Pie Restaurant Business Plan

START YOUR OWN BUSINESS PLAN

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Financial Plan

A bank relationship will be established as soon as possible. Sales could very well increase at a much sharper rate than assumed in these conservative projections. Sharper sales will result in a greater need for funds in support of inventory and store growth and a line of credit will need to be established.

We will set a budget for marketing and advertising and will continue to reinvest residual profits into company expansion and personnel.

Sales growth will be aggressive during the first 18 months as we sharpen our product line and inventory to better meet our customer's requirements. Although we anticipate substantial growth in years two and three we are forecasting a very conservative 10% growth rate.

  • Salaries and rent are two major expenses. Depreciation will also increase as the company develops.
  • The owners will not take any profits out of the business and will be paid as an employees.
  • Payoff of private investment is expected within four to five years.

9.1 Start-up Funding

Total startup funding amounts are shown in the table below. This includes initial start-up expenses, liquid cash for operating expenses, unforseen expenses, to help cover wages, and also includes start-up inventory. This inventory will include the purchase and storage costs of frozen products, purchasing of cold beverages and daily delivery of fresh salads and various other desserts.

The purchase of long-term assets that will include an oven, two pie warmers, an ambient display case, freezers and refrigerators, a dishwasher and microwave, a three-compartment sink, decor and furnishings, utensils, a cash register and Point-Of-Sale software and accessories.

A long-term loan has been secured for the purchase of the long-term assets.

A first round of private investment from outside investors and family members will begin in April 2005. A second round will commence at the end of April 2006 for the purchase of further inventory and long-term assets to service the next two stores.

Profits will be reinvested and the owners will be employees collecting a very modest wage. This will ensure that any operating debts incurred are paid for within the shortest possible time period.

Start-up Funding
Start-up Expenses to Fund $45,000
Start-up Assets to Fund $195,000
Total Funding Required $240,000
Assets
Non-cash Assets from Start-up $77,000
Cash Requirements from Start-up $118,000
Additional Cash Raised $0
Cash Balance on Starting Date $118,000
Total Assets $195,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $170,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $170,000
Capital
Planned Investment
Investor 1 $8,000
Investor 2 $8,000
Investor 3 $8,000
Investor 4 $8,000
Investor 5 $8,000
Investor 6 $10,000
Investor 7 $10,000
Investor 8 $10,000
Additional Investment Requirement $0
Total Planned Investment $70,000
Loss at Start-up (Start-up Expenses) ($45,000)
Total Capital $25,000
Total Capital and Liabilities $195,000
Total Funding $240,000

9.2 Important Assumptions

Payroll burden is calculated at an estimated 12.65% made up of 7.65% for social security and medicare, 2% for unemployment, and 3% for worker's compensation.

The tax rate has been left at 0% in the first year plan due to accumulated losses carried forward and that as an LLC the the owners will be taxed personally.

Our long-term interest rate is 6%.

Our State Sales tax is 4%. This does not affect our total profitability, but monthly payments to the State does impact our cash flow and cash balance.

Our financial plan depends on important assumptions. Our key underlying assumptions are:

  • A slow-growth economy without major recession.
  • There are no unforeseen changes in public health perceptions of our general products.
  • Access to sufficient capital to sustain the company's projected growth plan.

9.3 Break-even Analysis

Our break-even analysis is summarized by the following chart and table.

Break-even Analysis
Monthly Revenue Break-even $10,862
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $7,060

9.4 Projected Profit and Loss

The following table and charts indicate projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $123,589 $407,853 $679,746
Direct Cost of Sales $43,256 $136,257 $227,095
Other Costs of Sales $0 $0 $0
Total Cost of Sales $43,256 $136,257 $227,095
Gross Margin $80,333 $271,596 $452,651
Gross Margin % 65.00% 66.59% 66.59%
Expenses
Payroll $34,040 $102,120 $162,220
Marketing/Promotion $3,000 $9,000 $15,000
Depreciation $9,285 $9,285 $9,285
Rent $24,000 $72,000 $120,000
Utilities $2,700 $8,100 $13,500
Liability insurance $2,400 $7,200 $12,000
Payroll Taxes $0 $0 $0
Legal fees $0 $0 $0
Accounting $1,200 $3,600 $6,000
Bank Service Charges $1,500 $5,000 $7,000
Telephone/Cell Phone $900 $1,500 $2,100
License and Permits $500 $1,500 $2,500
Cold Storage $2,500 $6,000 $12,000
Office Supplies $500 $1,000 $2,000
Repairs and Maintenance $1,000 $2,500 $6,000
Gas/Auto Expenses $1,000 $2,000 $5,000
Postage $200 $400 $1,200
Total Operating Expenses $84,725 $231,205 $375,805
Profit Before Interest and Taxes ($4,392) $40,391 $76,846
EBITDA $4,893 $49,676 $86,131
Interest Expense $9,810 $9,060 $8,160
Taxes Incurred $0 $9,399 $0
Net Profit ($14,202) $21,932 $68,686
Net Profit/Sales -11.49% 5.38% 10.10%

9.5 Projected Cash Flow

Our projected cash flow is outlined in the following chart and table.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $123,589 $407,853 $679,746
Subtotal Cash from Operations $123,589 $407,853 $679,746
Additional Cash Received
Sales Tax, VAT, HST/GST Received $4,944 $16,314 $27,190
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 $60,000 $60,000
Subtotal Cash Received $128,533 $484,167 $766,936
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $34,040 $102,120 $162,220
Bill Payments $89,311 $294,893 $461,222
Subtotal Spent on Operations $123,351 $397,013 $623,442
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $4,466 $16,314 $27,190
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $12,000 $14,000 $16,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $65,000 $30,000 $30,000
Dividends $0 $0 $0
Subtotal Cash Spent $204,817 $457,327 $696,631
Net Cash Flow ($76,284) $26,840 $70,304
Cash Balance $41,716 $68,556 $138,861

9.6 Projected Balance Sheet

The following table explains the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $41,716 $68,556 $138,861
Inventory $16,744 $52,744 $87,906
Other Current Assets $0 $0 $0
Total Current Assets $58,460 $121,300 $226,767
Long-term Assets
Long-term Assets $130,000 $160,000 $190,000
Accumulated Depreciation $9,285 $18,570 $27,855
Total Long-term Assets $120,715 $141,430 $162,145
Total Assets $179,175 $262,730 $388,912
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $9,899 $25,522 $39,018
Current Borrowing $0 $0 $0
Other Current Liabilities $478 $478 $478
Subtotal Current Liabilities $10,376 $26,000 $39,496
Long-term Liabilities $158,000 $144,000 $128,000
Total Liabilities $168,376 $170,000 $167,496
Paid-in Capital $70,000 $130,000 $190,000
Retained Earnings ($45,000) ($59,202) ($37,270)
Earnings ($14,202) $21,932 $68,686
Total Capital $10,798 $92,730 $221,416
Total Liabilities and Capital $179,175 $262,730 $388,912
Net Worth $10,798 $92,730 $221,416

9.7 Business Ratios

Projected business ratios are provided in the table below. The final column, Industry Profile, shows ratios for the Fast-Food Restaurant, Independent industry, as determined by the Standard Industry Classification (SIC) Index code 7999.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 230.01% 66.66% 8.67%
Percent of Total Assets
Inventory 9.35% 20.08% 22.60% 3.24%
Other Current Assets 0.00% 0.00% 0.00% 37.31%
Total Current Assets 32.63% 46.17% 58.31% 45.97%
Long-term Assets 67.37% 53.83% 41.69% 54.03%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 5.79% 9.90% 10.16% 17.94%
Long-term Liabilities 88.18% 54.81% 32.91% 22.26%
Total Liabilities 93.97% 64.71% 43.07% 40.20%
Net Worth 6.03% 35.29% 56.93% 59.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 65.00% 66.59% 66.59% 59.05%
Selling, General & Administrative Expenses 76.49% 61.21% 56.49% 39.24%
Advertising Expenses 7.51% 0.00% 0.00% 1.96%
Profit Before Interest and Taxes -3.55% 9.90% 11.31% 1.92%
Main Ratios
Current 5.63 4.67 5.74 1.04
Quick 4.02 2.64 3.52 0.66
Total Debt to Total Assets 93.97% 64.71% 43.07% 50.22%
Pre-tax Return on Net Worth -131.51% 33.79% 31.02% 6.90%
Pre-tax Return on Assets -7.93% 11.93% 17.66% 13.87%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -11.49% 5.38% 10.10% n.a
Return on Equity -131.51% 23.65% 31.02% n.a
Activity Ratios
Inventory Turnover 2.78 3.92 3.23 n.a
Accounts Payable Turnover 10.02 12.17 12.17 n.a
Payment Days 27 21 25 n.a
Total Asset Turnover 0.69 1.55 1.75 n.a
Debt Ratios
Debt to Net Worth 15.59 1.83 0.76 n.a
Current Liab. to Liab. 0.06 0.15 0.24 n.a
Liquidity Ratios
Net Working Capital $48,083 $95,300 $187,271 n.a
Interest Coverage -0.45 4.46 9.42 n.a
Additional Ratios
Assets to Sales 1.45 0.64 0.57 n.a
Current Debt/Total Assets 6% 10% 10% n.a
Acid Test 4.02 2.64 3.52 n.a
Sales/Net Worth 11.45 4.40 3.07 n.a
Dividend Payout 0.00 0.00 0.00 n.a