Executive Summary

Pita Pal is a new restaurant that serves fresh and healthy pita sandwiches. Strategically located in downtown Washington, PA, Pita Pal will quickly become the premier lunch destination downtown, 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 SuccessPita Pal has identified three keys that will be instrumental in its success. The first is the design and implementation of strict financial controls, 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.FoodPita Pal will offer the community an exciting menu of pita sandwiches, salads, deserts and coffee beverages. Pita bread, Middle Eastern flat bread, is used as a healthy, 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 American filling.ManagementPita Pal will be lead by Steve Jones, a veteran of the restaurant industry. Steve worked for his parents at the family's restaurant for several years before moving on to work in one of Washington's finest restaurants while in college, as well as participating in Washington and Jefferson's Entrepreneurship Program.

Through a combination of extensive business experience, valuable academic course work, and the award of a starter loan from the school's Entrepreneurship Program, Steve will develop a profitable niche lunch restaurant. Sales for year two and three are £145,299 and £203,676 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 tasting pita sandwiches in Washington, PA. Pita Pal will offer the finest customer service, no customer will leave who is dissatisfied.

1.2 Keys to Success Employ strict financial controls. This is extremely important in a retail food establishment.

Offer the highest-quality lunch time fare.

Ensure sufficient visibility. A strong marketing campaign required.1.3 Objectives To become the premier sandwich shop in downtown Washington, PA.

To continually draw students off campus for lunch at a rate of 35% new customers per year after the second

year.

To become profitable within the first two years.

Company Summary

Pita Pal is a recently formed PA based L.L.C. formed by Steve Jones. The company is wholly owned by Steve. The business will be based in downtown Washington 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:

Cash register;

Computer system, including printer, CD-RW, Internet connection;

Convection oven;

Refrigeration unit;

Blender/food processor;

Assorted knives, cutting boards, serving dishes, silverware, food containers;

Shelving units;

Tables, chairs, table clothes and other table accessories;

Lighting units;

Espresso machine and coffee maker (these items are subsidized by the coffee vendor who sells the

coffee/espresso beans).

Start-up Funding

Start-up Expenses to Fund £5,500

Start-up Assets to Fund £59,500

Total Funding Required £65,000

Assets

Non-cash Assets from Start-up £25,000

Cash Requirements from Start-up £34,500

Additional Cash Raised £0

Cash Balance on Starting Date £34,500

Total Assets £59,500

Liabilities and Capital

Liabilities

Current Borrowing £0

Long-term Liabilities £0

Accounts Payable (Outstanding Bills) £0

Other Current Liabilities (interest-free) £0

Total Liabilities £0

Capital

Planned Investment

Entrepreneurship Program Loan £40,000

Investor 2 £25,000

Additional Investment Requirement £0

Total Planned Investment £65,000

Loss at Start-up (Start-up Expenses) (£5,500)

Total Capital £59,500

Total Capital and Liabilities £59,500

Total Funding £65,000

Start-up

Requirements

Start-up Expenses

Legal £3,000

Stationery etc. £300

Brochures £500

Consultants £1,000

Rent £700

Total Start-up Expenses £5,500

Start-up Assets

Cash Required £34,500

Other Current Assets £0

Long-term Assets £25,000

Total Assets £59,500

Total Requirements £65,000

2.2 Company Ownership

Pita Pal has been formed as a limited liability company in Pennsylvania. 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 a traditional corporation.

Services

Pita Pal is a downtown 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 range 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 salads available, both green as well as pastas, assorted deserts, espresso and coffee.

Market Analysis Summary

Pita Pal will be serving the Washington, PA lunch time and early evening crowd. Two distinct market segments will be targeted: students of Washington and Jefferson College 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 available on Main Street. Main Street has been chosen in Washington because of the recent renaissance of the downtown area. 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 downtown 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:

StudentsThis group is primarily from Washington and Jefferson College, a liberal arts school, a tenth of a mile from downtown. The students are looking for food vendors for two main reasons, the first is the desire to get off campus, the second is to have an alternative to the on-campus food service. Demographic data and behavioral traits for the students is as follows:

75% of the students are on some sort of financial aid;

67% have a part-time job;

Ages 17-22;

42% of the students were in the top 15% of their high school class;

36% of the students were in the 85th percentile for the SAT;

89% of the students eat out at least twice per week;

75% of the students are on the school food program.

This information pertains to the Washington and Jefferson students. There will be a few community college students who will trickle in, but since their campus is six miles away, there will not be a significant number of community college students.

TownersThis group is the people that live and work in Washington, primarily in the downtown area.

Ages 24-55;

The average individual income is £38,000;

55% of the people have at least some undergraduate schooling;

44% of the people work within a seven minute walk from the downtown area;

76% of the group go out for lunch one to two times a week.

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

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 lunch. 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 downtown and tend to patronize the other downtown businesses. These people are more in tune with the different business organizations that exist downtown. 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 counter and served within a few minutes, and the menu is somewhat limited in selection. It is also similar to fast casual 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 fast food restaurant and there is a larger product offering.

For the restaurant industry, it is normal for a venture to reach profitability by year 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.

4.3.1 Competition and Buying Patterns

Pita Pal's competition exists in many forms:

Fast food: This takes the form of the traditional restaurants such as McDonald's, Burger King, and Wendy's, as

well as healthier alternatives such as Subway.

Pizza: The predominant pizza place for sit down food is Brothers pizza, owned by two brothers who are

professors at the college. This place is more popular with locals than with college students based primarily on

the fact that the professor owners are not very well liked as professors so many students avoid the place.

Deli: There are two different delis located downtown that serve deli style sandwiches. These delis serve very

basic, standard deli fare, generally sliced deli meats.

Diners: Based on the aging demographic of Washington, a function of its steel industry roots, there are several

diners located in Washington, one of them downtown. These are very traditional diners, the menus are right out

of the 1950's.

On-campus food service: At least for the students, this is an alternative in terms 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

are looking for other alternatives regardless of the fact that their food is already paid for via the plan.

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 value of 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 arise are corrected.

5.1 Competitive 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 students. Recognizing 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 levels 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 work downtown, flyers will

be passed around the downtown area 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 current 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.

This sales philosophy is a way of treating customers. While the service offered 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.

Sales Forecast

Year 1 Year 2 Year 3

Sales

Food £48,361 £102,323 £143,434

Beverages £20,312 £42,976 £60,242

Total Sales £68,673 £145,299 £203,676

Direct Cost of Sales Year 1 Year 2 Year 3

Food £14,508 £30,697 £43,030

Beverages £4,062 £8,595 £12,048

Subtotal Direct Cost of Sales £18,571 £39,292 £55,079

5.4 Milestones

Pita Pal has identified four milestones that are clear in terms of the goals, and are achievable:

1. Business plan completion. The final version will be accomplished with in the first two months.

2. £50,000 in revenue. A date of expectancy has been established and it will be useful to gauge performance on

whether the revenue is realized on schedule.

3. Profitability. Very important, it is forecasted to occur within two years.

4. Payback of entrepreneurship loan. While non-payment of the loan will not result in serious consequences it is a

matter of pride to be able to take a loan from the College's Entrepreneurship Program and turn it into a successful

business.

Milestones

Milestone Start Date End Date Budget Manager Department

Business plan completion 1/1/2003 3/1/2003 £0 Steve Operations

£50K in revenue 3/1/2003 11/1/2003 £0 Steve Sales

Profitability 3/1/2003 10/15/2003 £0 Steve Accounting

Payback of loan 3/1/2003 1/1/2007 £0 Steve Accounting

Totals £0

Management Summary

Steve Jones is the driving force behind Pita Pal. Steve has lived in Washington, PA for the last four years while studying for his Bachelor of Arts from Washington and Jefferson College. Steve's introduction to the restaurant industry came at the early age of 14 when he worked in his family's restaurant in Cleveland.

While pursuing his degree Steve was a server at a fine dining restaurant called Angelo's, 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 Steve 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, Steve applied for the a loan through the Entrepreneurship Program and was pleasantly surprised that he won. Steve 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 Steve felt the need to rewrite the plan before beginning the business. He undertook this task and the business has begun.

6.1 Personnel Plan

Steve will be the main employee of Pita Pal. For the first two months of operation, Steve will be the sole employee. During this period he will oversee the finishing touches on the retail space, will develop the product recipes, and will establish vendor relationships. Month three will mark the first month of sales. Steve will have at least two employees present during open hours. Steve will also have one employee working 1.5 hours before opening to help with 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

Steve £24,000 £27,000 £30,000

employee 1 £9,000 £10,800 £10,800

employee 2 £9,000 £10,800 £10,800

employee 3 £7,200 £10,800 £10,800

employee 4 £5,400 £10,800 £10,800

Total People 5 5 5

Total Payroll £54,600 £70,200 £73,200

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

7.2 Break-even Analysis

The following table and chart show our Break-even Analysis.

Break-even Analysis

Monthly Revenue Break-even £9,799

Assumptions:

Average Percent Variable Cost 27%

Estimated Monthly Fixed Cost £7,149

7.3 Projected Profit and Loss

The following table and charts illustrate the Projected Profit and Loss.

Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales £68,673 £145,299 £203,676

Direct Cost of Sales £18,571 £39,292 £55,079

Other Costs of Goods £0 £0 £0

Total Cost of Sales £18,571 £39,292 £55,079

Gross Margin £50,102 £106,007 £148,598

Gross Margin % 72.96% 72.96% 72.96%

Expenses

Payroll £54,600 £70,200 £73,200

Sales and Marketing and Other Expenses £2,400 £2,400 £2,400

Depreciation £5,004 £5,004 £5,004

Rent £9,000 £9,000 £9,000

Utilities £3,600 £3,600 £3,600

Insurance £3,000 £3,000 £3,000

Payroll Taxes £8,190 £10,530 £10,980

Other £0 £0 £0

Total Operating Expenses £85,794 £103,734 £107,184

Profit Before Interest and Taxes (£35,691) £2,273 £41,414

EBITDA (£30,688) £7,277 £46,418

Interest Expense £0 £0 £0

Taxes Incurred £0 £682 £12,424

Net Profit (£35,691) £1,591 £28,990

Net Profit/Sales -51.97% 1.09% 14.23%

7.4 Projected Cash Flow

The following table and chart will indicate Projected Cash Flow.

Pro Forma Cash Flow

Year 1 Year 2 Year 3

Cash Received

Cash from Operations

Cash Sales £68,673 £145,299 £203,676

Subtotal Cash from Operations £68,673 £145,299 £203,676

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 £68,673 £145,299 £203,676

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending £54,600 £70,200 £73,200

Bill Payments £40,474 £67,160 £94,183

Subtotal Spent on Operations £95,074 £137,360 £167,383

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 £95,074 £137,360 £167,383

Net Cash Flow (£26,401) £7,939 £36,293

Cash Balance £8,099 £16,037 £52,331

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 £8,099 £16,037 £52,331

Other Current Assets £0 £0 £0

Total Current Assets £8,099 £16,037 £52,331

Long-term Assets

Long-term Assets £25,000 £25,000 £25,000

Accumulated Depreciation £5,004 £10,008 £15,012

Total Long-term Assets £19,996 £14,992 £9,988

Total Assets £28,095 £31,030 £62,319

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable £4,287 £5,630 £7,930

Current Borrowing £0 £0 £0

Other Current Liabilities £0 £0 £0

Subtotal Current Liabilities £4,287 £5,630 £7,930

Long-term Liabilities £0 £0 £0

Total Liabilities £4,287 £5,630 £7,930

Paid-in Capital £65,000 £65,000 £65,000

Retained Earnings (£5,500) (£41,191) (£39,601)

Earnings (£35,691) £1,591 £28,990

Total Capital £23,809 £25,399 £54,389

Total Liabilities and Capital £28,095 £31,030 £62,319

Net Worth £23,809 £25,399 £54,389

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 3 Industry Profile

Sales Growth 0.00% 111.58% 40.18% 6.96%

Percent of Total Assets

Other Current 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%

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 Expenses

124.93% 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

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

Sales/Net Worth 2.88 5.72 3.74 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix

Sales Forecast

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Sales

Food 0% £0 £0 £3,248 £3,939 £4,828 £4,577 £4,044 £4,348 £5,430 £6,148 £6,346 £5,454

Beverages 0% £0 £0 £1,364 £1,654 £2,028 £1,922 £1,699 £1,826 £2,281 £2,582 £2,665 £2,291

Total Sales £0 £0 £4,612 £5,593 £6,855 £6,499 £5,743 £6,174 £7,711 £8,730 £9,011 £7,745

Direct Cost of Sales

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Food £0 £0 £974 £1,182 £1,448 £1,373 £1,213 £1,304 £1,629 £1,844 £1,904 £1,636

Beverages £0 £0 £273 £331 £406 £384 £340 £365 £456 £516 £533 £458

Subtotal Direct Cost of Sales

£0 £0 £1,247 £1,512 £1,854 £1,757 £1,553 £1,670 £2,085 £2,361 £2,437 £2,094

Personnel Plan

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Steve 0% £2,000 £2,000 £2,000 £2,000 £2,000 £2,000 £2,000 £2,000 £2,000 £2,000 £2,000 £2,000

employee 1 0% £0 £0 £900 £900 £900 £900 £900 £900 £900 £900 £900 £900

employee 2 0% £0 £0 £900 £900 £900 £900 £900 £900 £900 £900 £900 £900

employee 3 0% £0 £0 £0 £0 £900 £900 £900 £900 £900 £900 £900 £900

employee 4 0% £0 £0 £0 £0 £0 £0 £900 £900 £900 £900 £900 £900

Total People 1 1 3 3 4 4 5 5 5 5 5 5

Total Payroll £2,000 £2,000 £3,800 £3,800 £4,700 £4,700 £5,600 £5,600 £5,600 £5,600 £5,600 £5,600

General Assumptions

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Plan Month

1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate

10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Long-term

10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Interest Rate

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month

10Month

11Month

12

Sales £0 £0 £4,612 £5,593 £6,855 £6,499 £5,743 £6,174 £7,711 £8,730 £9,011 £7,745

Direct Cost of Sales

£0 £0 £1,247 £1,512 £1,854 £1,757 £1,553 £1,670 £2,085 £2,361 £2,437 £2,094

Other Costs of Goods

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Cost of Sales

£0 £0 £1,247 £1,512 £1,854 £1,757 £1,553 £1,670 £2,085 £2,361 £2,437 £2,094

Gross Margin £0 £0 £3,365 £4,081 £5,001 £4,742 £4,190 £4,505 £5,626 £6,369 £6,574 £5,650

Gross Margin %

0.00% 0.00% 72.96% 72.96% 72.96% 72.96% 72.96% 72.96% 72.96% 72.96% 72.96% 72.96%

Expenses

Payroll £2,000 £2,000 £3,800 £3,800 £4,700 £4,700 £5,600 £5,600 £5,600 £5,600 £5,600 £5,600

Sales and Marketing and Other Expenses

£200 £200 £200 £200 £200 £200 £200 £200 £200 £200 £200 £200

Depreciation £417 £417 £417 £417 £417 £417 £417 £417 £417 £417 £417 £417

Rent £750 £750 £750 £750 £750 £750 £750 £750 £750 £750 £750 £750

Utilities £300 £300 £300 £300 £300 £300 £300 £300 £300 £300 £300 £300

Insurance £250 £250 £250 £250 £250 £250 £250 £250 £250 £250 £250 £250

Payroll Taxes 15% £300 £300 £570 £570 £705 £705 £840 £840 £840 £840 £840 £840

Other £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Operating Expenses

£4,217 £4,217 £6,287 £6,287 £7,322 £7,322 £8,357 £8,357 £8,357 £8,357 £8,357 £8,357

Profit Before Interest and Taxes

(£4,217) (£4,217) (£2,922) (£2,206) (£2,321) (£2,580) (£4,167) (£3,852) (£2,731) (£1,988) (£1,783) (£2,707)

EBITDA (£3,800) (£3,800) (£2,505) (£1,789) (£1,904) (£2,163) (£3,750) (£3,435) (£2,314) (£1,571) (£1,366) (£2,290)

Interest Expense

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Taxes Incurred

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Net Profit (£4,217) (£4,217) (£2,922) (£2,206) (£2,321) (£2,580) (£4,167) (£3,852) (£2,731) (£1,988) (£1,783) (£2,707)

Net Profit/Sales

0.00% 0.00% -63.36% -39.45% -33.85% -39.70% -72.56% -62.40% -35.42% -22.77% -19.79% -34.95%

Pro Forma Cash Flow

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month

10Month

11Month

12

Cash Received

Cash from Operations

Cash Sales £0 £0 £4,612 £5,593 £6,855 £6,499 £5,743 £6,174 £7,711 £8,730 £9,011 £7,745

Subtotal Cash from Operations

£0 £0 £4,612 £5,593 £6,855 £6,499 £5,743 £6,174 £7,711 £8,730 £9,011 £7,745

Additional Cash Received

Sales Tax, VAT, HST/GST Received

0.00% £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

New Current Borrowing

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

New Other Liabilities (interest-free)

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

New Long-term Liabilities

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Sales of Other Current Assets

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Sales of Long-term Assets

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

New Investment Received

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Subtotal Cash Received

£0 £0 £4,612 £5,593 £6,855 £6,499 £5,743 £6,174 £7,711 £8,730 £9,011 £7,745

Expenditures Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month

10Month

11Month

12

Expenditures from Operations

Cash Spending £2,000 £2,000 £3,800 £3,800 £4,700 £4,700 £5,600 £5,600 £5,600 £5,600 £5,600 £5,600

Bill Payments £60 £1,800 £1,851 £3,326 £3,598 £4,056 £3,960 £3,897 £4,023 £4,434 £4,703 £4,765

Subtotal Spent on Operations

£2,060 £3,800 £5,651 £7,126 £8,298 £8,756 £9,560 £9,497 £9,623 £10,034 £10,303 £10,365

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Principal Repayment of Current Borrowing

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Other Liabilities Principal Repayment

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Long-term Liabilities Principal Repayment

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Purchase Other Current Assets

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Purchase Long-term Assets

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Dividends £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Subtotal Cash Spent

£2,060 £3,800 £5,651 £7,126 £8,298 £8,756 £9,560 £9,497 £9,623 £10,034 £10,303 £10,365

Net Cash Flow (£2,060) (£3,800) (£1,038) (£1,533) (£1,443) (£2,257) (£3,817) (£3,323) (£1,912) (£1,305) (£1,292) (£2,621)

Cash Balance £32,440 £28,640 £27,602 £26,069 £24,625 £22,369 £18,552 £15,229 £13,317 £12,012 £10,719 £8,099

Pro Forma Balance Sheet

Month 1Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month 10Month 11 Month 12

AssetsStarting Balances

Current Assets

Cash £34,500 £32,440 £28,640 £27,602 £26,069 £24,625 £22,369 £18,552 £15,229 £13,317 £12,012 £10,719 £8,099

Other Current Assets

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Current Assets

£34,500 £32,440 £28,640 £27,602 £26,069 £24,625 £22,369 £18,552 £15,229 £13,317 £12,012 £10,719 £8,099

Long-term Assets

Long-term Assets

£25,000 £25,000 £25,000 £25,000 £25,000 £25,000 £25,000 £25,000 £25,000 £25,000 £25,000 £25,000 £25,000

Accumulated Depreciation

£0 £417 £834 £1,251 £1,668 £2,085 £2,502 £2,919 £3,336 £3,753 £4,170 £4,587 £5,004

Total Long-term Assets

£25,000 £24,583 £24,166 £23,749 £23,332 £22,915 £22,498 £22,081 £21,664 £21,247 £20,830 £20,413 £19,996

Total Assets £59,500 £57,023 £52,806 £51,351 £49,401 £47,541 £44,867 £40,633 £36,893 £34,564 £32,842 £31,133 £28,095

Liabilities and Capital

Month 1Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month 10Month 11 Month 12

Current Liabilities

Accounts Payable

£0 £1,740 £1,740 £3,207 £3,463 £3,924 £3,830 £3,763 £3,876 £4,278 £4,544 £4,617 £4,287

Current Borrowing

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Other Current Liabilities

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Subtotal Current Liabilities

£0 £1,740 £1,740 £3,207 £3,463 £3,924 £3,830 £3,763 £3,876 £4,278 £4,544 £4,617 £4,287

Long-term Liabilities

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Liabilities £0 £1,740 £1,740 £3,207 £3,463 £3,924 £3,830 £3,763 £3,876 £4,278 £4,544 £4,617 £4,287

Paid-in Capital £65,000 £65,000 £65,000 £65,000 £65,000 £65,000 £65,000 £65,000 £65,000 £65,000 £65,000 £65,000 £65,000

Retained Earnings

(£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500) (£5,500)

Earnings £0 (£4,217) (£8,434) (£11,356) (£13,562) (£15,883) (£18,463) (£22,630) (£26,483) (£29,214) (£31,202) (£32,985) (£35,691)

Total Capital £59,500 £55,283 £51,066 £48,144 £45,938 £43,617 £41,037 £36,870 £33,017 £30,286 £28,298 £26,515 £23,809

Total Liabilities and Capital

£59,500 £57,023 £52,806 £51,351 £49,401 £47,541 £44,867 £40,633 £36,893 £34,564 £32,842 £31,133 £28,095

Net Worth £59,500 £55,283 £51,066 £48,144 £45,938 £43,617 £41,037 £36,870 £33,017 £30,286 £28,298 £26,515 £23,809

Fast Food Restaurant Business PlanFresin Fries

Executive Summary

Fresin Fries is a locally owned fast food outlet that will be positioned as an international franchise through our creative approach to the company's image and detail presentation. Fresin Fries will provide a combination of excellent food at value pricing, with fun packaging and atmosphere. Fresin Fries is the answer to an increasing demand for snack-type fast food, to be consumed while window shopping and walking around inside a shopping mall.

In today's highly competitive environment, it is becoming increasingly difficult to differentiate one fast food outlet from another. Singapore, a city state, is now becoming the model metropolis for Asia's new economic boom. With more than 11 million visitors yearly, mainly from neighboring countries (Malaysia, Indonesia, Thailand and the Philippines), Singapore's retail sector is the strongest in the region.

Our main priority is to establish one outlet in a crowded mall, preferably in one of prominent shopping malls in Singapore. Later, our effort will be a further development of more retail outlets in the surrounding area.

This plan is prepared to obtain a location for the initial launch of this concept. Additional financing will need to be secured for the two subsequent outlets, anticipated in month 13 and early in year three. The financing, in addition to the capital contributions from shareholders, will allow Fresin Fries to successfully open and expand through year two. The initial capital investment will allow Fresin Fries to provide its customers with a value-driven, entertaining experience through the creativity of its founders.

Fresin Fries will entice youngsters to bring their friends and family with our innovative environment, fresh-cut Belgian fries, and selection of unique signature dipping sauces.

Please note that all tables are in Singaporean Dollars (1 USD= S£1.60)

1.1 Objectives

To establish a presence as a successful local fast food outlets and gain a market share in Singapore's fast food

industry.

To make Fresin Fries a destination spot for mall-goers.

To expand into a number of outlets by year three, and sell the franchise to neighboring metropolitan cities, such

as Jakarta, Kuala Lumpur, Bangkok and Manila.1.2 Mission

Our main goal is to be one of the most successful fast food outlets in Singapore, starting with one retail outlet located inside a major shopping mall as a "market tester."

Fresin Fries will strive to be a premier local fast food brand in the local marketplace. We want our customers to have the total experience when visiting our outlet(s) and website as they will learn about this fascinating new "pop culture." We will sell merchandise from pre-packaged sauces and t-shirts, to potato cutters, all with our official brand attached to them.

Our main focus will be serving high-quality food at a great value.

1.3 Keys to Success

To succeed in this business we must:

Create a unique, innovative, entertaining menu that will differentiate us from the rest of the competition.

Control costs at all times, in all areas and implement a conservative approach to growth policy. Although, we

provide more than enough fund to open more than one outlet, we want to be on the safe side of the business.

Sell the products that are of the highest quality, as well as keeping the customers happy with all of our product

categories from food to store merchandising.

Provide 100% satisfaction to our customers and maintaining the level of excellent services among other

competitors.

Encourage the two most important values in fast food business: brand and image, as these two ingredients are

a couple of main drivers in marketing communications.

Get access to high-traffic shopping malls near the target market.

Promote good values of company culture and business philosophy.

Company SummaryWhat is Fresin Fries? Fresin Fries sells gourmet fries in a cone with a  choice of sauce. We use the concept of Belgian Fries, where the fries are all made from fresh potatoes and fried twice. Our outlet also provides excellent and friendly customer service to support the ambience of fun, energetic and youthful lifestyle. Youthful and fresh surroundings We will imitate successful establishments, such as Jamba Juice and Starbucks, which represent the majority of our core target market, between 18 to 35 years of age. Our store will feature display cooking of our featured Belgian Fries from cutting to frying. Our customers will also be able to read our in-house brochures in regards to all knowledge about Belgian Fries and our featured sauces. Our store will be decorated with fast food setting, such as a bright counter and display menu on the wall.Quality foodEach store will offer nothing but freshly fried Belgian fries, sandwiches and variety of unique blend sauces, all served with old-fashioned home-style care.Open everyday Our store is open everyday from 10 am to 9 pm.Variety, variety, varietyA different selection of sauces will be featured every three months and we will also change our Italian soda flavors to accompany our fries.2.1 Company Ownership

Fresin Fries is a privately held company. It will be registered as a Limited company, with ownership 25% - Guy Fry, 25% - Sam Sauce, 25% - Carl Cone, 25% - Harry Hip.

Guy Fry and Sam Sauce have more than 10 years of experience in the food industry. Both are currently employed as Corporate Staff of Company A.

Sam Sauce holds an MBA degree from University V. A true entrepreneur by heart, his latest entrepreneurial project is a diamond store in the heart of Singapore.

Guy Fry holds a BA degree in Graphic Design from the Academy of Arts. His projects are widely varied from product design to brand development of several reputable companies.

Harry Hip holds a MS degree from Institute Y. He completed several projects and served as project manager for multi-national companies in Singapore.

Carl Cone holds a BS degree from University Z, majoring in Management and Information Technology. Prior to his return to Singapore, he has held several management positions in a U.S.-based IT company.

2.2 Start-up Summary

The retail outlet will be rented at one of the target location shopping malls. Our preference is Space A, for the main reason of reaching larger traffic.

Startup requirements will be financed through owner investments.

Start-up

Requirements

Start-up Expenses

Kitchen and Fixtures £21,600

Furniture and Interior £16,500

Legal £3,000

Rent £15,000

Packaging and Stationary £8,500

Contingencies £4,200

Total Start-up Expenses £68,800

Start-up Assets

Cash Required £50,000

Other Current Assets £0

Long-term Assets £0

Total Assets £50,000

Total Requirements £118,800

2.3 Company Locations and Facilities

Fresin Fries locations will range in size from 50 – 70 meter square and will seat from 15 – 25 guests. Our first location will be on the larger end of this range. The location will feature its own originality in merchandise display and other brand building attributes. We will equip the outlet with modern furniture and aim for cleanliness and an open feeling. We are currently looking at several possible sites in shopping malls along Orchard Road.

The space selection will be chosen based upon the following criteria:

Community size: minimum of 800,000 people within a radius of 8 kilometers.

Tourist destination.

Easy access.

Large percentage of teenagers in the community.

All of these qualities are consistent with Fresin Fries' goal of providing a top quality fast food experience. We want "word-of-mouth" to be our best form of marketing, where our customers value our brand as something exciting and cannot wait to tell their friends and neighbors.

Fresin Fries will directly compete with several fast food joints inside the chosen shopping mall, including Tori-Q (yakitori specialist), Bee Che Hiang (chinese sausages), Bread Talk (one of the most successful bakery franchises), and Pizza Walker (locally owned pizza chain).

Products

We want to focus only on selling fries. Alcoholic drinks will not be sold in our outlet, as Fresin Fries promotes a healthy and positive Singaporean lifestyle. Instead, we will offer Italian Soda to complement the fries.

In promoting the Fresin Fries lifestyle, we will offer various merchandise with our logo and colors, from hats to t-shirts to potato cutters to our signature sauces, so that our customers can enjoy Fresin Fries at home. Our signature sauce is exclusively manufactured by Company Q. They can be also purchased at selected retailers.

3.1 Product Description

Fresin Fries primarily sells fries and our unique dipping sauces. Main products sold are: Belgian fries, Italian sodas and corporate merchandise.

Belgian-style fries are available in large (choose 2 dips), small (choose 1 dip), with addition of garlic Fresin (add S£0.25).

The dips for Belgian style fries can also be served with sandwiches; they are available in more than 20 flavors:

Pesto Mayo

Satay Sauce

Teriyaki Sauce

Thai Chili Ketchup

Creamy Wasabi Mayo

Roasted Pepper Mayo

Lava Cheese

Black Pepper Sauce

Curry Ketchup

Barbecue

Jalapeno Ketchup

Caribbean Islands

Traditional Sambal

Korean BBQ

Hot Chili Sauce

Garlic Dip3.2 Competitive Comparison

Fresin Fries has several advantages over its leading competitors:

Unique "fusion" concept of dipping sauce.

We expect a high degree of enthusiasm and offer a fun store with friendly staff, that reflects the company's

youthful and energetic culture.

Supporting merchandise items that support the company's brand building.

Our fried potato is made 100% fresh, compared to most fast food outlets that use frozen fries.

Our dipping sauce is also made fresh without preservatives.

Our innovative packaging will be more entertaining than our competitors; a single cone with a cup reserved for

dipping sauce.

Company Clean Value Merchandising Hang Out Simple Fresh CoolPop Culture

Fresin Yes Yes Yes Yes Yes Yes Yes Yes

McDonald's Yes Yes Yes Yes Yes No Yes Yes

KFC Yes Yes No Yes No No Yes No

Tori-Q Yes Yes No No Yes Yes No No

Roti Boy Yes Yes No No Yes Yes No No

Bread Talk Yes Yes Yes No Yes Yes Yes No

Bee Che Hiang Yes Yes Yes No Yes Yes No No

Pizza Walker Yes Yes Yes Yes No Yes Yes Yes

3.3 Sales Literature

Fresin Fries will use advertising and sales programs to get the word out to customers.

2,000 color brochures to be distributed throughout destination shopping mall and facilities: in-store, cinemas,

area eateries, information during the grand opening in January 2005.

Half page magazine reviews in Singapore's lifestyle magazines that advertise the presence of the outlet.3.4 Sourcing

Fresh potatoes will be delivered weekly by our distributor directly from the U.S. We also have an agreement with Company Q to exclusively manufacture our signature sauces, and all of our merchandise will be printed and produced by our partner's office in China.

3.5 Sales Programs

Each opening of Fresin Fries will have, more or less, the same marketing mix as the others. Below are the programs that we will develop to open each location.

Grand Opening

Each new outlet will have outdoor signage as soon as possible. We want the signage to be supported by banners before the opening.

Point of Purchase

We will use "tray toppers" to explain the concept and philosophy of Fresin Fries. We will also sell gift certificates, announce future job openings, and possibly mention franchise opportunities.

Direct Mail Piece

A stand-alone piece, folded, will be produced in full color on heavy weight paper. Inside will be all the important details of Fresin Fries, explanation of our menu, prices, house of operation and a locator map.

3.6 Future Products

For now, we will focus on selling fries and signature sauces. However, as we grow further, we will add new categories to our menu, such as Belgian Sandwiches and Buffalo Wings.

In the future, our growth strategy will be offering the franchise of our brand to food entrepreneurs in the region. The success of Bread Talk franchising in Indonesia is the best example on growing globally.

Value Meal

Sales of Fresin Fries will not only generated from the selling of its famous Belgian Fries, but also will be generated by the conception of an innovative package menu called the "value meal." It primarily consists of a combination of our featured Belgian Fries, sandwiches and Italian soda at greater value than selling at individual items. Further customization could be done by selling a bigger size of fries called "Uber Fresin" to attract price sensitive customers.

Private Parties

Brochures and handouts will explain that we can handle banquets and private parties, in addition to our brochure that will list our daily entrees.

Market Analysis Summary

Consumer expenditures for fast food in Singapore rose during the end of the year 2000, followed by the recovery of Singapore's economy. The increasing number of new establishments such as fast food franchises, fancy restaurants and gourmet bakeries around Singapore has shown a significant growth in this sector. Food spending is around 56% of total consumer expenditures in Singapore, and consumer spending on leisure and recreation made up of 13% of total consumer spending.

A much broader appeal exists for weekend slots because those are the days when most of our core target market enjoys the mall going activities.

Age - Youngsters, single, currently enrolled in college and high school.

Family unit - We will also appeal to families (young families) with children.

Gender - We will target both sexes, with a slight skew for males due to their lower attention to dietary concerns.

Income - We will appeal to the medium income individuals and to all in the lower medium income bracket.

Our concept will have very broad appeal. It is our goal to be the hip destination for fast food cravings.

According to a recent public survey of people 15 - 45 years old, 80% of those interviewed like fast food. 90% of them like fast food on a regular basis, and 10% of them claimed that they like fast food "very much," or "love" fast food. The survey also provided the following particular reasons for the increasing popularity of fast food:

People have 52 weekends and three long holidays a year. Most of Singaporeans love to window shop, and

when they do strolling around the shopping district, they need a quick bite to accommodate their activities.

White-collar workers in offices have stopped bring lunch, and enjoy chicken, hamburger, pizza or other fast food

joints in the vicinity.

Parents give more money to kids and students to buy lunch. Fast food is naturally their first choice, because of

the brand building effort that heavily targets their age group.

Eating out still remains as Singaporeans' common habit of life. They do not perceive fast food is a luxury, and

they enjoy it by bringing their family, especially if they have smaller kids, in the environment of the western-style

fast food outlets.4.1 Market Segmentation

We are targeting young Singaporeans as our primary market. Orchard Road is the place to meet and hang out after school. Due to heavy extra-curricular activities among Singapore's youth, it is common for high schoolers to have lunch inside shopping malls, and not at home. They tend to flock to fast food joints inside shopping malls across Orchard Road.

Our secondary market segment is the "Working Singaporeans." With so many shopping malls in the vicinity, Orchard Road is the haven for shoppers and job seekers alike. In the new Paragon Shopping Centre, there are more than 8,000 workers currently working as sales persons and boutique staff. There are more than 10 major shopping malls across Orchard Road, including Ngee Ann City, the biggest shopping mall in the nation, employing more than 50,000 workers.

Lastly, Orchard Road is also the destination for tourists staying in the area. The Meritus Mandarin, Crown Prince Hotel, the Hilton, and Popular Hotel are a few of the biggest accommodations in Singapore. Tourists will stroll Orchard Road, hunting for the latest trend in fashion and have no time to stop for a full meal during shopping. Fresin Fries is the alternative for a quick bite while shopping the fancy boutiques in the area.

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Young Singaporeans 15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031 15.00%

Working Singaporeans

10% 3,000,000 3,300,000 3,630,000 3,993,000 4,392,300 10.00%

Tourists 20% 3,800,000 4,560,000 5,472,000 6,566,400 7,879,680 20.00%

Total 15.52% 11,800,000 13,610,000 15,714,500 18,163,775 21,017,011 15.52%

4.2 Target Market Segment Strategy

Fresin Fries intends to cater to the bulk of teenagers and youngsters in Singapore. We have chosen this group for several important reasons. It is our goal to be "the extraordinary fast food place" and we believe that the age group from 15 to 25 is the primary age where brand building efforts could take place. They are on limited or fixed incomes and seek a value/price relationship that will not stretch their budgets.

Our secondary target is between the ages of 25 and 37, which are a heavy lounge/restaurant user group. They are more flexible in budgets and seek more than a value/price relationship.

Our lunch strategy is dual purposed. First, we are featuring fresh fries to fill Singapore's craving for fast food as most ideas of lunch is a quick bite not a heavy meal.

Second, we want to keep the price point at lunch as fair as possible to keep us in competition with other fast food outlets. At S£4.00 for a medium size fries, we are only slightly above the segment, but we offer much more excitement than the rest of the competition.

4.2.1 Market Needs

Fresin Fries sees our targeted market group as having many "makan" (eating) Singaporean Dollar needs. A recent Consumer Trend and Analysis by Euromonitor identified the following needs among our target markets. Our core group:

Wants variety and flavor in its food, preferably something fried

Looks for speed of service

Wants an entertaining and fun experience

Insists upon a clean, friendly, and attractive environment

Adopts a global lifestyle

Is computer literate

Enjoys eating out

Has an active lifestyle

Comes from various ethnic backgrounds

According to a GAIN Report published in 2000, potatoes are the second largest commodity of US exports to Singapore after fresh fruit, valuing almost USD £13 million per annum. This is caused by the increasingly younger demographic and rising incomes throughout Singapore that have led to lifestyle changes that are influencing consumer purchases, food, and entertainment choices. Some changes taking place include a larger professional class with more working women, which means greater disposable incomes.

4.2.2 Market Trends

In the past, Singaporeans preferred Western chain restaurants. This was the time when KFC, McDonald's, Long John Silver's and Pizza Hut were dominating most of the chains. But the trend seems to have shifted in the last decade, with the success of the locally grown brands, such as Bread Talk and Bee Che Hiang. Many of these local brands grew to become giant franchises that dominate the Southeast Asia region. For instance, Bread Talk controls 55% of Indonesia's bakery market.

The key to success for these foreign chains was mainly due to the popularity of Singapore as tourist destination for these countries. Tourists are the strongest "buzzer." Usually after they went back from vacationing in Singapore, they told friends and families about new things in Singapore, including new shopping malls, new boutiques, new restaurants, and new fast food joints. The fascination of Asian tourists coming to Singapore has positioned the city itself as an aspiration to modern life in the region.

Many local entrepreneurs camouflaged their retail stores as an international brand in accordance to what they sell. For instance, there is a local entrepreneur who created a Japanese name to sell yakitori (Japanese BBQ meat skewers), and there is a fashion boutique named after an old Italian movie.

4.3 Industry Analysis

Despite the prolonged effects of the Asian Economic Crisis followed by political turmoil up to mid 2001, Singapore's food service industry witnessed growth over 2000/2001 at 4 - 5% in terms of units and transaction (Euromonitor). Much of this growth was contributed by the cafes/bars, fast food, and food retail sectors, whose wide appeal amongst a young population, for whom time is of a premium, led to high levels of growth. This growth is underpinned by market demand and lifestyle changes, such as seeing eating out as part of trendy lifestyle.

Entry of major multi-national food service operators into major shopping destination in the late 1980s until the 1990s led to growth in competition in the marketplace, mainly from fast food chains. This stimulated the rise in the number of fast food units, both of international and local chains, that started in the early 1990s. Although there was a slowdown during the economic crisis in 1998, the food service industry recovered faster than others, particularly during 2000 and 2001. Recent bombing tragedies have also proven that negative effects on this sector are moderately short-term.

Franchising became popular in the food service industry through the introduction and entry of multi-national food service brands, primarily U.S.-owned enterprises, such as KFC, Pizza Hut and McDonald's. Currently, there are many local chains that have also experienced growth by applying this system to their operations.

4.3.1 Trends in Food Service Retail

According to government surveys, Singapore's spending on "eating out" is continuing to increase. Spending on cooked food as a percentage of total average food-spend reached 55% in 1998. The growth in spending in the food service sector arises from a number of factors:

Increased affluence amongst Singaporeans, especially those under the age of 40 years.

Increases in the number of expatriate residents, which has more than doubled since 1988.

Increased convenience-seeking amongst younger Singaporeans who live in a hectic city today compared to the

much slower pace of life that existed 20 years ago.

When they want convenient cooked food, Singaporeans have long turned to the local hawker stalls, rather than prepared ready-to-cook or ready-to-eat processed convenience foods. As the numbers and variety of food service outlets has increased in Singapore, locals have adopted the convenient products of other food service outlets, especially the fast food outlets, as alternative sources of convenient cooked food. Younger middle and upper income group families and individuals are also frequent users of the full service restaurants, modern-style coffee shops and cafés that now exist all across Singapore.

Over the past 5 years, there has been a general upgrading in the food service sector which has seen the establishment of more air conditioned food centers (food courts) that are considerably cleaner than the traditional hawker markets. At the same time, increased investment from foreign and local businesses in the sector has also produced an increase in the numbers of:

Foreign chains, including chains such as Outback Steakhouse.

Modern retail bakery/café outlets such as Bread Talk.

Modern coffee shops such as Starbucks.4.3.2 Competition and Buying Patterns

The competition in this arena is the fiercest in all other metropolitan areas in SE Asia. Singapore is a compact city, but has a lot to offer. Usually there are a minimum of two of the same outlets within a radius of less than 300 meters. For instance, Bread Talk opens one outlet inside the Ngee Ann City Shopping Centre and another just across the street inside the Far East Plaza Shopping Centre. It is quite common for retailers to implement this kind of strategy, due to the high volume of people strolling around the main area of Orchard Road.

Another reason is because many retailers do not want to lose sales opportunity, as the competitors are offering substitutions and similar product categories. This phenomenon has made Singapore the best place to shop. If you just missed Häagen Dazs waffle at CK Tang Shopping Mall, there is another Häagen Dazs across the street at the new Paragon Shopping Centre.

4.3.3 Main Competitors

Our main competitors in this segment are any food outlets within the 300 meter radius along the Orchard Road. In our location, there are Tori-Q, Pizza Walker, Starbucks, Bread Talk, and Rotiboy.

Tori-QTori-Q is locally owned franchise who sells Japanese BBQ skewers. Established in 1998, Tori-Q had expanded its operation into neighboring countries, Indonesia, Malaysia, and Thailand. Tori-Q is popular among local teenagers as it offers fast service to its customers. Commonly, Tori-Q outlets are rather small, and can only serve a maximum of 6 guests. It is a choice for those who are in a hurry and would like to grab a quick lunch on the way.Pizza WalkerPizza Walker is a joint venture positioned as gourmet pizza joint in Singapore. Most of its retail outlets are decorated with welcoming ambience, such as flowers and see-through kitchens. Pizza Walker is a good place to hang out, and the place is always full during lunch hour. It has more than enough tables to serve a maximum of 55 guests. Its specialty is all-you-can-eat pizza!StarbucksStarbucks' strategy entering the lunch market had made some impact in Singapore. Usually, a lunch menu in Singapore consists of "fried and BBQ stuff" such as roast pork with rice or the Big Mac. Starbucks is one of the first food retailers that popularized "light and healthy" alternatives such as salad or lean sandwich as an options for Singapore's lunch accommodations.Bread TalkAs the most successful franchiser in Singapore, Bread Talk is surely becoming a threat for most food retailers. Bread Talk not only rented most of the retail space along Orchard Road, but now they are doing delivery to offices and apartments nearby. Bread Talk outlets usually consist of a huge see-through kitchen, and bread trays ready for pick-

up by customers, with three or four cashiers at front, to speed up the queue. Rumor has it that Bread Talk sold more than 35,000 breads each day in just one of their retail outlets.RotiboyA Malaysian franchise. Rotiboy is quite popular in the region as it is now expanding into several cities in Indonesia, Vietnam, Thailand, and the Philippines. Rotiboy offers simplicity for quick lunch franchiser, and often considered alternatives for its long queueing rivals.4.3.4 Foreign Vs. Local Franchising

Around 40% of the franchises operating in Singapore are foreign. Home grown franchises are still in their maturing stages as they start to expand globally. Franchises from the U.S. account for 65% of foreign brands, with big players such as KFC, Starbucks, Pizza Hut, etc. Due to high capital investment, Singapore conglomerates tend to dominate the industry.

Home grown franchises are more often sought more by young entrepreneurs than are their Western counterparts, as they offer greater flexibility and lower franchise fees to operate. Unlike Western license holders, home grown franchises are more efficient in the overall supply chain management as the basic raw ingredients are commonly found anywhere in the region.

Strategy and Implementation Summary

At first, we will open one outlet inside the New Paragon Shopping Centre. This will become our "market testing area," and as we go further, Fresin Fries is planning to open another in nearby shopping malls. In attracting customers to try our fries, we will provide a see-through kitchen, so that people will see how we are committed to freshness in our products.

The kitchen will also let out an aroma of our freshly fried fries into the surroundings area, so that people will come and try our products.

5.1 Competitive Edge Our unique dipping sauces blend local taste and international into one fusion recipe for the signature sauce.

Enthusiastic and friendly staff

Supporting merchandise items that support company's brand building.

Our fries are made of 100% fresh potatoes, unlike the frozen fries used by competitors.

Innovative packaging will position us at the same level with foreign fast food franchises.5.2 Marketing Strategy

Our strategy is based on serving our markets well. We will start our first outlet as a "market tester" that could become a model of the expanding number of outlets in the future. Concentration will be on maintaining quality and establishing a strong identity in the local market.

A combination of local media and local store marketing programs will be utilized at each location. Local store marketing is most effective, followed by print ad. As soon as a concentration of stores is established in a market, then broader media will be explored. We believe, however, that the best form of advertising is still "buzz." By providing a fun and energetic environment, with unbeatable quality at an acceptable price in a clean and friendly outlet, we will be the talk of the town. Therefore, the execution of our concept is the most critical element of our plan. We will actively build our brand, through the selling of supporting materials, such as merchandise, promotional items and other marketing gimmicks similar to those of other fast food franchises.

5.2.1 Pricing Strategy

Our pricing strategy is positioned as "generic", meaning that S£4.00 is the average consumer spending for a snack or light lunch in Singapore. Leveraging the volume of fries, Italian Soda, and signature style sauces to be sold, we are serving the majority of Singaporeans.

5.2.2 Brand Challenges

Fresin Fries must establish a distinct brand to stand out from the other Western-style fast food competitors.

Our logo is distinct as fresh, energetic and playful with color elements that are eye catching.

Product names are geared toward the target market (teens), with items such as "Frenzy Fresin" and "Uber

Fresin" which are fun and easy to remember.5.2.3 Marketing Programs

We will deploy three different marketing tactics to increase customer awareness of Fresin Fries. Our most important tactic will be "word-of-mouth" and in-store marketing. This will be by far the cheapest and most effective of our marketing programs because of the high traffic in targeted shopping locations.

The second tactic will be local store marketing. These will be low-budget plans that will provide community support and awareness of our facility. The last marketing effort will be utilizing local media. Although, this will be the most costly, this tactic will be used sparingly as a supplement where necessary. 

In-Store Marketing

o In-store brochures containing our concept and philosophy.

o Wall posters.

o Design concept.

o In-store viewing of making fries process from cutting to frying.

o Standing signage inside malls’ lobby/aisle.

o Outdoor signage (if possible).

o Grand opening promotion.

o Party catering.

o Merchandising items.

 

Local Store Marketing

o Brochures.

o Free occasional t-shirts at local stores events.

 

Local Media

o Direct mail piece – containing brochures sent to surrounding addresses.

o Web page – containing company philosophy, history and news.

o Local magazines that target our core customers, such as Free! Magazine.

o Newspaper campaign – placing several large ads throughout the month to explain our concept to the local

area.5.2.4 Positioning Statement

Our main focus in marketing will be to increase customer awareness in the surrounding community. We will direct all of our tactics and programs toward the goal of explaining who we are and what we are all about. We will price our products fairly, keep our standards high, and execute the concept so that “word-of-mouth” will be our main marketing force.

5.3 Sales Strategy

The sales strategy is to build and open new locations in order to increase revenue. However, this plan will be implemented when the one "market tester" outlet showed potential growth. As each individual location will continue to build its local customer base over the first three years of operation, the goal of each store is S£104,250 in annual sales, with the original flagship store expected to earn almost S£200,000 per year.

5.3.1 Sales Forecast

We anticipate the highest peak on the months of November and December in our sales forecast, due to the holiday seasons. In November, there is Ramadan, and for non-muslim Malaysians and Indonesians, it means vacation time. Approximately 1.5 million Indonesians visit Singapore each year, mostly for shopping and dining. Then in December, we anticipate more tourists coming into Singapore; this explains the jumped of sales in these last two months of the year.

Sales Forecast

Year 1 Year 2 Year 3

Unit Sales

Belgian Fries 49,464 98,928 197,856

Italian Soda 27,692 55,384 110,768

Merchandising 3,889 7,778 15,556

Signature Packaged Sauces 3,356 6,712 13,425

Total Unit Sales 84,401 168,802 337,605

Unit Prices Year 1 Year 2 Year 3

Belgian Fries £4.00 £4.00 £4.00

Italian Soda £1.50 £1.50 £1.50

Merchandising £8.50 £8.50 £8.50

Signature Packaged Sauces £2.00 £2.00 £2.00

Sales

Belgian Fries £197,856 £395,712 £791,424

Italian Soda £41,538 £83,076 £166,152

Merchandising £33,057 £66,114 £132,228

Signature Packaged Sauces £6,712 £13,425 £26,849

Total Sales £279,163 £558,327 £1,116,654

Direct Unit Costs Year 1 Year 2 Year 3

Belgian Fries £0.80 £0.80 £0.80

Italian Soda £0.15 £0.15 £0.15

Merchandising £3.83 £3.83 £3.83

Signature Packaged Sauces £1.00 £1.00 £1.00

Direct Cost of Sales

Belgian Fries £39,571 £79,142 £158,285

Italian Soda £4,154 £8,308 £16,615

Merchandising £14,876 £29,751 £59,503

Signature Packaged Sauces £3,356 £6,712 £13,425

Subtotal Direct Cost of Sales £61,957 £123,914 £247,827

5.4 Strategic Alliances

Our business requires a long relationship with raw suppliers as well as partner vendors. In Chinese, this relationship is called "guanxi," meaning business bonding. We already have a long and good standing relationship with Company V in our previous ventures. For Company Y, Mr. Joe Shmo, the managing director, is a prominent figure in the society and we hope to strengthen further our business relationship with him and the company.

5.5 Milestones

During the initial set up of the company, the 4 founders (Guy Fry, Harry Hip, Sam Sauce, and Carl Cone) will conduct the planning and implementation in building the brand and the construction of our first outlet. The planning and construction will take approximately 8 months, in addition to the revision and refinement process that will take the rest of the 12 month period before our opening in early 2005.

Milestones

Milestone Start Date End Date Budget Manager Department

Presentation materials for all stakeholders

1/12/2004 3/12/2004 TBD Carl ConeBusiness

Development

Follow up with suppliers 1/21/2004 3/22/2004 £100 Sam SauceBusiness

Development

Follow up with developers

1/21/2004 9/8/2004 £50 Sam SauceBusiness

Development

Printing materials 2/13/2004 4/10/2004 £8,000 Guy Fry Marketing

Marketing communication program

2/21/2004 6/23/2004 TBD Sam Sauce Marketing

Constructions 5/22/2004 12/3/2004 TBD Harry HipBusiness

Development

In store signage, POP 5/23/2004 10/11/2004 TBD Guy Fry Marketing

Grand opening materials 6/2/2004 10/13/2004 TBD Guy Fry Marketing

Hiring staff 7/14/2004 8/12/2004 £900 Harry HipHuman

Resources

Open second location 7/1/2005 7/1/2005 £10,000 Carl ConeBusiness

Development

Open 3rd and 4th locations

1/1/2006 6/1/2006 £15,000 Carl ConeBusiness

Development

Open 5th, 6th, and 7th locations

1/1/2007 12/31/2007 £20,000 Carl ConeBusiness

Development

Training staff 9/12/2004 12/10/2004 £1,000 Harry Hip Human

Resources

Totals £55,050

Web Plan Summary

The website will, of course, show visitors everything about Belgian food culture, including the history of french fries over time. To make the website interactive, Fresin Fries will offer gift cards and promotions via the Internet, so our visitors can print the promotional coupon in PDF format and bring it when they visit Fresin Fries. Visitors can also download Fresin Fries' theme song as ring tones, or order potato cutters for delivery.

Besides the traditional formats of customer service hotline and in-store form, customers can now write their comments and suggestions on our website, which will be directed to one of our staff.

So, the website itself will act as the medium between our company and our audience.

In the future, our website will show information on franchising/licensing our brand name.

6.1 Website Marketing Strategy

We will leverage the visibility of our shopping mall's website by getting them to include a link to ours. We will also post banners on an official Singapore tourism website.

6.2 Development Requirements

To adequately serve our audience, the front end strategy of our website should be parallel with our corporate color. The front end design of our website will be entirely trusted to Mr. Guy Fry.

The diversity of founders' background in our company has enabled a cost efficient development in our venture. As Mr. Harry Hip and Mr. Carl Cone are experts in Information Technology, the back end of our website will be developed by these gentlemen.

Management Summary

The initial management team depends on the founders themselves, with little back-up. As we grow, we will take on additional help in certain key areas. Part of our basic philosophy will be able to run our executive management as a "knowledge sharing" fellowship. We will not add additional overhead until absolutely necessary. This will mean that the initial staff support team will have to work extra. By doing this, we will keep our overhead as low as possible, allowing us to adequately staff our outlets. This will also allow us and future business partners to recoup investments as quickly as possible and enjoy a higher return.

At present time, Fresin Fries is being owned by its 4 founders. Others that have helped on the development of this business venture will be offered an opportunity to grow together with the company at the appropriate time, and when the time comes, the 4 founders’ share will be consolidated as one entity.

7.1 Management Team

Fresin Fries is currently the creative idea of its four founders. As the company is small in nature, it only requires a simple organizational structure. Implementation of this organization form calls for all four individuals to make all major management decisions in addition to monitoring all other business activities.

As we expand into multiple locations, each location will have a primary site manager.

7.2 Organizational Structure

Future organizational structure will include a director of store operations when the store locations exceed four units. We hope that this individual will come out of the ranks of our stores’ management. This will provide a supervisory level between the executive level and the store management level.

Current plan is to have our accounting and payroll functions done by an in-house bookkeeping. Mr. David Lu will be responsible for accounting and business development of Fresin Fries, helped by Mr. Harry Hip, acting Head of Human Resources Division. Possible positions might be added at a later date include marketing manager, purchasing manager, controller, human resources, R&D and administrative support team.

7.3 Personnel Plan

Our initial employees will include two cashiers, two cooks and two bus boys per location, with one of each on the premises during open hours. This is considered an ideal personnel number for a food outlet the size of our own. Each employee will work for 38-40 hours per week.

In the long run, as we expand our product category and retail outlets, we will employ more people in the middle management to ensure the focus of our work, including site managers.

Personnel Plan

Year 1 Year 2 Year 3

Site Managers £0 £60,000 £96,000

Cashiers £36,000 £80,000 £144,400

Cook £28,800 £66,000 £115,200

Busboy £23,400 £56,000 £94,000

Total People 12 26 40

Total Payroll £88,200 £262,000 £449,600

Financial Plan

The company is now privately held by Harry Hip, Guy Fry, Carl Cone, and Sam Sauce. Future shares will be offered after two consecutive years of operating in Singapore.

8.1 Start-up Funding

Currently, the company is owned by the original 4 founders, who each will contribute £200,000 for the same amount of share, 25%. This will more than cover start-up requirements, and provide the business with a cash cushion to use for expansion over the first three years.

Start-up Funding

Start-up Expenses to Fund £68,800

Start-up Assets to Fund £50,000

Total Funding Required £118,800

Assets

Non-cash Assets from Start-up £30,000

Cash Requirements from Start-up £50,000

Additional Cash Raised £681,200

Cash Balance on Starting Date £731,200

Total Assets £761,200

Liabilities and Capital

Liabilities

Current Borrowing £0

Long-term Liabilities £0

Accounts Payable (Outstanding Bills) £0

Other Current Liabilities (interest-free) £0

Total Liabilities £0

Capital

Planned Investment

Eric Yam £200,000

Martin Ng £200,000

David Lu £200,000

Sagita Suwandi £200,000

Additional Investment Requirement £0

Total Planned Investment £800,000

Loss at Start-up (Start-up Expenses) (£68,800)

Total Capital £731,200

Total Capital and Liabilities £731,200

Total Funding £800,000

8.2 Break-even Analysis

Our break-even analysis shows that we need unit sales over 9,700 per month to break even. We do not expect to begin turning a profit until year three.

Break-even Analysis

Monthly Units Break-even 9,706

Monthly Revenue Break-even £32,104

Assumptions:

Average Per-Unit Revenue £3.31

Average Per-Unit Variable Cost £0.73

Estimated Monthly Fixed Cost £24,979

8.3 Projected Profit and Loss

As the Profit and Loss shows, Fresin Fries will run at a loss for the first two years, using up some of the cash reserves initially invested by the founders. As sales increase, we will expand into new locations to aggressively spread brand recognition. This increase in visibility will allow us to take up less expensive locations off of Orchard Road, while maintaining our flagship operation, the first store, in a prime spot.

 

 

Pro Forma Profit and Loss

Year 1 Year 2 Year 3

Sales £279,163 £558,327 £1,116,654

Direct Cost of Sales £61,957 £123,914 £247,827

Other Costs of Sales £0 £0 £0

Total Cost of Sales £61,957 £123,914 £247,827

Gross Margin £217,207 £434,413 £868,826

Gross Margin % 77.81% 77.81% 77.81%

Expenses

Payroll £88,200 £262,000 £449,600

Marketing/Promotion £10,000 £10,000 £10,000

Depreciation £0 £0 £0

Rent £174,000 £248,000 £298,000

Utilities £2,550 £5,000 £8,000

New location setup £25,000 £50,000 £50,000

Total Operating Expenses £299,750 £575,000 £815,600

Profit Before Interest and Taxes (£82,543) (£140,587) £53,226

EBITDA (£82,543) (£140,587) £53,226

Interest Expense £0 £0 £0

Taxes Incurred £0 £0 £0

Net Profit (£82,543) (£140,587) £53,226

Net Profit/Sales -29.57% -25.18% 4.77%

8.4 Projected Cash Flow

The following chart and table show the Projected Cash Flow for Fresin Fries.

Pro Forma Cash Flow

Year 1 Year 2 Year 3

Cash Received

Cash from Operations

Cash Sales £279,163 £558,327 £1,116,654

Subtotal Cash from Operations £279,163 £558,327 £1,116,654

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 £279,163 £558,327 £1,116,654

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending £88,200 £262,000 £449,600

Bill Payments £244,265 £430,245 £599,286

Subtotal Spent on Operations £332,465 £692,245 £1,048,886

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 £332,465 £692,245 £1,048,886

Net Cash Flow (£53,301) (£133,918) £67,767

Cash Balance £677,899 £543,981 £611,748

8.5 Projected Balance Sheet

Fresin's projected company balance sheet follows. We expect to run at a loss for the first two years, decreasing our net worth slightly. As the operation becomes more profitable in the third year, our net worth rises again.

Pro Forma Balance Sheet

Year 1 Year 2 Year 3

Assets

Current Assets

Cash £677,899 £543,981 £611,748

Other Current Assets £0 £0 £0

Total Current Assets £677,899 £543,981 £611,748

Long-term Assets

Long-term Assets £0 £0 £0

Accumulated Depreciation £0 £0 £0

Total Long-term Assets £0 £0 £0

Total Assets £677,899 £543,981 £611,748

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable £29,242 £35,911 £50,452

Current Borrowing £0 £0 £0

Other Current Liabilities £0 £0 £0

Subtotal Current Liabilities £29,242 £35,911 £50,452

Long-term Liabilities £0 £0 £0

Total Liabilities £29,242 £35,911 £50,452

Paid-in Capital £800,000 £800,000 £800,000

Retained Earnings (£68,800) (£151,343) (£291,930)

Earnings (£82,543) (£140,587) £53,226

Total Capital £648,657 £508,070 £561,296

Total Liabilities and Capital £677,899 £543,981 £611,748

Net Worth £648,657 £508,070 £561,296

8.6 Business Ratios

The following table outlines some of the more important ratios from the Fast Food Restaurants and Stands 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% 100.00% 100.00% 8.67%

Percent of Total Assets

Other Current Assets 0.00% 0.00% 0.00% 37.31%

Total Current Assets 100.00% 100.00% 100.00% 45.97%

Long-term Assets 0.00% 0.00% 0.00% 54.03%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 4.31% 6.60% 8.25% 17.94%

Long-term Liabilities 0.00% 0.00% 0.00% 22.26%

Total Liabilities 4.31% 6.60% 8.25% 40.20%

Net Worth 95.69% 93.40% 91.75% 59.80%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 77.81% 77.81% 77.81% 59.05%

Selling, General & Administrative Expenses

107.37% 102.99% 73.04% 39.24%

Advertising Expenses 0.00% 0.00% 0.00% 1.96%

Profit Before Interest and Taxes -29.57% -25.18% 4.77% 1.92%

Main Ratios

Current 23.18 15.15 12.13 1.04

Quick 23.18 15.15 12.13 0.66

Total Debt to Total Assets 4.31% 6.60% 8.25% 50.22%

Pre-tax Return on Net Worth -12.73% -27.67% 9.48% 6.90%

Pre-tax Return on Assets -12.18% -25.84% 8.70% 13.87%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -29.57% -25.18% 4.77% n.a

Return on Equity -12.73% -27.67% 9.48% n.a

Activity Ratios

Accounts Payable Turnover 9.35 12.17 12.17 n.a

Payment Days 27 27 26 n.a

Total Asset Turnover 0.41 1.03 1.83 n.a

Debt Ratios

Debt to Net Worth 0.05 0.07 0.09 n.a

Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios

Net Working Capital £648,657 £508,070 £561,296 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 2.43 0.97 0.55 n.a

Current Debt/Total Assets 4% 7% 8% n.a

Acid Test 23.18 15.15 12.13 n.a

Sales/Net Worth 0.43 1.10 1.99 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Sales ForecastMonth 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month 10Month 11 Month 12

Unit Sales

Belgian Fries 2% 1,000 1,200 1,440 1,728 2,074 2,488 3,981 4,778 5,733 6,880 8,256 9,907Italian Soda 2% 650 780 936 1,123 1,348 1,617 2,426 2,790 3,209 3,690 4,243 4,880Merchandising 2% 100 120 144 160 180 220 299 358 430 516 619 743Signature Packaged Sauces

1% 100 118 139 150 150 150 270 319 376 444 523 618

Total Unit Sales 1,850 2,218 2,659 3,161 3,751 4,476 6,976 8,244 9,747 11,529 13,641 16,147Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month 10Month 11 Month 12Belgian Fries £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00Italian Soda £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50Merchandising £8.50 £8.50 £8.50 £8.50 £8.50 £8.50 £8.50 £8.50 £8.50 £8.50 £8.50 £8.50Signature Packaged Sauces

£2.00 £2.00 £2.00 £2.00 £2.00 £2.00 £2.00 £2.00 £2.00 £2.00 £2.00 £2.00

Sales

Belgian Fries £4,000 £4,800 £5,760 £6,912 £8,294 £9,953 £15,925 £19,110 £22,932 £27,519 £33,023 £39,627Italian Soda £975 £1,170 £1,404 £1,685 £2,022 £2,426 £3,639 £4,185 £4,813 £5,535 £6,365 £7,320Merchandising £850 £1,020 £1,224 £1,360 £1,530 £1,870 £2,538 £3,046 £3,655 £4,386 £5,263 £6,316Signature Packaged Sauces

£200 £236 £278 £300 £300 £300 £540 £637 £752 £887 £1,047 £1,235

Total Sales £6,025 £7,226 £8,666 £10,257 £12,146 £14,549 £22,642 £26,978 £32,152 £38,326 £45,697 £54,498Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9Month 10Month 11 Month 12Belgian Fries 20.00% £0.80 £0.80 £0.80 £0.80 £0.80 £0.80 £0.80 £0.80 £0.80 £0.80 £0.80 £0.80Italian Soda 10.00% £0.15 £0.15 £0.15 £0.15 £0.15 £0.15 £0.15 £0.15 £0.15 £0.15 £0.15 £0.15Merchandising 45.00% £3.83 £3.83 £3.83 £3.83 £3.83 £3.83 £3.83 £3.83 £3.83 £3.83 £3.83 £3.83Signature Packaged Sauces

50.00% £1.00 £1.00 £1.00 £1.00 £1.00 £1.00 £1.00 £1.00 £1.00 £1.00 £1.00 £1.00

Direct Cost of Sales

Belgian Fries £800 £960 £1,152 £1,382 £1,659 £1,991 £3,185 £3,822 £4,586 £5,504 £6,605 £7,925Italian Soda £98 £117 £140 £168 £202 £243 £364 £419 £481 £553 £636 £732Merchandising £383 £459 £551 £612 £689 £842 £1,142 £1,371 £1,645 £1,974 £2,368 £2,842Signature Packaged Sauces

£100 £118 £139 £150 £150 £150 £270 £319 £376 £444 £523 £618

Subtotal Direct Cost of Sales

£1,380 £1,654 £1,982 £2,313 £2,700 £3,225 £4,961 £5,930 £7,088 £8,474 £10,133 £12,117

Personnel PlanMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9

Month 10

Month 11

Month 12

Site Managers 0% £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Cashiers 0% £2,000 £2,000 £2,000 £2,000 £2,000 £2,000 £4,000 £4,000 £4,000 £4,000 £4,000 £4,000Cook 0% £1,600 £1,600 £1,600 £1,600 £1,600 £1,600 £3,200 £3,200 £3,200 £3,200 £3,200 £3,200Busboy 0% £1,300 £1,300 £1,300 £1,300 £1,300 £1,300 £2,600 £2,600 £2,600 £2,600 £2,600 £2,600Total People 6 6 6 6 6 6 12 12 12 12 12 12Total Payroll £4,900 £4,900 £4,900 £4,900 £4,900 £4,900 £9,800 £9,800 £9,800 £9,800 £9,800 £9,800

Pro Forma Profit and LossMonth 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11

Month 12

Sales £6,025 £7,226 £8,666 £10,257 £12,146 £14,549 £22,642 £26,978 £32,152 £38,326 £45,697 £54,498Direct Cost of Sales £1,380 £1,654 £1,982 £2,313 £2,700 £3,225 £4,961 £5,930 £7,088 £8,474 £10,133 £12,117Other Costs of Sales £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Total Cost of Sales £1,380 £1,654 £1,982 £2,313 £2,700 £3,225 £4,961 £5,930 £7,088 £8,474 £10,133 £12,117Gross Margin £4,645 £5,572 £6,684 £7,944 £9,447 £11,325 £17,681 £21,048 £25,063 £29,852 £35,565 £42,381Gross Margin % 77.10% 77.11% 77.13% 77.45% 77.77% 77.84% 78.09% 78.02% 77.95% 77.89% 77.83% 77.77%

Expenses

Payroll £4,900 £4,900 £4,900 £4,900 £4,900 £4,900 £9,800 £9,800 £9,800 £9,800 £9,800 £9,800Marketing/Promotion £833 £833 £833 £833 £833 £833 £833 £833 £833 £833 £833 £833Depreciation £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Rent £12,000 £12,000 £12,000 £12,000 £12,000 £12,000 £17,000 £17,000 £17,000 £17,000 £17,000 £17,000Utilities 15% £125 £125 £125 £125 £125 £125 £300 £300 £300 £300 £300 £300New location setup £0 £0 £0 £0 £0 £25,000 £0 £0 £0 £0 £0 £0Total Operating Expenses £17,858 £17,858 £17,858 £17,858 £17,858 £42,858 £27,933 £27,933 £27,933 £27,933 £27,933 £27,933Profit Before Interest and Taxes

(£13,213) (£12,286) (£11,174) (£9,914) (£8,412) (£31,534) (£10,252) (£6,885) (£2,870) £1,919 £7,631 £14,447

EBITDA (£13,213) (£12,286) (£11,174) (£9,914) (£8,412) (£31,534) (£10,252) (£6,885) (£2,870) £1,919 £7,631 £14,447Interest Expense £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Taxes Incurred £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Net Profit (£13,213) (£12,286) (£11,174) (£9,914) (£8,412) (£31,534) (£10,252) (£6,885) (£2,870) £1,919 £7,631 £14,447Net Profit/Sales -219.30% -170.03% -128.94% -96.66% -69.25% -216.74% -45.28% -25.52% -8.93% 5.01% 16.70% 26.51%

Pro Forma Cash FlowMonth 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Cash Received

Cash from Operations

Cash Sales £6,025 £7,226 £8,666 £10,257 £12,146 £14,549 £22,642 £26,978 £32,152 £38,326 £45,697 £54,498Subtotal Cash from Operations £6,025 £7,226 £8,666 £10,257 £12,146 £14,549 £22,642 £26,978 £32,152 £38,326 £45,697 £54,498

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0New Current Borrowing £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0New Other Liabilities (interest-free) £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0New Long-term Liabilities £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Sales of Other Current Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Sales of Long-term Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0New Investment Received £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Subtotal Cash Received £6,025 £7,226 £8,666 £10,257 £12,146 £14,549 £22,642 £26,978 £32,152 £38,326 £45,697 £54,498Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Expenditures from Operations

Cash Spending £4,900 £4,900 £4,900 £4,900 £4,900 £4,900 £9,800 £9,800 £9,800 £9,800 £9,800 £9,800Bill Payments £478 £14,347 £14,623 £14,952 £15,284 £16,509 £40,580 £23,127 £24,102 £25,268 £26,663 £28,332Subtotal Spent on Operations £5,378 £19,247 £19,523 £19,852 £20,184 £21,409 £50,380 £32,927 £33,902 £35,068 £36,463 £38,132

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Principal Repayment of Current Borrowing

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Other Liabilities Principal Repayment

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Long-term Liabilities Principal Repayment

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Purchase Other Current Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Purchase Long-term Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Dividends £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Subtotal Cash Spent £5,378 £19,247 £19,523 £19,852 £20,184 £21,409 £50,380 £32,927 £33,902 £35,068 £36,463 £38,132Net Cash Flow £647 (£12,021) (£10,857) (£9,595) (£8,038) (£6,859) (£27,738) (£5,949) (£1,750) £3,259 £9,234 £16,365Cash Balance £731,847 £719,826 £708,969 £699,374 £691,336 £684,477 £656,739 £650,791 £649,041 £652,299 £661,534 £677,899

Pro Forma Balance SheetMonth 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Assets Starting Balances

Current Assets

Cash £731,200 £731,847 £719,826 £708,969 £699,374 £691,336 £684,477 £656,739 £650,791 £649,041 £652,299 £661,534 £677,899Other Current Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Total Current Assets £731,200 £731,847 £719,826 £708,969 £699,374 £691,336 £684,477 £656,739 £650,791 £649,041 £652,299 £661,534 £677,899

Long-term Assets

Long-term Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Accumulated Depreciation £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Total Long-term Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Total Assets £731,200 £731,847 £719,826 £708,969 £699,374 £691,336 £684,477 £656,739 £650,791 £649,041 £652,299 £661,534 £677,899Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Current Liabilities

Accounts Payable £0 £13,860 £14,125 £14,443 £14,762 £15,136 £39,810 £22,325 £23,261 £24,381 £25,721 £27,324 £29,242Current Borrowing £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Other Current Liabilities £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Subtotal Current Liabilities £0 £13,860 £14,125 £14,443 £14,762 £15,136 £39,810 £22,325 £23,261 £24,381 £25,721 £27,324 £29,242Long-term Liabilities £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0Total Liabilities £0 £13,860 £14,125 £14,443 £14,762 £15,136 £39,810 £22,325 £23,261 £24,381 £25,721 £27,324 £29,242Paid-in Capital £800,000 £800,000 £800,000 £800,000 £800,000 £800,000 £800,000 £800,000 £800,000 £800,000 £800,000 £800,000 £800,000Retained Earnings (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800) (£68,800)Earnings £0 (£13,213) (£25,499) (£36,674) (£46,588) (£55,000) (£86,533) (£96,785) (£103,670) (£106,540) (£104,621) (£96,990) (£82,543)Total Capital £731,200 £717,987 £705,701 £694,526 £684,612 £676,200 £644,667 £634,415 £627,530 £624,660 £626,579 £634,210 £648,657Total Liabilities and Capital £731,200 £731,847 £719,826 £708,969 £699,374 £691,336 £684,477 £656,739 £650,791 £649,041 £652,299 £661,534 £677,899Net Worth £731,200 £717,987 £705,701 £694,526 £684,612 £676,200 £644,667 £634,415 £627,530 £624,660 £626,579 £634,210 £648,657