Ethnic Food Restaurant Business Plan

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