La Salsa Fresh Mexican Grill

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Mexican Restaurant Business Plan

Financial Plan

The following sections present the financial plan for La Salsa Fresh Mexican Grill. Year end totals for the first three years are present in each section. First year monthly figures are presented in the appendix.

6.1 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 that the economy gets back on its feet and returns to 'normal', after the current recession.
  • We assume access to equity capital and financing sufficient to maintain 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 7.00% 7.00% 7.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

6.2 Break-even Analysis

The break-even analysis is based on planned fixed costs estimates. 
Break-even Analysis
Monthly Revenue Break-even $20,895
Assumptions:
Average Percent Variable Cost 26%
Estimated Monthly Fixed Cost $15,398

6.3 Projected Profit and Loss

In order not to underestimate costs, costs listed are considerably higher than what will most likely be experienced. This makes the profits and margins appear less attractive, but realize there are many ways to cut costs.

The Santa Barbara Restaurant Group requires royalties of 4% of gross sales to cover national and local advertising costs. This is included in the Profit/Loss table under Corporate Marketing Fee. The Franchise Fee is 6% of gross sales and is labeled Franchise Fee on the Profit/Loss table. 

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $692,108 $740,556 $792,394
Direct Cost of Sales $182,072 $194,817 $208,454
Production Payroll $129,098 $132,969 $136,958
SBRG Franchise Fee $41,526 $44,433 $47,544
Other Production Expenses $12,000 $12,000 $12,000
Total Cost of Sales $364,696 $384,219 $404,956
Gross Margin $327,412 $356,336 $387,439
Gross Margin % 47.31% 48.12% 48.89%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $12,168 $12,531 $12,907
Advertising/ Promotion $12,000 $12,000 $12,000
SBRG Corporate Marketing Fee $27,684 $29,622 $31,696
Travel $1,800 $1,800 $1,800
Miscellaneous $1,200 $1,200 $1,200
Total Sales and Marketing Expenses $54,852 $57,153 $59,603
Sales and Marketing % 7.93% 7.72% 7.52%
General and Administrative Expenses
General and Administrative Payroll $48,641 $50,097 $51,600
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $12,000 $12,000 $12,000
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $2,400 $2,400 $2,400
Rent $36,000 $36,000 $36,000
Payroll Taxes $28,486 $29,340 $30,220
Other General and Administrative Expenses $0 $0 $0
Total General and Administrative Expenses $129,927 $132,237 $134,620
General and Administrative % 18.77% 17.86% 16.99%
Other Expenses:
Other Payroll $0 $0 $0
Consultants $0 $0 $0
Contract/Consultants $0 $0 $0
Total Other Expenses $0 $0 $0
Other % 0.00% 0.00% 0.00%
Total Operating Expenses $184,779 $189,390 $194,223
Profit Before Interest and Taxes $142,632 $166,947 $193,216
EBITDA $154,632 $178,947 $205,216
Interest Expense $20,194 $18,690 $17,020
Taxes Incurred $36,731 $44,477 $52,859
Net Profit $85,707 $103,779 $123,337
Net Profit/Sales 12.38% 14.01% 15.57%

6.4 Projected Cash Flow

In the following chart and table it is imperative to realize the importance of having cash on hand. If the company were to run into any problems the cash on hand will ensure that the business stays running.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $692,108 $740,556 $792,394
Subtotal Cash from Operations $692,108 $740,556 $792,394
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 $692,108 $740,556 $792,394
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $189,907 $195,597 $201,465
Bill Payments $336,482 $432,352 $454,852
Subtotal Spent on Operations $526,389 $627,949 $656,317
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 $21,479 $23,032 $24,697
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $36,000 $36,000
Subtotal Cash Spent $547,868 $686,981 $717,014
Net Cash Flow $144,240 $53,574 $75,381
Cash Balance $246,240 $299,814 $375,195

6.5 Projected Balance Sheet

The projected balance sheet is shown below.
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $246,240 $299,814 $375,195
Inventory $19,201 $20,545 $21,984
Other Current Assets $0 $0 $0
Total Current Assets $265,441 $320,360 $397,179
Long-term Assets
Long-term Assets $287,000 $287,000 $287,000
Accumulated Depreciation $12,000 $24,000 $36,000
Total Long-term Assets $275,000 $263,000 $251,000
Total Assets $540,441 $583,360 $648,179
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $37,214 $35,385 $37,564
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $37,214 $35,385 $37,564
Long-term Liabilities $278,521 $255,488 $230,791
Total Liabilities $315,735 $290,874 $268,355
Paid-in Capital $300,000 $300,000 $300,000
Retained Earnings ($161,000) ($111,293) ($43,514)
Earnings $85,707 $103,779 $123,337
Total Capital $224,707 $292,486 $379,823
Total Liabilities and Capital $540,441 $583,360 $648,179
Net Worth $224,707 $292,486 $379,823

6.6 Business Ratios

The following table outlines some of the more important ratios from the Restaurant/ Eating Places industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5812.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 7.00% 7.00% 7.60%
Percent of Total Assets
Inventory 3.55% 3.52% 3.39% 3.60%
Other Current Assets 0.00% 0.00% 0.00% 35.60%
Total Current Assets 49.12% 54.92% 61.28% 43.70%
Long-term Assets 50.88% 45.08% 38.72% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 6.89% 6.07% 5.80% 32.70%
Long-term Liabilities 51.54% 43.80% 35.61% 28.50%
Total Liabilities 58.42% 49.86% 41.40% 61.20%
Net Worth 41.58% 50.14% 58.60% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 47.31% 48.12% 48.89% 60.50%
Selling, General & Administrative Expenses 34.92% 34.10% 33.33% 39.80%
Advertising Expenses 1.73% 1.62% 1.51% 3.20%
Profit Before Interest and Taxes 20.61% 22.54% 24.38% 0.70%
Main Ratios
Current 7.13 9.05 10.57 0.98
Quick 6.62 8.47 9.99 0.65
Total Debt to Total Assets 58.42% 49.86% 41.40% 61.20%
Pre-tax Return on Net Worth 54.49% 50.69% 46.39% 1.70%
Pre-tax Return on Assets 22.66% 25.41% 27.18% 4.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 12.38% 14.01% 15.57% n.a
Return on Equity 38.14% 35.48% 32.47% n.a
Activity Ratios
Inventory Turnover 8.68 9.80 9.80 n.a
Accounts Payable Turnover 10.04 12.17 12.17 n.a
Payment Days 27 31 29 n.a
Total Asset Turnover 1.28 1.27 1.22 n.a
Debt Ratios
Debt to Net Worth 1.41 0.99 0.71 n.a
Current Liab. to Liab. 0.12 0.12 0.14 n.a
Liquidity Ratios
Net Working Capital $228,227 $284,974 $359,614 n.a
Interest Coverage 7.06 8.93 11.35 n.a
Additional Ratios
Assets to Sales 0.78 0.79 0.82 n.a
Current Debt/Total Assets 7% 6% 6% n.a
Acid Test 6.62 8.47 9.99 n.a
Sales/Net Worth 3.08 2.53 2.09 n.a
Dividend Payout 0.00 0.35 0.29 n.a