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Deli Restaurant Business Plan

New World Deli

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Financial Plan

The financial plan depends on initial investment of £20,000 from the founder, plus a five-year loan of £30,000, and another £10,000, 10-month,  interest-free loan from a family member. Much as we'd like to bootstrap this business without initial investment, it just isn't worth it.  The rest of the plan is reasonably conservative, but there does have to be money at risk.

The bank loan will be secured with real estate owned by the founder.

7.1 Important Assumptions

Important general assumptions are shown in the following table.

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 Key Financial Indicators

The benchmarks chart shows changes in sales, operating expenses, gross margin, and collection days. We think the chart speaks for itself, and what it says is that the numbers and assumptions are reasonable.

7.3 Break-even Analysis

This is a preliminary break-even for now.

Break-even Analysis
Monthly Revenue Break-even £39,158
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost £25,275

7.4 Projected Profit and Loss

We assume a slightly higher gross margin than industry standards for eating places, because we don't have the full slate of meals or servers.  Also, kitchen and busboy employees are not included in cost of sales, for simplicity. 

Because we're new to this business, we've adjusted the profitability into normal range by adding a relatively large amount of additional unitemized expenses.  That gives us a buffer for the additional unforeseen expenses that we expect will come up.  If they don't, then we'll be more profitable than normal for the deli business.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales £649,221 £681,682 £715,766
Direct Cost of Sales £230,178 £259,039 £271,991
Other kitchen expenses £36,000 £40,000 £45,000
Total Cost of Sales £266,178 £299,039 £316,991
Gross Margin £383,043 £382,643 £398,775
Gross Margin % 59.00% 56.13% 55.71%
Expenses
Payroll £186,000 £135,000 £170,000
Sales and Marketing and Other Expenses £81,000 £57,500 £76,000
Depreciation £0 £0 £0
Utilities £2,400 £2,400 £2,400
Insurance £6,000 £6,600 £7,200
Payroll Taxes £27,900 £20,250 £25,500
Other £0 £0 £0
Total Operating Expenses £303,300 £221,750 £281,100
Profit Before Interest and Taxes £79,743 £160,893 £117,675
EBITDA £79,743 £160,893 £117,675
Interest Expense £3,678 £1,257 £0
Taxes Incurred £22,819 £47,891 £35,303
Net Profit £53,245 £111,745 £82,373
Net Profit/Sales 8.20% 16.39% 11.51%

7.5 Projected Cash Flow

With the financing plan as projected, the business remains cash positive throughout the first three years.   During year two and three, it is expected that a significant amount of cash will be used to upgrade facilities and purchase new equipment.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales £649,221 £681,682 £715,766
Subtotal Cash from Operations £649,221 £681,682 £715,766
Additional Cash Received
Sales Tax, VAT, HST/GST Received £0 £0 £0
New Current Borrowing £15,000 £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 £664,221 £681,682 £715,766
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending £186,000 £135,000 £170,000
Bill Payments £400,625 £436,393 £462,602
Subtotal Spent on Operations £586,625 £571,393 £632,602
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out £0 £0 £0
Principal Repayment of Current Borrowing £19,868 £25,132 £0
Other Liabilities Principal Repayment £10,000 £0 £0
Long-term Liabilities Principal Repayment £0 £0 £0
Purchase Other Current Assets £0 £40,000 £0
Purchase Long-term Assets £0 £50,000 £0
Dividends £25,000 £25,000 £60,000
Subtotal Cash Spent £641,493 £711,525 £692,602
Net Cash Flow £22,728 (£29,843) £23,164
Cash Balance £50,928 £21,086 £44,250

7.6 Projected Balance Sheet

The balance sheet shows that the negative net worth is gradually solved with profits later on.  Debts are repaid ahead of schedule.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash £50,928 £21,086 £44,250
Inventory £24,979 £28,111 £29,516
Other Current Assets £2,000 £42,000 £42,000
Total Current Assets £77,907 £91,197 £115,766
Long-term Assets
Long-term Assets £24,000 £74,000 £74,000
Accumulated Depreciation £0 £0 £0
Total Long-term Assets £24,000 £74,000 £74,000
Total Assets £101,907 £165,197 £189,766
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable £34,330 £36,006 £38,203
Current Borrowing £25,132 £0 £0
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £59,462 £36,006 £38,203
Long-term Liabilities £0 £0 £0
Total Liabilities £59,462 £36,006 £38,203
Paid-in Capital £20,000 £20,000 £20,000
Retained Earnings (£30,800) (£2,555) £49,191
Earnings £53,245 £111,745 £82,373
Total Capital £42,445 £129,191 £151,563
Total Liabilities and Capital £101,907 £165,197 £189,766
Net Worth £42,445 £129,191 £151,563

7.7 Business Ratios

Standard business ratios are for the eating establishment industry as a whole. Because of the vast number of firms in this industry and the incredible variety that exists between firms, there is variance between the industry standard and a specific company like New World Deli. However, the ratios do show a healthy company that has appropriate costs plus asset and liability allocation. Industry profile ratios are based on the Standard Industrial Classification (SIC) code 5812, Eating Places, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 5.00% 5.00% 7.60%
Percent of Total Assets
Inventory 24.51% 17.02% 15.55% 3.60%
Other Current Assets 1.96% 25.42% 22.13% 35.60%
Total Current Assets 76.45% 55.20% 61.00% 43.70%
Long-term Assets 23.55% 44.80% 39.00% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 58.35% 21.80% 20.13% 32.70%
Long-term Liabilities 0.00% 0.00% 0.00% 28.50%
Total Liabilities 58.35% 21.80% 20.13% 61.20%
Net Worth 41.65% 78.20% 79.87% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 59.00% 56.13% 55.71% 60.50%
Selling, General & Administrative Expenses 50.80% 39.74% 44.18% 39.80%
Advertising Expenses 5.08% 3.67% 5.59% 3.20%
Profit Before Interest and Taxes 12.28% 23.60% 16.44% 0.70%
Main Ratios
Current 1.31 2.53 3.03 0.98
Quick 0.89 1.75 2.26 0.65
Total Debt to Total Assets 58.35% 21.80% 20.13% 61.20%
Pre-tax Return on Net Worth 179.21% 123.57% 77.64% 1.70%
Pre-tax Return on Assets 74.64% 96.63% 62.01% 4.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 8.20% 16.39% 11.51% n.a
Return on Equity 125.44% 86.50% 54.35% n.a
Activity Ratios
Inventory Turnover 10.91 9.76 9.44 n.a
Accounts Payable Turnover 12.67 12.17 12.17 n.a
Payment Days 27 29 29 n.a
Total Asset Turnover 6.37 4.13 3.77 n.a
Debt Ratios
Debt to Net Worth 1.40 0.28 0.25 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital £18,445 £55,191 £77,563 n.a
Interest Coverage 21.68 128.04 183,568,059.24 n.a
Additional Ratios
Assets to Sales 0.16 0.24 0.27 n.a
Current Debt/Total Assets 58% 22% 20% n.a
Acid Test 0.89 1.75 2.26 n.a
Sales/Net Worth 15.30 5.28 4.72 n.a
Dividend Payout 0.47 0.22 0.73 n.a
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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
Break-even Analysis
Monthly Revenue Break-even £39,158
Assumptions:
Average Percent Variable Cost 35%
Estimated Monthly Fixed Cost £25,275
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales £649,221 £681,682 £715,766
Direct Cost of Sales £230,178 £259,039 £271,991
Other kitchen expenses £36,000 £40,000 £45,000
Total Cost of Sales £266,178 £299,039 £316,991
Gross Margin £383,043 £382,643 £398,775
Gross Margin % 59.00% 56.13% 55.71%
Expenses
Payroll £186,000 £135,000 £170,000
Sales and Marketing and Other Expenses £81,000 £57,500 £76,000
Depreciation £0 £0 £0
Utilities £2,400 £2,400 £2,400
Insurance £6,000 £6,600 £7,200
Payroll Taxes £27,900 £20,250 £25,500
Other £0 £0 £0
Total Operating Expenses £303,300 £221,750 £281,100
Profit Before Interest and Taxes £79,743 £160,893 £117,675
EBITDA £79,743 £160,893 £117,675
Interest Expense £3,678 £1,257 £0
Taxes Incurred £22,819 £47,891 £35,303
Net Profit £53,245 £111,745 £82,373
Net Profit/Sales 8.20% 16.39% 11.51%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales £649,221 £681,682 £715,766
Subtotal Cash from Operations £649,221 £681,682 £715,766
Additional Cash Received
Sales Tax, VAT, HST/GST Received £0 £0 £0
New Current Borrowing £15,000 £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 £664,221 £681,682 £715,766
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending £186,000 £135,000 £170,000
Bill Payments £400,625 £436,393 £462,602
Subtotal Spent on Operations £586,625 £571,393 £632,602
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out £0 £0 £0
Principal Repayment of Current Borrowing £19,868 £25,132 £0
Other Liabilities Principal Repayment £10,000 £0 £0
Long-term Liabilities Principal Repayment £0 £0 £0
Purchase Other Current Assets £0 £40,000 £0
Purchase Long-term Assets £0 £50,000 £0
Dividends £25,000 £25,000 £60,000
Subtotal Cash Spent £641,493 £711,525 £692,602
Net Cash Flow £22,728 (£29,843) £23,164
Cash Balance £50,928 £21,086 £44,250
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash £50,928 £21,086 £44,250
Inventory £24,979 £28,111 £29,516
Other Current Assets £2,000 £42,000 £42,000
Total Current Assets £77,907 £91,197 £115,766
Long-term Assets
Long-term Assets £24,000 £74,000 £74,000
Accumulated Depreciation £0 £0 £0
Total Long-term Assets £24,000 £74,000 £74,000
Total Assets £101,907 £165,197 £189,766
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable £34,330 £36,006 £38,203
Current Borrowing £25,132 £0 £0
Other Current Liabilities £0 £0 £0
Subtotal Current Liabilities £59,462 £36,006 £38,203
Long-term Liabilities £0 £0 £0
Total Liabilities £59,462 £36,006 £38,203
Paid-in Capital £20,000 £20,000 £20,000
Retained Earnings (£30,800) (£2,555) £49,191
Earnings £53,245 £111,745 £82,373
Total Capital £42,445 £129,191 £151,563
Total Liabilities and Capital £101,907 £165,197 £189,766
Net Worth £42,445 £129,191 £151,563
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 5.00% 5.00% 7.60%
Percent of Total Assets
Inventory 24.51% 17.02% 15.55% 3.60%
Other Current Assets 1.96% 25.42% 22.13% 35.60%
Total Current Assets 76.45% 55.20% 61.00% 43.70%
Long-term Assets 23.55% 44.80% 39.00% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 58.35% 21.80% 20.13% 32.70%
Long-term Liabilities 0.00% 0.00% 0.00% 28.50%
Total Liabilities 58.35% 21.80% 20.13% 61.20%
Net Worth 41.65% 78.20% 79.87% 38.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 59.00% 56.13% 55.71% 60.50%
Selling, General & Administrative Expenses 50.80% 39.74% 44.18% 39.80%
Advertising Expenses 5.08% 3.67% 5.59% 3.20%
Profit Before Interest and Taxes 12.28% 23.60% 16.44% 0.70%
Main Ratios
Current 1.31 2.53 3.03 0.98
Quick 0.89 1.75 2.26 0.65
Total Debt to Total Assets 58.35% 21.80% 20.13% 61.20%
Pre-tax Return on Net Worth 179.21% 123.57% 77.64% 1.70%
Pre-tax Return on Assets 74.64% 96.63% 62.01% 4.30%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 8.20% 16.39% 11.51% n.a
Return on Equity 125.44% 86.50% 54.35% n.a
Activity Ratios
Inventory Turnover 10.91 9.76 9.44 n.a
Accounts Payable Turnover 12.67 12.17 12.17 n.a
Payment Days 27 29 29 n.a
Total Asset Turnover 6.37 4.13 3.77 n.a
Debt Ratios
Debt to Net Worth 1.40 0.28 0.25 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital £18,445 £55,191 £77,563 n.a
Interest Coverage 21.68 128.04 183,568,059.24 n.a
Additional Ratios
Assets to Sales 0.16 0.24 0.27 n.a
Current Debt/Total Assets 58% 22% 20% n.a
Acid Test 0.89 1.75 2.26 n.a
Sales/Net Worth 15.30 5.28 4.72 n.a
Dividend Payout 0.47 0.22 0.73 n.a