Mediterranean Restaurant Business Plan

On The Water

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Financial Plan

The following topics and tables outline our financial plan. We plan to turn a significant profit, but we will structure the business so as to maintain a healthy cash flow.

7.1 Important Assumptions

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

  • We assume a slow-growth economy, without major recession.
  • We assume that there are no unforseen changes in the expectancy in the popularity of our restaurant.
  • We assume access to investments and financing are sufficient to maintain and fulfill our financial plan as shown in the tables.
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 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Break-even Analysis

For our Break-even Analysis, we assume running costs which include our full payroll, rent, and utilities, and an estimation of other running costs.

Break-even Analysis
Monthly Units Break-even 4,117
Monthly Revenue Break-even $29,113
Assumptions:
Average Per-Unit Revenue $7.07
Average Per-Unit Variable Cost $1.03
Estimated Monthly Fixed Cost $24,875

7.3 Projected Profit and Loss

The most important assumption in the Projected Profit and Loss statement is the gross margin. Although it doesn't jump drastically in the first year, over given time the restaurant will develop its customer base and name, and the growth will pick up more rapidly towards the fourth and fifth years of business. The increase in gross margin will be due to a slow increase in sales prices and an increase in customer base, which is critical.

Month-by-month assumptions for profit and loss are included in the appendix.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,319,635 $1,785,000 $2,345,000
Direct Cost of Sales $192,074 $348,000 $477,750
Other $0 $0 $0
Total Cost of Sales $192,074 $348,000 $477,750
Gross Margin $1,127,561 $1,437,000 $1,867,250
Gross Margin % 85.44% 80.50% 79.63%
Expenses
Payroll $226,350 $248,985 $273,884
Sales and Marketing and Other Expenses $2,200 $200 $300
Depreciation $0 $0 $0
Insurance $0 $0 $0
Rent $36,000 $36,000 $36,000
Utilities $0 $0 $0
Leased Equipment $0 $0 $0
Payroll Taxes $33,953 $37,348 $41,083
Other $0 $0 $0
Total Operating Expenses $298,503 $322,533 $351,266
Profit Before Interest and Taxes $829,059 $1,114,467 $1,515,984
EBITDA $829,059 $1,114,467 $1,515,984
Interest Expense $0 $0 $0
Taxes Incurred $207,115 $278,617 $385,313
Net Profit $621,944 $835,850 $1,130,671
Net Profit/Sales 47.13% 46.83% 48.22%

7.4 Projected Cash Flow

The cash flow depends on assumptions for inventory turnover, payment days, and accounts receivable management. Our projected same-day collection is critical, and also reasonable and expected in the restaurant industry. We don't expect to need that much continued support even when we reach the less profitable months, as they are expected.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $1,319,635 $1,785,000 $2,345,000
Subtotal Cash from Operations $1,319,635 $1,785,000 $2,345,000
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 $1,319,635 $1,785,000 $2,345,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $226,350 $248,985 $273,884
Bill Payments $455,248 $717,511 $938,543
Subtotal Spent on Operations $681,598 $966,496 $1,212,426
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 $681,598 $966,496 $1,212,426
Net Cash Flow $638,037 $818,504 $1,132,574
Cash Balance $660,037 $1,478,541 $2,611,115

7.5 Projected Balance Sheet

The projected Balance Sheet is quite solid. We do not project any real trouble meeting our debt obligations, as long as we can achieve our specific goals.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $660,037 $1,478,541 $2,611,115
Inventory $25,988 $47,085 $64,641
Other Current Assets $0 $0 $0
Total Current Assets $686,025 $1,525,626 $2,675,755
Long-term Assets
Long-term Assets $45,000 $45,000 $45,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $45,000 $45,000 $45,000
Total Assets $731,025 $1,570,626 $2,720,755
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $55,531 $59,282 $78,740
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $55,531 $59,282 $78,740
Long-term Liabilities $0 $0 $0
Total Liabilities $55,531 $59,282 $78,740
Paid-in Capital $115,000 $115,000 $115,000
Retained Earnings ($61,450) $560,494 $1,396,344
Earnings $621,944 $835,850 $1,130,671
Total Capital $675,494 $1,511,344 $2,642,016
Total Liabilities and Capital $731,025 $1,570,626 $2,720,755
Net Worth $675,494 $1,511,344 $2,642,016

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5812, Eating places, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 35.26% 31.37% 7.60%
Percent of Total Assets
Inventory 3.56% 3.00% 2.38% 3.60%
Other Current Assets 0.00% 0.00% 0.00% 35.60%
Total Current Assets 93.84% 97.13% 98.35% 43.70%
Long-term Assets 6.16% 2.87% 1.65% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 7.60% 3.77% 2.89% 32.70%
Long-term Liabilities 0.00% 0.00% 0.00% 28.50%
Total Liabilities 7.60% 3.77% 2.89% 61.20%
Net Worth 92.40% 96.23% 97.11% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 85.44% 80.50% 79.63% 60.50%
Selling, General & Administrative Expenses 38.33% 65.53% 56.44% 39.80%
Advertising Expenses 0.00% 0.00% 0.00% 3.20%
Profit Before Interest and Taxes 62.82% 62.44% 64.65% 0.70%
Main Ratios
Current 12.35 25.74 33.98 0.98
Quick 11.89 24.94 33.16 0.65
Total Debt to Total Assets 7.60% 3.77% 2.89% 61.20%
Pre-tax Return on Net Worth 122.73% 73.74% 57.38% 1.70%
Pre-tax Return on Assets 113.41% 70.96% 55.72% 4.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 47.13% 46.83% 48.22% n.a
Return on Equity 92.07% 55.31% 42.80% n.a
Activity Ratios
Inventory Turnover 10.81 9.52 8.55 n.a
Accounts Payable Turnover 8.92 12.17 12.17 n.a
Payment Days 28 29 26 n.a
Total Asset Turnover 1.81 1.14 0.86 n.a
Debt Ratios
Debt to Net Worth 0.08 0.04 0.03 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $630,494 $1,466,344 $2,597,016 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.55 0.88 1.16 n.a
Current Debt/Total Assets 8% 4% 3% n.a
Acid Test 11.89 24.94 33.16 n.a
Sales/Net Worth 1.95 1.18 0.89 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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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 25.42% 25.00% 25.42%
Other 0 0 0
Break-even Analysis
Monthly Units Break-even 4,117
Monthly Revenue Break-even $29,113
Assumptions:
Average Per-Unit Revenue $7.07
Average Per-Unit Variable Cost $1.03
Estimated Monthly Fixed Cost $24,875
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,319,635 $1,785,000 $2,345,000
Direct Cost of Sales $192,074 $348,000 $477,750
Other $0 $0 $0
Total Cost of Sales $192,074 $348,000 $477,750
Gross Margin $1,127,561 $1,437,000 $1,867,250
Gross Margin % 85.44% 80.50% 79.63%
Expenses
Payroll $226,350 $248,985 $273,884
Sales and Marketing and Other Expenses $2,200 $200 $300
Depreciation $0 $0 $0
Insurance $0 $0 $0
Rent $36,000 $36,000 $36,000
Utilities $0 $0 $0
Leased Equipment $0 $0 $0
Payroll Taxes $33,953 $37,348 $41,083
Other $0 $0 $0
Total Operating Expenses $298,503 $322,533 $351,266
Profit Before Interest and Taxes $829,059 $1,114,467 $1,515,984
EBITDA $829,059 $1,114,467 $1,515,984
Interest Expense $0 $0 $0
Taxes Incurred $207,115 $278,617 $385,313
Net Profit $621,944 $835,850 $1,130,671
Net Profit/Sales 47.13% 46.83% 48.22%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $1,319,635 $1,785,000 $2,345,000
Subtotal Cash from Operations $1,319,635 $1,785,000 $2,345,000
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 $1,319,635 $1,785,000 $2,345,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $226,350 $248,985 $273,884
Bill Payments $455,248 $717,511 $938,543
Subtotal Spent on Operations $681,598 $966,496 $1,212,426
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 $681,598 $966,496 $1,212,426
Net Cash Flow $638,037 $818,504 $1,132,574
Cash Balance $660,037 $1,478,541 $2,611,115
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $660,037 $1,478,541 $2,611,115
Inventory $25,988 $47,085 $64,641
Other Current Assets $0 $0 $0
Total Current Assets $686,025 $1,525,626 $2,675,755
Long-term Assets
Long-term Assets $45,000 $45,000 $45,000
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $45,000 $45,000 $45,000
Total Assets $731,025 $1,570,626 $2,720,755
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $55,531 $59,282 $78,740
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $55,531 $59,282 $78,740
Long-term Liabilities $0 $0 $0
Total Liabilities $55,531 $59,282 $78,740
Paid-in Capital $115,000 $115,000 $115,000
Retained Earnings ($61,450) $560,494 $1,396,344
Earnings $621,944 $835,850 $1,130,671
Total Capital $675,494 $1,511,344 $2,642,016
Total Liabilities and Capital $731,025 $1,570,626 $2,720,755
Net Worth $675,494 $1,511,344 $2,642,016
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 35.26% 31.37% 7.60%
Percent of Total Assets
Inventory 3.56% 3.00% 2.38% 3.60%
Other Current Assets 0.00% 0.00% 0.00% 35.60%
Total Current Assets 93.84% 97.13% 98.35% 43.70%
Long-term Assets 6.16% 2.87% 1.65% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 7.60% 3.77% 2.89% 32.70%
Long-term Liabilities 0.00% 0.00% 0.00% 28.50%
Total Liabilities 7.60% 3.77% 2.89% 61.20%
Net Worth 92.40% 96.23% 97.11% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 85.44% 80.50% 79.63% 60.50%
Selling, General & Administrative Expenses 38.33% 65.53% 56.44% 39.80%
Advertising Expenses 0.00% 0.00% 0.00% 3.20%
Profit Before Interest and Taxes 62.82% 62.44% 64.65% 0.70%
Main Ratios
Current 12.35 25.74 33.98 0.98
Quick 11.89 24.94 33.16 0.65
Total Debt to Total Assets 7.60% 3.77% 2.89% 61.20%
Pre-tax Return on Net Worth 122.73% 73.74% 57.38% 1.70%
Pre-tax Return on Assets 113.41% 70.96% 55.72% 4.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 47.13% 46.83% 48.22% n.a
Return on Equity 92.07% 55.31% 42.80% n.a
Activity Ratios
Inventory Turnover 10.81 9.52 8.55 n.a
Accounts Payable Turnover 8.92 12.17 12.17 n.a
Payment Days 28 29 26 n.a
Total Asset Turnover 1.81 1.14 0.86 n.a
Debt Ratios
Debt to Net Worth 0.08 0.04 0.03 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $630,494 $1,466,344 $2,597,016 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.55 0.88 1.16 n.a
Current Debt/Total Assets 8% 4% 3% n.a
Acid Test 11.89 24.94 33.16 n.a
Sales/Net Worth 1.95 1.18 0.89 n.a
Dividend Payout 0.00 0.00 0.00 n.a