4 Moons Pizzeria

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Pizzeria Franchise Business Plan

Financial Plan

Our main concerns will be aggressive time management to keep labor costs under control. Proper purchasing, food preparation and handling, and control of cheese consumption to keep food costs down. Growth will be sustained through increased sales.

7.1 Start-up Funding

Our start-up figures are approximate costs for start-up of a 4 Moons Pizzeria franchise as prescribed by the Franchisor. 

4 Moons has $160,000 initial investment, $25,000 of which will cover the franchise fee.

Our estimated start up is $505,000.  We are seeking an SBA Loan in the amount of $345,000 (see Long term liability line).

Start-up Funding
Start-up Expenses to Fund $266,207
Start-up Assets to Fund $238,793
Total Funding Required $505,000
Assets
Non-cash Assets from Start-up $151,507
Cash Requirements from Start-up $87,286
Additional Cash Raised $0
Cash Balance on Starting Date $87,286
Total Assets $238,793
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $345,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $345,000
Capital
Planned Investment
Solutrian, Steve and Diane $75,000
Mittani, Rikard and Carol $75,000
Additional Investment Requirement $10,000
Total Planned Investment $160,000
Loss at Start-up (Start-up Expenses) ($266,207)
Total Capital ($106,207)
Total Capital and Liabilities $238,793
Total Funding $505,000

7.2 Important Assumptions

We are projecting profit based on the performance of other franchises and our own judgement based on the following:

  • We assume by using marketing strategies, sales strategies, good customer relationships, fresh food, and good management practices, we will succeed.
  • In order to meet the sales goal in the first year, open for at least 360 days, we would have to sell 111 checks each day with a $17 per check average.
  • Our sales each day should reach an minimum average of $1,881.43.
  • Our forecast is based on an average. Some months will increase and others decrease. We do not predict any major decreases in sales, as Ohno area restaurants are busy all year round.
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 0.00% 0.00% 0.00%
Long-term Interest Rate 7.00% 7.00% 7.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.3 Break-even Analysis

Break-even based on fixed costs including rent, insurance, maintenance, investor note, and pre-opening amortization. Additionally, controllables such as service labor, kitchen labor, management labor, excess rent, advertising, royalty, and legal/professional fees are included.

Break-even Analysis
Monthly Revenue Break-even $22,254
Assumptions:
Average Percent Variable Cost 20%
Estimated Monthly Fixed Cost $17,804

7.4 Projected Profit and Loss

As the Profit and Loss table shows, the company expects to continue its steady growth in profitability over the next three years. We predicted a conservative 6% per year increase in sales.

The first month may have higher payroll due to employee training and restaurant set up.

Our operating expenses include rent at $4,242 estimate per month, royalty fees of 5% of gross sales, equipment rental and repair, utilities projected at 11% of gross sales, administrative charges including PC charges, cleaning supplies, payroll charges, and office supplies.

Marketing fees are 4% of gross sales per month.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $677,297 $717,935 $761,011
Direct Cost of Sales $135,461 $143,590 $152,206
Other Costs of Sales $0 $0 $0
Total Cost of Sales $135,461 $143,590 $152,206
Gross Margin $541,836 $574,345 $608,805
Gross Margin % 80.00% 80.00% 80.00%
Expenses
Payroll $126,738 $129,228 $136,982
Marketing/Promotion $0 $0 $0
Depreciation $30,000 $30,000 $30,000
Rent $50,904 $50,904 $52,431
Royalty fees $0 $0 $0
Equip rent/repair $3,000 $5,400 $5,400
Utilities $0 $0 $0
Admin charges $3,000 $3,000 $3,000
Total Operating Expenses $213,642 $218,532 $227,813
Profit Before Interest and Taxes $328,194 $355,813 $380,992
EBITDA $358,194 $385,813 $410,992
Interest Expense $23,367 $21,648 $19,738
Taxes Incurred $91,448 $100,249 $108,376
Net Profit $213,378 $233,915 $252,878
Net Profit/Sales 31.50% 32.58% 33.23%

7.5 Projected Cash Flow

The cash flow depends on assumptions for good daily operational management, good traffic counts in the restaurant, inventory turnover, payment days, and accounts receivable management. We do not predict any new financing until we open our second franchise.

Principal amounts are based on a loan of $345,000 with a 10 year SBA Loan at 7% interest.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $677,297 $717,935 $761,011
Subtotal Cash from Operations $677,297 $717,935 $761,011
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 $677,297 $717,935 $761,011
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $126,738 $129,228 $136,982
Bill Payments $276,887 $324,767 $340,189
Subtotal Spent on Operations $403,625 $453,995 $477,171
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 $22,576 $26,332 $28,237
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $426,201 $480,327 $505,408
Net Cash Flow $251,096 $237,608 $255,603
Cash Balance $338,382 $575,990 $831,592

7.6 Projected Balance Sheet

The balance sheet is quite solid. We do not project any real trouble meeting our debt obligations--as long as we can achieve our specific sales objectives.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $338,382 $575,990 $831,592
Inventory $6,044 $6,407 $6,791
Other Current Assets $41,775 $41,775 $41,775
Total Current Assets $386,201 $624,171 $880,159
Long-term Assets
Long-term Assets $99,732 $99,732 $99,732
Accumulated Depreciation $30,000 $60,000 $90,000
Total Long-term Assets $69,732 $39,732 $9,732
Total Assets $455,933 $663,903 $889,891
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $26,338 $26,725 $28,071
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $26,338 $26,725 $28,071
Long-term Liabilities $322,424 $296,092 $267,855
Total Liabilities $348,762 $322,817 $295,926
Paid-in Capital $160,000 $160,000 $160,000
Retained Earnings ($266,207) ($52,829) $181,086
Earnings $213,378 $233,915 $252,878
Total Capital $107,171 $341,086 $593,964
Total Liabilities and Capital $455,933 $663,903 $889,891
Net Worth $107,171 $341,086 $593,964

7.7 Business Ratios

The company's projected business ratios are provided in the following table. The final column, Industry Profile, shows ratios for the "Pizza Restaurant Industry", as determined by the Standard Industry Classification 5812.0600 with annual sales of $500,000 to $999,000.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 6.00% 6.00% 5.24%
Percent of Total Assets
Inventory 1.33% 0.97% 0.76% 4.34%
Other Current Assets 9.16% 6.29% 4.69% 35.11%
Total Current Assets 84.71% 94.02% 98.91% 43.74%
Long-term Assets 15.29% 5.98% 1.09% 56.26%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 5.78% 4.03% 3.15% 18.93%
Long-term Liabilities 70.72% 44.60% 30.10% 25.48%
Total Liabilities 76.49% 48.62% 33.25% 44.41%
Net Worth 23.51% 51.38% 66.75% 55.59%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 80.00% 80.00% 80.00% 61.91%
Selling, General & Administrative Expenses 48.50% 47.42% 46.77% 39.08%
Advertising Expenses 4.43% 0.00% 0.00% 2.55%
Profit Before Interest and Taxes 48.46% 49.56% 50.06% 1.38%
Main Ratios
Current 14.66 23.36 31.35 1.14
Quick 14.43 23.12 31.11 0.79
Total Debt to Total Assets 76.49% 48.62% 33.25% 49.97%
Pre-tax Return on Net Worth 284.43% 97.97% 60.82% 3.97%
Pre-tax Return on Assets 66.86% 50.33% 40.60% 7.93%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 31.50% 32.58% 33.23% n.a
Return on Equity 199.10% 68.58% 42.57% n.a
Activity Ratios
Inventory Turnover 23.52 23.07 23.07 n.a
Accounts Payable Turnover 11.51 12.17 12.17 n.a
Payment Days 27 30 29 n.a
Total Asset Turnover 1.49 1.08 0.86 n.a
Debt Ratios
Debt to Net Worth 3.25 0.95 0.50 n.a
Current Liab. to Liab. 0.08 0.08 0.09 n.a
Liquidity Ratios
Net Working Capital $359,863 $597,446 $852,087 n.a
Interest Coverage 14.04 16.44 19.30 n.a
Additional Ratios
Assets to Sales 0.67 0.92 1.17 n.a
Current Debt/Total Assets 6% 4% 3% n.a
Acid Test 14.43 23.12 31.11 n.a
Sales/Net Worth 6.32 2.10 1.28 n.a
Dividend Payout 0.00 0.00 0.00 n.a