Sagebrush Sam's
Financial Plan
Sales — Sagebrush Sam’s is basing its projected sales on the assumption that the first unit will open on July 1, 2001. The second restaurant will open on July 1, 2002, followed by the last one opening on January 1, 2003. We have projected sales on the low side using $3 million dollars per year per restaurant. We did not factor in any sales growth for subsequent years.
Cost of Goods Sold — The cost of goods sold was determined by taking actual Profit and Loss statements from various restaurant concepts and then using our pricing structure and guest counts to arrive at costs.
Management Payroll — Figures are based upon the use of five managers per unit at our maximum bonus and salary levels. If we use four managers per restaurant, this will lower our payroll.
Fixed and Variable Expenses — The various fixed and variable expenses were determined by taking actual numbers from several different restaurant concepts.
Marketing Fees — These funds will be used for the production of various marketing materials.
Advertising — These funds will be used, if necessary, to maintain our sales at projected levels. If we are running significantly ahead of our sales projections, then these funds may not be necessary.
Management Fees — We will use these dollars for accounting and payroll services of our firm. As we grow in size, this cost burden will shrink per store due to efficiencies in volume.
Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendix. Interest rates, tax rates, and personnel burden are based on conservative assumptions. Some of the more important underlying assumptions are:
- We assume a strong economy, without a major recession.
- We assume, of course, that there are no unforeseen changes in consumers’ tastes or interests to make our concept less competitive.
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 | 10.00% | 10.00% | 10.00% |
Tax Rate | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
Key Financial Indicators
Food costs must be kept at, or below, 35%.
Unit level employee costs must be kept at, or below, 17%.
One of the other important indicators is inventory turnover. In the restaurant business, turnover exceeds 50 per year, with product being purchased and sold often within the week. The only exception to this will be our sirloin steaks, which will be aged at the unit for 21 days.
Above all, controls must be instituted and maintained over multiple store locations.
Sagebrush Sam’s will use state-of-the-art restaurant control and inventory systems. All systems will be computer-based, allowing for accurate off-premises control.

Break-even Analysis
VARIABLE COSTS
- 35.00% – Cost of goods sold.
- 17.00% – Employee payroll.
- 00.25% – Credit card charges.
- 00.33% – Marketing fees.
- 2.00% – Management fees.
- 2.00% – Advertising.
- 2.00% – Management bonus.
- 3.03% – Employee payroll taxes and benefits.
- 1.50% – Paper and cleaning.
- 63.11% – Total variable costs.
ANNUAL FIXED COSTS
- $170,000 – Management salaries.
- $37,000 – Management payroll taxes and benefits.
- $16,410 – Group insurance.
- $137,100 – Controllable expenses minus credit card charges and paper/cleaning.
- $40,208 – Other expenses minus marketing fees, advertising, and management fees.
- $85,000 – Depreciation.
- $485,718 – Total fixed costs.

Break-even Analysis | |
Monthly Revenue Break-even | $67,519 |
Assumptions: | |
Average Percent Variable Cost | 35% |
Estimated Monthly Fixed Cost | $43,888 |
Projected Profit and Loss
Projected Profit and Loss Income Statement for the entire company for three years. Estimates for each month of the first year are in the appendix tables.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $1,644,606 | $4,644,600 | $9,000,000 |
Direct Cost of Sales | $575,611 | $1,627,610 | $3,150,000 |
Production Payroll | $468,406 | $1,044,582 | $2,040,000 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $1,044,017 | $2,672,192 | $5,190,000 |
Gross Margin | $600,589 | $1,972,408 | $3,810,000 |
Gross Margin % | 36.52% | 42.47% | 42.33% |
Operating Expenses | |||
Sales and Marketing Expenses | |||
Sales and Marketing Payroll | $0 | $0 | $0 |
Advertising/Promotion | $32,892 | $92,892 | $180,000 |
Production Expense | $5,427 | $15,327 | $29,700 |
Miscellaneous | $0 | $0 | $0 |
Total Sales and Marketing Expenses | $38,319 | $108,219 | $209,700 |
Sales and Marketing % | 2.33% | 2.33% | 2.33% |
General and Administrative Expenses | |||
General and Administrative Payroll | $152,675 | $193,000 | $304,000 |
Sales and Marketing and Other Expenses | $0 | $0 | $0 |
Depreciation | $42,504 | $127,500 | $255,000 |
Fixed Costs | $44,652 | $133,962 | $267,924 |
Variable Costs | $94,565 | $267,065 | $517,500 |
Utilities | $40,002 | $120,000 | $240,000 |
Insurance | $4,002 | $12,000 | $24,000 |
Rent | $0 | $0 | $0 |
Payroll Taxes | $109,931 | $219,052 | $414,888 |
Other General and Administrative Expenses | $0 | $0 | $0 |
Total General and Administrative Expenses | $488,331 | $1,072,579 | $2,023,312 |
General and Administrative % | 29.69% | 23.09% | 22.48% |
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 | $526,651 | $1,180,798 | $2,233,012 |
Profit Before Interest and Taxes | $73,938 | $791,610 | $1,576,988 |
EBITDA | $116,442 | $919,110 | $1,831,988 |
Interest Expense | $0 | $0 | $0 |
Taxes Incurred | $17,727 | $197,903 | $400,818 |
Net Profit | $56,212 | $593,708 | $1,176,170 |
Net Profit/Sales | 3.42% | 12.78% | 13.07% |
Projected Cash Flow
The chart and table below show our cash flow projections. Monthly figures are in the appendix tables.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $1,644,606 | $4,644,600 | $9,000,000 |
Subtotal Cash from Operations | $1,644,606 | $4,644,600 | $9,000,000 |
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 | $1,644,606 | $4,644,600 | $9,000,000 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $621,081 | $1,237,582 | $2,344,000 |
Bill Payments | $817,393 | $3,061,401 | $5,221,404 |
Subtotal Spent on Operations | $1,438,474 | $4,298,983 | $7,565,404 |
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 | $0 | $0 | $0 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $1,438,474 | $4,298,983 | $7,565,404 |
Net Cash Flow | $206,132 | $345,617 | $1,434,596 |
Cash Balance | $366,132 | $711,749 | $2,146,344 |
Projected Balance Sheet
The accompanying table presents our year end balance sheet estimates from our first three years. Year one monthly information is included in the appendix tables.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $366,132 | $711,749 | $2,146,344 |
Inventory | $101,063 | $561,795 | $744,178 |
Other Current Assets | $100,000 | $100,000 | $100,000 |
Total Current Assets | $567,195 | $1,373,543 | $2,990,522 |
Long-term Assets | |||
Long-term Assets | $1,500,000 | $1,500,000 | $1,500,000 |
Accumulated Depreciation | $42,504 | $170,004 | $425,004 |
Total Long-term Assets | $1,457,496 | $1,329,996 | $1,074,996 |
Total Assets | $2,024,691 | $2,703,539 | $4,065,518 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $173,479 | $258,620 | $444,428 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $173,479 | $258,620 | $444,428 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $173,479 | $258,620 | $444,428 |
Paid-in Capital | $2,003,945 | $2,003,945 | $2,003,945 |
Retained Earnings | ($208,945) | ($152,733) | $440,974 |
Earnings | $56,212 | $593,708 | $1,176,170 |
Total Capital | $1,851,212 | $2,444,919 | $3,621,090 |
Total Liabilities and Capital | $2,024,691 | $2,703,539 | $4,065,518 |
Net Worth | $1,851,212 | $2,444,919 | $3,621,090 |
Business Ratios
These business ratios are future estimates based upon current assumptions. Standard industry comparisons are for SIC code 5812, retail eating places.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | n.a. | 182.41% | 93.77% | 6.96% |
Percent of Total Assets | ||||
Inventory | 4.99% | 20.78% | 18.30% | 3.90% |
Other Current Assets | 4.94% | 3.70% | 2.46% | 28.39% |
Total Current Assets | 28.01% | 50.81% | 73.56% | 37.68% |
Long-term Assets | 71.99% | 49.19% | 26.44% | 62.32% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 8.57% | 9.57% | 10.93% | 19.17% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 29.21% |
Total Liabilities | 8.57% | 9.57% | 10.93% | 48.38% |
Net Worth | 91.43% | 90.43% | 89.07% | 51.62% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 36.52% | 42.47% | 42.33% | 59.31% |
Selling, General & Administrative Expenses | 33.15% | 29.68% | 29.19% | 39.09% |
Advertising Expenses | 2.00% | 2.00% | 2.00% | 2.75% |
Profit Before Interest and Taxes | 4.50% | 17.04% | 17.52% | 1.59% |
Main Ratios | ||||
Current | 3.27 | 5.31 | 6.73 | 1.26 |
Quick | 2.69 | 3.14 | 5.05 | 0.87 |
Total Debt to Total Assets | 8.57% | 9.57% | 10.93% | 3.27% |
Pre-tax Return on Net Worth | 3.99% | 32.38% | 43.55% | 54.38% |
Pre-tax Return on Assets | 3.65% | 29.28% | 38.79% | 7.17% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 3.42% | 12.78% | 13.07% | n.a |
Return on Equity | 3.04% | 24.28% | 32.48% | n.a |
Activity Ratios | ||||
Inventory Turnover | 8.19 | 4.91 | 4.82 | n.a |
Accounts Payable Turnover | 5.71 | 12.17 | 12.17 | n.a |
Payment Days | 32 | 25 | 24 | n.a |
Total Asset Turnover | 0.81 | 1.72 | 2.21 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.09 | 0.11 | 0.12 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $393,716 | $1,114,923 | $2,546,094 | n.a |
Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 1.23 | 0.58 | 0.45 | n.a |
Current Debt/Total Assets | 9% | 10% | 11% | n.a |
Acid Test | 2.69 | 3.14 | 5.05 | n.a |
Sales/Net Worth | 0.89 | 1.90 | 2.49 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |