Sagebrush Sam's

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Steak Buffet Restaurant Business Plan

Financial Plan

Sales -- Sagebrush Sam's is basing its projected sales on the assumption that the first unit will open on July 1, 2001. The second restaurant will open on July 1, 2002, followed by the last one opening on January 1, 2003. We have projected sales on the low side using $3 million dollars per year per restaurant. We did not factor in any sales growth for subsequent years.

Cost of Goods Sold -- The cost of goods sold was determined by taking actual Profit and Loss statements from various restaurant concepts and then using our pricing structure and guest counts to arrive at costs.

Management Payroll -- Figures are based upon the use of five managers per unit at our maximum bonus and salary levels. If we use four managers per restaurant, this will lower our payroll.

Fixed and Variable Expenses -- The various fixed and variable expenses were determined by taking actual numbers from several different restaurant concepts.

Marketing Fees -- These funds will be used for the production of various marketing materials.

Advertising -- These funds will be used, if necessary, to maintain our sales at projected levels. If we are running significantly ahead of our sales projections, then these funds may not be necessary.

Management Fees -- We will use these dollars for accounting and payroll services of our firm. As we grow in size, this cost burden will shrink per store due to efficiencies in volume.

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 appendix. Interest rates, tax rates, and personnel burden are based on conservative assumptions. Some of the more important underlying assumptions are:

  • We assume a strong economy, without a major recession.
  • We assume, of course, that there are no unforeseen changes in consumers' tastes or interests to make our concept less competitive.
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

Key Financial Indicators

Food costs must be kept at, or below, 35%.

Unit level employee costs must be kept at, or below, 17%.

One of the other important indicators is inventory turnover. In the restaurant business, turnover exceeds 50 per year, with product being purchased and sold often within the week. The only exception to this will be our sirloin steaks, which will be aged at the unit for 21 days.

Above all, controls must be instituted and maintained over multiple store locations.

Sagebrush Sam's will use state-of-the-art restaurant control and inventory systems. All systems will be computer-based, allowing for accurate off-premises control.

Break-even Analysis

VARIABLE COSTS

  1. 35.00% - Cost of goods sold.
  2. 17.00% - Employee payroll.
  3. 00.25% - Credit card charges.
  4. 00.33% - Marketing fees.
  5. 2.00% - Management fees.
  6. 2.00% - Advertising.
  7. 2.00% - Management bonus.
  8. 3.03% - Employee payroll taxes and benefits.
  9. 1.50% - Paper and cleaning.
  10. 63.11% - Total variable costs.

ANNUAL FIXED COSTS

  1. $170,000 - Management salaries.
  2. $37,000 - Management payroll taxes and benefits.
  3. $16,410 - Group insurance.
  4. $137,100 - Controllable expenses minus credit card charges and paper/cleaning.
  5. $40,208 - Other expenses minus marketing fees, advertising, and management fees.
  6. $85,000 - Depreciation.
  7. $485,718 - Total fixed costs.
Break-even Analysis
Monthly Revenue Break-even $67,519
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost $43,888

Projected Profit and Loss

Projected Profit and Loss Income Statement for the entire company for three years. Estimates for each month of the first year are in the appendix tables.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,644,606 $4,644,600 $9,000,000
Direct Cost of Sales $575,611 $1,627,610 $3,150,000
Production Payroll $468,406 $1,044,582 $2,040,000
Other $0 $0 $0
Total Cost of Sales $1,044,017 $2,672,192 $5,190,000
Gross Margin $600,589 $1,972,408 $3,810,000
Gross Margin % 36.52% 42.47% 42.33%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $0 $0 $0
Advertising/Promotion $32,892 $92,892 $180,000
Production Expense $5,427 $15,327 $29,700
Miscellaneous $0 $0 $0
Total Sales and Marketing Expenses $38,319 $108,219 $209,700
Sales and Marketing % 2.33% 2.33% 2.33%
General and Administrative Expenses
General and Administrative Payroll $152,675 $193,000 $304,000
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $42,504 $127,500 $255,000
Fixed Costs $44,652 $133,962 $267,924
Variable Costs $94,565 $267,065 $517,500
Utilities $40,002 $120,000 $240,000
Insurance $4,002 $12,000 $24,000
Rent $0 $0 $0
Payroll Taxes $109,931 $219,052 $414,888
Other General and Administrative Expenses $0 $0 $0
Total General and Administrative Expenses $488,331 $1,072,579 $2,023,312
General and Administrative % 29.69% 23.09% 22.48%
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 $526,651 $1,180,798 $2,233,012
Profit Before Interest and Taxes $73,938 $791,610 $1,576,988
EBITDA $116,442 $919,110 $1,831,988
Interest Expense $0 $0 $0
Taxes Incurred $17,727 $197,903 $400,818
Net Profit $56,212 $593,708 $1,176,170
Net Profit/Sales 3.42% 12.78% 13.07%

Projected Cash Flow

The chart and table below show our cash flow projections. Monthly figures are in the appendix tables.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $1,644,606 $4,644,600 $9,000,000
Subtotal Cash from Operations $1,644,606 $4,644,600 $9,000,000
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 $1,644,606 $4,644,600 $9,000,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $621,081 $1,237,582 $2,344,000
Bill Payments $817,393 $3,061,401 $5,221,404
Subtotal Spent on Operations $1,438,474 $4,298,983 $7,565,404
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 $1,438,474 $4,298,983 $7,565,404
Net Cash Flow $206,132 $345,617 $1,434,596
Cash Balance $366,132 $711,749 $2,146,344

Projected Balance Sheet

The accompanying table presents our year end balance sheet estimates from our first three years.  Year one monthly information is included in the appendix tables.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $366,132 $711,749 $2,146,344
Inventory $101,063 $561,795 $744,178
Other Current Assets $100,000 $100,000 $100,000
Total Current Assets $567,195 $1,373,543 $2,990,522
Long-term Assets
Long-term Assets $1,500,000 $1,500,000 $1,500,000
Accumulated Depreciation $42,504 $170,004 $425,004
Total Long-term Assets $1,457,496 $1,329,996 $1,074,996
Total Assets $2,024,691 $2,703,539 $4,065,518
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $173,479 $258,620 $444,428
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $173,479 $258,620 $444,428
Long-term Liabilities $0 $0 $0
Total Liabilities $173,479 $258,620 $444,428
Paid-in Capital $2,003,945 $2,003,945 $2,003,945
Retained Earnings ($208,945) ($152,733) $440,974
Earnings $56,212 $593,708 $1,176,170
Total Capital $1,851,212 $2,444,919 $3,621,090
Total Liabilities and Capital $2,024,691 $2,703,539 $4,065,518
Net Worth $1,851,212 $2,444,919 $3,621,090

Business Ratios

These business ratios are future estimates based upon current assumptions. Standard industry comparisons are for SIC code 5812, retail eating places.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 182.41% 93.77% 6.96%
Percent of Total Assets
Inventory 4.99% 20.78% 18.30% 3.90%
Other Current Assets 4.94% 3.70% 2.46% 28.39%
Total Current Assets 28.01% 50.81% 73.56% 37.68%
Long-term Assets 71.99% 49.19% 26.44% 62.32%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 8.57% 9.57% 10.93% 19.17%
Long-term Liabilities 0.00% 0.00% 0.00% 29.21%
Total Liabilities 8.57% 9.57% 10.93% 48.38%
Net Worth 91.43% 90.43% 89.07% 51.62%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 36.52% 42.47% 42.33% 59.31%
Selling, General & Administrative Expenses 33.15% 29.68% 29.19% 39.09%
Advertising Expenses 2.00% 2.00% 2.00% 2.75%
Profit Before Interest and Taxes 4.50% 17.04% 17.52% 1.59%
Main Ratios
Current 3.27 5.31 6.73 1.26
Quick 2.69 3.14 5.05 0.87
Total Debt to Total Assets 8.57% 9.57% 10.93% 3.27%
Pre-tax Return on Net Worth 3.99% 32.38% 43.55% 54.38%
Pre-tax Return on Assets 3.65% 29.28% 38.79% 7.17%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.42% 12.78% 13.07% n.a
Return on Equity 3.04% 24.28% 32.48% n.a
Activity Ratios
Inventory Turnover 8.19 4.91 4.82 n.a
Accounts Payable Turnover 5.71 12.17 12.17 n.a
Payment Days 32 25 24 n.a
Total Asset Turnover 0.81 1.72 2.21 n.a
Debt Ratios
Debt to Net Worth 0.09 0.11 0.12 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $393,716 $1,114,923 $2,546,094 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 1.23 0.58 0.45 n.a
Current Debt/Total Assets 9% 10% 11% n.a
Acid Test 2.69 3.14 5.05 n.a
Sales/Net Worth 0.89 1.90 2.49 n.a
Dividend Payout 0.00 0.00 0.00 n.a