Catering Business Plan

Catering For Kids

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Financial Plan

The Catering For Kids will finance growth through cash flow, grants and school district revenues. We recognize that this means we will have to grow more slowly than we might like but that no borrowing is necessary.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:

  • We assume direct food costs will be equal to or less than 30% of total direct costs.
  • We assume a slow-growth economy, without major recession or crisis in food contamination.
  • We assume that there are no unforeseen changes in government grant funding availability.
  • We assume a continued interest in restaurant and hospitality services by students of the Chambers School. It has proved to be a highly popular program in the past and we have no reason to believe this situation will change.
  • We assume a continued interest in using catering services by organizations and businesses in the Eugene/Springfield area.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 0.00% 0.00% 0.00%
Other 0 0 0

8.2 Key Financial Indicators

The following benchmark chart indicates our key financial indicators for the first three years. We foresee slow but steady growth in demand for our services and consequent increase in operating expenses. During year one, Catering For Kids will serve its internal market only, as we ramp up to serving the external market in year two.

8.3 Break-even Analysis

Our break-even analysis is based on the ongoing costs we incur to keep Catering For Kids running. Fixed costs including the overhead for use of the commercial kitchen, utilities/contract services, payroll, and marketing costs. The payroll cost includes the salary for one permanent part-time staff person who will manage the operation of the catering business as well as instruct the student workers for the entrepreneurship portion of the curriculum. Marketing expenses will be kept to a minimum, primarily employing word-of-mouth and other inexpensive means. Our assumptions on the average unit revenue are based on the average price we will charge for our corporate boxed lunch, however this is not the only product that will be offered by Catering For Kids. The result of this analysis offers general insight regarding the number of boxed lunches we  must sell in order to maintain uninterrupted operation of the catering business each month.

Break-even Analysis
Monthly Units Break-even 2,555
Monthly Revenue Break-even $3,308
Assumptions:
Average Per-Unit Revenue $1.29
Average Per-Unit Variable Cost $0.10
Estimated Monthly Fixed Cost $3,043

8.4 Projected Surplus or Deficit

The surplus indicates positive revenues flowing into the Catering For Kids. Expenses will be minimal as we are able to rely on existing resources, including equipment and staff.
Surplus and Deficit
Year 1 Year 2 Year 3
Funding $30,300 $36,553 $43,815
Direct Cost $2,430 $3,706 $4,985
Other Production Expenses $0 $0 $0
Total Direct Cost $2,430 $3,706 $4,985
Gross Surplus $27,870 $32,847 $38,831
Gross Surplus % 91.98% 89.86% 88.62%
Expenses
Payroll $24,000 $24,840 $25,722
Sales and Marketing and Other Operating Expenses $655 $0 $0
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $444 $0 $0
Payroll Taxes $98 $0 $0
Commercial Kitchen Use Overhead $10,716 $0 $0
Miscellaneous $600 $0 $0
Total Operating Expenses $36,513 $24,840 $25,722
Surplus Before Interest and Taxes ($8,643) $8,007 $13,109
EBITDA ($8,643) $8,007 $13,109
Interest Expense $0 $0 $0
Taxes Incurred $0 $0 $0
Net Surplus ($8,643) $8,007 $13,109
Net Surplus/Funding -28.53% 21.90% 29.92%

8.5 Projected Cash Flow

Cash flow projections are critical to Catering For Kids' success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix.
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Funding $27,270 $32,897 $39,434
Cash from Receivables $2,779 $3,604 $4,321
Subtotal Cash from Operations $30,049 $36,501 $43,755
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $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 $30,049 $36,501 $43,755
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $24,000 $24,840 $25,722
Bill Payments $14,566 $4,623 $5,179
Subtotal Spent on Operations $38,566 $29,463 $30,901
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $38,566 $29,463 $30,901
Net Cash Flow ($8,517) $7,038 $12,854
Cash Balance $6,932 $13,970 $26,824

8.6 Projected Balance Sheet

Equipment in kitchen is not included in current assets as they are the property of the lessor. Any depreciation will be accounted for in that party's accounting records.
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $6,932 $13,970 $26,824
Accounts Receivable $251 $302 $363
Inventory $570 $869 $1,169
Other Current Assets $0 $0 $0
Total Current Assets $7,753 $15,142 $28,355
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $7,753 $15,142 $28,355
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $947 $329 $434
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $947 $329 $434
Long-term Liabilities $0 $0 $0
Total Liabilities $947 $329 $434
Paid-in Capital $30,000 $30,000 $30,000
Accumulated Surplus/Deficit ($14,551) ($23,194) ($15,188)
Surplus/Deficit ($8,643) $8,007 $13,109
Total Capital $6,806 $14,813 $27,921
Total Liabilities and Capital $7,753 $15,142 $28,355
Net Worth $6,806 $14,812 $27,921

8.7 Standard Ratios

Standard business ratios, based on the NAICS code 722320, Caterers are included in the table for comparison. The ratios show a plan for balanced, healthy operations.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Funding Growth 0.00% 20.64% 19.87% 6.61%
Percent of Total Assets
Accounts Receivable 3.23% 2.00% 1.28% 5.65%
Inventory 7.35% 5.74% 4.12% 3.34%
Other Current Assets 0.00% 0.00% 0.00% 36.38%
Total Current Assets 100.00% 100.00% 100.00% 45.37%
Long-term Assets 0.00% 0.00% 0.00% 54.63%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.22% 2.17% 1.53% 18.54%
Long-term Liabilities 0.00% 0.00% 0.00% 23.40%
Total Liabilities 12.22% 2.17% 1.53% 41.94%
Net Worth 87.78% 97.83% 98.47% 58.06%
Percent of Funding
Funding 100.00% 100.00% 100.00% 100.00%
Gross Surplus 91.98% 89.86% 88.62% 48.89%
Selling, General & Administrative Expenses 15.49% 11.74% 9.63% 25.03%
Advertising Expenses 8.09% 6.48% 5.42% 2.52%
Surplus Before Interest and Taxes -28.53% 21.90% 29.92% 1.70%
Main Ratios
Current 8.18 46.00 65.28 1.09
Quick 7.58 43.36 62.59 0.69
Total Debt to Total Assets 12.22% 2.17% 1.53% 51.63%
Pre-tax Return on Net Worth -127.00% 54.05% 46.95% 5.84%
Pre-tax Return on Assets -111.48% 52.88% 46.23% 12.06%
Additional Ratios Year 1 Year 2 Year 3
Net Surplus Margin -28.53% 21.90% 29.92% n.a
Return on Equity -127.00% 54.05% 46.95% n.a
Activity Ratios
Accounts Receivable Turnover 12.08 12.08 12.08 n.a
Collection Days 59 28 28 n.a
Inventory Turnover 3.17 5.15 4.89 n.a
Accounts Payable Turnover 16.38 12.17 12.17 n.a
Payment Days 27 58 26 n.a
Total Asset Turnover 3.91 2.41 1.55 n.a
Debt Ratios
Debt to Net Worth 0.14 0.02 0.02 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $6,806 $14,812 $27,921 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Funding 0.26 0.41 0.65 n.a
Current Debt/Total Assets 12% 2% 2% n.a
Acid Test 7.32 42.44 61.76 n.a
Funding/Net Worth 4.45 2.47 1.57 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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