immediate area is comprised of a mixture of single family and multi-family housing. The medium household income is RM46, 532. The target demographic is both men and women between the ages of 25 to 65 years old. Generally, these individuals have more disposable income than younger individuals
Figure 2.3 Demographic Chart of Province Wellesley, Penang (Mainland) Source: Department of Statistics, Malaysia
3.0 Product and Services Cinnamon’s Grill will feature authentic Indian dishes, an eclectic ambiance, and superior service. Our ingredients and spices will be of the fi nest quality and prepared with exotic flare. We will change our menu every 4 months, but maintain the 'favorites' for loyal patrons. 3.1
Product and Service Description
Cinnamon’s Grill will be open 6 days a week for lunch and dinner requiring multiple shifts. The schedules will be written in a manner that will allow the ability to increase or decrease hourly labor according to sales volume in order to maintain a consistent labor cost control. The restaurant layout, including the dining room, kitchen and serving line, has been designed for efficiency and flexibility to accommodate the fluctuation in customer traffic and peak meal periods. 3.2
Competitive Comparison
The Malaysian food and beverage retail market are expected to grow by around 10 percent per annum. As such each and very restaurant is competing to grab the market revenue Local competitors within a 5 miles radius are as follows.
▪
▪
▪
D’Tandoor - This is a full-service family restaurant established in 1997. Prices seemed a little higher than Cinnamon’s Grill but the meal serving was excessive and equal to the price point and range from RM30.00-RM50 per entry. Ananda Bhavan - this is a chain restaurant offering standard fare. The food quality is average. Entrées range from RM6.99 - RM20 Overall both competitors don’t have any signature grill menu nor a grill concept restaurant.
▪
3.3
Sales Literature
For an initial start, we will print flyers focusing on our menu, sales promotion. This primarily will be an advertisement of the restaurant. The flyer will be distributed as per following. ▪ ▪ ▪
Give a way in-restaurant Personally, hand out at shopping malls Social media fan page and sharing as this medium plays a very prime role in promoting the restaurant.
Following are samples of flyers.
Figure 3.3.1 (i) front page 1
Figure 3.3.1 (ii) back page 2
3.4
Sourcing and Fulfillment
From years of experience combined with their existing catering business, Kishore and Kumar have established relationships with qualified suppliers. These suppliers can provide reasonably priced products, delivered according to the schedule. 3.5
Technology
With an ample of technology, computerized information systems can improve and link food preparation and serving operations. Touch screen ordering programs ensure accurate communication of customer orders. Timing systems monitor meal progress and can alert staff if an order is running behind schedule. Reservations programs maximize traffic flow and seating. Inventory management systems track supply levels and can help reduce waste due to spoilage. Cost accounting programs help companies determine the profitability of individual menu items. Handheld point-of-sale (POS) devices allow servers to place orders and print checks tableside, improving accuracy and reducing ordering time. Some handhelds can also print customer checks and process credit card payments.
3.6
Future Services
Cinnamon’s Grill has future plans to provide catering services for family reunions, weddings and other events desiring an authentic grill menu. This could potentially become a large portion of gross sales. The Dev brothers are targeting Year 2 and at that point, a sales agent would be hired to directly market the products for daily delivery or catered functions.
4.0 Market Analysis Summary The restaurant industry is a large and diverse business. Young adults have the potential of providing large volume sales to the company during the peak hours of 11 a.m. to 2 p.m. The lunch business is driven by individuals. People who working around nearest Sunway Business Park, Prai Industrial area will be looking for walk-in good food and convenience for lunch. Apart from working people.
4.1
Industry Analysis ▪ ▪ ▪ ▪ ▪
Reasonable Prices for concept restaurant The Dining Experience Quick, healthy, authentic, An appetite for change Food away from home trend while outside eg. Office, leisure, college, family function
The restaurant industry is highly competitive, companies may consider population density, household income, competition, visibility, accessibility, and traffic.
4.2
Market Segments
Cinnamon’s Grill will appeal to a consumer in both the residential and business community. The location selected for Cinnamon’s Grill was chosen primarily to appeal to the growing number of households in the area. Butterworth is located in mainland of Penang, it has population of 99,804 according to the 2017 Census Report of Department of Statistic of Malaysia. The residential population in the immediate area is comprised of a mixture age group.
Figure 4.2 Population Chart of Province Wellesley, Penang (Mainland) as per age group Source: Department of Statistics, Malaysia
4.2.1 Market Needs
Growing preferences for healthier food options, concerns over environmental sustainability, increased competition from this industry, heightened consumer expectations, rapidly advancing technology are reinventing the traditional dining experience and forcing change on how the industry operates. Food away from home" trends Demographic trends 4.2.2 Market Trends ▪
▪
Generation has changed and impacted the entire span of the whole consumer mind-set, regardless of demographic. They are constantly connected and have high expectations regarding quality, sustainability, convenience, quick, healthy, authentic, and reviewed or suggested. Inclination towards global cuisines - preferences for global/ethnic cuisines is prompting restaurants to diversify their businesses.
Preferences for healthier food options - are incl ined to consume healthier and less processed foods. Modification of menu - focusing on specialized menu to enhance quality standards, speed, and service. Increase in food service Sustainable seafood Technological advancements - adopting new technologies for ordering, payment, and loyalty programs to offer convenient. Generation Z – strategy to attract on high-tech service, louder music, high-speed
▪
▪
▪ ▪ ▪
▪
4.2.3 Market Growth ▪
Restaurants industry are looking for growth through increased market penetration, innovative product development, new markets, diversified businesses, and new business models. According to Department of Statistic Malaysia in 2017, entrepreneur engaged in food and beverage services was 891,616 persons in 2015 compared to 645,743 persons in 2010 with annual growth of 6.7 percent. This service recorded a total of 569,632 persons as paid full-time employees with percentage share of 63.9 per cent in 2010 with annual growth rate of 14.4 percent. The census results showed that there were 167,490 establishments operated in food and beverage services compared to 130,570 establishments in 2010 with annual growth rate of 5.1 percent.
Figure 4.3.3 Economy Chart on Restaurant Market Growth (Census 2016) Source: Department of Statistics, Malaysia
4.3
Target Market Segment Strategy
Cinnamon’s Grill will provide locals a place to socialize and talk shop while enjoying grilled cuisine and hearty food.
4.3.1 Main Competitors
The following restaurants are located within a 5 miles radius of Cinnamon’s Grill. ▪
▪
4.4
D’Tandoor - This is a full-service family restaurant established in 1977. Prices are higher than Cinnamon’s Grill and range from RM20.00-RM500 per entry. Kumara Bhavan - this is a chain restaurant offering standard fare. The food quality is average. Entrées range from RM6.99 - RM20.
Positioning
Consumers believe that meals at home are healthier and higher quality than eating at restaurants. At Cinnamon’s Grill we will position ourselves as the premier home-style restaurant by preparing quality home cooked meals with simple wholesome ingredients. Kishore and Kumar will also provide home cooked fare that appeals to the current trends of healthier food and offer menu selections which will appeal to this group. Cinnamon’s grill will be positioned as the premier traditional home-style restaurant.
5.0 Marketing Strategy and Implementation Cinnamon’s Grill intend to succeed by giving people a combination of excellent and food in an environment. We will focus on establishing a strong identity in our community with a grand opening by creating an appealing and entert aining environment with unbeatable quality at an exceptional price. We will place the catering and lunch service flyers strategically on and near the industrial are and university campus, park events, with local businesses. 5.1
Strategy Pyramid
Strategy:
Be Butterworth area’s premier Grill Restaurant in Customer Satisfaction.
Tactics:
First create awareness-- our signage on the front of restaurant will bring customers to us and once inside, we will immediately acknowledge the customer with and most sincere greeting and begin the service process anticipating repeat customers.
Programs:
Provide employee training on customer service and retention; offer ongoing training programs for employees keeping them current on industry trends and food safety. Keep track of Cinnamon’s Grill reviews and offer employees incentives attracting and retailing customers. Employ the use of surveys both at the table and online.
5.2
Value Proposition
Cinnamon’s Grill will be able to offer signature grill menus for a reasonable price in a comfortable ‘home-like’ setting. The average check price is expected to be between RM8-RM15 which appears in line with industry standards below RM25.00 this to hit the customers. As this is a new concept restaurant, to attract the customers we will; ▪ ▪ ▪ ▪
5.3
Market the benefit, not the product. Ensure customer satisfaction. Develop long relationships. Market the company.
Competitive Edge
Cinnamon’s Grill competitive edge is in its people. We truly believe business is not only as good as your products (meals) but the quality of your staff as well. Our food quality is a reflection of us. The magic grill! 5.4
Marketing Strategy
We will create an "identity" oriented marketing strategy with executions particularly in social media, mouth to mouth and event marketing strategies. We will utilize a marketing plan to build customer traffic. We will achieve these goals by using the following: •
•
•
Social Media Marketing – Facebook, WhatsApp and Twitter offer a unique opportunity growing up quickly. Word of Mouth Marketing- Word of Mouth is one of the ancient ways people learned about what to purchase Event Marketing - Creating events is a great way to drive sales. Customers often need a reason to celebrate dining out and events can often offer the perfect reason e.g. Valentine’s Day, Mother’s Day, Deepavali, Xmas.
5.4.1 Positioning Statement
Cinnamon’s Grill is a finest place in town to enhance your dining experience wide range of delicious grill cuisine represents splendor, beauty, and elegance in every dish. The only magic grill provides sumptuous feast menu that bursts with flavor.
5.4.2 Pricing Strategy
As a new start-up we can currently control employee cost by hiring family members who will work for low and reduced wages.
5.4.3 Promotion Strategy ▪
▪
▪
▪
Location- The restaurant will be located in a strip center at the busy intersection of Wellesley. With easy access from and to Penang Bridge and located on the “going home side” of the intersection. We will have Signage on The Pacific Mall as well as signage over our entrance. Word of Mouth – We already have a database of existing catering customers and will rely heavily on this method to attract a nd grow new business. Event Marketing -We plan on joining our local networking for our grand opening Social Media – We will share with as much as friends on Facebook, Twitter, WhatsApp
5.4.4 Distribution Pattern
Varieties of grill and Indian cuisine menus will be available at Cinnamon’s Grille only location at LG 79, The Pacific Mall, Prai. Customers will have ample parking at Lowe ground car park which per entry is RM1 only. Cinnamon’s Grill will use their website as an advertising medium, offering coupons, information, and upcoming specials. 5.4.5 Marketing Programs ▪
▪
5.5
Our initial marketing campaign will consist of contacting our databases clients and notifying them of our grand opening. Loyalty and Birthday Club members will have notified of upcoming special menu items and to alert them of our catering service.
Sales Strategy
Our sales strategy requires consistently high-quality food, service, speed and atmosphere. We can accomplish this by hiring employees who genuinely enjoy their jobs. Continually assessing the quality of all aspects mentioned above. Interacting with our customers personally 5.5.1 Sales Forecast
We are expecting a conservative 5% increase in sal es revenues annually over the next 3 years. The growth is adjusted for inflation. With the addition of catering revenues, sales will increase by 12.93% in Year 2 and 6.02% in Year 3.
The following table shows expected Sales Forecast for the next 3 years: Table 5.5.1 Annual Sales Forecast Annual Sales Forecast Sales Food and Beverage Revenues Additional Revenues Total Sales Controllable Costs COGS Payroll Total Prime Cost Subtotal Direct Cost of Sales
2017 RM
2018
2019
RM
RM
1,028,422.00
1,079,843.00
1,133,835.00
0.00 1,028,422.00
81,600.00 1,161,443.00
102,000.00 1,235,835.00
402,113.00 269,987.00 672,100.00
414,176.00 323,057.00 737,234.00
426,602.00 340,027.00 766,628.00
356,322.00
424,209.00
469,207.00
Sales Forecast 1,400,000.00 1,200,000.00 1,000,000.00 800,000.00 600,000.00 400,000.00 200,000.00 0.00
2017
2018
2019
5.5.1 Bar Chart Sales Forecast 5.5.2 Sales Programs
We will encourage our employees to grow our customer base and provide incentives and regular bonuses to employees for referrals and repeat customers. These initiatives are still in the planning stages as we gear up to hire and staff. They will play an active role in our employee culture. 5.6
Milestones
Our initial milestones are as follows:
Table 5.6 Milestones
Milestone
Date
Sign Lease with The Pacific Mall, Prai
2/1/2017
Complete Interior Decor
3/1/2017
Complete Kitchen / Wait Station Needs
3/1/2017
Hire Back Staff
3/1/2017
Hire Front Staff
3/1/2017
Secure a Point of Sale System
4/1/2017
Secure Lending for Initial Start-Up, Working Capital and Cash Flow
4/1/2017
Chart 5.6 Milestone Chart
6.0 Management Summary At the present time Kishore and Kumar runs all operations for Cinnamon’s Grill. Other key personnel are the management at each location. Candidates have already been identif ied for the first additional
6.1
Organizational Structure
Cinnamon’s Grill expects to hire 19 employees. Together, Kishore and Kumar will personally select each candidate. They’ve adopted an effective interview process designed to staff the restaurant with highly qualified people for each position. 6.2
Management Team
The restaurant will be owned by Kishore Dev. Kishore began his restaurant career at the age of 15 working in a quick-service foodservice operation. After earning his degree, he worked for a regional restaurant and an independent fine dining restaurant. In these organizations he held the positions of F & B Assistant Manager and then Manager. Kumar Dev received his Culinary Degree from the KDU, Penang. After graduation she was employed by a local chain restaurant and then at a Five Star Hotel in Penang. Kumar will initially be employed as the Kitchen Manager. 6.3
Management Team Gaps
Initially brothers will fill in many of the management gaps. Over time, they have plans to hire a Manager and a Kitchen manager. The Dev brothers will purchase have considered a POS (point of sale system) that it simplifies communications between the kitchen and the wait staff. Orders go Cinnamon’s Grill the computer, directly to the kitchen printer. Another benefit of a restaurant POS programs is that it can track everything from food usage, to the most popular menu items. Because the POS system acts as a time clock, it can also help prepare payroll – which will save some money in the bookkeeping department. Along with the daily operations of running a restaurant, a POS system can organize profit and loss statement and sales tax. 6.4
Personnel Plan
This operation is an independent full-service restaurant operating for both lunch and dinner. Table 6.4 Personnel Plan Personal Plan Owner / General Manager
2017
2018
2019
0
0
0
Asst. Manager / Cashier
25,872
26,648
27,448
Line Cooks
38,304
39,453
40,637
Prep Cooks
60,480
62,294
64,163
Servers / Cashiers
46,848
48,253
49,701
Kitchen Helper
24,024
24,745
25,487
8,640
8,899
9,166
Sales Agent
0
20,000
20,600
Catering Employees
0
18,432
23,731
204,168
248,725
260,933
Accounts Executive
Total
7.0 Financial Plan The over-all financial plan for growth allows for use of the significant cash flow generated by operations. Every opportunity will be seized to accelerate expansion past the critical dates in this plan if cash flow from new stores exceeds projections. Plan for the wors t, but manage for the Best. The following sections outline our financial plan: ▪ ▪ ▪ ▪ ▪
7.1
Cost of Start-Up Profit and Loss Cash Flow Balance Sheet Financial Ratios Important Assumptions ▪ ▪ ▪ ▪
▪ ▪
▪ ▪
7.2
Meal Price range from RM8.00 – RM15.00 Average lunch price: 8.79 Average dinner price: 13.74 The restaurant is located in The Pacific Mall, Prai and is comprised of 2,500 square feet The restaurant will employ 19 employees RM860, 000 -1,200,000 revenue targets; Industry average for casual restaurant average of RM860, 000. Annual 3% increase for inflation and 5% annual increase in revenues Year 2 Assumes Catering Business in Place. Assumes 4 parties monthly @ RM15 per plate and RM50 persons. Catering will escalate to 8 parties monthly in month 20 and then 10 parties monthly thereafter. Also assumes additional increase in staffing (4 persons to be hired at 6 hours @ RM8.00 per hour.
Start-Up Costs
Total startup costs will be RM363, 000, RM174, 000 of which will be contributed by the owners and the remainder will be secured Cinnamon’s Grill a proposed bank loan.
Table 7.2 Start-Up Costs Start-Up Requirement Start-Up Expenses Graphic Logo and Name Creation
1,000.00
SSM Registration + Lease Deposit
1,200.00
Contingency
10,000.00
Outdoor Sign
3,000.00
Building Improvements Working Capital Pre-Opening Expenses Total Start-Up Expenses
50,000.00 172,500.00 14,800.00 252,500.00
Start-Up Assets Cash required Startup inventory
7.3
(142,000.00) 110,500.00
Other Current Asset
-
Long term Asset
-
Total Assets
110,500.00
Total requirement
363,000.00
Source and Use of Funds
Total start-up costs are estimated to be RM363, 000. The majority of the costs are associated with the restaurant equipment, inventory and furniture and furnishings for the dining room. Total costs for these items are reported to be RM110, 500. The costs are associated with build out and renovation of the restaurant to provide updated plumbing and creating additional space in the dining area by removing a non-supporting wall: RM50, 000. Additional startup expenses are in the form of working capital and contingency RM182, 500. Kishore and Kumar will contribute RM174, 000 and are requesting an additional RM189, 000 in the of a bank loan.
Table 7.3 Source and Use of Funds Start-Up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required
252,500.00 110,500.00 363,000.00
Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets
(142,000.00) (142,000.00) (142,000.00)
Liabilities and Capital Liabilities Current Borrowing
189,000.00
Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities
189,000.00
Capital Planned Investment Kishore Kumar
87,000.00 87,000.00
Other Additional Investment Requirement Total Planned Investment
Loss at Start-up (Start-up Expenses) Total Capital
Total Capital and Liabilities
Total Funding
174,000.00
(252,500.00) (78,500.00)
110,500.00
363,000.00
7.4
Break-Even Analysis
Total fixed costs associated with the restaurant are RM669, 186 and represent the annual expenses. The variable cost (overhead) is estimated to be RM4.51 per meal. Based on the assumption of RM11.37 as the average meal price, the breakeven revenue then is RM1, 108,970 or 97,535 meals (units). This is further depicted in the Table Below and the Graph that follow: Table 7.4 Break-Even Analysis Break-Even Analysis Fixed Cost
669,186.01
Variable Cost
4.51
Number of Units
13,934
Avg. Unit Price Net Units
11.37 Sales
13,934.00 27,867.00 41,801.00 55,734.00 69,668.00 83,601.00 97,535.00 111,468.00 125,402.00 139,335.00 153,269.00 167,202.00 181,136.00 195,070.00 209,003.00 222,937.00
Fixed Cost -
669,186.00
158,424.00
669,186.00
316,849.00
669,186.00
475,273.00
669,186.00
633,697.00
669,186.00
792,122.00
669,186.00
950,546.00
669,186.00
1,108,970.00
669,186.00
1,267,395.00
669,186.00
1,425,819.00
669,186.00
1,584,243.00
669,186.00
1,742,668.00
669,186.00
1,901,092.00
669,186.00
2,059,517.00
669,186.00
2,217,941.00
669,186.00
2,376,365.00
669,186.00
2,534,790.00
669,186.00
Variable Cost 62,826.00 125,653.00 188,479.00 251,306.00 314,132.00 376,958.00 439,785.00 502,611.00 565,438.00 628,264.00 691,090.00 753,917.00 816,743.00 879,570.00 942,396.00 1,005,222.00
Total Cost 669,186.00 732,012.00 794,839.00 857,665.00 920,492.00 983,318.00 1,046,144.00 1,108,971.00 1,171,797.00 1,234,624.00 1,297,450.00 1,360,276.00 1,423,103.00 1,485,929.00 1,548,756.00 1,611,582.00 1,674,408.00
Total Profit (669,186.00) (573,588.00) (477,990.00) (382,392.00) (286,794.00) (191,196.00) (95,598.00) 95,598.00 191,196.00 286,793.00 382,391.00 477,989.00 573,587.00 669,185.00 764,783.00 860,381.00
Break-even Analysis 3,000,000.00 2,500,000.00 2,000,000.00 1,500,000.00 1,000,000.00 500,000.00 1
2
3
4
5
Sales
6
7
8
9
Fixed Cost
10 11 12 13 14 15 16 17 TotalCost
Chart 7.4 Break-even Analysis 7.5
Projected Profit and Loss
The profit and loss demonstrate modest increases in revenues over Cinnamon’s Grill are expected years with adjustments for inflation. Table 7.5.
Pro Profit and Loss
Pro Forma Profit and Loss
Year 1
Year 2
Year 3
Income Sales
1,028,422
1,161,443
1,235,835
-402,113
-414,176
-426,602
626,309
747,267
809,234
Accounting / Legal
12,000
12,360
12,731
Bad Debts
25,711
26,482
27,276
Shrinkage
90,000
92,700
95,481
Credit Card Fees
20,568
21,185
21,821
Insurance
75,000
77,250
79,568
Miscellaneous
44,112
45,435
46,798
0
0
0
7,356
7,577
7,804
Rent
68,000
70,040
72,141
Salaries
12,341
12,711
13,093
Wages
269,987
323,057
340,027
Total Expenses
625,075
688,798
716,739
1,234
58,469
92,494
Cost of Goods Sold Gross Profit Expenses
Payroll Taxes Registration SSM and Licenses
Net Profit
7.6
Projected Cash Flow
The statement of cash flow shows the incoming and outgoing cash of the business. Table 7.5.2 Pro Cash Flow Pro Forma Cash Flow
Year 1
Year 2
Year 3
Cash Received
Cash from Operations
148,101
30,995
11,402
1,028,422
1,161,443
1,235,835
0
0
1,176,523
1,192,438
1,247,237
1,539,523
1,192,438
1,247,237
Expenditures from Operations
765,113
414,176
426,602
Cash Spent
710,176
731,481
753,426
1,475,289
1,145,658
1,180,028
Loan Payment
33,240
35,378
37,654
Subtotal Additional Cash Spent
33,240
35,378
37,654
1,508,529
1,181,036
1,217,681
Net Cash Flow
30,994
11,402
29,556
Cash Balance
30,994
42,397
71,953
Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received
189,000
Sales Tax Owners Investment Subtotal Cash Received
174,000
Expenditures
Bills Paid Subtotal Spent on Operations
Additional Cash Spent Sales Tax
Subtotal Expenditures
7.7
Projected Balance Sheet Table 7.7 Proforma Balance Sheet Pro Forma Balance Sheet 2017
2018
2019
Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets
63,000 25,000 14,000 129,500 231,500
66,150 26,250 14,700 135,975 243,075
71,111 28,219 15,803 146,173 261,306
Long Term Assets Long Term Assets Accumulated Depreciation Total Long Term Assets Total Assets
144,500 0 268,500 500,000
151,725 0 281,925 525,000
163,104 0 303,069 564,375
Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long Term Liabilities Total Liabilities Paid In / Invested Capital
29,000 1,500 28,500 59,000 189,000 277,000 223,000
30,450 1,575 29,925 61,950 198,450 290,850 234,150
32,734 1,693 32,169 66,596 213,334 312,664 251,711
Retained Earnings Earnings Total Capital Total Liabilities and Capital
223,000 500,000
234,150 525,000
251,711 564,375
Net Worth
223,000
234,150
251,711
Assets
7.8
Business Ratios
These business ratios are future estimates based upon current assumptions. Table 7.8
Ratio Analysis
Ratio Analysis Year 1
Year 2
Year 3
Industry Profile
Quick Ratio
1.49
1.49
1.49
1.06
Current Ratio Current Liabilities to Net Worth Current Liabilities to Inventory
3.92
3.92
3.92
1.46
0.26
0.26
0.26
0.4
4.21
4.21
4.21
5.85
Total Liabilities to Net Worth
1.24
1.24
1.24
1.24
Fixed Assets to Net Worth
1.2
1.2
1.2
1.11
28.7
28.2
27
29.44
Assets to Sales
48.60%
45.20%
45.70%
49.10%
Working Capital to Sales
16.80%
15.60%
15.80%
14.00%
Accounts Payable to Sales
2.80%
2.60%
2.60%
2.80%
Return on Sales
0.10%
5.00%
7.50%
1.00%
Return on Assets
0.20%
11.10%
16.40%
2.10%
Return on Equity
0.60%
25.00%
36.70%
4.70%
Interest Coverage
0.8
7.6
15.5
1.66
Gross Sales
100.00%
100.00%
100.00%
100.00%
Gross Profit
60.90%
64.30%
65.50%
56.00%
Operating Income
0.10%
5.00%
7.50%
2.10%
Cash
12.60%
12.60%
12.60%
12.60%
Accounts Receivable
5.00%
5.00%
5.00%
5.00%
Inventory Total Current Assets
2.80% 46.30%
2.80% 46.30%
2.80% 46.30%
3.00% 49.50%
Total Fixed Assets
28.90%
28.90%
28.90%
25.70%
Other Non-Current Assets
24.80%
24.80%
24.80%
24.80%
Total Assets
100.00%
100.00%
100.00%
100.00%
Accounts Payable
5.80%
5.80%
5.80%
5.80%
Total Current Liabilities
0.00%
0.00%
0.00%
17.60%
Total Long Liabilities
37.80%
37.80%
37.80%
37.80%
Net Worth
44.60%
44.60%
44.60%
44.60%
Main Ratios
Collection Period Inventory Turnover
Income Statement
Net Profit After Tax Balance Sheet
8.0 References
1. Mr.Franklin Styne Iyadurai, our module l ecturer. 2. https://en.wikipedia.org/wiki/Nibong_Tebal 3. https://www.dosm.gov.my/v1/index.php?r=column/cthree&menu_id=UEg1NkpJUFYzRzBKclE 4V2JEb2I3QT09 4. https://www.penang.gov.my/images/penerbitan/sosioekonomi/Penang-in-Numbers-20142015.pdf 1. 4. https://www.bloomberg.com/news/articles/2015-04-14/americans-spending-on-dining-out just-overtook-grocery-sales-for-the-first-time-ever 5. QSR magazine as of August 20, 2015, accessed on August 31, 2015; Franchise Help accessed on September 1, 2015; Nerac accessed on September 1, 2015; PR Newswire as of August 10, 2015, accessed on August 31, 2015 6. http://www.restaurant.org/Restaurant/media/Restaurant/SiteImages/News%20and%20Research/ Whats%20Hot/What-s_Hot_Concept_Trends_1.jpg 7. http://www.bplans.com/sports_bar_business_plan/financial_plan_fc.php 8. http://digitalscholarship.unlv.edu/cgi/viewcontent.cgi?article=1591&context=thesesdissertations 9. http://penanginstitute.org/v3/resources/articles/statistics/515-statistics-july-2013
