Italian Restaurant Business Plan

1. Growth will be moderate, cash flows steady.
2. Sales increase at a steady rate of 4% per year.
3. Costs will increase at a rate of 1% to 2% per year.
4. The company will invest residual profits into financial markets and not company expansion (unless absolutely necessary).
5. General maintenance and repairs will be kept up to maintain a solid operation.
6. Future cash investments will use NPV projections to achieve maximum return with limited risk.

8.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual figures. The key underlying assumptions are:

• We assume JD Drews will be unable to make their note payment or lease payment and will have to default on their loans.
• We assume that we will take over the SBA note payment and acquire all of the assets and leasehold improvements.
• We assume the equipment is in good working order.
• We assume this will happen in the next three to six months.
• We assume a slow-growth economy, without major recession.
• We assume that there are no unforseen changes in the expectancy in the popularity of our candidates.
• We assume access to loans and financing are sufficient to maintain and fulfill our financial plan as shown in the tables.
• We assume the landlord will have no problem allowing us to take over the current lease.
• We assume The Pasta House Co. will approve our leasehold improvements and budget.

8.2 Projected Profit and Loss

The most important assumption in the Projected Profit and Loss statement is the gross margin. Although it doesn’t jump drastically in the first year, over time the restaurant will develop its customer base and reputation and the growth will pick up more rapidly towards the fourth and fifth years of business.

Month-by-month assumptions for profit and loss are included in the appendix.

8.3 Projected Cash Flow

The cash flow depends on assumptions for inventory turnover, payment days, and accounts receivable management. Our projected same-day collections is critical, and is reasonable and customary in the restaurant industry. We do not expect to need significant additional support even when we reach the less profitable months, as they are expected. The first six months of PHC openings have shown huge sales volumes. We expect this volume, however our projections do not reflect this high volume. We have done this in the event there is normal sales during the first six months.

Month-by-month assumptions for projected cash flow are included in the appendix.

8.4 Projected Balance Sheet

The projected Balance Sheet is quite solid. We do not anticipate difficulty meeting our debt obligations providing that we achieve our specific goals.

8.5 Business Ratios

We expect our net profit margin, and gross margin to increase steadily over the three-years. Our net working capital will increase by year three, proving that we have the cash flows to remain a going concern. The following table shows these important financial ratios. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5812.0108, Italian restaurant, are shown for comparison.