b plan ful mehnat
TRANSCRIPT
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Executive Summary
Pita Pal is a new restaurant that serves fresh and healthy pita sandwiches.
Strategically located in sambra. Pita Pal will quickly become the premier lunch
destination in Belgaum, serving locals and students. Pita Pal will attract 35%new customers a year after the second year and will reach profitability by the
end of year two.
Keys to Success
Pita Pal has identified three keys that will be instrumental in its success. The
first is the design and implementation of strict financial cont rols, which will be
important, since the restaurant industry is quite competitive. The second
requirement is that it offers high-quality fresh and healthy food to clearly stand
out from the competition. The last key is the need to ensure proper visibility.
Pita Pal must have a effective, targeted marketing campaign to support the
opening of the store in order to ensure enough business.
Food
Pita Pal will offer the community an exciting menu of pita sandwiches, salads,
desserts and coffee beverages. Pita bread, Middle Eastern flat bread, is used as ahealthy, tasty foundation for a variety of sandwiches. The customers will have
the choice of Middle Eastern filling such as Hummus and Tabouli or more
traditional Indian filling.
Management
Pita Pal will be lead by Mr Rao, an MBA also worked in the restaurant industry.
He worked for 15 years at the restaurant before moving on to work and he
participated in number of Entrepreneurship Programs.
Through a combination of extensive business experience, valuable academic
course work, and the award of a starter loan from the school's Entrepreneurship
Program, Rao will develop a profitable niche lunch restaurant.
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Sales for year two and three are 4500000 and 5500000 respectively.
Profitability will be reached by the end of year two.
1.1 Mission
It is Pita Pal's mission to offer the finest, healthiest and best tasti ng pita
sandwiches in India. Pita Pal will offer the finest customer service; no customer
will leave who is dissatisfied.
1.2 Keys to Success
y Employ strict financial controls. This is extremely important in a retail foodestablishment.
y Offer the highest-quality lunch time fare.y Ensure sufficient visibility. A strong marketing campaign required.
1.3 Objectives
y To become the premier sandwich shop in downtown sambra.y To continually draw students off campus for lunch at a rate of 35% new
customers per year after the second year.
y To become profitable within the first two years.
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Company Summary
Pita Pal is based sole proprietorship. Formed by Mr. Rao. The company is
wholly owned by Mr. Rao. The business will be based in sambra and will serve
the lunch and early evening crowd.
2.1 Start-up Summary
As a start-up organization, Pita Pal will require a decent amount of equipment to
begin operations. The following is a somewhat complete list of the needed
equipment:
y Cash register;y Computer system, including printer, CD-RW, Internet connection;y Convection oven;y Refrigeration unit;y Blender/food processor;y Assorted knives, cutting boards, serving dishes, silverware, food containers;y Shelving units;y Tables, chairs, table clothes and other table accessories;y Lighting units;y Espresso machine and coffee maker (these items are subsidized by the coffee
vendor who sells the coffee/espresso beans).
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Start-up Funding
Start-up Expenses to Fund300000
Start-up Assets to Fund 680000
Total Funding Required 980000
Non-cash Assets from Start-up 100000
Cash Requirements from Start-up 500000
0
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400000
600000
800000
1000000
1200000
1400000
1600000
expenses assets investment loans
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Assets
Cash Balance on Starting Date 80000
Total Assets 680000
Liabilities and Capital
Liabilities
Current Borrowing 500000
Long-term Liabilities 0
Accounts Payable (Outstanding Bills) 0
OtherCurrent Liabilities (interest-free) 0
Total Liabilities 500000
Planned Investment
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Entrepreneurship Program Loan 500000
Investor 2 1000000
Additional Investment Requirement 0
Total Planned Investment 1500000
Loss at Start-up (Start-up Expenses) (300000)
Total Capital 1200000
Total Capital and Liabilities 1200000
Total Funding 1500000
Start-up
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Requirements
Start-up Expenses
Legal 100000
Stationery etc. 20000
Brochures 20000
Consultants 25000
Rent 35000
Total Start-up Expenses 200000
Start-up Assets
Cash Required 180000
OtherCurrent Assets 0
Long-term Assets 500000
Total Assets 680000
Total Requirements 680000
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2.2Company Ownership
Pita Pal has been formed as a limited l iability company in Sambra (Belgaum).
The L.L.C. business formation has been chosen as a way of protecting the
owner from personal liability while avoiding double taxation associated with atraditional corporation.
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Services
Pita Pal is an out skirts based sandwich shop serving the lunch time hour as well
as early evening, weekdays from 10-6 pm. Pita bread is chosen for several
reasons: it is unusual, healthy, and quite versatile. Each customer will have their
choice of different fillings for the pita sandwiches. The ranges of options for
fillings (not an exhaustive list) are: tofu pate, falafel, hummus, baba ganouj,
tabouli, turkey, ham, chicken, pesto, assorted vegetables and assorted cheeses.
In addition to the pitas, there will be several different salad s available, both
green as well as pastas, assorted deserts, espresso and coffee.
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Market Analysis Summary
Pita Pal will be serving the Belgaum lunch time and early evening crowd. Two
distinct market segments will be targeted: students of kle and other societies and
Colleges and "towners." The students will be attracted to Pita Pal as a better
alternative to their on-campus meal plan. The towners will appreciate the
selection and change from the more traditional offerings currently availabl e in
Belgaum. Sambra has been chosen in Belgaum because its nearby NH4 and .
Currently, there are lots of different businesses that have hungry lunch time
workers.
The competitive environment that Pita Pal faces is not too stiff. Most of the
lunch time fare in Belgaum can be categorized as traditional offerings, diner
food. While this might appeal to older residents of the town, this does not
appeal to many college students and to a growing population of people who are
in search of more healthy food, Pita Pal should be a big hit.
4.1 Market Segmentation
Pita Pal has segmented the market into two distinct segments:
Students
this group is primarily from students of kle and other societies and Colleges and
"towners." From Belgaum. The students are looking for food vendors for two
main reasons, the first is the desire to get off campus, and the second is to have
an alternative to the on-campus food service.Demographic data and
behavioural traits for the students is as follows:
y 75% of the students are on some sort of financial aid;y 67% have a part-time job;y Ages 17-22;y 42% of the students were in the top 15% of their high school class;y 36% of the students were in the 85th percentile for the SAT;
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y 89% oft st ts eat out atleastt i e per week;y 75% oft e students are on t e school food program.
This information pertains to thestudents of kle and other societies. There will bea few communit college students who willtrickle in, but since their campus is
si miles away, there will not be a significant number of community college
students.
Towners
This group is the people thatli e and workin Belgaum, primarily in the sambra
and nearby area.
y Ages 24-55;y The average individualincome is $500;y 55% ofthe people have atleast some undergraduate schooling;y 44% ofthe people work within a seven minute walk from the sambray 76% ofthe group go out forlunch one to two times a week.
MarketAnalysis
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Year 1 Year 2 Year 3 Year 4 Year 5
PotentialCustomers Growth
Students 8% 2,285 2,468 2,665 2,878 3,108 7.99%
Towners 8% 45,989 49,668 53,641 57,932 62,567 8.00%
Total 8.00% 48,274 52,136 56,306 60,810 65,675 8.00%
4.2 Target Market Segment Strategy
The two different market segments that Pita Pal will be going after are distinct
enough that there will be two different marketing campaigns, one for each
group. This is necessary because the two groups respond to different forms of
communication. Students spend the majority of their day on campus, but
typically venture off campus during the day for lun ch. The marketing effort to
reach the students will be based on their forms of written media, The General,
student newspaper.
The towners can be reached through different sources of communication. These
are people who work in Belgaum and tend to patronize the other businesses.
These people are more in tune with the different business o rganizations that
exist belgaum. Pita Pal will attempt to communicate with this group via the
local newspaper.
4.3 Service Business Analysis
Pita Pal exists within the general restaurant industry. There are many different
categories within the restaurant industry. Pita Pal fits within two different niches
within the industry, fast food and fast casual. Their offerings are similar to fast
food in that orders are placed at the co unter and served within a few minutes,
and the menu is somewhat limited in selection. It is also similar to fast casual
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where the clientele tends to spend more time at a table relative to a fast food
restaurant. The food is more expensive than a normal fas t food restaurant and
there is a larger product offering.
For the restaurant industry, it is normal for a venture to reach profitability byyear two. If they reach it any earlier it is likely that they are cutting corners and
that profit is unlikely to be sustainable. If it takes more than two years than it is
quite questionable whether they will ever reach profitability.
y On-campus food service: At least for the students, this is an alternative interms of food offerings. Most of the students have a food plan. Because of
the poor food offerings and the need for variety, many of the students arelooking for other alternatives regardless of the fact that their food is already
paid for via the plan.
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Strategy and Implementation Summary
Pita Pal's business strategy will be to emphasize its healthy, custom food
alternatives. Most of the competitors cannot compete with Pita Pal's healthy
menu. Most places uses a lot of fried foods, compromising the nutritional valueof their food. Additionally, no one offers the same flexibility or ability to
customize the product offerings. This competitive edge will also be stressed in
the marketing campaign.
As mentioned earlier, Pita Pal's marketing strategy will be distinct for each of
the two market segments that it is seeking to attract.
The sales effort will be based on obtaining 100% satisfaction. Pita Pal will work
hard to ensure that every customer has a wonderful experience at Pita Pal.
Almost anything will be done to ensure any problems that ar ise are corrected.
5.1Competitive Edge
Pita Pal has two competitive edges that will help it succeed in its business. The
first edge is its healthy menu. Pita Pal takes pride in the fact that the only thing
fried on the menu is falafel. Everything else is oil free, or at least free of any
oils other than olive oil. In addition to the absence of oil based fats, much of its
offered ingredients are vegetables, ensuring a healthy meal.
The other competitive edge that Pita Pal will leverage is customization.
Customers are offered a laundry list of ingredients that they get to choose from.
It is Pita Pal's goal to serve the customer in whatever capacity is needed. This
takes the form of its competitive edge where it will build the patrons pita pocket
any way that they want.
5.2 Marketing Strategy
Pita Pal will employ a two pronged marketing strategy in an attempt to reach
potential customers within the two market segments. To reach the students, Pita
Pal must use resources that are successful in reaching the studen ts. Recognizing
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that the students spend the majority of their time on campus, Pita Pal will rely
on print advertisements and coupons within the student publications. The print
advertisements will serve to draw notice to Pita Pal, increasing the student's
awareness about this new restaurant alternative. Pita Pal will emphasize its
menu as a tasty, healthy alternative to the campus meal plan as well as other
local food vendors. Pita Pal will also use coupons as a way drawing in students.
Coupons are quite effective for students; most of them are on a fixed budget and
jump at the chance to save money by using a coupon.
Print advertising will be used for the towners; however, Pita Pal will choose a
different media source to reach these people. The readership lev els for the local
paper, The Sentinel are 67% of the targeted population. This will prove to be an
effective method for reaching this group. Since the majority of this market
segment works in Belgaum, flyers will be passed around the Belgaum calling
attention to Pita Pal's opening. Coupons will be used, but to a lesser degree with
this segment as they tend to have much lower response rates relative to the other
market segment.
5.3 Sales Strategy
As previously mentioned, Pita Pal will emphasize its 100% customer
satisfaction to win over customers. The fact that it advertises 100% satisfaction
is far less significant relative to its actions that ensure total satisfaction. This
effort is based on the philosophy that it is far cheaper to maintain a curr ent
customer than it is to attract a new customer. Additionally, it is far easier and
cheaper to remedy any problems with a customer as it occurs instead of dealing
with an unhappy customer. With this in mind, the organization has the firm
belief that if all customers leave the store happy, there will be a significant
increase in sales in the long term, directly correlated with the fact that customers
are being properly taken care of.
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This sales philosophy is a way of treating customers. While the service o ffered
customers is quite important, there is a need to have a quality product, otherwise
the service aspect is in vain in the long term because the customers are treated
well but do not perceive value in the food that they are buying. That being said,
Pita Pal must offer fresh, healthy, quality food in order to fully support its
customer-centered service. The menu has been devised in order to offer a wide
selection with menu items that are easy to prepare, remain fresh, and are cost
effective to serve. Having both a quality product and excellent service will
ensure realization of the sales forecast.
5.3.1 Sales Forecast
Pita Pal has decided to take a conservative viewpoint toward its sales forecast in
order to increase the likelihood of achieving the stated goals. Pita Pal has
reason to believe that the first three months of business will be fairly slow. It is
forecasted that business will steadily increase over the first two years.
Profitability is forecasted to be achieved toward the end of year two.
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Management Summary
Mr Rao is the driving force behind Pita Pal. Rao has lived in Belgaum for the
last three years while studying for his Bachelor of business administration from
Belgaum. Mr Rao introduction to the restaurant industry came at the early age
of 14 when he worked in his family's restaurant in Pune.
While pursuing his degree was a server at a fine dining restaurant called Arush,
where he received more insight into the restaurant industry. He enrolled in
the Entrepreneurship Program which combined coursework with speakers and
empirical experience. For lucky few, it also provided them with a low interest
loan which if the business fails does not personally obligate the borrower to
repay.
While Mr Rao became more and more active in this program, he began to
realize that he would not be truly happy unless he was operating his own
business. He also realized that he would be most effective if he worked within
the restaurant industry due to all of his experience as well as the wealth of
contacts that he had access to because of his parent's business. With this in
mind, at the end of the last semester of his last year, Rao applied for the a loan
through the Entrepreneurship Program and was pleasantly surprised that he
won. Rao has written a business plan in response to the application
requirements for the loans, however by the time the loan was awarded, many
months had passed and he felt the need to rewrite the plan before beginning the
business. He undertook this task and the business has begun.
6.1 Personnel Plan
Rao will be the main employee of Pita Pal. For the first two months of
operation, he will be the sole employee. During this period he will oversee the
finishing touches on the retail space, will de velop the product recipes, and will
establish vendor relationships. Month three will mark the first month of sales.
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Mr Rao will have at least two employees present during open hours. he will also
have one employee working 1.5 hours before opening to help w ith food prep
and both employees for .5 -1 hour after closing. As business ramps, Steve will
employ additional employees to help out with food prep, front restaurant help,
as well as back kitchen activities such as dishes and clean up.
Personnel Plan
Year 1 Year 2 Year 3
Mr rao 25000 30000 45000
employee 1 10000 12000 15000
employee 2 5000 7000 10000
employee 3 3000 3500 4000
employee 4 3000 3500 4000
Total People 5 5 5
Total Payroll 46000 56000 78000
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Financial Plan
The following sections will detail important financial information.
7.1 Important Assumptions
The following table will detail important Financial Assumptions.
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 30.00% 30.00% 30.00%
Other 0 0 0
Assumptions:
Average Percent Variable Cost 27%
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Estimated Monthly Fixed Cost 210000
7.3 Projected Profit and Loss
The following table and charts illustrate the Projected Profit and Loss
Pro Forma Profit and Loss
Year 1Year 2 Year 3
Sales 4600000 6000000 6500000
Direct Cost of Sales 1600000 2000000 2200000
OtherCosts of Goods 0 0 0
Total Cost of Sales 160000 2000000 2200000
Gross Margin 3000000 4000000 4300000
Gross Margin % 65.21% 66.66% 66.15%
Expenses 2204600
Payroll 46000 56000 78000
Sales and Marketing and Other
Expenses1600000 2000000 2200000
Depreciation 40000 40000 40000
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Rent 270000 270000 270000
Utilities 50000 50000 50000
Insurance 80000 80000 80000
Payroll Taxes 160000 160000 160000
Other 0 0 0
Total O perating Expenses 2204600 2656000 2807800
Profit Before Interest and Taxes 2395400 3344000 3692200
EBITDA 0 0 0
Interest Expense 0 0 0
Taxes Incurred 479080 668800 738440
Net Profit 1916320 2675200 3625360
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7.5 Projected Balance Sheet
The following table will indicate the Projected Balance Sheet.
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash 180000 180000 180000
OtherCurrent Assets 0 0 0
Total Current Assets 180000 180000 180000
Long-term Assets
Long-term Assets 500000 500000 500000
Accumulated Depreciation 40000 40000 40000
Total Long-term Assets 460000 460000 460000
Total Assets 640000 640000 640000
Liabilities and Capital Year 1 Year 2 Year 3
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Current Liabilities
Accounts Payable 50000 65000 69000
Current Borrowing 0 0 0
OtherCurrent Liabilities 0 0
Subtotal Current Liabilities 50000 65000 69000
Long-term Liabilities 0 0 0
Total Liabilities 500000 500000 500000
Paid-in Capital
Retained Earnings
Earings 1916320 2675200 3625360
Total Capital 120000 120000 120000
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7.6 Business Ratios
The following table displays Business Ratios of this company as well as those
within the restaurant industry.
Ratio Analysis
Year 1 Year 2 Year 3Industry
Profile
Sales Growth 0.00% 111.58% 40.18% 6.96%
Percent of Total Assets
OtherCurrent Assets 0.00% 0.00% 0.00% 28.39%
Total Current Assets 28.83% 51.68% 83.97% 37.68%
Long-term Assets 71.17% 48.32% 16.03% 62.32%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 15.26% 18.15% 12.72% 19.17%
Long-term Liabilities 0.00% 0.00% 0.00% 29.21%
Total Liabilities 15.26% 18.15% 12.72% 48.38%
Net Worth 84.74% 81.85% 87.28% 51.62%
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Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 72.96% 72.96% 72.96% 59.31%
Selling, General &
Administrative Expenses124.93% 71.86% 58.72% 39.09%
Advertising Expenses 0.00% 0.00% 0.00% 2.75%
Profit Before Interest and Taxes -51.97% 1.56% 20.33% 1.59%
Main Ratios
Current 1.89 2.85 6.60 1.26
Quick 1.89 2.85 6.60 0.87
Total Debt to Total Assets 15.26% 18.15% 12.72% 54.38%
Pre-tax Return on Net Worth -149.91% 8.95% 76.14% 3.27%
Pre-tax Return on Assets -127.04% 7.32% 66.45% 7.17%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -51.97% 1.09% 14.23% n.a
Return on Equity -149.91% 6.26% 53.30% n.a
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Activity Ratios
Accounts Payable Turnover 10.44 12.17 12.17 n.a
Payment Days 27 26 26 n.a
Total Asset Turnover 2.44 4.68 3.27 n.a
Debt Ratios
Debt to Net Worth 0.18 0.22 0.15 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $3,812 $10,407 $44,401 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.41 0.21 0.31 n.a
Current Debt/Total Assets 15% 18% 13% n.a
Acid Test 1.89 2.85 6.60 n.a
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Sales/Net Worth 2.88 5.72 3.74 n.a
Dividend Payout 0.00 0.00 0.00 n.a