Sample of Business Plan

AZKA RESTAURANT Business Plan Submitted to: Sir Khuwaja Tariq Submitted by: Mushtaq Ahmed Saqib Fahad Hussain Rehan Hanif MBA-6B W/E EXECUTIVE SUMMARY This report is prepared for the course of ENTREPRENEURSHIP, fully guided by Mr. Khuwaja Tariq. This is a comprehensive report on the establishment of a restaurant. A complete analysis of environment of this restaurant is given which supports the succession of the project in selected location i.e. Gulshan-e-Iqbal Karachi. The project is financed by six partners each contributing equal investment. Its building will be rented and it will be around competitors’ zone near Lasania Restaurant. The marketing and promotion will be accomplished by placement of bill boards and distribution of handbills in general public. The target market is chosen upper middle and middle middle classes. All the machinery will be procured from Pakistan but some of the equipments which are not available in Pakistan can be imported. A complete organizational setup has been defined from managing director to the waiters. The project cost estimated is more than the investment so a loan of 1400000 has been sanctioned from bank for 5 years payback period at 16% interest rate. Finally, 3 year projections of income statements cash flows and balance sheet has been performed. The thorough and comprehensive projections along with income statement and balance sheet assumptions show that project is a viable and practical business to be run. PROJECT OUTLOOK PURPOSE OF STUDY This study is developed to provide the entrepreneur with potential investment opportunity in setting up and operating a medium sized restaurant offering a variety of food items to the general public. This pre-feasibility gives an insight into various aspects of planning, setting up and operating a restaurant for the upper-middle and middle-middle class. The study is designed to provide relevant details (including technical) to facilitate the entrepreneur in making the decision by providing various technological as well as business alternatives. The document also allows flexibility to change various project parameters to suit the needs of the entrepreneur. COMPANY DESCRIPTION We will operate a restaurant by the name of Azka Restaurant. The restaurant will be located at Gulshan-e-Iqbal Rashid Minhas Road just close to a dense population of the target market. This project will be on rent and take 6 months for interior setup and marketing. Azka Restaurant can then open and the operations phase of the project can begin. PROJECT ASSUMPTIONS - Building will be on rent. (Requirements of rent is 12+1 means 1 year of rent is paid In advance plus first month rent. Estate agent’s fee is equal to first month rent). - Azka Restaurant can entertain 100 to 150 customers in a day.- The Total Land Area covered by the Project is 400 sq yards MISSION STATEMENT “To serve our customers with the best quality food and environment” OBJECTIVE Along with the mission of our restaurant our objective is that of a comprehensive success. We will meet this goal while trying to consider; - To ensure that each guest receives prompt, professional, friendly and courteous service. - To maintain a clean, comfortable and well maintained premises for our guests and staff. - To provide nutritional, well-prepared meals - using only quality ingredients. - To ensure that all guests and staff are treated with the respect and dignity they deserve. - The high quality of attitude, fairness, understanding, and generosity between management, staff, customers, By maintaining these objectives we shall be assured of a fair profit that will allow us to contribute to the community we serve. BACKGROUND/INTRODUCTION OF PARTNERS ,[object Object],Rehan Hanif has been working as an accountant in multinational firms. ,[object Object],Mushtaq Ahmed Saqib is a business man who is engaged in import and export who wants to invest in diversified business. ,[object Object],Fahad Hussain is working as HR-manager in corporation. Equity Positions Name of InvestorShare in Investment (Rs)Rehan Hanif22, 00,000Mushtaq Ahmed Saqib22, 00,000Fahad Hussain22, 00,000Total6,600,000 5. MARKETING ASPECTS & ANALYSIS 5.1. COMPETITIVE ANALYSIS The proposed Azka restaurant will aim at providing good quality food to people especially families of upper-middle and middle-middle group. There are number of restaurants located in different areas of Karachi. Especially at Gulshan-e-Iqbal there are many competitions in our way which are also targeting to the upper-middle and middle-middle class. The main competitors are Mela and Lasania restaurants. As we are opening up at Gulshan-e-Iqbal so we have to face a lot of competition but by providing best quality food and with the help of marketing strategies along with competitive prices we aim at making our name and place in the market share soon. 5.2. TARGET MARKET Our products will be targeted to the upper-middle and middle-middle class because we will provide an appropriate environment with the product with an extra intended service. As this is a restaurant we are expecting that families will contribute more in our customers. 5.3. PRODUCT MIX 5.3.1. PRODUCT Historically it was the common phenomena that a good product sell itself, however no products are bad the only difference which we think make the difference between good and bad is the attributes that the product posses, in food industry the attribute of the product consist of the quality that the product holds and the way it is served with appropriate servings and also the comfortable environment. 5.3.2. PLACE Available on the right time in right quantity and right place is the basic theme of any marketing strategy, we are going to open the restaurant in a highly populated area at Gulshan-e-Iqbal, so the place will be appropriate to sell the products on value pricing, but counter to this facility we have to keep the standards intact with our products because at that place we have to face intense competition. 5.3.3. PRICE As we our opening our restaurant at Gulshan-e-Iqbal and targeting upper-middle and middle-middle class so the prices of our restaurant are charged keeping in mind the customers. Plus prices are charged so that we are able to cover our cost quickly and settle on earning profits. Price list of our complete menu has been given below. 5.3.4. PROMOTION Since this is a restaurant there will be more promotional activity the initial thing which we will do is we can spread the pamphlets in general public, the major strategy for promotion will be “word of mouth” besides it is the most difficult to maintain as the chances of failure remain a continuous matter of concerns. Our Promotion vehicles will be: E-Marketing Bill Boards Brochures and Pamphlets Cable TV-Marketing New papers Advertisements (Jang, Dawn and Kawish) 5.4. MENU CARD -41275190518738851270 *All prices are in Pak Rupees. HANDI Chicken Handi B/L (Full)500.00Chicken Handi B/L (Half)260.00Chicken Handi B/L White (LQD) 500.00Chicken Handi B/L White (Dry)500.00Chicken Masala Handi 400.00Chicken Achari Handi with Bone 400.00Chicken Channa Handi B/L350.00Mutton Handi B/L White (LQD) 640.00Mutton Handi B/L White (Dry) 640.00Mutton Handi B/L (Full) 490.00Mutton Handi B/L (Half) 290.00 KARAHI Chicken Karahi (Full)360.00Chicken Karahi (Half) 140.00Chicken Karahi White (LQD) 380.00Chicken Karahi White (Dry)380.00Mutton Karahi White (LQD) 590.00Mutton Karahi White (Dry)590.00Mutton Karahi (Full) 590.00Mutton Karahi (Half)290.00 -33020-2590802641600-267335*All prices are in Pak Rupees. CHICKEN Chicken Kalmi Tikka Boti (Boneless) 380.00Chicken Achari Boti 340.00 Chicken Kastori Kabab 350.00Chicken Malai Tikka 320.00Chicken Reshmi Kabab 290.00Chicken Behari Kabab 350.00Chicken Boti 340.00Chicken Afghani Boti 340.00Chicken Seekh Kabab (6 Pcs) 250.00Chicken Tikka (white) 100.00Chicken Tikka 100.00 MUTTON & BEEF Mutton Boti (250g) 390.00Peshawari Mutton Tikka 350.00Behari Kabab 230.00Seekh Kabab (6 Pcs)210.00Mutton Behari Kabab350.00Mutton Seekh Kabab350.00 SEA FOOD Special Jumbo Prawn with Honey Sauce 550.00Special Prawn Fried 460.00Prawn Fried 450.00Dhaka Fish 340.00Finger Fish 340.00Lahori Fish (8 Pieces)320.00Fried Fish 340.00Fish Pomfret (1 Piece) 340.00 622301784352442845178435 *All prices are in Pak Rupees. CHINESE GRAVYS Special Chicken410.00Special Manchurian (Sizzling)410.00 Speical slice Chicken 380.00Roast Chicken with Spicy Garlic Sauce 380.00Chicken Curry with Peanut Sauce 380.00Chicken Green Pepper 350.00Chicken Manchurian 350.00Chicken Chilli Dry 360.00 PRAWN & FISH GRAVYS Special Prawn 440.00Hot Sauce Prawn 430.00Sweet & Sour Prawn 430.00Prawn Manchurian 310.00Prawn Garlic Sauce 380.00Fish Manchurian 370.00 CHOWMIEN & CHOPSUEY Special Chowmein 350.00Thai Special Chowmein 340.00Chicken Chowmein 330.00Vegetable Chowmein 210.00Beef Chowmein 210.00American Chopsuey 330.00Vegetable Chopsuey200.00 CHINESE RICE Special Rice 240.00Prawn Fried Rice 230.00Chicken Masala Rice 230.00Chicken Fried Rice 200.00Vegetable Fried Rice 170.00Egg Fried Rice 170.00Singapurian Rice 230.00Beef Masala Rice 200.00Plain Steam Rice 180.00 -67310025146000 *All prices are in Pak Rupees. Tuty Fruity 90.00Mango (seasonal) 80.00Pine Apple70.00Pistachio70.00Strawberry70.00Vanilla70.00Peach Melba70.00Crunch70.00-2413099695252920588265 *All prices are in Pak Rupees. Fruit Triffle 70.00Kheer80.00Special Kulfa 80.00 -330203460752736215327660 *All prices are in Pak Rupees. Special Steak 430.00Chicken Steak 355.00Cheese Steak 330.00Grilled Steak 330.00American Steak 330.00Pepper Steak 330.00 6. ENGINEERING AND TECHNICAL ASPECTS 6.1. LOCATION The Azka restaurant is located at Gulshan-e-Iqbal Rashid Minhas road, Karachi. This has been chosen after keeping several considerations in mind and after careful evaluation of the alternatives. The population living in Gulshan-e-Iqbal is mostly upper middle class and middle class, enabling the Restaurant to cater the target markets directly. The total area covered by the Azka Restaurant is 400 sq. yards. 6.2. PROPOSED LAYOUT 6.3. MACHINERY & EQUIPMENTS Understanding the customer’s individual needs and the capability to satisfy these completely is a vital part of the restaurant’s success. This is in turn dependent on the machinery and equipment used to produce good quality food. Food machines are easily available in the market the owner has to choose between expensive brands and cheaper ones depending on how much he can afford to give quality to his customers. The machines can be ordered local whole sellers with a minimum delivery period of 3 months while refurbished / reconditioned machines are also available. Since we are new to this industry so we have preferred to go with new machinery and we have estimated their cost in feasibility. MachineryQuantityCost/UnitTotal costBroast Machine2300,000600,000Fryer Machine240008000BBQ and Steak Machine215,00030,000 Oven21500030,000Steam grilling Machine230006000Deep Freezer427300109200Fridge430000120000Food Factory310,00030,000Coffee Machine2800016000Exhaust fans and Lighting5450022500Total9,71,700 6.4. DINING FURNITURE & FIXTURES An appealing lobby to sit in also contributes in growing the business and the factor of attraction also comes from well decorated sitting area and as we are targeting the upper- middle and middle-middle class of society we should maintain a certain status by providing an appropriate luxury to the visitors, as according to estimates gathered with consensus, we expect minimum of 100 to 150 people to visit the restaurant and for this course we have estimated the cost of making the environment to look appealing. Lobby FurnitureQuantityCost/UnitTotal costGlass Tables20100020,000Wooden Chairs603000180,000Sofa Set with a Round Wooden Table435,000140,000Kitchen Cutlery Set325007500Dinning Cutlery1202000240,000Salad Bar2800016000Lights40100040000Wirings and Switching110,00010,000 Centrally Air conditioners1155,000155,000Hot Water Geyser Large210,00020,000Generator Large2100,000200,000Wall fans102,00020,000TV LCD299,900199800Surround sound system150,00050,000Counter table Chairs6180010800Office Chair & Table Set630,000180,000Miscellaneous133,30033,300Computers340,000120,000Telephones38002,400Security system112,00012,000Total1,656,800 6.5. RECEPTION & OWNER’S OFFICE For the restaurant the dine in is more used rather than take away service and for that purpose it will be well appropriate that we should manage the ordering and serving as well as possible and we also going to provide home delivery service. The Office Furniture & Equipment will be depreciated at the rate of 10% per annum according to the diminishing balance method for the projected period. Dedicated area requirement%age area usearea sq yardsDining60%240 sq ydReception & Waiting5%20 sq ydStaff Room5%20 sq ydKitchen and preparation20%80 sq ydOffices10%40 sq ydTotal100%400 sq yd 6.6. HUMAN RESOURCE MANAGEMENT A better human resource is the core factor in developing any business and well motivated and adequately paid employees contribute a major part in maintaining the standards, the human resource which we going use are as under. Human ResourceQuantityWages/UnitTotal Wages (Monthly)Total Wages (yearly)Chief Chef235,00070,000840,000Office Staff312,00036,000432,000Guards28,00016,000192,000Waiters86,00048,000576,000Dishwasher3500015,000180,000Sweeper25,00010,000120,000Supervisor / Manager220,00040,000480,000Delivery Rider240008,00096,000Cooks610,00060,000720,000Labor wages303,0003,120,000Total labor wages3,636,000 6.7. ASSUMPTIONS Labor cost is assumed to increase at 10% annually 7. LEGAL ASPECTS The tax will be paid under the Pakistani law with the rate of straight 35 percent on total income. Every tax year is self contained year hence taxable profit is the profit accrued or arisen in that year. Anticipated of potential profit or losses which may occur in the future are not considered for arriving at taxable income of a tax year. This rule is however , subject to one exception stock in trade may be valued on the basis of cost or net realizable value, whichever is lower section 35 (4). Real profit and Notional profit are both to be taken under consideration. Recovery of sums already allowed as deduction is to be included in Business income of the year in which it is recovered. Mode of book entries is not relevant. Both legal and illegal business is taxable. Commercial principles for computing business income are also to be considered. Capital receipts and expenditure are not to be considered in the computation of Business income. Two criteria for admissibility of Business Expenditure are: Any expenditure wholly of exclusively for the purpose of Business. Any expenditure incidental to business. Scheme of Business deductions/allowances (Section 22 to 31) Section 22 : Depreciation Allowances Section 23 : Initial Allowances Section 24 : Amortized Expenses Section 25 : Pre commencement Expenditures Section 26 : Scientific research expenditure Section 27 : Expenses on employee training and facility Section 28 : Profits on debt, financial cost and lease payments Section 29 : Bad debts Section 30 : Profits on non performing debts of a banking company Section 31 : Transfer to participatory reserve 8. TOTAL PROJECT COSTING & FINANCING PLAN Total cost of projectCostRent26,00,000Machinery and equipment9,71,700Furniture & fixtures1,656,800Interior Decoration300,000Vehicles (delivery)70,000Pre operating cost2401500Total Project Cost8,000,000 Financing planRs.8,000,000DEBT (17.5%)Rs. 14,00,000EQUITY (82.5%)Rs. 66,00,000 9. FINANCIAL ANALYSIS & KEY ASSUMPTIONS The financial analysis has been done on the estimates done by projecting the future earnings while taken in consideration the views of current market players and experts. The estimates cover the cost of rented building, inventory and machinery. 9.1. REVENUE & COST PROJECTION We are expecting that in starting we may have to bear the cost below equilibrium, but as we move on with the proposed strategy of “Quality with Consistency” our sales volume will increase. Concerning the pricing, we will revalue our products after every 3-month period considering the attributes of demand and product market. The sales are expected to grow by 20 percent (year-on year) while we are expecting that we will recover our fixed cost in almost 2 years after which the present values of cash flows will ultimately marked under the profits. On the other hand the increase in variable cost numbers is anticipated relative to inflation rate which is 20 percent y-o-y. Further on, after the consensus with different categories of market players we are expecting the following sales breakup, Revenue Stream% of Total SalesDine In75%Home Delivery25%Total Revenue100% 9.2. UTILITY REQUIREMENT Following breakup of utility bills is expected in relation to the machinery used in the restaurant. UtilityCharges (monthly)Charges (annually)Electricity50,000600,000Water250030,000Gas10,000120,000Telephone12,000144,000Total utility74,500894,000 As depicted above the most of the fast food machines require considerable gas during the preparation process. The preheating procedure of the equipment before commencement of preparation also consumes considerable gas. It is assumed that utilities expenses will be increased by 10% every year. 10. FINANCIAL STATEMENTS 10.1. BALANCE SHEET End of ConstructionYear 1Year 2Year 3Fixed Assets Intangibles Plant & Machinery971700971700971700971700Acc Depreciation: P & M64780129560194340 906920842140777360 Furniture & Fixture1656800165680016568001656800Acc Depreciation: F & F165680331360497040 149112013254401159760 Vehicles70000700007000070000Acc Depreciation:Vehicles140002800042000 560004200028000 Total Fixed Assets2698500245404022095801965120 Current Assets Cash & Bank Balance4,701,500488050052899605506720Short term Investment 300000450000600000Inventory1200000144000017280002073600 Total Current Assets5901500662050074679608180320 Total Assets 8600000 9074540967754010145440 Current Liabilities Accounts Payable6000007200008640001036800Rent payable 200000200000200000Tax Payable 80876355206572171Interest Payable 203467158667113867Total Current Liabilities600000120434215778721922837 Long Term Liabilities Long Term Loan1,400,0001,120,000840,000560,000 Total Liabilities2,000,0002,324,3422,417,8722,482,837 Owner's Equity Capital6600000660000066000006600000 Retained Earning1501986596681062603 Total Equity + Liabilities 8,600,000 9074540967754010145440 10.2. INCOME STATEMENT YEAR 1YEAR 2YEAR 3 Total Sales127800001533600017636400 Cost of Goods Sold 95850001150200013227300 Gross Profit319500038340004409100 Operating Expense Electricity600000600000600000 Sui Gas120000120000120000 Water300003000030000 Rent for Building240000024000002400000 Fuel Expense126000126000126000 Telephone144000144000144000 Advertising Expense200000100000100000 Miscellaneous600006000060000 Salary Expense363600036360003636000 Depreciation Expense - Plant & Machinery647806478064780 Depreciation Expense - Furniture & Fixture165680165680165680 Depreciation Expense - vehicles140001400014000 Total operating Expense756046074604607460460 Other Income480000048000004800000 Operating Profit (EBIT)43454011735401748640 Interest Payment for Loan203467158667113867 Net Profit Before Tax (EBT)23107310148731634773 Income Tax(35%)80876355206572171 Net Profit After Tax 150198 659668 1062603 10.3. CASH FLOW STATEMENT End of construction YearYEAR 1Year 2Year 3Sources of funds Operating Profit43454011735401748640Add: Depreciation244460244460244460 Total funds from operations67900014180001993100 DFI Loans1400000 Paid up Capital6600000 Bank Borrowings600000 Total Sources of funds 8600000 679000 1418000 1993100 Applications Of funds Investment in Fixed Assets2698500 Preproduction Expenses2401500 Repayment of Loan324,342840,000594,703Interest on loan203467158667113867Increase in Current Assets1200000240000288000345600Payment of Income tax80876355205.7572170.7Short Term Investment300000150000150000Total Applications of funds3,898,500500,0001,008,5401,776,340 Cash Surplus/deficite4,701,500179,000409,460216760Cash at the beginning of the year4,701,5004,880,5005289960Cash At the end of the Year 4,701,500 4880500 5289960 5506720 11. CONCLUSION & RECOMMENDATIONS The restaurant being located in an area like Gulshan-e-Iqbal it will be facing an ever increasing fierce competition therefore the menu and some special features must be continuously evolved. The restaurant should work effectively and efficiently to grab a huge part of the local market share within one year of its operations and make its presence felt to its competitors. In order to gain consumer appeal the restaurant should particularly take care of its customer services, food quality, hygiene and cleanliness, good interior & pleasant and appealing environment. The restaurant should use an attractive marketing policy and promotion campaigns to place the restaurant into a unique category and increase its awareness among the population. Best quality and freshness of all the raw materials to be used in the menu must be ensured. The restaurant can also offer an introductory discount to attract customers. The restaurant should also come up with fresh, nutritious and diet menus to cater to the health conscious customers. Sugar-free desserts and beverages should be introduced at the same time. The restaurant should use efficient cost saving techniques to get the best benefit out of its pricing. The restaurant can also offer free delivery services of certain menu items in selected areas. The restaurant should organize special events on occasions such as Eid, Independence Day, and Christmas etc. The owners should give incentives to their workers so they work efficiently and provide good customer service. APPENDIX SUMMARY OF KEY ASSUMPTIONS PROJECT COSTING Total cost of projectfurniture and fixturesCost 1656800plant and machinery 971700vehicles70000Interior Decoration 300000Rent 2600000Pre preparing cost 2401500Total Project Cost8000000Long term Loan 1400000Capital6600000Total Sources8000000 DEPRECIATION ASSUMTION Fixed Assets:-CostLifeYear 1 Year 2 Year 3 Furniture & Fixtures165680010165680165680165680Plant & Machinery 97170015647806478064780Vehicles700005140001400014000 Total depreciation expense244460244460244460 Acc- depreciation furniture & fixtures165680331360497040Acc- depreciation plant & machinery64780129560194340Acc- depreciation vehicles140002800042000 SCHEDULE OF REPAYMENTS OF LONGTERM LOAN-5 YEARS AMOUNT OF LONGTERM LOAN1,400,000 INTEREST RATE (YEARLY)16% INTEREST RATE (MONTHLY)1.33% NO.OF PERIODS60 INSTALLMENT NOINTEREST AMOUNTPRINCIPAL PAYMENTTOTAL AMOUNT PAIDBALANCEYEARLY INTERESTPRINCIPAL (YEARLY)118666.6723333.3342000.001,376,667 218355.5623333.3341688.891,353,333 318044.4423333.3341377.781,330,000 417733.3323333.3341066.671,306,667 517422.2223333.3340755.561,283,333 617111.1123333.3340444.441,260,000 716800.0023333.3340133.331,236,667 816488.8923333.3339822.221,213,333 916177.7823333.3339511.111,190,000 1015866.6723333.3339200.001,166,667 1115555.5623333.3338888.891,143,333 1215244.4423333.3338577.781,120,000 YEAR 1 TOTAL 203466.67280000 1314933.3323333.3338266.671,096,667 1414622.2223333.3337955.561,073,333 1514311.1123333.3337644.441,050,000 1614000.0023333.3337333.331,026,667 1713688.8923333.3337022.221,003,333 1813377.7823333.3336711.11980,000 1913066.6723333.3336400.00956,667 2012755.5623333.3336088.89933,333 2112444.4423333.3335777.78910,000 2212133.3323333.3335466.67886,667 2311822.2223333.3335155.56863,333 2411511.1123333.3334844.44840,000 YEAR 2 TOTAL 158666.67280000 2511200.0023333.3334533.33816,667 2610888.8923333.3334222.22793,333 2710577.7823333.3333911.11770,000 2810266.6723333.3333600.00746,667 299955.5623333.3333288.89723,333 309644.4423333.3332977.78700,000 319333.3323333.3332666.67676,667 329022.2223333.3332355.56653,333 338711.1123333.3332044.44630,000 348400.0023333.3331733.33606,667 358088.8923333.3331422.22583,333 367777.7823333.3331111.11560,000 YEAR 3 TOTAL 113866.67280000 377466.6723333.3330800.00536,667 387155.5623333.3330488.89513,333 396844.4423333.3330177.78490,000 406533.3323333.3329866.67466,667 416222.2223333.3329555.56443,333 425911.1123333.3329244.44420,000 435600.0023333.3328933.33396,667 445288.8923333.3328622.22373,333 454977.7823333.3328311.11350,000 464666.6723333.3328000.00326,667 474355.5623333.3327688.89303,333 484044.4423333.3327377.78280,000 YEAR 4 TOTAL 69066.67280000493733.3323333.3327066.667256,667503422.2223333.3326755.556233,333513111.1123333.3326444.444210,000522800.0023333.3326133.333186,667532488.8923333.3325822.222163,333542177.7823333.3325511.111140,000551866.6723333.3325200116,667561555.5623333.3324888.88993,333571244.4423333.3324577.77870,00058933.3323333.3324266.66746,66759622.2223333.3323955.55623,33360311.1123333.3323644.4440YEAR 5 TOTAL 24266.67280000TOTAL INTEREST PAID569333.33 TOTAL AMOUNT PAID 1969333.33

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