Belle Epoque Dinner Theatre

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Dinner Theater Business Plan

Financial Plan

We are assuming a low start-up funding figure of approximated $500,000.  The business will grow exponentially by a net worth of about two million dollars per year and this growth is based off of sheer cash profits and managerial excellence.  Growth will be self financed.  No additional funding will be needed.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions.  The monthly assumptions are included in the appendices.  From the beginning, we recognize that our direct marketing will be critical to advertising, a factor we can influence easily.  Weather and catastrophe cannot be so easily planned on and would delay project by a year (hurricane, tornado, etc...)  At least we are planning on the potential problem, and dealing with it.

Interest rates, tax rates, and personnel burden are based on conservative assumptions.

Two of the more important underlying assumptions are:

  1. We assume a strong economy, without major recession.
  2. We assume funding will be maintained and strongly backed.

One item of particular note is that we have set our cost of goods for food sales at high percentage factors of 30% to 36%.  The majority of seasoned managers would raise an eyebrow at those percentages.  We intend to beat these percentages and therefore bring in a windfall on our P & L.  One important assumption is our capability to decrease food waste and costs.

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 8.20% 8.20% 8.20%
Tax Rate 25.00% 25.00% 25.00%
Other 0 0 0

8.2 Start-up Funding

Start-up funding requirements come to just shy of $500,000.  This presumes we can move into an established, equiped restaurant space.  Expenses and asset purchases will increase dramatically if we must fully outfit and equip a space for its first use as a restaurant.

Funding will be through a combination of owner investment, outside investment, and long-term loans.  A small amount of current borrowing (credit card purchases) complete the start-up funding.

Start-up Funding
Start-up Expenses to Fund $178,420
Start-up Assets to Fund $317,000
Total Funding Required $495,420
Assets
Non-cash Assets from Start-up $267,000
Cash Requirements from Start-up $50,000
Additional Cash Raised $420
Cash Balance on Starting Date $50,420
Total Assets $317,420
Liabilities and Capital
Liabilities
Current Borrowing $5,420
Long-term Liabilities $40,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $45,420
Capital
Planned Investment
Owner $50,420
Investor $400,000
Additional Investment Requirement $0
Total Planned Investment $450,420
Loss at Start-up (Start-up Expenses) ($178,420)
Total Capital $272,000
Total Capital and Liabilities $317,420
Total Funding $495,840

8.3 Business Ratios

The following table shows the projected businesses ratios.  We expect to maintain healthy ratios for profitability, risk, and return.  The Standard Industrial Classification (SIC) Code for the industry we chose is French Restaurant (5812.0104), though there is no SIC that accurately describes our offering platform of dinner theatre.  We used the Industry Ratios report for Eating Places (5812) to generate the industry profile shown in the following table.
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 17.70% 17.70% 7.60%
Percent of Total Assets
Inventory 1.79% 1.00% 0.73% 3.60%
Other Current Assets 0.46% 0.22% 0.14% 35.60%
Total Current Assets 95.58% 98.01% 98.84% 43.70%
Long-term Assets 4.42% 1.99% 1.16% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 5.68% 4.70% 3.46% 32.70%
Long-term Liabilities 0.90% 0.33% 0.13% 28.50%
Total Liabilities 6.58% 5.03% 3.60% 61.20%
Net Worth 93.42% 94.97% 96.40% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 69.27% 70.13% 70.69% 60.50%
Selling, General & Administrative Expenses 32.12% 34.20% 34.10% 39.80%
Advertising Expenses 1.12% 1.10% 1.08% 3.20%
Profit Before Interest and Taxes 56.94% 59.34% 61.10% 0.70%
Main Ratios
Current 16.82 20.84 28.56 0.98
Quick 16.50 20.63 28.35 0.65
Total Debt to Total Assets 6.58% 5.03% 3.60% 61.20%
Pre-tax Return on Net Worth 126.67% 74.25% 56.06% 1.70%
Pre-tax Return on Assets 118.34% 70.52% 54.04% 4.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 42.67% 44.48% 45.81% n.a
Return on Equity 95.01% 55.69% 42.04% n.a
Activity Ratios
Inventory Turnover 24.00 38.04 38.21 n.a
Accounts Payable Turnover 17.85 12.17 12.17 n.a
Payment Days 27 24 28 n.a
Total Asset Turnover 2.08 1.19 0.88 n.a
Debt Ratios
Debt to Net Worth 0.07 0.05 0.04 n.a
Current Liab. to Liab. 0.86 0.93 0.96 n.a
Liquidity Ratios
Net Working Capital $3,313,676 $7,081,367 $11,450,067 n.a
Interest Coverage 1,354.42 2,241.85 3,837.09 n.a
Additional Ratios
Assets to Sales 0.48 0.84 1.13 n.a
Current Debt/Total Assets 6% 5% 3% n.a
Acid Test 16.50 20.63 28.35 n.a
Sales/Net Worth 2.23 1.25 0.92 n.a
Dividend Payout 0.03 0.06 0.10 n.a

8.4 Break-even Analysis

The following chart and table summarize our break-even analysis. We expect to reach break-even a few months into the business operation.  With favorable response from PR exposure and teaser advertising, in the first month we open, April of 2005, we may achieve goal and break even.

The break-even assumes variable costs of 38% percent of revenue.  This assumption is probably too high, and therefore conservative.  With initial monthly expenses of over $86,600 we will need averaged monthly revenues of about $140,000 to break-even.

Break-even Analysis
Monthly Units Break-even 127,018
Monthly Revenue Break-even $127,018
Assumptions:
Average Per-Unit Revenue $1.00
Average Per-Unit Variable Cost $0.38
Estimated Monthly Fixed Cost $78,751

8.5 Projected Profit and Loss

Our advertising budget pulls data from several tables; the fact that we are spending less than the industry average will be due to getting such great reviews in the consumer and press related magazines and newspapers.  Also, of specific note is our unique marketing stunts and plan that does not rely on traditional advertising schemes.

We are profitable in the first year at just over $3 million.  As with the break-even, we are projecting very conservatively regarding cost of sales and gross margin. Our cost of goods should be much lower, and gross margin higher, than in this projection.  We prefer to project conservatively so that we make sure we have enough cash.

Based on 30+ years of restaurant experience we have budgeted for continued computer and equipage purchases. If we do open in a previously equipped restaurant space we know we will need replacements. If we must open with brand new, guaranteed equipment, we will not have replacement expenses as soon.  Normal wear and tear and breakage of plates, glasses, tableware, etc. are budgeted monthly.

Labor costs may be lower than the pro forma projects - but we are planning on worst-case scenario of our attention being diverted as we grow into exactly what we need and when.  Later years may be lower as we learn more about how much labor is truly critical.  Conversely, if our dinner and show concept is well received, we may have to increase staff (and therefore labor costs) to serve the customer demand.

The Gross Margin Percentage holds steady from year to year due to holding menu and show prices with minimal increases to cover increased food costs and operating expenses.  This may be unrealistic - the quandary is - do we want to raise our prices each year or hold them fast.  Customer response surveys combined with economic condition analysis will yield the answer to this after the first twelve months.  Either way, at worst, we forecast profits between $3-$4 million per annum. 

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $7,666,320 $9,023,259 $10,620,375
Direct Cost of Sales $2,355,984 $2,695,245 $3,113,008
Other Production Expenses $0 $0 $0
Total Cost of Sales $2,355,984 $2,695,245 $3,113,008
Gross Margin $5,310,336 $6,328,013 $7,507,367
Gross Margin % 69.27% 70.13% 70.69%
Expenses
Payroll $634,040 $665,742 $699,029
Sales and Marketing and Other Expenses $92,807 $81,632 $81,632
Depreciation $12,000 $12,000 $12,000
MICROS syterm, phones, security, fire, computer upgrades $10,000 $10,000 $10,000
Exterminating $300 $300 $300
Ceramic/Glass/Silver Upkeep $2,400 $2,400 $3,000
Maintenance/Repairs $22,000 $20,000 $22,000
Linen and Dry Cleaning $2,100 $2,400 $2,700
Dish and Cleaning Supplies $4,800 $5,000 $5,250
Office Products Upkeep $2,400 $2,500 $2,600
Paper Products Upkeep $9,600 $10,000 $11,000
Utilities $28,160 $30,160 $32,160
Insurance $8,604 $9,104 $9,604
Rent $49,800 $54,800 $56,800
Employee Healthcare $36,000 $38,000 $40,000
Comps/Donations/Handouts $30,000 $30,000 $30,000
Payroll Taxes $0 $0 $0
Total Operating Expenses $945,011 $974,038 $1,018,075
Profit Before Interest and Taxes $4,365,325 $5,353,975 $6,489,292
EBITDA $4,377,325 $5,365,975 $6,501,292
Interest Expense $3,223 $2,388 $1,691
Taxes Incurred $1,090,525 $1,337,897 $1,621,900
Net Profit $3,271,576 $4,013,690 $4,865,701
Net Profit/Sales 42.67% 44.48% 45.81%

8.6 Projected Cash Flow

The plan projects a $11,340,000 net worth by 2007 (three years of operation in a high activity vacation environment).  The plan anticipates full staffing, a small management team, and maximum acceptance by the dining public.  The highest sales will be in the prime summer vacation months, but we believe our unique offering will draw customers to Belle Epoque all year long.

If our sales and profits forecasts prove accurate Chef Joachim will expand his management team and accelerate the long-term plan of opening a second and third Belle Epoque restaurants in other demographic markets.  The opening of the second venue will be financed by the profits from this restaurant, and the third site will be financed by the profits from the first two ventures.  Obviously this will result in substantial changes in the cash flow and profit figures in year two and year three of this plan.

Cash flow projections are critical to our 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 appendices.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $7,666,320 $9,023,259 $10,620,375
Subtotal Cash from Operations $7,666,320 $9,023,259 $10,620,375
Additional Cash Received
Sales Tax, VAT, HST/GST Received $536,642 $631,628 $743,426
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 $8,202,962 $9,654,887 $11,363,802
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $634,040 $665,742 $699,029
Bill Payments $3,530,306 $4,194,008 $4,996,678
Subtotal Spent on Operations $4,164,346 $4,859,750 $5,695,707
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $536,642 $631,628 $743,426
Principal Repayment of Current Borrowing $5,400 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $6,900 $8,000 $9,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $100,000 $250,000 $500,000
Subtotal Cash Spent $4,813,288 $5,749,378 $6,948,133
Net Cash Flow $3,389,674 $3,905,508 $4,415,668
Cash Balance $3,440,094 $7,345,603 $11,761,271

8.7 Projected Balance Sheet

The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. The monthly estimates are included in the appendices.
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $3,440,094 $7,345,603 $11,761,271
Inventory $66,090 $75,607 $87,326
Other Current Assets $17,000 $17,000 $17,000
Total Current Assets $3,523,184 $7,438,209 $11,865,597
Long-term Assets
Long-term Assets $175,000 $175,000 $175,000
Accumulated Depreciation $12,000 $24,000 $36,000
Total Long-term Assets $163,000 $151,000 $139,000
Total Assets $3,686,184 $7,589,209 $12,004,597
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $209,488 $356,823 $415,509
Current Borrowing $20 $20 $20
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $209,508 $356,843 $415,529
Long-term Liabilities $33,100 $25,100 $16,100
Total Liabilities $242,608 $381,943 $431,629
Paid-in Capital $450,420 $450,420 $450,420
Retained Earnings ($278,420) $2,743,156 $6,256,847
Earnings $3,271,576 $4,013,690 $4,865,701
Total Capital $3,443,576 $7,207,267 $11,572,967
Total Liabilities and Capital $3,686,184 $7,589,209 $12,004,597
Net Worth $3,443,576 $7,207,267 $11,572,967