The over-all financial plan for growth allows for use of the significant cash flow generated by operations.
Equity/debt infusion of $1.5 to $2 million allows for more rapid expansion of store starts than could be accomplished from cash flow alone. Outside investment capital also allows a buffer of excess cash so that the expansion plan can be revised on short notice. Every opportunity will be seized to accelerate expansion past the critical dates in this plan if cash flow from new stores exceeds projections.
It is management's intent to build equity in the brand name and in its franchise. Other models exists in the recent past of successful IPO's on similar concepts.
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 a slow-growth economy, without major recession.
- We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.
- We assume the continued popularity of sports in America and the growing demand for sports theme venues.
6.2 Key Financial Indicators
The most important indicator in our case is inventory turnover. In the restaurant business turnover exceeds 50, with product being purchased and sold often within the week.
Food costs must be kept below 32%.
Beverage costs must be kept below 21%.
Above all, controls must be instituted and maintained over multiple store locations.
Take Five now uses state-of-the-art restaurant management control and inventory systems. All systems are computer based that allow for accurate off-premises control of all aspects of food and beverage service business. The systems used are point-of-sale from HSI and inventory and recipe management from VIP. Both systems are PC based and have become industry standards.
Management's background in corporate finance indicates understanding of the importance of these control systems.
6.3 Break-even Analysis
The break even analysis is based upon fixed costs at the Medlock Bridge location. This location exceeded required volume to break even in only its second month of operation.
At $15 per average ticket the break even volume at Medlock Bridge is attained less than one full seating per day. The industry average is between 3 and 4 turns of seating capacity.
6.4 Projected Profit and Loss
We project rapid expansion of sales and profits. Net profits remain above 16% of sales even in the most aggressive expansion period.
6.5 Projected Cash Flow
We expect to manage cash flow with an additional investment totaling $1.5 to $2 million. All additional requirements can be met from internally generated funds. With investment coming in during late 1996 and mid 1997 there is no point at which future cash flow appears to be in danger.
6.6 Projected Balance Sheet
As shown in the balance sheet in the table, we expect a healthy growth in net worth, from approximately $1 million at present to more than $8 million by the end of the third year of operations.
6.7 Business Ratios
These business ratios are future estimates based upon current assumptions. Industry Ratios are based on Standard Industry Classification code, 5813, Drinking Places.