We are assuming a low start-up funding figure of approximated $500,000. The business will grow exponentially by a net worth of about two million dollars per year and this growth is based off of sheer cash profits and managerial excellence. Growth will be self financed. No additional funding will be needed.
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 appendices. From the beginning, we recognize that our direct marketing will be critical to advertising, a factor we can influence easily. Weather and catastrophe cannot be so easily planned on and would delay project by a year (hurricane, tornado, etc...) At least we are planning on the potential problem, and dealing with it.
Interest rates, tax rates, and personnel burden are based on conservative assumptions.
Two of the more important underlying assumptions are:
One item of particular note is that we have set our cost of goods for food sales at high percentage factors of 30% to 36%. The majority of seasoned managers would raise an eyebrow at those percentages. We intend to beat these percentages and therefore bring in a windfall on our P & L. One important assumption is our capability to decrease food waste and costs.
Start-up funding requirements come to just shy of $500,000. This presumes we can move into an established, equiped restaurant space. Expenses and asset purchases will increase dramatically if we must fully outfit and equip a space for its first use as a restaurant.
Funding will be through a combination of owner investment, outside investment, and long-term loans. A small amount of current borrowing (credit card purchases) complete the start-up funding.
The break-even assumes variable costs of 38% percent of revenue. This assumption is probably too high, and therefore conservative. With initial monthly expenses of over $86,600 we will need averaged monthly revenues of about $140,000 to break-even.
Our advertising budget pulls data from several tables; the fact that we are spending less than the industry average will be due to getting such great reviews in the consumer and press related magazines and newspapers. Also, of specific note is our unique marketing stunts and plan that does not rely on traditional advertising schemes.
We are profitable in the first year at just over $3 million. As with the break-even, we are projecting very conservatively regarding cost of sales and gross margin. Our cost of goods should be much lower, and gross margin higher, than in this projection. We prefer to project conservatively so that we make sure we have enough cash.
Based on 30+ years of restaurant experience we have budgeted for continued computer and equipage purchases. If we do open in a previously equipped restaurant space we know we will need replacements. If we must open with brand new, guaranteed equipment, we will not have replacement expenses as soon. Normal wear and tear and breakage of plates, glasses, tableware, etc. are budgeted monthly.
Labor costs may be lower than the pro forma projects - but we are planning on worst-case scenario of our attention being diverted as we grow into exactly what we need and when. Later years may be lower as we learn more about how much labor is truly critical. Conversely, if our dinner and show concept is well received, we may have to increase staff (and therefore labor costs) to serve the customer demand.
The Gross Margin Percentage holds steady from year to year due to holding menu and show prices with minimal increases to cover increased food costs and operating expenses. This may be unrealistic - the quandary is - do we want to raise our prices each year or hold them fast. Customer response surveys combined with economic condition analysis will yield the answer to this after the first twelve months. Either way, at worst, we forecast profits between $3-$4 million per annum.
The plan projects a $11,340,000 net worth by 2007 (three years of operation in a high activity vacation environment). The plan anticipates full staffing, a small management team, and maximum acceptance by the dining public. The highest sales will be in the prime summer vacation months, but we believe our unique offering will draw customers to Belle Epoque all year long.
If our sales and profits forecasts prove accurate Chef Joachim will expand his management team and accelerate the long-term plan of opening a second and third Belle Epoque restaurants in other demographic markets. The opening of the second venue will be financed by the profits from this restaurant, and the third site will be financed by the profits from the first two ventures. Obviously this will result in substantial changes in the cash flow and profit figures in year two and year three of this plan.
Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.