La Salsa Fresh Mexican Grill
Financial Plan
The following sections present the financial plan for La Salsa Fresh Mexican Grill. Year end totals for the first three years are present in each section. First year monthly figures are presented in the appendix.
6.1 Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:
- We assume that the economy gets back on its feet and returns to ‘normal’, after the current recession.
- We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
| Tax Rate | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 |
6.2 Break-even Analysis
The break-even analysis is based on planned fixed costs estimates.
| Break-even Analysis | |
| Monthly Revenue Break-even | $20,895 |
| Assumptions: | |
| Average Percent Variable Cost | 26% |
| Estimated Monthly Fixed Cost | $15,398 |
6.3 Projected Profit and Loss
In order not to underestimate costs, costs listed are considerably higher than what will most likely be experienced. This makes the profits and margins appear less attractive, but realize there are many ways to cut costs.
The Santa Barbara Restaurant Group requires royalties of 4% of gross sales to cover national and local advertising costs. This is included in the Profit/Loss table under Corporate Marketing Fee. The Franchise Fee is 6% of gross sales and is labeled Franchise Fee on the Profit/Loss table.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $692,108 | $740,556 | $792,394 |
| Direct Cost of Sales | $182,072 | $194,817 | $208,454 |
| Production Payroll | $129,098 | $132,969 | $136,958 |
| SBRG Franchise Fee | $41,526 | $44,433 | $47,544 |
| Other Production Expenses | $12,000 | $12,000 | $12,000 |
| Total Cost of Sales | $364,696 | $384,219 | $404,956 |
| Gross Margin | $327,412 | $356,336 | $387,439 |
| Gross Margin % | 47.31% | 48.12% | 48.89% |
| Operating Expenses | |||
| Sales and Marketing Expenses | |||
| Sales and Marketing Payroll | $12,168 | $12,531 | $12,907 |
| Advertising/ Promotion | $12,000 | $12,000 | $12,000 |
| SBRG Corporate Marketing Fee | $27,684 | $29,622 | $31,696 |
| Travel | $1,800 | $1,800 | $1,800 |
| Miscellaneous | $1,200 | $1,200 | $1,200 |
| Total Sales and Marketing Expenses | $54,852 | $57,153 | $59,603 |
| Sales and Marketing % | 7.93% | 7.72% | 7.52% |
| General and Administrative Expenses | |||
| General and Administrative Payroll | $48,641 | $50,097 | $51,600 |
| Sales and Marketing and Other Expenses | $0 | $0 | $0 |
| Depreciation | $12,000 | $12,000 | $12,000 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $2,400 | $2,400 | $2,400 |
| Insurance | $2,400 | $2,400 | $2,400 |
| Rent | $36,000 | $36,000 | $36,000 |
| Payroll Taxes | $28,486 | $29,340 | $30,220 |
| Other General and Administrative Expenses | $0 | $0 | $0 |
| Total General and Administrative Expenses | $129,927 | $132,237 | $134,620 |
| General and Administrative % | 18.77% | 17.86% | 16.99% |
| Other Expenses: | |||
| Other Payroll | $0 | $0 | $0 |
| Consultants | $0 | $0 | $0 |
| Contract/Consultants | $0 | $0 | $0 |
| Total Other Expenses | $0 | $0 | $0 |
| Other % | 0.00% | 0.00% | 0.00% |
| Total Operating Expenses | $184,779 | $189,390 | $194,223 |
| Profit Before Interest and Taxes | $142,632 | $166,947 | $193,216 |
| EBITDA | $154,632 | $178,947 | $205,216 |
| Interest Expense | $20,194 | $18,690 | $17,020 |
| Taxes Incurred | $36,731 | $44,477 | $52,859 |
| Net Profit | $85,707 | $103,779 | $123,337 |
| Net Profit/Sales | 12.38% | 14.01% | 15.57% |
6.4 Projected Cash Flow
In the following chart and table it is imperative to realize the importance of having cash on hand. If the company were to run into any problems the cash on hand will ensure that the business stays running.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $692,108 | $740,556 | $792,394 |
| Subtotal Cash from Operations | $692,108 | $740,556 | $792,394 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Subtotal Cash Received | $692,108 | $740,556 | $792,394 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $189,907 | $195,597 | $201,465 |
| Bill Payments | $336,482 | $432,352 | $454,852 |
| Subtotal Spent on Operations | $526,389 | $627,949 | $656,317 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $21,479 | $23,032 | $24,697 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $36,000 | $36,000 |
| Subtotal Cash Spent | $547,868 | $686,981 | $717,014 |
| Net Cash Flow | $144,240 | $53,574 | $75,381 |
| Cash Balance | $246,240 | $299,814 | $375,195 |
6.5 Projected Balance Sheet
The projected balance sheet is shown below.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $246,240 | $299,814 | $375,195 |
| Inventory | $19,201 | $20,545 | $21,984 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $265,441 | $320,360 | $397,179 |
| Long-term Assets | |||
| Long-term Assets | $287,000 | $287,000 | $287,000 |
| Accumulated Depreciation | $12,000 | $24,000 | $36,000 |
| Total Long-term Assets | $275,000 | $263,000 | $251,000 |
| Total Assets | $540,441 | $583,360 | $648,179 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $37,214 | $35,385 | $37,564 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $37,214 | $35,385 | $37,564 |
| Long-term Liabilities | $278,521 | $255,488 | $230,791 |
| Total Liabilities | $315,735 | $290,874 | $268,355 |
| Paid-in Capital | $300,000 | $300,000 | $300,000 |
| Retained Earnings | ($161,000) | ($111,293) | ($43,514) |
| Earnings | $85,707 | $103,779 | $123,337 |
| Total Capital | $224,707 | $292,486 | $379,823 |
| Total Liabilities and Capital | $540,441 | $583,360 | $648,179 |
| Net Worth | $224,707 | $292,486 | $379,823 |
6.6 Business Ratios
The following table outlines some of the more important ratios from the Restaurant/ Eating Places industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5812.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 7.00% | 7.00% | 7.60% |
| Percent of Total Assets | ||||
| Inventory | 3.55% | 3.52% | 3.39% | 3.60% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 35.60% |
| Total Current Assets | 49.12% | 54.92% | 61.28% | 43.70% |
| Long-term Assets | 50.88% | 45.08% | 38.72% | 56.30% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 6.89% | 6.07% | 5.80% | 32.70% |
| Long-term Liabilities | 51.54% | 43.80% | 35.61% | 28.50% |
| Total Liabilities | 58.42% | 49.86% | 41.40% | 61.20% |
| Net Worth | 41.58% | 50.14% | 58.60% | 38.80% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 47.31% | 48.12% | 48.89% | 60.50% |
| Selling, General & Administrative Expenses | 34.92% | 34.10% | 33.33% | 39.80% |
| Advertising Expenses | 1.73% | 1.62% | 1.51% | 3.20% |
| Profit Before Interest and Taxes | 20.61% | 22.54% | 24.38% | 0.70% |
| Main Ratios | ||||
| Current | 7.13 | 9.05 | 10.57 | 0.98 |
| Quick | 6.62 | 8.47 | 9.99 | 0.65 |
| Total Debt to Total Assets | 58.42% | 49.86% | 41.40% | 61.20% |
| Pre-tax Return on Net Worth | 54.49% | 50.69% | 46.39% | 1.70% |
| Pre-tax Return on Assets | 22.66% | 25.41% | 27.18% | 4.30% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 12.38% | 14.01% | 15.57% | n.a |
| Return on Equity | 38.14% | 35.48% | 32.47% | n.a |
| Activity Ratios | ||||
| Inventory Turnover | 8.68 | 9.80 | 9.80 | n.a |
| Accounts Payable Turnover | 10.04 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 31 | 29 | n.a |
| Total Asset Turnover | 1.28 | 1.27 | 1.22 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 1.41 | 0.99 | 0.71 | n.a |
| Current Liab. to Liab. | 0.12 | 0.12 | 0.14 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $228,227 | $284,974 | $359,614 | n.a |
| Interest Coverage | 7.06 | 8.93 | 11.35 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.78 | 0.79 | 0.82 | n.a |
| Current Debt/Total Assets | 7% | 6% | 6% | n.a |
| Acid Test | 6.62 | 8.47 | 9.99 | n.a |
| Sales/Net Worth | 3.08 | 2.53 | 2.09 | n.a |
| Dividend Payout | 0.00 | 0.35 | 0.29 | n.a |
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