Sumptuous Cuisine Catering

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Catering and Ballroom Rental Business Plan

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Financial Plan

Sumptuous Cuisine Catering will fund its expansion largely though its own cash reserves and a loan for the purchase of The Sumptuous Ballroom.

The funds needed include:

  • $2 million for purchase of The Sumptuous Ballroom
  • $100,000 for improvements
  • $50,000 for equipment for the ballroom
  • $82,500 for marketing devoted to The Sumptuous Ballroom acquisition

Sources for the funds include:

  • $1.6 million mortgage
  • $270,000 in convertible debt from investors for an equity stake of 10% in Sumptuous Cuisine Catering (diluting the current ownership equally) and 10% interest paid over three years. Likely investors include family and angel investors interested in lower risk than in a start-up firm, along with some guaranteed returns
  • $300,000 in cash reserves of Sumptuous Cuisine Catering
  • Cash flow surpluses in the later half of 2010 to make up the remainder

The business will return to stronger profits and gross margins after the acquisition.

Important Assumptions

The table below presents the assumptions used in the financial calculations of this business plan.

Break-even Analysis

Due to the high fixed costs of the venue, the monthly break even is rather high, as shown below. This would be approximately 9-10 events at $10,000 per event. Revenue is higher for The Sumptuous Ballroom events due to the ballroom rental fee and greater leverage to provide additional services to clients, than for revenue from off-site events.

Break-even Analysis
Monthly Revenue Break-even $93,206
Assumptions:
Average Percent Variable Cost 10%
Estimated Monthly Fixed Cost $84,264

Projected Profit and Loss

Gross margins will improve for the business as ballroom rentals build as a revenue stream. Facility rentals do not have a direct cost of sales, although higher fixed costs are associated with The Sumptuous Ballroom than with the core business.

Subcontracted services are the other major cost of sales category, and incur a higher cost of sales, at 80% of subcontracted services sold, than other categories. These services (like floral design, rental furniture, etc.) are discounted by the vendors because of their relationship with Sumptuous Cuisine Catering. The effect is that Sumptuous Cuisine Catering bills these services on to clients at the vendor's advertised rates and takes their margin of 20% on those revenues.

Marketing will be higher in the first year to accommodate the additional marketing activities described in the marketing strategy and milestones table. Depreciation will be for the existing equipment in the catering kitchen and for the installed sound and networking equipment in the venue.

Rent is for the catering kitchen and office only, as the ballroom will be purchased by the business. Utilities will be much higher than previously due to the high electric, heating, and air conditioning costs of the new space compared with the kitchen and office alone. Insurance also must increase significantly from previous levels due to the need for general liability for the space and guests.

Payroll taxes are 15% of payroll (which includes the event staff cost of sales) and employee benefits (including health insurance, 401K contributions for employees who with tenure over 2 years, vacation and sick pay) are 10% of payroll and event staff costs.

Office expenses cover maintenance of computer equipment and sundry supplies for the office. Facility cleaning and maintenance includes a budget for $200 of maintenance and an estimate for cleaning which will grow as use of the ballroom scales up. Cleaning will be provided by an outside vendor and managed by the Facility Manager.

Pro Forma Profit and Loss
2010 2011 2012
Sales $2,251,998 $2,752,086 $3,346,846
Direct Cost of Sales $216,056 $261,259 $316,101
Event Staff $382,840 $467,855 $568,964
Subcontracted Services $283,841 $340,609 $408,730
Total Cost of Sales $882,736 $1,069,723 $1,293,795
Gross Margin $1,369,262 $1,682,363 $2,053,051
Gross Margin % 60.80% 61.13% 61.34%
Expenses
Payroll $474,000 $540,480 $609,845
Marketing/Promotion $106,000 $100,000 $100,000
Depreciation $28,000 $28,000 $28,000
Rent $24,000 $25,200 $26,460
Utilities $7,959 $9,000 $10,000
Insurance $36,000 $37,440 $38,938
Payroll Taxes $128,526 $151,250 $176,821
Employee Benefits $85,684 $100,833 $117,881
Office Expenses $6,000 $6,500 $7,000
Facility Cleaning & Maintenance $115,000 $137,804 $167,542
Total Operating Expenses $1,011,168 $1,136,508 $1,282,487
Profit Before Interest and Taxes $358,094 $545,855 $770,564
EBITDA $386,094 $573,855 $798,564
Interest Expense $181,222 $171,000 $160,333
Taxes Incurred $53,061 $112,457 $183,069
Net Profit $123,810 $262,399 $427,162
Net Profit/Sales 5.50% 9.53% 12.76%

Projected Cash Flow

The projected cash flow table and chart show the business's investment in The Sumptuous Ballroom, a $2 million purchase. The asset will be purchased with 20% down and a $1.6 million 15-year mortgage. An additional $270,000 in convertible debt will be raised at 10% interest for three years.

In addition to this investment, $50,000 in depreciable assets will be purchased (sound system, office set-up for the facility). Small investments in replacing these assets and augmenting them with strategic purchases will be made in future years. Current assets ($100,000) purchased will include signage and improvements to the venue.

The business will reach cash flow break-even in July 2010.

Pro Forma Cash Flow
2010 2011 2012
Cash Received
Cash from Operations
Cash Sales $1,125,999 $1,376,043 $1,673,423
Cash from Receivables $1,055,339 $1,336,295 $1,626,150
Subtotal Cash from Operations $2,181,338 $2,712,337 $3,299,573
Additional Cash Received
Sales Tax, VAT, HST/GST Received $180,160 $220,167 $267,748
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $1,870,000 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $4,231,498 $2,932,504 $3,567,321
Expenditures 2010 2011 2012
Expenditures from Operations
Cash Spending $474,000 $540,480 $609,845
Bill Payments $1,508,109 $1,928,419 $2,254,866
Subtotal Spent on Operations $1,982,109 $2,468,899 $2,864,711
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $180,160 $220,167 $267,748
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $106,668 $106,668 $106,668
Purchase Other Current Assets $100,000 $0 $0
Purchase Long-term Assets $2,050,000 $5,000 $5,000
Dividends $0 $0 $0
Subtotal Cash Spent $4,418,937 $2,800,734 $3,244,127
Net Cash Flow ($187,439) $131,771 $323,194
Cash Balance $112,561 $244,331 $567,526

Projected Balance Sheet

The balance sheet shows the increasing strength of the business as its mortgage is paid off and profits are earned from the expansion of the business. Accounts payable will rise significantly from previous levels due to the added expenses taken on by the business when The Sumptuous Ballroom opens.

Pro Forma Balance Sheet
2010 2011 2012
Assets
Current Assets
Cash $112,561 $244,331 $567,526
Accounts Receivable $178,994 $218,742 $266,015
Inventory $11,664 $13,163 $15,936
Other Current Assets $102,500 $102,500 $102,500
Total Current Assets $405,719 $578,737 $951,976
Long-term Assets
Long-term Assets $2,140,000 $2,145,000 $2,150,000
Accumulated Depreciation $68,000 $96,000 $124,000
Total Long-term Assets $2,072,000 $2,049,000 $2,026,000
Total Assets $2,477,719 $2,627,737 $2,977,976
Liabilities and Capital 2010 2011 2012
Current Liabilities
Accounts Payable $163,743 $158,031 $187,776
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $163,743 $158,031 $187,776
Long-term Liabilities $1,763,332 $1,656,664 $1,549,996
Total Liabilities $1,927,075 $1,814,695 $1,737,772
Paid-in Capital $200,000 $200,000 $200,000
Retained Earnings $226,833 $350,643 $613,042
Earnings $123,810 $262,399 $427,162
Total Capital $550,643 $813,042 $1,240,204
Total Liabilities and Capital $2,477,719 $2,627,737 $2,977,976
Net Worth $550,643 $813,042 $1,240,204

Business Ratios

The table compares the business ratios of Sumptuous Cuisine Catering to caterers in the $1 million to $5 million revenue category. Caterers with banquet halls are covered by NAICS industry code 722320, or SIC code 5812.

Ratio Analysis
2010 2011 2012 Industry Profile
Sales Growth 50.13% 22.21% 21.61% 1.65%
Percent of Total Assets
Accounts Receivable 7.22% 8.32% 8.93% 3.53%
Inventory 0.47% 0.50% 0.54% 6.34%
Other Current Assets 4.14% 3.90% 3.44% 43.25%
Total Current Assets 16.37% 22.02% 31.97% 53.12%
Long-term Assets 83.63% 77.98% 68.03% 46.88%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 6.61% 6.01% 6.31% 25.40%
Long-term Liabilities 71.17% 63.05% 52.05% 73.91%
Total Liabilities 77.78% 69.06% 58.35% 99.31%
Net Worth 22.22% 30.94% 41.65% 0.69%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 60.80% 61.13% 61.34% 58.06%
Selling, General & Administrative Expenses 55.30% 51.60% 48.58% 23.02%
Advertising Expenses 4.71% 3.63% 2.99% 1.74%
Profit Before Interest and Taxes 15.90% 19.83% 23.02% 6.52%
Main Ratios
Current 2.48 3.66 5.07 1.25
Quick 2.41 3.58 4.98 1.00
Total Debt to Total Assets 77.78% 69.06% 58.35% 99.31%
Pre-tax Return on Net Worth 32.12% 46.11% 49.20% 4325.19%
Pre-tax Return on Assets 7.14% 14.27% 20.49% 29.65%
Additional Ratios 2010 2011 2012
Net Profit Margin 5.50% 9.53% 12.76% n.a
Return on Equity 22.48% 32.27% 34.44% n.a
Activity Ratios
Accounts Receivable Turnover 6.29 6.29 6.29 n.a
Collection Days 44 53 53 n.a
Inventory Turnover 24.00 21.05 21.73 n.a
Accounts Payable Turnover 9.90 12.17 12.17 n.a
Payment Days 28 31 28 n.a
Total Asset Turnover 0.91 1.05 1.12 n.a
Debt Ratios
Debt to Net Worth 3.50 2.23 1.40 n.a
Current Liab. to Liab. 0.08 0.09 0.11 n.a
Liquidity Ratios
Net Working Capital $241,975 $420,706 $764,200 n.a
Interest Coverage 1.98 3.19 4.81 n.a
Additional Ratios
Assets to Sales 1.10 0.95 0.89 n.a
Current Debt/Total Assets 7% 6% 6% n.a
Acid Test 1.31 2.19 3.57 n.a
Sales/Net Worth 4.09 3.38 2.70 n.a
Dividend Payout 0.00 0.00 0.00 n.a