Ethnic Food Restaurant Business Plan

Zara Restaurant and Lounge

Executive Summary

Opportunity

Problem

Atlanta consumers are seeking variety and new experiences. Location is clearly important, but so is atmosphere and distinctiveness. Our marketing challenge is thus to stand out from our competitors, not only as the "new" restaurant, but as one that offers consistently high quality food, menu variety, and a unique atmosphere.

Solution

Our concept combines variety, ambiance, entertainment and a superior staff to create a sense of ‘place’ in order to reach our goal of overall value in the dining/entertainment experience. We offer fair profits for the owners and investors, and a rewarding place to work for the employees.

Market

Instead of building a business around a preconceived concept, we conducted market research and built a concept around our consumers. Our market analysis identified the following key drivers as areas of opportunity to service Atlanta’s restaurant customers:

1. Portion Selection: Nearly 95% of our surveyed focus group endorsed having a choice of different size portions. This statistic is in line with findings reported by the Tableservice Operator Survey. Zara’s Tapas concept is built to offer different-sized portions. Our customers want the option to choose what satisfies their appetite.
2. Menu Variety: Ethnic restaurants are increasing in Atlanta. The proliferation of international cookbooks, food magazines, TV cooking shows and imported goods offers ample evidence that America, as a whole, is currently on an international tasting spree. In fact, eating places that identify themselves as ethnic establishments numbered nearly 78,000 in 1999 and recorded sales of $30.5 billion. Our research results do not identify any single ethnic style of restaurant as desired, but rather suggest that incorporating strong multi-ethnic influences in the menu selection will be popular. Again, variety is the underlying element for this concept.
3. The Dining Experience: Customer satisfaction with food and service has been and continues to be of utmost importance, but our findings indicate that the décor, lighting, bar, and other options to improve the dining experience are also factors in customer decisions. Zara takes all these factors in consideration for the design of this cosmopolitan restaurant.
4. Reasonable Prices: This was no surprise given the economic tide. Although the restaurant industry as a whole has seen growth in 2002/2003, customers are demanding value for their dining dollar. Zara’s menu is priced at a mid-tier level, with no entrée over $20. In addition we have an extended Tapas and Appetizer selection priced between $3.50 – $9.50, allowing budget dining in a full-service restaurant.

Competition

The top ten Atlanta restaurants shared two things: cozy, hip interiors and reasonably priced, regionally specialized menus. Only one of them offered traditional "southern" cooking. And half of them were located in Midtown. Our competitors are heading in the right direction, but only Zara is based on sound market research in the local market.

Why Us?

Zara will be an inspiring restaurant, combining an eclectic atmosphere with excellent and interesting food. The mission is to have not only a great food selection, but also efficient and superior service – customer satisfaction is our paramount objective. Zara will be the restaurant of choice for a mature and adult crowd, couples and singles, young and old, male or female.

Expectations

Forecast

We have taken the necessary precautions to ensure the business is fully capitalized, and have addressed all financial shortfalls to ensure a successful business start-up. Under a realistic scenario, the company should have over $84,000 in cash balance the third year. Even with the worst-case sales scenario, we reach a Net Worth break even at the end of Year 5. On a linear projection, the entire financial debt will be retired by Year 7.

Financial Highlights by Year

Financing Needed

We estimate total startup costs at $665,000, including $430,000 in pre-launch expenses and $235,000 in pre-launch assets. We itemize the expenses in detail in the financial section of this plan, and the assets in the table here. 

Funding, as shown below, includes $110,000 owner investment, $200,000 in partner investment, plus a Midtown Redevelopment Grant for $130,000, Accounts Payable of $30,000, and a business loan of $195,000. 

The capital begins with the owners. Mr. Alex Hunte and Mr. Peter Smith are investing $110,000 in personal capital. Private Investors, who will be part owners with a non-managerial interest in the business, will contribute another $200,000. And As owners, our commitment is to take personal accountability for all financial debt.

This Plan is being submitted in order to secure a Business loan for $195,000. The loan will be used towards Equipment purchase, Design, Construction, and Operational Start-Up expenses.

We have taken the necessary precautions to ensure the business is fully capitalized, and have addressed all financial shortfalls to ensure a successful business start-up. Under a realistic scenario, the company should have over $84,000 in cash balance the third year. Even with the worst-case sales scenario, we reach a Net Worth break even at the end of Year 5. On a linear projection, the entire financial debt will be retired by Year 7. 

 

Opportunity

Problem & Solution

Problem Worth Solving

Where do you go in Atlanta that caters to the young but mature adult crowd? Where do you have a client or business partnership meeting when presentation is everything? Atlanta is filling with refined trendy fashion forward technology workers who need somewhere to go. They want to a trendy place sit and have a drink and relax with like minded people. Get a really good meal with people who appreciate good food. Businesses need somewhere to make a reservation when their success is dependent on showing the client they know how to give them the treatment they deserve. A lot of clients equate that with respect. Its the difference between landing a account and having them go with someone else. 

Our Solution

Zara will be an inspiring restaurant, combining an eclectic atmosphere with excellent and interesting food. The mission is to have not only a great food selection, but also efficient and superior service – customer satisfaction is our paramount objective. Zara will be the restaurant of choice for a mature and adult crowd, couples and singles, young and old, male or female.

Target Market

Market Size & Segments

Market Segmentation

Zara’s Restaurant & Lounge intends to cater to a wide customer base. We want everyone to feel welcome and entertained. We have defined the following groups as targeted segments that contribute to our growth projections:

• The Business Person
• Downtown Atlanta Couples
• The Destination Customer
• High-End Singles
• Tourists

These particular market segments are 25-45 years old, have disposable income, and are seeking upscale, trendy, and comfortable restaurant options. These are the types of people who frequent other restaurants and bars in the area. They are likely to spend more on experiences they perceive as unique, cosmopolitan, and sophisticated. They are also the most open to trying something new, foodwise, and will embrace our international fusion cuisine. 

Target Market Segment Strategy

The Business Person: They work hard all day and often stay overnight in a strange city. They need a competent establishment that helps impress clients and prospects. Afterward, they want to relax and use the money they are making (or is expensed by their company). They spend the most on drinks, food and tips. Zara’s cosmopolitan flair and comfortable atmosphere will be perfect for sophisticated business people, whether they live in and around Atlanta or are here for work.

Downtown Atlanta Couples: The restaurant will have an intimate, romantic, enticing adult atmosphere that suggests "date." Zara’s will be the best date location in town. These young Midtown couples are generally very successful working professionals. In most cases they are budgeting to eat out on a regular basis, as they don’t have the time to prepare food nightly.

The Destination Customer: Atlanta is a very ‘sectioned’ city, and consumers often look only in their own neighborhoods for restaurant options. Zara will break these habits, using marketing to draw customers from outside the main city limits. Zara will be a destination restaurant. Our Destination Clients tend to be new suburbanites that miss the excitement of the inner city. They have disposable income, and will spend quite a bit on such outings. Zara’s will be especially appealing to married suburban couples indulging themselves with a "date night" downtown, away from  the kids. Many of these consumers are new to Atlanta from larger cities, accustomed to dining within the city and at non-franchised restaurants.

High-end Singles: We will attract them with our eclectic atmosphere and layout. Our international menu, striking decor, entertainment and events, excellent service and engaging clientele will confirm the feeling of being in "the in place" in Atlanta. These are the individuals that pride themselves on socializing and dining at the premier locations – The Image Seekers.

Tourists: Atlanta attracts many vacationers during the summer months of May through September. Zara’s will be a destination dining locale, with its attractive atmosphere, international menu, and lounge. A large percentage of the tourist population are vacationing singles, here to socialize and be entertained. This is especially true for the tourist population that visit for sporting and social events – they are not interested in family establishments.

Competition

Current Alternatives

Competitor Analysis

Below are excerpts from our competitive analysis study.

1. The Kitchen (Direct Competitor):

We were able to draw some conclusions from this analysis that helped defined the concept and positioning for Zara: 1) Keep the menu pricing modest but offer superior food quality and presentation. We plan to keep the menu prices under $20; 2) Midtown is a prime restaurant location. One Midtown Kitchen is in an obscure location but has thrived as one of the more successful restaurants in the area; and 3) The customer base in this segment of Atlanta is ready for after-hours dining, and is willing to travel to establishments that accommodate their needs.

2. Lunaci (Direct Competitor):

This restaurant is a main competitor for Zara, a casual dining restaurant that has evolved to be a great success story for the Midtown district. This restaurant served to validate 1) the tapas concept appeal for Midtown customers; 2) the evolving need for after-hours dining; 3) tapas as a good food concept for after-hours dining (smaller portions, smaller price); 4) the appeal of live Entertainment.

3. Cumulus (Indirect Competitor)

This restaurant has grown in popularity over the years, and has gained popularity as a destination restaurant that can cater to business professionals as well as the local residents. The menu is somewhat formal for this market segment, but the bar attracts a good crowd. During this study it was evident that some patrons came exclusively to sit at the bar, without any intent of dining in the restaurant.

Cumulus is more of a formal dining restaurant and meets a certain need within the community, but I don’t see it as a direct competitor of Zara. I do feel that it has some very special elements that have helped it succeed over the past 3 years, which Zara can benefit from.

4. Cheesecake Factory (#1 Restaurant Comparison):

Although Cheesecake Factory is outside of Zara’s restaurant district and not considered a direct competitor, it was beneficial to analyze the most profitable restaurant in Atlanta to understand what contributes to their success. Cheesecake Factor offers several key elements that would also benefit Zara: 1) Customer Satisfaction through moderate pricing and high-quality food; 2) Location selection to benefit from core customer demographics, situated in a busy/popular area for both business and residential traffic; 3) Exceptional Service, from the Valet, to Hosting, to Wait, Bus, and Bar staff; and 4) Menu Variety, offering a broad array of menu items.

5. Swing Restaurant (Indirect Competitor):

This restaurant is not in our market district and therefore not a direct competitor, although we do consider it an ‘indirect’ competitor. Swing incorporates some of the characteristics that we have mapped out for Zara. Those elements are: 1) A Tapas and Entrée menu – realizing that customers want varied meal size and variety; 2) A club type atmosphere to entice the single scene and to drive bar sales.

Swing validates some of the elements uncovered in our market research as to what the new Atlanta diners are looking for. This serves as a true validation that the timing is right for the Zara Restaurant & Lounge concept.

 

Failed Restaurant Analysis : Mumbo Jumbo
Mumbo Jumbo was an Atlanta restaurant attraction in the downtown core, a strong competitor that was severely impacted by the patronage demise after 9/11. I also completed an analysis of this restaurant back in 1999 and compared it to this current analysis in 2003. Several factors led to closing of this restaurant:

Location: 
This was a very cosmopolitan restaurant located in a core business community. The restaurant was hidden in cross streets and away from the general street traffic. This was a destination restaurant and a secondary selection for the general customer base in this area.

Lesson Learned:  As part of this analysis, we have determined that the downtown core is not a good fit for the Zara concept. We will limit our site selection to the core Midtown district and the upper Downtown district. Midtown is Atlanta’s major growth district and is developing the residential infrastructure in pace with the business infrastructure.

Customer Segment: 
Atlanta’s downtown core is not ready for this type of restaurant. Atlanta’s downtown core is a business district, and residential development for this area is at the Genesis state. The primary customer base is the business person and tourist. The largest percentage of this customer segment will be looking for a restaurant in which to conduct business or a family establishment; Mumbo Jumbo would not be a primary selection in either case.

Lesson Learned:  Zara’s target market demographics are perfectly in alignment with the Midtown profile. Midtown has a business core as well as a residential core. We will look to the business core for our primary daytime business, but to our residential core for our dinner and after-hours patronage. In addition, the business core will look to Zara as a place of socialization for dinner and after-hours unwinding. Mumbo Jumbo depended on the business segment for their lunch and dinner profits, and customers who would travel from outside the downtown district to eat at the restaurant – there was no static dinner segment.

Visibility: 
Hand-in-hand with location, this restaurant also suffered from poor visibility. In the downtown core a large percentage of business is from walk-in traffic. The business and tourist customers tend to select a restaurant from touring the area and accessibility. Mumbo Jumbo was situated on a cross street behind the main street.

Lesson Learned:  Although being situated on a main street is not as key in the Midtown district, we will ensure that visibility is part of our site selection criteria. In addition, we will use signage and exterior décor as means to attract customers and get noticed.

In all, this restaurant was a staple in Atlanta’s downtown core for over 10 years, but key restaurant disciplines (Location, Customer Segment, Visibility) came back to hurt them as the economic climate changed.

 

Our Advantages

Besides the lessons learned listed above, Zara’s competitive edges are:

1. The owners’ thorough understandings of opening and running a restaurant
2. An extraordinary contemporary restaurant design
3. International menu with featured menu changes every 4 months
4. Unique, 3-Tiered spatial layout
5. Chef Co-op program to allow new entrants, trainee and featured chef
6. Chef/Management Stock Incentive Program.
7. Inner and Outer City Marketing campaign (i.e. "Come to Town" promotions)
8. Employee Training, Incentive and Retention program

Keys to Success

Keys to Success

Our keys to success are: 

1. Unique, Innovative & Contemporary: The creation of a unique and innovative fine dining atmosphere will differentiate us from the competition. The restaurant will stand out from the other restaurants in the area because of the unique design and decor. We will offer a fine dining experience in an electric atmosphere.
2. Product quality: great food, great service and atmosphere.
3. ‘Spice of Life’ Menu: The menu will appeal to a wide and varied clientele. Our eclectic menu features regional specialties around the globe, from Spanish ceviche, to Thai and Indian curries, to local crabcakes.
4. Employee Retention Focus: Employee retention and development programs will be a primary focus and success platform for this business. Through these programs, we will be able to draw seasoned and elite professionals and build a committed work force. We have budgeted for a stock option program for Chef and Management positions to subsidize a lower salary base. This lowers our immediate overhead and attracts quality staff.  
5. Cost Control Focus: We will control costs at all times, without exception. Cost Control will be an integrated function of the restaurant from the onset. Cost control is about managing the numbers – interpreting and comparing the numbers that impact the bottom line. 80 percent of the success of a restaurant is determined before it opens. Our focus is to reduce the cost of goods sold to meet our profit margin goals by managing the following crucial elements of cost: Purchasing, Receiving, Storage, Issuing Inventory, Rough Preparation, Service Preparation, Portioning, Order Taking, Cash Receipts, Bank Deposits and Accounts Payable. We will use of this restaurant/ethnic food business plan to track actual costs against our forecasts in managing the business. 

Due to intense competition, restauranteurs must look for ways to differentiate their business to achieve and maintain a competitive advantage. Midtown/Downtown Atlanta’s redevelopment requires a place that will fit into the ‘new look’ of the community, one that is contemporary and entertaining. Zara will fill that niche.

Execution

Marketing & Sales

Marketing Plan

Zara Restaurant & Lounge’s Marketing strategy will be to promote our electric food, superior service, and exciting concepts to draw in the local repeat customers. Marketing initiatives will concentrate on the following:

Building and Signage: 
The most important Marketing tool that we have is the exterior of our building, our new sign and our website. We budgeted a great deal into the renovations and decor to generate the aesthetic appeal of Zara. 

Customer Service:
In our years within the restaurant industry, customer service has always been the major draw for the dining clientele. Food and atmosphere is far out-shadowed by superior customer service that turns a new customer into a repeat customer.

Management will demand the wait-staff provide the very best in quality services to the customer, making certain that they are content and satisfied with their dining experience. Wait-staff are thoroughly trained, and every 90 days they undergo a performance appraisal. This is part of our Employee Manual, and Operations Manual guide.

Advertising and Promotion:
Our Advertising and Social Media plan call for targeting customers directly through local publications aimed at , respectively, singles, couples, and destination customers.

Management recognizes the key to success at this time of initial opening is extensive media promotion. This must be done aggressively in order to accomplish our service goals. A healthy budget is allocated for the first year. A primary part of the budget is allocated to create the media and customer buzz for the month prior to opening and the next three months after the grand opening. The full Marketing program is as follows:.

Media Objectives and Strategy:
Establish our image as a unique Midtown restaurant with great service, value, and great food served in an eclectic atmosphere. We will maximize efficiency in the selection and scheduling of advertisements by:

• Reaching out to select businesses in the area to build relationships. We will promote their services and they promote ours. 
• Scheduling adequate frequency of Facebook ads to impact market with menu items and promotions.
• Where possible, linking and sharing with non competing sites in or near entertainment/food related editorials. 
• Redirecting customers to our website to register for upcoming functions, VIP lists, reservations, and flash media promotions.
• Maximizing google ad words with well timed expensive buys. 

Working with The Reynolds Group Media Co. (Zara Advisory Board), we will develop an advertising campaign built around our Zara Diner theme, menu offering, location, and decor. We will support this plan with ads that reinforce the Zara dining concept.

Additionally, we will develop a consistent reach and frequency throughout the year, targeting each specific customer segment within a five-mile radius, and new ‘suburbanites,’ who still appreciate in-town dining.

Promotional Campaign:
The best way to reach our potential customers is to develop an intense advertising campaign promoting our Zara concept of "Spice of Life." In addition to standard advertising practices, we will gain considerable recognition through newspapers, Facebook, Twitter, Instagram, public announcements, paid website promotions/ blogs about our services. Consumers will be encouraged to visit our website to be greeted with a flash media intro that highlights the restaurant, past happenings, upcoming attractions and our dynamic menu.

Our periodic customer surveys and weekly menu item sales evaluations will help us to understand what advertising is working and what is not; basically, who we are reaching. Our goal is to understand our customer, measure the success of our direct marketing and media activities, and redirect advertising as effectively as possible.

Sales Plan

Our strategy is simple: we intend to succeed by giving our customers a combination of delicious and interesting food in an appealing environment, with excellent customer service, whether on their first visit or their hundredth.

Our marketing strategies are designed to get critics and initial customers into our doors. Our sales strategies must take the next step and encourage customers to become repeat customers, and to tell all their friends and acquaintances about the great experiences they just had at Zara.

New restaurants often make one of two mistakes: they are unprepared or underprepared for opening, and initial poor service, speed, or quality discourages customers from returning, or they spend all of their efforts at opening, and are unable to maintain the initial quality customers expect on return visits, decreasing word of mouth advertising and leading to poor revenues.

Zara’s sales strategy requires consistently high quality food, service, speed, and atmosphere. We can accomplish this by:

• Hiring employees who genuinely enjoy their jobs and appreciate Zara’s unique offerings
• Continually assessing the quality of all aspects mentioned above, and immediately addressing any problems
• Interacting with our customers personally, so they know that their feedback goes directly to the owners 
• Evaluating food choices for popularity, and keeping favorites on the menu as we rotate seasonal foods and specials

Operations

Locations & Facilities

Location & Operations

Restaurant Location
Midtown Atlanta is the location selected for the Zara concept. The outlook for the future of Atlanta’s Midtown district is exceptionally positive and the most progressive development area in the city. Developers are infusing over $50 billion in Commercial, Residential, and Retail development. Zara’s will benefit from Atlanta’s desire to revamp the Midtown district with a $130,000 renovation grant for restoring and renovating the 100 year old property we plan to lease.

The market has been carefully selected and tested for the necessary demographics and retail traffic necessary to meet the goals laid down for profitability. The busy Midtown commercial/residential location has been chosen based upon a successful demographic model and a traffic count of more than 33,000 cars daily.

Restaurant Design
Single-Level Design Concept:  The total space requirement is 3,000 square feet. The restaurant will feature a comfortable and open concept design. The central dining area will allocate 76 seats, the lounge 22 seats, and the dining bar with 12 seats. In total, the restaurant will provide seating for 110 patrons. Where possible, consideration will be given to incorporate a dining patio. Zoning, parking, and accessibility issues will be reviewed as part of this analysis.

Optional Patio:  During the busy summer months customers can also sit outside on our patio and we will offer a special summer menu, featuring lighter fare, exotic drinks, as well as non-alcoholic offerings. The patio setting will be a fun and casual atmosphere for the summer crowd.

Operating Criteria
The restaurant will be located in Midtown Atlanta. The restaurant will service lunch, dinner, and after-hours dining during the week and weekends. The restaurant will operate during peak service time to take advantage of street traffic, and after-hour patronage from the entertainment facilities in the area. Service will be available during the following hours:

Lunch:   Monday to Saturday, 11 a.m. – 2:30 p.m.

Dinner:  Monday to Saturday, 5:30 p.m. – 12 midnight

Sundays – Market brunch takeout only.

Milestones & Metrics

Milestones Table

Key Metrics

Our Metrics are

• # of customers who come to drink 
• # of customers favorite food 
• cost of making the most popular dishes vs price
• # customers who tweet or retweet about our restaurant
• # of returning or frequent flyer customers 
• # of Facebook pageviews and links and website shares 

 

Company

Overview

Ownership & Structure

The restaurant will start out as an LLC corporation, owned by its founders, Zander Hunte and Peter Smith. Mr. Smith will function as the General Manager and Executive Chef, and Mr. Hunte as Managing Partner.

Mr. Hunte and Mr. Smith have a long-standing professional relationship in the restaurant industry, stemming back to Toronto, Canada. Mr. Smith is an accomplished restauranteur, having owned several full-service restaurants. He currently owns Brassaii Restaurant (www.brassaii.com), and Bauhaus Bar and Nightclub. Mr. Smith is also an international Restaurant Consultant for top organizations such as the Starwood Group, who own the hotel chains of The Westin, Sheraton Hotels, Four Points, St. Regis, and W Hotels.

Mr. Hunte has a background in International Business Management, and is certified in Restaurant and Hotel Management. Under the management of Zander Hunte, Myth Restaurant was a feature restaurant in Toronto, and distinguished as a top 10 restaurant while under his management.

Team

Management Team

Ownership & Management

Together, Alex Hunte and Peter Smith bring over 20 years of experience in the restaurant industry to their new joint venture.

Alex Hunte: Managing Partner 
(Operations, Marketing, Financial and Business Development)

Mr. Hunte brings to Zara an accomplished restaurant background, exceptional business acumen, and a lifetime passion for the restaurant experience. Alex has over 17 years of business management in the Information Technology industry. Like IT, successful ventures in the restaurant industry must balance capitalizing on new trends with continual quality assessment. Alex’s understanding of day-to-day cash flow planning and staff management will be critical to Zara’s financial success. 

Mr. Hunte has a background in International Business Management and Business Start-ups, and is certified in Restaurant and Hotel Management. As co-owner, Alex Hunte is responsible for overall direction and operational management. Mr. Hunte is a strong business leader responsible for strategic planning and continued growth of restaurant services and business development. In addition, Alex will be the management lead for all public relations, financial and investor services.

Degrees, Certifications, and Professional Affiliations:

• MBA in International Business Management
• B.S. in Computer Science
• Certified in Restaurant & Hotel Management from Ryerson University
• PMP (Project Management Professional) certification
• Member of the Midtown Alliance
• Business partner member of the National Restaurant Association.

 

 

Peter Smith: Managing Partner 
(Executive Chef and Restaurant Operations)

Mr. Smith is an accomplished restaurateur, having owned several full-service restaurants. Mr. Smith is responsible for the concept and the daily operations management, with yearly sales targets of $7 million.

In addition, Peter is the owner of Bauhaus Bar and Nightclub, and former owner of Myth Restaurant, Ouzeri, and Kapilyo Restaurant, all financial and critical successes. Mr. Smith is also an international restaurant consultant for top international organizations. Mr. Smith’s Contracting responsibilities for Zara included logistics, Site and Lease Negotiations, Concept Definition, Start-Up and Financial forecast, Menu and Operations Management, as well as Implementation and Launch Management.

With a degree in Economics and an accomplished career, Mr. Smith contributes the experience of his past successes, and is charged with leading the Restaurant Operations, Staff Selection, Menu Definition and Training initiatives for Zara Restaurant & Lounge.

 

Managing Partner Responsibilities

In addition to the management of day to day operations, both managers, as principals within the company, will oversee menu development, purchasing, portioning, pricing and inventory control, including approval of all financial obligations of the company. They will plan, develop, and establish customer service policies and objectives, and write, explain, and enforce an employee’s manual for all employee-related policies.

Responsibilities for hiring and firing employees lie solely with the two operations managers, and any decisions in these areas will be made jointly.

They will:

• Manage working capital, including receivables, inventory, cash and marketable securities.
• Perform financial forecasting, including capital budgeting, cash flow analysis, pro forma financial statements, and external financing requirements.
• Prepare financial analyses of operations for guiding management, including reports which outline the company’s income, expenses, and earnings.
• Direct preparation of budgets and financial forecasts and arrange for audits of company’s accounts.

Personnel Table

Advisors

Zara’s Advisory Board

• Stephen Hollier of Hollier Collier & Loewenthal: Corporate Attorney
• John Katz of SS&G Financial Services: CPA
• Robert Shaefer of Shafer Hospitality Services: Restaurant Consultant
• Mary Zimmerman of The Zimmerman Group: Media & Public Relations consultant

Financial Plan

Forecast

Key Assumptions

Important Assumptions

The financial plan depends on important assumptions, most of which are reflected in the financial statements that follow. We have been cautious with our projections, and incorporate a mitigation for all manageable risks. The key underlying assumptions are:

Economy

Slow Economic Recovery. We anticipate a slow-growth economy, recovering from an economic recession.

Business Growth

Annual Growth Rate Percentage. We anticipate modest growth over the coming years. The financials account for the following growth projections:

• Year 2: 6%
• Year 3: 5%
• Year 4: 4%
• Year 5: 4%

Weekly Sales Variance. Saturday will typically be our best sales for the week. The sales volume for all other days is represented as a percentage relative to Saturday. Therefore our weekly sales will vary as follows:

• Monday: 55%
• Tuesday: 60%
• Wednesday: 75%
• Thursday: 95%
• Friday: 90%
• Saturday: 100%

Seasonal Sales Variance. In Atlanta, October through the late season is the most productive sales period, while the summer months tend to be the slowest restaurant period. This trend is reflected in the financials though a seasonal variance as follows (where October is targeted to be our most successful sales month):

• January: 85%
• February: 95%
• March: 85%
• April: 90%
• May: 90%
• June: 70%
• July: 75%
• August: 80%
• September: 85%
• October: 100%
• November: 95%
• December: 95%

Industry & Start-Up

Fiscal Year-1 Ramp-up. Our experience in the industry confirms a longer ramp-up stage for restaurants over other retail/service businesses. Our Annual Sales Growth is based on attaining the following seating capacity percentage per dining period:

• Year 1: After-Hours = 53%, Lunch = 70%, Dinner = 88%
• Year 2: After-Hours = 70%, Lunch = 82%, Dinner = 100% (implied wait period)
• Year 3: After-Hours = 80%, Lunch = 87%, Dinner = 100% (implied wait period)

 

Six-Month Start-Up Stage. As a new restaurant entry to the Midtown market, the ramp-up in customer draw is expected to extend over 6 months. This is reflected in a higher than average monthly sales variance shown as follows (Worst-case / Expected-case):

• Month 1: 32% / 51%
• Month 2: 41% / 58%
• Month 3: 52% / 66%
• Month 4: 64% / 75%
• Month 5: 80% / 90%
• Month 6: 90% / 92%

Market Analysis findings are static. We assume that there are no unforeseen changes in findings outlined in the Market Analysis.

 

Pricing & Cost Control

Competitive Pricing Model. Revenue calculations are based upon competitive price comparisons and established menu values in the current marketplace. The following are baseline assumptions on Average Check Totals, and Average Seat Turns:

Daily average for lunch spending is $10.50 per person, dinner at $27.50 per person; and $17.50 per person for After-Hours dining (All check totals include Beverages, but not Bar). Seat Turn averages are modestly estimated at:

• Year 1: After-Hours = 0.7, Lunch = 1.0, Dinner = 1.0
• Year 2: After-Hours = 0.7, Lunch = 1.0, Dinner = 1.0
• Year 3: After-Hours = 1.0, Lunch = 1.0, Dinner = 1.25

 

Cost Control. Cost of goods sold have been calculated as a percentage of sales and will be monitored on a daily basis in order to keep Cost of Food within the range of 31 – 33%, Bar Costs within 28 – 31%, and Cost of Beverages (Non Alcohol) below 9%. With a focus on Cost Control, we anticipate 6 months to fine tune the restaurant operations and manage our costs within the defined tolerance range.

Inventory turnover and Accounts Payable. Accounts receivable turnover is calculated to be 0 days, as payment is rendered with service. Inventory is turned on a 7 day cycle as inventory is used daily within all categories, and accounts payable are projected to be 30 days.

Revenue by Month

Expenses by Month

Net Profit (or Loss) by Year

Financing

Use of Funds

Itemized pre-launch expenses: 

Complete startup costs and funding plan:

Implications on financials and starting balance:

We show the grant funding on the capitalization table for convenience only. It is non-dilutive funding, so it doesn’t require distributing shares in the corporation.

 

Sources of Funds

We will be getting the money to start Zara from the Following Sources:

Zander Hunte – $60,0000 

Peter Smith – $50,000

5 investors (yet to be determined) – $200,000

Midtown Revitalization Grant – $130,000

Long term Loan – $195,000

Accounts Payable – $30,000

Totaling $665,000

Note: the Midtown Revitalization Grant is entered on our financials as equity investment. However, it is non dilutive, so it won’t require shares of ownership. 

Also: The $195,000 long-term business loan shows in our starting balance as $35,396 current debt and $159,604 of long-term. This is due to the standard treatment dividing long term debt into the current portion and the long-term portion.

Statements

Projected Profit & Loss

	2020	2021	2022
Revenue	$1,396,100	$1,626,000	$1,845,712
Direct Costs	$572,401	$666,660	$756,742
Gross Margin	$823,699	$959,340	$1,088,970
Gross Margin %	59%	59%	59%
Operating Expenses
Salaries & Wages	$391,980	$562,936	$633,175
Employee Related Expenses	$39,356	$56,528	$59,466
Marketing and Promotion	$7,293	$4,800	$4,900
Leased Equipment	$12,000	$12,000	$12,000
Accounting	$6,000	$6,000	$6,000
Legal Retainer Fees	$2,400	$2,400	$2,400
Business License Fees	$6,000	$6,000	$6,000
Credit Card Expense	$18,720	$18,720	$18,720
Music & Entertainment	$4,320	$4,320	$4,320
Repairs and Maintenance	$9,000	$9,000	$9,000
Utilities	$14,400	$14,400	$14,400
Telephone	$1,800	$1,800	$1,800
Insurance	$21,600	$21,600	$21,600
Rent	$75,360	$75,360	$75,360
Trash	$4,800	$4,800	$4,800
Dishware, Uniforms, Cleaning Supplies,	$12,240	$12,240	$12,240
R and D	$2,400	$2,400	$2,400
Amortization of Other Current Assets	$0	$0	$0
Total Operating Expenses	$629,669	$815,304	$888,581
Operating Income	$194,030	$144,036	$200,389
Interest Incurred	$7,036	$5,593	$4,093
Depreciation and Amortization	$12,000	$12,000	$12,000
Gain or Loss from Sale of Assets
Income Taxes	$26,249	$18,966	$27,645
Total Expenses	$1,247,355	$1,518,523	$1,689,062
Net Profit	$148,745	$107,477	$156,650
Net Profit/Sales	11%	7%	8%

Projected Balance Sheet

	Starting Balances	2020	2021	2022
Cash	$75,000	$169,397	$239,418	$370,395
Accounts Receivable		$22,010	$20,325	$23,071
Inventory	$27,000	$55,555	$63,062	$63,062
Other Current Assets	$10,000	$10,000	$10,000	$10,000
Total Current Assets	$112,000	$256,962	$332,804	$466,528
Long-Term Assets	$120,000	$120,000	$120,000	$120,000
Accumulated Depreciation		($12,000)	($24,000)	($36,000)
Total Long-Term Assets	$120,000	$108,000	$96,000	$84,000
Total Assets	$232,000	$364,962	$428,804	$550,528
Accounts Payable	$30,000	$36,657	$38,055	$39,298
Income Taxes Payable		$12,956	$4,762	$6,931
Sales Taxes Payable		$0	$0	$0
Short-Term Debt	$35,396	$36,838	$38,339	$39,901
Prepaid Revenue
Total Current Liabilities	$65,396	$86,452	$81,157	$86,130
Long-Term Debt	$156,604	$119,765	$81,426	$41,525
Long-Term Liabilities	$156,604	$119,765	$81,426	$41,525
Total Liabilities	$222,000	$206,217	$162,583	$127,655
Paid-In Capital	$440,000	$440,000	$440,000	$440,000
Retained Earnings	($430,000)	($430,000)	($281,255)	($173,778)
Earnings		$148,745	$107,476	$156,651
Total Owner’s Equity	$10,000	$158,745	$266,222	$422,872
Total Liabilities & Equity	$232,000	$364,962	$428,804	$550,528

Projected Cash Flow Statement

	2020	2021	2022
Net Cash Flow from Operations
Net Profit	$148,745	$107,477	$156,650
Depreciation & Amortization	$12,000	$12,000	$12,000
Change in Accounts Receivable	($22,010)	$1,685	($2,746)
Change in Inventory	($28,555)	($7,507)	$0
Change in Accounts Payable	$6,657	$1,398	$1,243
Change in Income Tax Payable	$12,956	($8,194)	$2,169
Change in Sales Tax Payable	$0	$0	$0
Change in Prepaid Revenue
Net Cash Flow from Operations	$129,794	$106,859	$169,316
Investing & Financing
Assets Purchased or Sold
Net Cash from Investing
Investments Received
Dividends & Distributions
Change in Short-Term Debt	$1,442	$1,501	$1,562
Change in Long-Term Debt	($36,838)	($38,339)	($39,901)
Net Cash from Financing	($35,396)	($36,838)	($38,339)
Cash at Beginning of Period	$75,000	$169,397	$239,418
Net Change in Cash	$94,397	$70,020	$130,977
Cash at End of Period	$169,397	$239,418	$370,395