Our main concerns will be aggressive time management, so that our labor costs stay under control, and proper purchasing, prep and food handling to keep food costs down, as well as managing the higher costs of meats and seafoods. Secondarily, hiring the best grill and broiler cooks, training them properly and retaining them will be a critical component to good meat and seafood costs. A good grill cook does not waste steaks by burning them, nor does he anger customers by undercooking them. He must also be accurate time after time in how he carves his prime rib.
Growth will be sustained through a contribution to an expansion fund, and potential investment from current investors in a "roll-over" plan, and from potential future investors or bank capital.
We are seeking $900,000 (see section 2.2 "Start-up Summary"), and will seek it from one, two, or three investment groups, or under an SEC "Regulation D" equity offering (where the company sells partial ownership in the company - via the sale of stock or a membership unit, to raise capital). We prefer this approach as an early stage company because there is no set repayment schedule or debt service payments - the investors profit when the company profits. Initially, the company is projected as a Limited Partnership, but may switch the preferred structure to a stock "C" Corporation or Limited Liability Corporation "LLC". The preparation of the investment documents will be handled in a cooperative effort by the legal firms representing each party individually. These documents will include, but are not limited to:
Private Placement Memorandum
The Private Placement Memorandum, or "PPM", is the document that discloses all pertinent information to the investors about the company, proposed company operations, the transaction structure (whether we are selling equity ownership or raising debt financing from the investors), the terms of the investment (share price, note amounts, maturity dates, etc.), risks the investors may face, etc.
Form D SEC Filing
It notifies the SEC that we are using the Regulation D program and provides them basic information on the company and the offering. It is not an approval document or registration - it is merely a filing that notifies the SEC that we have a Regulation D Offering in place. Raising capital from investors without filing this document with the Federal government could place a company in violation of securities laws.
The Subscription Agreement sets forth the terms and conditions of the investment. It is the "sales contract" for purchasing the securities.
For a debt offering (if necessary), outlining the terms of any loan arrangement with the investors. The note is the actual "loan document" between the company and the investor.
Break-even based on fixed costs including rent, insurance, maintenance, investor note, and pre-opening amortization. Additionally, controllables such as service labor, kitchen labor, management labor, payroll taxes, property taxes, excess rent, advertising and legal/professional fees are included.
2004 is not a full year on the yearly P&L. Highlights include a bottom line of better than 18% for every year. The numbers reflect realism in the start up and continuing operations of the restaurant. We begin contributing aggressively to an expansion fund in 2005. We begin accruing for vacations immediately, and we are budgeting money from the insurance line for health benefits, all as an early commitment to the future prosperity of our staff. These numbers are an excellent indication that our investors, owners, partners and staff will all prosper and grow with the Fire Fountain Grille!
The cash flow depends on assumptions for good daily operational management, good traffic counts in the restaurant, inventory turnover, payment days, and accounts receivable management. We will need no new financing until we open our second unit.
Initial projections are a sales-to-investment ratio in excess of 2-to-1, return on investment in excess of 30 percent and return on equity of 20 percent-plus.
The balance sheet is quite solid. We do not project any real trouble meeting our debt obligations--as long as we can achieve our specific objectives.
The table follows with our main business ratios. We do intend to improve gross margin, collection days, sales and labor controls. Our ratios are compared to industry ratios for Steak Restaurants - SIC code 5812.0802.
Our long term plan is to continue to maintain a cash flow of 19-20% while increasing sales annually, thereby increasing actual dollars earned by our investors, principals and staff.