Fire Fountain Grille

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Steak Restaurant Business Plan

Financial Plan

Our main concerns will be aggressive time management, so that our labor costs stay under control, and proper purchasing, prep and food handling to keep food costs down, as well as managing the higher costs of meats and seafoods. Secondarily, hiring the best grill and broiler cooks, training them properly and retaining them will be a critical component to good meat and seafood costs. A good grill cook does not waste steaks by burning them, nor does he anger customers by undercooking them. He must also be accurate time after time in how he carves his prime rib.

Growth will be sustained through a contribution to an expansion fund, and potential investment from current investors in a "roll-over" plan, and from potential future investors or bank capital.

8.1 Start-up Funding

We are seeking $900,000 (see section 2.2 "Start-up Summary"), and will seek it from one, two, or three investment groups, or under an SEC "Regulation D" equity offering (where the company sells partial ownership in the company - via the sale of stock or a membership unit, to raise capital). We prefer this approach as an early stage company because there is no set repayment schedule or debt service payments - the investors profit when the company profits. Initially, the company is projected as a Limited Partnership, but may switch the preferred structure to a stock "C" Corporation or Limited Liability Corporation "LLC". The preparation of the investment documents will be handled in a cooperative effort by the legal firms representing each party individually. These documents will include, but are not limited to:

Private Placement Memorandum
The Private Placement Memorandum, or "PPM", is the document that discloses all pertinent information to the investors about the company, proposed company operations, the transaction structure (whether we are selling equity ownership or raising debt financing from the investors), the terms of the investment (share price, note amounts, maturity dates, etc.), risks the investors may face, etc.

Form D SEC Filing
It notifies the SEC that we are using the Regulation D program and provides them basic information on the company and the offering. It is not an approval document or registration - it is merely a filing that notifies the SEC that we have a Regulation D Offering in place. Raising capital from investors without filing this document with the Federal government could place a company in violation of securities laws.

Subscription Agreement
The Subscription Agreement sets forth the terms and conditions of the investment. It is the "sales contract" for purchasing the securities.

Promissory Note
For a debt offering (if necessary), outlining the terms of any loan arrangement with the investors. The note is the actual "loan document" between the company and the investor.

Start-up Funding
Start-up Expenses to Fund $324,500
Start-up Assets to Fund $645,500
Total Funding Required $970,000
Assets
Non-cash Assets from Start-up $65,000
Cash Requirements from Start-up $580,500
Additional Cash Raised $0
Cash Balance on Starting Date $580,500
Total Assets $645,500
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $50,000
Accounts Payable (Outstanding Bills) $10,000
Other Current Liabilities (interest-free) $10,000
Total Liabilities $70,000
Capital
Planned Investment
Investor Group One $300,000
Investor Group Two $300,000
Investor Group Three $300,000
Investor Contingency $0
Additional Investment Requirement $0
Total Planned Investment $900,000
Loss at Start-up (Start-up Expenses) ($324,500)
Total Capital $575,500
Total Capital and Liabilities $645,500
Total Funding $970,000

8.2 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, payroll taxes, property taxes, excess rent, advertising and legal/professional fees are included.

 

Break-even Analysis
Monthly Revenue Break-even $64,679
Assumptions:
Average Percent Variable Cost 31%
Estimated Monthly Fixed Cost $44,890

8.3 Projected Profit and Loss

2004 is not a full year on the yearly P&L. Highlights include a bottom line of better than 18% for every year. The numbers reflect realism in the start up and continuing operations of the restaurant. We begin contributing aggressively to an expansion fund in 2005. We begin accruing for vacations immediately, and we are budgeting money from the insurance line for health benefits, all as an early commitment to the future prosperity of our staff. These numbers are an excellent indication that our investors, owners, partners and staff will all prosper and grow with the Fire Fountain Grille!

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $1,297,957 $2,360,000 $2,548,800 $2,752,702 $2,972,917
Direct Cost of Sales $397,121 $732,671 $789,990 $853,198 $921,455
Production Payroll $100,140 $171,576 $174,980 $178,503 $182,578
Other Costs of Goods $0 $0 $0 $0 $0
Total Cost of Sales $497,261 $904,247 $964,970 $1,031,701 $1,104,033
Gross Margin $800,696 $1,455,753 $1,583,830 $1,721,001 $1,868,884
Gross Margin % 61.69% 61.68% 62.14% 62.52% 62.86%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $75,876 $128,164 $128,346 $128,531 $122,719
Operating Supplies $12,940 $23,600 $27,840 $32,860 $38,770
Janitorial $10,500 $18,000 $18,000 $18,000 $18,000
Repairs $1,750 $3,000 $6,000 $6,000 $9,000
Aprons, Towels & Napkins $7,000 $12,000 $12,000 $12,000 $12,000
Menus $1,050 $1,800 $1,800 $1,800 $1,800
Miscellaneous Supplies $1,750 $3,000 $3,000 $3,000 $3,000
Miscellaneous Purchases $51,500 $3,000 $3,000 $3,000 $3,000
Complimentary Meals or Drinks For PR $5,250 $9,000 $9,000 $9,000 $9,000
Advertising/Promotion $3,000 $6,000 $6,000 $6,000 $6,000
Credit Card Charges $10,760 $23,600 $27,840 $32,680 $38,775
Fraud Credit Cards/Checks $1,050 $1,800 $1,800 $1,800 $1,800
Professional Fees $1,000 $3,000 $3,000 $3,000 $3,000
Membership Fees $525 $900 $900 $900 $900
Uniforms $600 $1,800 $1,800 $1,800 $1,800
Travel $0 $3,000 $3,000 $6,000 $6,000
Employee Discounts $3,500 $6,000 $6,000 $6,000 $6,000
Total Sales and Marketing Expenses $188,051 $247,664 $259,326 $272,371 $281,564
Sales and Marketing % 14.49% 10.49% 10.17% 9.89% 9.47%
General and Administrative Expenses
General and Administrative Payroll $81,200 $139,200 $140,160 $141,168 $142,226
Sales and Marketing and Other Expenses $0 $0 $0 $0 $0
Depreciation $13,500 $24,000 $24,000 $24,000 $24,000
Leased Equipment $1,050 $1,800 $1,800 $1,800 $1,800
Utilities $58,000 $99,000 $105,000 $108,000 $111,000
Amortization $35,000 $60,000 $60,000 $60,000 $60,000
Debt Service $25,000 $75,000 $150,000 $175,000 $175,000
Insurance $21,000 $36,000 $38,000 $40,000 $42,000
Excess Insurance $3,500 $6,000 $6,500 $7,000 $7,500
Property Taxes $10,500 $18,000 $19,000 $20,000 $21,000
Excess Taxes $3,500 $6,000 $6,200 $6,300 $6,400
Vacation Accrual $2,450 $4,200 $4,300 $4,500 $4,700
Base Rent $42,000 $72,000 $72,000 $72,000 $72,000
Percentage Rent $12,958 $23,600 $27,848 $32,860 $38,775
CAM Rent $5,250 $9,000 $9,500 $10,000 $10,500
Payroll Taxes $25,722 $43,894 $44,349 $44,820 $44,752
Other General and Administrative Expenses $0 $0 $0 $0 $0
Total General and Administrative Expenses $340,630 $617,694 $708,657 $747,448 $761,653
General and Administrative % 26.24% 26.17% 27.80% 27.15% 25.62%
Other Expenses:
Other Payroll $0 $0 $0 $0 $0
Consultants $0 $0 $0 $0 $0
Expansion Fund $10,000 $50,000 $40,000 $75,000 $125,000
Total Other Expenses $10,000 $50,000 $40,000 $75,000 $125,000
Other % 0.77% 2.12% 1.57% 2.72% 4.20%
Total Operating Expenses $538,681 $915,358 $1,007,983 $1,094,819 $1,168,217
Profit Before Interest and Taxes $262,015 $540,395 $575,847 $626,182 $700,667
EBITDA $275,515 $564,395 $599,847 $650,182 $724,667
Interest Expense $4,928 $3,916 $2,860 $1,804 $748
Taxes Incurred $38,510 $80,472 $93,110 $93,657 $113,737
Net Profit $218,577 $456,007 $479,877 $530,721 $586,182
Net Profit/Sales 16.84% 19.32% 18.83% 19.28% 19.72%

8.4 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 will need no new financing until we open our second unit.

Initial projections are a sales-to-investment ratio in excess of 2-to-1, return on investment in excess of 30 percent and return on equity of 20 percent-plus.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $1,297,957 $2,360,000 $2,548,800 $2,752,702 $2,972,917
Subtotal Cash from Operations $1,297,957 $2,360,000 $2,548,800 $2,752,702 $2,972,917
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $1,297,957 $2,360,000 $2,548,800 $2,752,702 $2,972,917
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $257,216 $438,940 $443,486 $448,202 $447,523
Bill Payments $738,769 $1,511,347 $1,600,633 $1,747,267 $1,912,087
Subtotal Spent on Operations $995,985 $1,950,287 $2,044,119 $2,195,469 $2,359,610
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $9,600 $9,600 $9,600 $9,600 $9,600
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $1,005,585 $1,959,887 $2,053,719 $2,205,069 $2,369,210
Net Cash Flow $292,372 $400,113 $495,081 $547,633 $603,707
Cash Balance $872,872 $1,272,985 $1,768,066 $2,315,698 $2,919,405

8.5 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 objectives.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $872,872 $1,272,985 $1,768,066 $2,315,698 $2,919,405
Inventory $61,302 $113,099 $121,947 $131,703 $142,239
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $934,174 $1,386,084 $1,890,013 $2,447,401 $3,061,645
Long-term Assets
Long-term Assets $65,000 $65,000 $65,000 $65,000 $65,000
Accumulated Depreciation $13,500 $37,500 $61,500 $85,500 $109,500
Total Long-term Assets $51,500 $27,500 $3,500 ($20,500) ($44,500)
Total Assets $985,674 $1,413,584 $1,893,513 $2,426,901 $3,017,145
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $141,197 $122,700 $132,352 $144,619 $158,281
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $10,000 $10,000 $10,000 $10,000 $10,000
Subtotal Current Liabilities $151,197 $132,700 $142,352 $154,619 $168,281
Long-term Liabilities $40,400 $30,800 $21,200 $11,600 $2,000
Total Liabilities $191,597 $163,500 $163,552 $166,219 $170,281
Paid-in Capital $900,000 $900,000 $900,000 $900,000 $900,000
Retained Earnings ($324,500) ($105,923) $350,084 $829,961 $1,360,682
Earnings $218,577 $456,007 $479,877 $530,721 $586,182
Total Capital $794,077 $1,250,084 $1,729,961 $2,260,682 $2,846,864
Total Liabilities and Capital $985,674 $1,413,584 $1,893,513 $2,426,901 $3,017,145
Net Worth $794,077 $1,250,084 $1,729,961 $2,260,682 $2,846,864

8.6 Business Ratios

The table follows with our main business ratios. We do intend to improve gross margin, collection days, sales and labor controls.  Our ratios are compared to industry ratios for Steak Restaurants - SIC code 5812.0802.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 81.82% 8.00% 8.00% 8.00% 6.96%
Percent of Total Assets
Inventory 6.22% 8.00% 6.44% 5.43% 4.71% 3.90%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 28.39%
Total Current Assets 94.78% 98.05% 99.82% 100.84% 101.47% 37.68%
Long-term Assets 5.22% 1.95% 0.18% -0.84% -1.47% 62.32%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 15.34% 9.39% 7.52% 6.37% 5.58% 19.17%
Long-term Liabilities 4.10% 2.18% 1.12% 0.48% 0.07% 29.21%
Total Liabilities 19.44% 11.57% 8.64% 6.85% 5.64% 48.38%
Net Worth 80.56% 88.43% 91.36% 93.15% 94.36% 51.62%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 61.69% 61.68% 62.14% 62.52% 62.86% 59.31%
Selling, General & Administrative Expenses 44.89% 42.42% 43.12% 43.35% 42.99% 39.09%
Advertising Expenses 1.00% 1.00% 1.09% 1.19% 1.30% 2.75%
Profit Before Interest and Taxes 20.19% 22.90% 22.59% 22.75% 23.57% 1.59%
Main Ratios
Current 6.18 10.45 13.28 15.83 18.19 1.26
Quick 5.77 9.59 12.42 14.98 17.35 0.87
Total Debt to Total Assets 19.44% 11.57% 8.64% 6.85% 5.64% 3.27%
Pre-tax Return on Net Worth 32.38% 42.92% 33.12% 27.62% 24.59% 54.38%
Pre-tax Return on Assets 26.08% 37.95% 30.26% 25.73% 23.20% 7.17%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 16.84% 19.32% 18.83% 19.28% 19.72% n.a
Return on Equity 27.53% 36.48% 27.74% 23.48% 20.59% n.a
Activity Ratios
Inventory Turnover 10.91 8.40 6.72 6.73 6.73 n.a
Accounts Payable Turnover 6.16 12.17 12.17 12.17 12.17 n.a
Payment Days 27 32 29 29 29 n.a
Total Asset Turnover 1.32 1.67 1.35 1.13 0.99 n.a
Debt Ratios
Debt to Net Worth 0.24 0.13 0.09 0.07 0.06 n.a
Current Liab. to Liab. 0.79 0.81 0.87 0.93 0.99 n.a
Liquidity Ratios
Net Working Capital $782,977 $1,253,384 $1,747,661 $2,292,782 $2,893,364 n.a
Interest Coverage 53.17 138.00 201.35 347.11 936.72 n.a
Additional Ratios
Assets to Sales 0.76 0.60 0.74 0.88 1.01 n.a
Current Debt/Total Assets 15% 9% 8% 6% 6% n.a
Acid Test 5.77 9.59 12.42 14.98 17.35 n.a
Sales/Net Worth 1.63 1.89 1.47 1.22 1.04 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

8.7 Long-term Plan

Our long term plan is to continue to maintain a cash flow of 19-20% while increasing sales annually, thereby increasing actual dollars earned by our investors, principals and staff.