Zara Restaurant and Lounge
Financial Plan
Forecast
Key Assumptions
Important Assumptions
The financial plan depends on important assumptions, most of which are reflected in the financial statements that follow. We have been cautious with our projections, and incorporate a mitigation for all manageable risks. The key underlying assumptions are:
Economy
Slow Economic Recovery. We anticipate a slow-growth economy, recovering from an economic recession.
Business Growth
Annual Growth Rate Percentage. We anticipate modest growth over the coming years. The financials account for the following growth projections:
- Year 2: 6%
- Year 3: 5%
- Year 4: 4%
- Year 5: 4%
Weekly Sales Variance. Saturday will typically be our best sales for the week. The sales volume for all other days is represented as a percentage relative to Saturday. Therefore our weekly sales will vary as follows:
- Monday: 55%
- Tuesday: 60%
- Wednesday: 75%
- Thursday: 95%
- Friday: 90%
- Saturday: 100%
Seasonal Sales Variance. In Atlanta, October through the late season is the most productive sales period, while the summer months tend to be the slowest restaurant period. This trend is reflected in the financials though a seasonal variance as follows (where October is targeted to be our most successful sales month):
- January: 85%
- February: 95%
- March: 85%
- April: 90%
- May: 90%
- June: 70%
- July: 75%
- August: 80%
- September: 85%
- October: 100%
- November: 95%
- December: 95%
Industry & Start-Up
Fiscal Year-1 Ramp-up. Our experience in the industry confirms a longer ramp-up stage for restaurants over other retail/service businesses. Our Annual Sales Growth is based on attaining the following seating capacity percentage per dining period:
- Year 1: After-Hours = 53%, Lunch = 70%, Dinner = 88%
- Year 2: After-Hours = 70%, Lunch = 82%, Dinner = 100% (implied wait period)
- Year 3: After-Hours = 80%, Lunch = 87%, Dinner = 100% (implied wait period)
Six-Month Start-Up Stage. As a new restaurant entry to the Midtown market, the ramp-up in customer draw is expected to extend over 6 months. This is reflected in a higher than average monthly sales variance shown as follows (Worst-case / Expected-case):
- Month 1: 32% / 51%
- Month 2: 41% / 58%
- Month 3: 52% / 66%
- Month 4: 64% / 75%
- Month 5: 80% / 90%
- Month 6: 90% / 92%
Market Analysis findings are static. We assume that there are no unforeseen changes in findings outlined in the Market Analysis.
Pricing & Cost Control
Competitive Pricing Model. Revenue calculations are based upon competitive price comparisons and established menu values in the current marketplace. The following are baseline assumptions on Average Check Totals, and Average Seat Turns:
Daily average for lunch spending is $10.50 per person, dinner at $27.50 per person; and $17.50 per person for After-Hours dining (All check totals include Beverages, but not Bar). Seat Turn averages are modestly estimated at:
- Year 1: After-Hours = 0.7, Lunch = 1.0, Dinner = 1.0
- Year 2: After-Hours = 0.7, Lunch = 1.0, Dinner = 1.0
- Year 3: After-Hours = 1.0, Lunch = 1.0, Dinner = 1.25
Cost Control. Cost of goods sold have been calculated as a percentage of sales and will be monitored on a daily basis in order to keep Cost of Food within the range of 31 – 33%, Bar Costs within 28 – 31%, and Cost of Beverages (Non Alcohol) below 9%. With a focus on Cost Control, we anticipate 6 months to fine tune the restaurant operations and manage our costs within the defined tolerance range.
Inventory turnover and Accounts Payable. Accounts receivable turnover is calculated to be 0 days, as payment is rendered with service. Inventory is turned on a 7 day cycle as inventory is used daily within all categories, and accounts payable are projected to be 30 days.
Revenue by Month
Expenses by Month
Net Profit (or Loss) by Year
Financing
Use of Funds
Itemized pre-launch expenses:
Complete startup costs and funding plan:
Implications on financials and starting balance:
We show the grant funding on the capitalization table for convenience only. It is non-dilutive funding, so it doesn’t require distributing shares in the corporation.
Sources of Funds
We will be getting the money to start Zara from the Following Sources:
Zander Hunte – $60,0000
Peter Smith – $50,000
5 investors (yet to be determined) – $200,000
Midtown Revitalization Grant – $130,000
Long term Loan – $195,000
Accounts Payable – $30,000
Totaling $665,000
Note: the Midtown Revitalization Grant is entered on our financials as equity investment. However, it is non dilutive, so it won’t require shares of ownership.
Also: The $195,000 long-term business loan shows in our starting balance as $35,396 current debt and $159,604 of long-term. This is due to the standard treatment dividing long term debt into the current portion and the long-term portion.
Statements
Projected Profit & Loss
| 2020 | 2021 | 2022 | |
|---|---|---|---|
| Revenue | $1,396,100 | $1,626,000 | $1,845,712 |
| Direct Costs | $572,401 | $666,660 | $756,742 |
| Gross Margin | $823,699 | $959,340 | $1,088,970 |
| Gross Margin % | 59% | 59% | 59% |
| Operating Expenses | |||
| Salaries & Wages | $391,980 | $562,936 | $633,175 |
| Employee Related Expenses | $39,356 | $56,528 | $59,466 |
| Marketing and Promotion | $7,293 | $4,800 | $4,900 |
| Leased Equipment | $12,000 | $12,000 | $12,000 |
| Accounting | $6,000 | $6,000 | $6,000 |
| Legal Retainer Fees | $2,400 | $2,400 | $2,400 |
| Business License Fees | $6,000 | $6,000 | $6,000 |
| Credit Card Expense | $18,720 | $18,720 | $18,720 |
| Music & Entertainment | $4,320 | $4,320 | $4,320 |
| Repairs and Maintenance | $9,000 | $9,000 | $9,000 |
| Utilities | $14,400 | $14,400 | $14,400 |
| Telephone | $1,800 | $1,800 | $1,800 |
| Insurance | $21,600 | $21,600 | $21,600 |
| Rent | $75,360 | $75,360 | $75,360 |
| Trash | $4,800 | $4,800 | $4,800 |
| Dishware, Uniforms, Cleaning Supplies, | $12,240 | $12,240 | $12,240 |
| R and D | $2,400 | $2,400 | $2,400 |
| Amortization of Other Current Assets | $0 | $0 | $0 |
| Total Operating Expenses | $629,669 | $815,304 | $888,581 |
| Operating Income | $194,030 | $144,036 | $200,389 |
| Interest Incurred | $7,036 | $5,593 | $4,093 |
| Depreciation and Amortization | $12,000 | $12,000 | $12,000 |
| Gain or Loss from Sale of Assets | |||
| Income Taxes | $26,249 | $18,966 | $27,645 |
| Total Expenses | $1,247,355 | $1,518,523 | $1,689,062 |
| Net Profit | $148,745 | $107,477 | $156,650 |
| Net Profit/Sales | 11% | 7% | 8% |
Projected Balance Sheet
| Starting Balances | 2020 | 2021 | 2022 | |
|---|---|---|---|---|
| Cash | $75,000 | $169,397 | $239,418 | $370,395 |
| Accounts Receivable | $22,010 | $20,325 | $23,071 | |
| Inventory | $27,000 | $55,555 | $63,062 | $63,062 |
| Other Current Assets | $10,000 | $10,000 | $10,000 | $10,000 |
| Total Current Assets | $112,000 | $256,962 | $332,804 | $466,528 |
| Long-Term Assets | $120,000 | $120,000 | $120,000 | $120,000 |
| Accumulated Depreciation | ($12,000) | ($24,000) | ($36,000) | |
| Total Long-Term Assets | $120,000 | $108,000 | $96,000 | $84,000 |
| Total Assets | $232,000 | $364,962 | $428,804 | $550,528 |
| Accounts Payable | $30,000 | $36,657 | $38,055 | $39,298 |
| Income Taxes Payable | $12,956 | $4,762 | $6,931 | |
| Sales Taxes Payable | $0 | $0 | $0 | |
| Short-Term Debt | $35,396 | $36,838 | $38,339 | $39,901 |
| Prepaid Revenue | ||||
| Total Current Liabilities | $65,396 | $86,452 | $81,157 | $86,130 |
| Long-Term Debt | $156,604 | $119,765 | $81,426 | $41,525 |
| Long-Term Liabilities | $156,604 | $119,765 | $81,426 | $41,525 |
| Total Liabilities | $222,000 | $206,217 | $162,583 | $127,655 |
| Paid-In Capital | $440,000 | $440,000 | $440,000 | $440,000 |
| Retained Earnings | ($430,000) | ($430,000) | ($281,255) | ($173,778) |
| Earnings | $148,745 | $107,476 | $156,651 | |
| Total Owner’s Equity | $10,000 | $158,745 | $266,222 | $422,872 |
| Total Liabilities & Equity | $232,000 | $364,962 | $428,804 | $550,528 |
Projected Cash Flow Statement
| 2020 | 2021 | 2022 | |
|---|---|---|---|
| Net Cash Flow from Operations | |||
| Net Profit | $148,745 | $107,477 | $156,650 |
| Depreciation & Amortization | $12,000 | $12,000 | $12,000 |
| Change in Accounts Receivable | ($22,010) | $1,685 | ($2,746) |
| Change in Inventory | ($28,555) | ($7,507) | $0 |
| Change in Accounts Payable | $6,657 | $1,398 | $1,243 |
| Change in Income Tax Payable | $12,956 | ($8,194) | $2,169 |
| Change in Sales Tax Payable | $0 | $0 | $0 |
| Change in Prepaid Revenue | |||
| Net Cash Flow from Operations | $129,794 | $106,859 | $169,316 |
| Investing & Financing | |||
| Assets Purchased or Sold | |||
| Net Cash from Investing | |||
| Investments Received | |||
| Dividends & Distributions | |||
| Change in Short-Term Debt | $1,442 | $1,501 | $1,562 |
| Change in Long-Term Debt | ($36,838) | ($38,339) | ($39,901) |
| Net Cash from Financing | ($35,396) | ($36,838) | ($38,339) |
| Cash at Beginning of Period | $75,000 | $169,397 | $239,418 |
| Net Change in Cash | $94,397 | $70,020 | $130,977 |
| Cash at End of Period | $169,397 | $239,418 | $370,395 |
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