Hospitality Business Plan for Gouger Chinese Dessert Shop - Case Study Example

sрitаlity Business Plаn Name: Institution: Table of Contents Table of Contents 2 Executive Summary 4 Background and Description of the Business Concept 6 Vision Statement 6 Mission Statement 7 Objectives 7 Industry Analysis 7 The Market 8 a. Market Description 8 b. Customer segments 8 d. Competitors 10 Dessert Story 12 Dessert Story Logo 12 Gelatissimo Restaurant 13 CIBO Espresso 13 SWOT Analysis 15 Strengths 15 Weaknesses 15 Opportunities 16 Threats 16 Marketing Strategies 16 Marketing mix (Price, Place, Promotion, Product) 16 Product 16 Place 17 Price 17 Promotion 18 Sales Strategy 18 The Organization 19 a.Legal and Organizational Structure 19 b.HRM and Key Personnel 19 c.Key Suppliers 20 The Financials 21 Sales Forecasts and Break-Even Analysis 23 Break-Even Analysis 25 Cash Flow Forecasts 25 Assumptions 32 References 33 Appendices 34 Executive Summary This hospitality business plan is for the proposed Gouger Chinese dessert shop to be located in Chinatown on Gouger Street, Adelaide city in South Australia. Gouger Chinese dessert shop is a newly envisioned Oriental-style restaurant that will offer a variety of Chinese desserts (sweet food and dishes served with tea, with meals or after meals. Gouger Chinese dessert shop will be the only restaurant in this region to embrace the new tantalizing concept of a dessert-only restaurant. This would be a fun idea especially for adult clients who would get a chance to fulfill their childhood fantasy of skipping real meals by having straight dessert. The dessert shop would also be an addition to typical restaurants struggling with tight seating schedules and make customers rush from appetizers to settling the bill. The restaurant will offer a variety of dessert-tasting menus that would come with food, wines and teas. The desserts will be prepared to use a variety of ingredients characteristic of East Asian cuisines. These would include such ingredients as whole or powdered glutinous rice, agar, and sweet bean pastes. The culinary masterpieces would also be prepared before the customer’s eyes. Gouger Chinese dessert shop will be located on Gouger Street in Adelaide city, Chinatown in South Australia. Gouger Street is strategically located in proximity to the Adelaide Central Markets and is reputed for its high-end international restaurants, dessert shops and cafes. The cuisines range from Chinese, Thai, Vietnamese, Malaysian, Italian, Argentinean, to French. This location will be great for the new Gouger Chinese dessert shop considering that it is always a hive of activity having distinct Asian flavor. The location of the new dessert shop is also precise because of the guaranteed ample supplies of ingredients, fresh fruits and vegetables from the nearby Adelaide Central Markets. The menu shall include such desserts as steamed egg custard, almond jelly with Mandarin oranges, sugared tomatoes, Chinese mung bean dessert, Chinese steamed apple pears, banana spring rolls, kluay buad chee (bananas in coconut milk), creamy lychee jelly, and creamy green tea jelly. The shop shall incorporate the best in Chinese Australian fair. Gouger Chinese dessert shop envisions creating a new niche in the Australian restaurant industry and increase sales in excess of $150,000 over three years. Significant increases in sales are expected to begin in the second year, approximately 50%. Through much focus on the product and service quality, Gouger Chinese dessert shop would strive to establish itself as the destination of choice in terms of desserts in Chinatown Adelaide, and maintain a gross margin of 80 percent by Year 3. More competitive advantage will be sought through catered and take out deserts. Background and Description of the Business Concept The basis for the Gouger Chinese dessert shop concept is a newly visualized by Oriental-style restaurant that was destined to offer diverse menus of Chinese deserts for each and every clientele within the highly viable food market. The chain of shops will introduce a new approach amongst the restaurants in this region to embrace the new tantalizing concept of a dessert-only restaurant. This will as well introduce a pleasurable experience for clients who might have missed to accomplish their fetish for food variety by having straight dessert. The dessert shop would greatly introduce a competitive edge in closing the gap of delayed eating schedules and common rush from appetizers to settling the bill. A variety of dessert-tasting menus will be offered as well as diverse food, as well as beverages. Constituents such as whole or rather powdered glutinous rice, sweet bean pastes and agar, and the culinary dishes that will be cooked in the customer vicinity. Feedback note will be offered once a week to improve or rather have a more competitive edge in alignment with the variety of customers. An example could be, ‘what kind of food would you like to have as a snack, et cetera. Vision Statement The vision statement of Gouger Chinese dessert shop would be “bringing back the traditional Chinese flair in dinning.” This is inspired by the urge to blend traditional and modern Chinese cuisine in these parts of the world. This is especially relevant considering the strong cultural and economic ties that exist between China and Australia. This would not be your typical Chinese dessert shop that is easily comparable to other dessert shops in Chinatown. Instead, Gouger Chinese dessert shop would be a grand and very exquisite dessert shop that would offer unmatched dining experience to natives and East Asian tourists of this part of the world. The restaurant must generate sufficient profit so as earn a return on investment and further invest in the continued growth and development of quality products and service (Walker 2008, p. 65). The business shall nurture a friendly, safe, and a clean environment. Additionally, the restaurant shall focus on diversity, creativity, professionalism and openness to criticism and new ideas. Mission Statement The mission statement of Gouger Chinese dessert shop would be “Adding true deliciousness to the eating experience”. The shop’s priority would be to provide the freshest dessert and best service so as to ensure highest customer satisfaction, a commitment that is in line with the shop’s mission statement. Similarly, Gouger Chinese dessert shop would be a convenient dining dessert shop of choice for people wishing to have high-quality Chinese desserts in an atmosphere that comfortable. The main target audience for Gouger Chinese dessert shop is people seeking a fun oriental gourmet experience. Objectives 1. To be a creative dessert shop in Chinatown Adelaide. This will be achieved by having a creative pastry chefs make dessert bars defined by their character. There will be a strong emphasis on quality, freshness and customer value. 2. Creating an unforgettable dining experience for customers – our desserts shall be prepared before the very eyes of the customer, with topmost attention being accorded to ingredients and presentation that will exhibit great chef expertise. 3. Holding true to our vision of blending traditional and modern Chinese cuisine so as to gain competitive advantage in Chinatown Adelaide by Year 3. Industry Analysis Australia has a thriving economy and has cultural diversity. The country has also high per capita income, relatively open trade, and English as the official language. Australia has always been a wonderful and solid market for the food service and retail food industry. There are varied cuisines styles in Australia ranging from English, Aboriginal, Chinese, Italian, French, Vietnamese, Indian, American, etc., offered by many restaurants and fast food eateries ((RS&G 2004, p.23). The dessert-only restaurant business is fast picking up in Australia. There are a number of traditional restaurants in the Adelaide’s Chinatown that deal in Chinese cuisine including desserts, but only a handful have ventured specifically into the dessert-only segment. There is a growing market segment for desserts in the region consisting of natives and tourists. The business climate is also conducive because of the strong support of the Australian government through friendly taxation programmes and encouragement of people to become more spenders than savers. It is thus evident that the starting of the new business comes at an appropriate time. Providing high quality desserts and the accompanying service, significantly build the brand reputation for the new Gouger Chinese dessert shop. The Market a. Market Description The proposed Gouger Chinese dessert shop main focus on the local markets around Adelaide’s Chinatown. Particular focus shall be on restaurant and ice-cream shop consumers. Chinatown in Adelaide promises to be a wonderful climate for the new dessert shop considering the rapidly growing number of household that are spending their money dining out. b. Customer segments There are four main customer segments that the new Gouger Chinese dessert shop would target Gourmet pursuits, Revelers, Exotic consumers, and Families. These represents groups of dinners that share almost similar behavior patterns and therefore, reasons for eating at Gouger Chinese dessert shop. Exotic Consumers are composed of mainly originally East Asian dinners who long to catch a dessert with the Chinese flair just like back at their home country. This category may also include Australian natives and others who are adventurous with their food, trying food from other parts of the world. Revelers represents a group of diners for an excellent place to celebrate their special occasions are over sumptuous desserts. Such special occasions could include the Lunar New Year, birthdays, anniversaries, graduations, Valentine’s Day etc (Walker 2008, p. 71). Gouger Chinese dessert shop would be the place of choice because of its second to none menu and festive atmosphere. Gourmet pursuits refer to a segment of customers who have discriminating or refined taste for food who are out for dessert prepared by particularly high caliber chefs. Gouger Chinese dessert shop would seek to be a destination point for gourmet tourists – adventuresome diners seeking fine dessert experience. This category of consumers is on the rise in Australia especially in Chinatown. Families represent all members of the family who dine out. Gouger Chinese dessert shop would be an excellent gathering place most welcoming to families as well as precisely comfortable for the young and adults. Table 1 represents the anticipated growth in all the four customer segments over three years: Market Analysis Potential Customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR Gourmet Pursuits 12% 5 5,55 6,16 6,84 7,59 11% Revelers 16% 5 5,70 6,50 7,41 8,44 14.00% Exotic Consumers 14% 5 5,8 6,73 7,80 9,05 16.00% Families 10% 5 5,55 6,16 6,84 7,59 10.00% Total 13% 20,00 22,60 25,55 28,89 32,68 12.75% Market Analysis c. Target Market Segmentation Gouger Chinese dessert shop would specifically target segments of customers with love for sumptuous desserts along with desire for comfort and relaxation. The restaurant would be the right pastime joint for the busy and successful looking to a treatment of a top notch dessert dining experience and relaxation. The restaurant would create a name for itself as a fast, fun yet quality dessert joint in the acclaimed Chinese-cuisine area of Adelaide Chinatown. d. Competitors Although Gouger Chinese dessert shop would be seeking to create a new niche in the Australian food service industry, it would share similarities with current and new desert-only restaurants in Adelaide Chinatown. There are five categories of competitors in the market: i) Restaurants – Gouger Chinese dessert shop shall face competition from several restaurants in the area that principally offer desert. ii) Ice Cream shops iii) Donut and Coffee Shops - these offer coffee and pastries for dine-in and carry-out consumption. iv) Supermarkets – there are plenty supermarkets in Adelaide’s Chinatown area that have in-store bakeries and frozen specialty desserts that would pose significant competition for Gouger Chinese dessert shop. v) Bakeries – these are a number of free-standing conventional bakeries in the region. The competition and buying patterns would be based on the fact that dessert as a product that only accompanies a special meal and does not need to be any better than a frozen cake. Gouger Chinese dessert shop would make it appealing for everyone to experience the expert preparation of the gourmet dessert. The price factor may become prominent when competition with Ice Cream and Coffee Shops. However, there are grounds to believe that consumers are very conscious of better quality products and services. It is our strong belief that many consumers will not mind spending more for an exceptional dessert offered in an overly warm and friendly environment. The comfort factor will also be major in dealing with completion. Gouger Chinese dessert shop’s menu will appropriately respond to this by reflecting “comfort food” desserts and not intimidating desserts. We will make sure to offer the highest quality products, combine the traditional and modern, and presenting our deserts in the most appealing manner to the consumer. The main competition will come from the following established restaurants: Dessert Story, Gelatissimo, and CIBO Espresso. Dessert Story Dessert Story is a restaurant on 118 Gouger Street, Adelaide that specializes in Taiwanese and Hong-Kong home-style dessert. The restaurant is reputed for striving to bring the Asian Dessert Culture to Adelaide’s Chinatown, delivering something new and fresh and a modern twist to traditional food. Dessert Story has over 100 products in its range and boasts of offering the freshest, tastiest Asian dessert to its customers (Dessert Story 2013, pg.1). Dessert Story Logo The desserts are exotic and added coconut milk or shaved ice, fruits or syrups, beans or nuts. Cold dishes on offer include Crushed Ice series and Snow Ice while hot dishes include Peanut Soup. Taro and tofu are also available. This is best expressed on their website: "Dessert Story brings you the best of Taiwanese and Hong Kong home-style dessert. Our desserts are handmade using the freshest natural ingredients ensures that we bring you the delicious and healthy Asian desserts. Our aim at Dessert Story is to bring Asian Dessert Culture to deliver something new and fresh in people's life so that they can enjoy us, a modern twist of this traditional food." The following video link shows the dessert preparation spectacle at Dessert Story restaurant: http://www.youtube.com/watch?feature=player_embedded&v=GAoAua0nt0I. The atmosphere at Dessert Shop is relatively of enjoyment and awe along with somewhat polite service. The greatest let down of the restaurant is its small size which means that many customers are without seats and tables during high peaks especially in the evening. The staff tries to make up for this by ensuring that customers cycle through fairly quickly. Also, the restaurant is poor in disseminating information to customers as evidenced by their Facebook page that lacks any meaningful information. Dessert Story operates into late night, especially on weekends. Gelatissimo Restaurant Gelatissimo has grown from a niche product restaurant serving a few privileged people to large food business offering smooth sweet treat enjoyed by many people today. The restaurant is famed for its effort to replicate the sweet way of its native south Italy characteristic of enjoying food prepared to use the Gelatissimo secret recipe. Each of the gelaterias captures the Italian ancestry and family recipes of the restaurant’s founders. The desserts are made fresh on the site, and served on cups, cones, and irresistible sundaes among others (Gelatissimo 2013, p.1). They also include an array of dolci (sweets) accompanied often by freshly ground coffee to create an authentic Italian feel and flavor of the Gelatissimo experience. The desserts offered include baked bananas, Iced summer pudding, choc croissant, and mango coconuts. CIBO Espresso CIBO Espresso is an Adelaide-based café and coffee shop franchise on 41 Gouger Street, offering conventional Italian food prepared from local ingredients in a typically Italian atmosphere (Cibo Espresso 2013, p1). Cibo Espresso has relatively strong brand loyalty in Adelaide compared to local outlets of other larger chains. Company logo CIBO Espressso The Cibo Espresso brand is renowned for expertly brewed coffee as well as a variety of Italian-style eats including a selection of pizzas, Panini, and custard-filled doughnuts. Cibo Expresso is widely spread throughout Adelaide offering the foodie town relatively better coffee and sweet of savory treat (Nimemsn 2013, p1). It has a relatively sufficient outside dining area, wheelchair access and offers take-away. The major undoing of Cibo Espresso restaurant is the choice not to accept booking, which means it loses out on a significant customer segment particularly the busy and successful. Also, the restaurant has limited parking space discourages many driving customers. The site map below shows the proposed location of our new dessert shop and the existing competitors. Figure 1: Site Map for Dessert Restaurants on Gouger Street, Chinatown Adelaide SWOT Analysis Strengths The greatest advantage of the proposed Chinese dessert shop would be its particular focus on desserts only as opposed to striving to venture into the most established product lines in the food sector. Focusing on a single primary product that has not yet proliferated in the market provides the new dessert shop with a golden opportunity for success. Additionally, the Gouger Chinese dessert shop would provide unmatched quality both in product and service because of the highly skilled staff as well as our specialization in offering desserts. Weaknesses Gouger Chinese dessert shop as a startup business faces the weakness of lacking brand recognition; thus it may take quite some time before competitors’ customers begin to appreciate our offering and make a switch. The dessert shop may also be disadvantaged by its limited range of product offering i.e. Chinese desserts only. The targeted market is thus narrow, especially because the uptake of the product relies mainly on customers with oriental taste. Opportunities Gouger Chinese dessert shop has the opportunity to create a niche in the new idea of desserts-only restaurant considering the small number of players currently in the market There also exists a chance for making good fortunes especially from Year 2 as the number of consumers embracing the dessert dining increases steadily. Liaising with traditional restaurants to refer their main meal customers to Gouger Chinese dessert shop for a perfect finishing up of the dining experience. Threats The major threat for the proposed Gouger Chinese dessert shop is strong competition from large traditional restaurants offering Chinese desserts along with other meals. Marketing Strategies Marketing mix (Price, Place, Promotion, Product) Product Gouger Chinese Dessert Shop will sell gourmet desserts accompanied with customer service in a highly comfortable atmosphere. The restaurant will offer a variety of dessert-tasting menus that would come with food, wines and teas. The desserts will be prepared to use a variety of ingredients characteristic of East Asian cuisines. These would include such ingredients as whole or powdered glutinous rice, agar, and sweet bean pastes. The shop shall also offer carry-out so that the desserts can be prepared at home or desserts for special occasions. The menu shall include such desserts as steamed egg custard, almond jelly with Mandarin oranges, sugared tomatoes, Chinese mung bean dessert, Chinese steamed apple pears, banana spring rolls, kluay buad chee (bananas in coconut milk), creamy lychee jelly, and creamy green tea jelly. The shop shall incorporate the best in Chinese Australian fair. The culinary masterpieces would also be prepared before the customer’s eyes. Place The dessert shop shall also build on location as a marketing and promotion aspect. The location of business shall be in a high-traffic area with large Chinese population – Adelaide’s Chinatown along Gouger Street. The local authority offers a variety of incentives to food businesses operating there. The decision on placement takes into consideration the target population of the area, the transport system in the proposed restaurant site, traffic that would pass by the dessert shop site, the demographics of the location, and knowledge about customers’ needs and behaviors (Callabaut 2000, p.32). The setting up of a new restaurant business is often costly and thus requires that the placement should be in a business area that would maximize the customer exposure, increasing our chances of generating business (RS&G 2004, p.23). The merits of the place factor are fairly shared with competitors who are located in the area. The location of the new dessert shop is also precise because of the guaranteed ample supplies of ingredients, fresh fruits and vegetables from the nearby Adelaide Central Markets. Our research has established that that Gouger Street on Adelaide’s Chinatown is an excellent choice for location of the new Chinese dessert shop. Price Gouger Chinese Dessert shop understands that good pricing is essential to earning profit as well as encouraging repeat business. We shall employ effective pricing of our products in a way that it would enable anyone to enjoy of dessert offerings at affordable prices relative to competitors. To be truly competitive, our dessert shop offers value menu, entails selected menu items offered at a bargain price of $1.00 or fewer. Emphasis shall be placed on the value on the understanding that best pricing alone cannot sell our products if they do not perceive value in them (Pavesic 2005, p.54). Promotion As a start-up business, Gouger Chinese dessert shop understands that high quality product and services, effective pricing would not pay if they are not well promoted. As such would undertake formal consumer education followed by word-of-mouth. The restaurant shall be positioned as a superior pastry shop offering unique dining experience of oriental gourmet. Communication to the customers will be done through fliers, radio, TV and print advertisement as well as special holiday promotions. Unlike most competition, Gouger Chinese dessert shop targets progressive, well-educated, affluent consumers who are willing to try new products and experiences. Strong appeal will also be made to dinners dissatisfied with the current limited selection as well as lack of personal service characteristics with many store bakeries, ice cream shops, neighborhood cafes and area restaurants. Gouger Chinese dessert shop envisions creating a new niche in the Australian restaurant industry and increase sales in excess of $150,000 over three years. Significant increases in sales are expected to begin in the second year, approximately 50%. Through much focus on the product and service quality, Gouger Chinese dessert shop would strive to establish itself as the destination of choice in terms of desserts in Chinatown Adelaide, and maintain a gross margin of 80 percent by Year 3. More competitive advantage will be sought through catered and take out deserts. Sales Strategy 1. The dessert shop will strive to sell the product as well as the organization, with the ultimate goal being to make Gouger Chinese dessert shop synonymous with great dessert quality and an excellent gathering place for different kinds of consumers. 2. The dessert shop shall also present an intriguing show of the dessert preparation process as well as sell its top notch service team who are highly skilled and friendly. Customers will always feel welcome and at home at Gouger Chinese dessert shop. The Organization a. Legal and Organizational Structure Gouger Chinese dessert shop will be a sole proprietorship business registered under the Ministry of Trade. The manager shall have the final decision on the day to day running of the restaurant. The business shall enlist several suppliers for fresh ingredients and food supplements required for preparation of the desserts. The kitchen department shall be headed by the chief chef while the service department shall be under a manager. b. HRM and Key Personnel In the first and a half year, Gouger Chinese dessert shop will be slow in hiring personnel, but remain loyal to those hired. All employees will be hired on the part-time basis considering that the bulk of the work will be undertaken by the chef-proprietor. The chef and proprietor initially would operate as dessert shop chef, also serve as the store manager and instructor. With the growth of the restaurant over time, new employees will be hired, then trained and supervised by their resident colleagues who would have assumed a leadership position. There will be appropriate reward to the effort of the employees contributing to the success of our dessert shop. The shop shall start with 4 employees and increase to 7 by the end of Year 1, 10 in Year 2 and 12 in Year 3. Only culinary professionals shall be hired to meet the demands of the dessert shop business. The responsibilities of this staff shall be thereafter increased as opposed to hiring more people, and will be instrumental in our expansion process. Personnel Plan   Year 1 Year 2 Year 3 Amount in Dollars Amount in Dollars Amount in Dollars Chef 28700 31600 34800 Baker 3900 4300 6700 Host 4350 4340 4350 Dessert Shop Assistants 7200 7900 8725 Busser 5700 5700 5756 Total People 7 11 13 Total Payroll 49850 53840 60331 c. Key Suppliers It is important to find the right suppliers for any business. Whether one is a start-up of running an existing business the type of suppliers will ultimately determine the success of the business. First, the dessert shop will establish a strategy that will start by listing all know suppliers in the region. This will include suppliers of equipment such as ovens to deep frying tools. This list will be as clear and details as possible. Second, once the supplier is identified, the dessert shop will go further and look for the source of the supplier. This can be known from the industry association website. This two prong approach will ensure that the dessert shop will save in terms of it set up cost and later in terms of its long term supply contacts of equipment and food supplies. The Financials ‘Critical Risk’ The risk that may be aptly related to the opening of this restaurant includes: the possibility of inadequate capital, demanding work load, as well as the location of the business. Inadequate Capital- The restaurant is likely to face a challenge in sourcing for adequate funding to run it during its start. This is so since demographics tend to show that many businesses, struggle through out the first phases of operation as they try to gain ground in the market they have venture into and make less profits. Nonetheless, this will be solved by outsourcing for more funds from investors, banks among many others. Demanding workload- The restaurant is likely to also face a risk of experiencing unparallel overtime hours, because of spontaneous increases in the number of customers who visit the restaurant. This may be solved by designing a work schedule that allows worker to work in shifts, hence promoting the business into its new market or outsourcing from family members among many others. Location- Finding an appropriate business location that will ascertain an exponential increase income is likely to poise challenge as well as a risk, especially in finding a place that is appealing to customers. Moreover, there is likely to be stiff competition when and in establishing a place to put up the restaurant near the market. Consequently, this will lead to outsourcing for mentors in the industry who will give good counsel about locating the restaurant among many others. a. Start-up Costs The start-up costs are estimated at $300,000 to cater for construction, store furnishings, kitchen equipment, and starting inventory expenses. The start-up costs still be financed by outside investment. Start-up Funding Start-up Expenses to Fund 281000 Start-up Assets to Fund 19000 Total Funding Required 300000 Assets Non-cash Assets from Start-up 0 Cash Requirements from Start-up 19000 Additional Cash Raised 0 Cash Balance on Starting Date 19000 Total Assets 19000 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 Investor 1 300000 Other 0 Additional Investment Requirement 0 Total Planned Investment 300000 Loss at Start-up (Start-up Expenses) -281000 Total Capital 19000 Total Capital and Liabilities 19000 Total Funding 300000 Sales Forecasts and Break-Even Analysis Our Sales Forecast depicts modest estimates for Year 1. However, aggressive sales increases are expected to follow thereafter, with about 30% and 50% sales increase in Year 2 and Year 3 respectively. In addition, we project a 10% increase in our Weekly Lesson fees for each Year 2 and Year 3 while cost shall remain constant. The dessert shop’s cost of sales is calculated on the average food cost of 20 percent for dine in Chinese desserts and 15 percent for point of purchase items, take-away and weekly lessons. A consistent food cost percentage is expected for the subsequent two years as the business shall be keen on maintaining low food costs and sales increase for profitability. The sales forecast shown in the illustrations below: Sales Forecast   Year 1 Year 2 Year 3 Dessert Sales $144 000,00 $216 000,00 $280 800,00 POP Sales $2 650,00 $3 445,00 $5 167,00 Carry Out $5 100,00 $6 240,00 $9 360,00 Weekly Lessons $14 400,00 $15 840,00 $17 424,00 Total Sales $166 150,00 $166 150,00 $166 150,00 Direct Cost of Sales Year 1 Year 2 Year 3 Dessert Sales $28 800,00 $43 200,00 $56 160,00 POP Sales $398,00 $936,00 $775,00 Carry Out $765,00 $936,00 $1 404,00 Weekly Lessons $2 160,00 $2 160,00 $2 160,00 Subtotal Direct Cost of Sales $32 123,00 $47 232,00 $60 499,00 Break-Even Analysis According to our break-even analysis, assumptions are made about running costs (.e. payroll, rent, utilities, and miscellaneous. It is difficult to make assume margins that are far in the future. Cash Flow Forecasts As a quick-service business, the dessert shop’s cash flow relies on sales assumptions. Food cost must be kept low in addition to striking balance between slow (non-holiday) months and busy months. Pro Forma Cash Flow   Year 1 Year 2 Year 3 Cash Received       Cash from Operations       Sales $166 150,00 $241 525,00 $312 751,00 Subtotal Cash from Operations $166 150,00 $241 525,00 $312 751,00 Additional Cash Received       Sales Tax, VAT, HST/GST Received $0,00 $0,00 $0,00 New Current Borrowing $0,00 $0,00 $0,00 New Other Liabilities (interest-free) $0,00 $0,00 $0,00 New Long-term Liabilities $0,00 $0,00 $0,00 Sales of Other Current Assets $0,00 $0,00 $0,00 Sales of Long-term Assets $0,00 $0,00 $0,00 New Investment Received $0,00 $0,00 $0,00 Subtotal Cash Received $166 150,00 $241 525,00 $312 751,00 Expenditures Year 1 Year 2 Year 3 Expenditures from Operations       Cash Spending $50 063,00 $54 019,00 $60 387,00 Bill Payments $104 118,00 $146 159,00 $173 213,00 Subtotal Spent on Operations $154 181,00 $200 178,00 $233 600,00 Additional Cash Spent       Sales Tax, VAT, HST/GST Paid Out $0,00 $0,00 $0,00 Principal Repayment of Current Borrowing $0,00 $0,00 $0,00 Other Liabilities Principal Repayment $0,00 $0,00 $0,00 Long-term Liabilities Principal Repayment $0,00 $0,00 $0,00 Purchase Other Current Assets $0,00 $0,00 $0,00 Purchase Long-term Assets $0,00 $0,00 $0,00 Dividends $0,00 $0,00 $0,00 Subtotal Cash Spent $154 181,00 $200 178,00 $233 600,00 Net Cash Flow $11 969,00 $41 347,00 $79 151,00 Cash Balance $30 969,00 $72 316,00 $151 467,00 Pro Forma Profit and Loss   Year 1 Year 2 Year 3 Sales $166 150,00 $241 525,00 $312 751,00 Direct Cost of Sales $32 132,00 $47 232,00 $60 499,00 Other Production Expenses $0,00 $0,00 $0,00 Total Cost of Sales $32 132,00 $47 232,00 $60 499,00 Gross Margin $134 018,00 $194 293,00 $252 252,00 Gross Margin % 80,66% 80,44% 80,66% Expenses       Payroll $50 063,00 $54 019,00 $60 387,00 Sales and Marketing and Other Expenses $2 300,00 $2 500,00 $2 500,00 Depreciation $0,00 $0,00 $0,00 Leased Equipment $0,00 $0,00 $0,00 Utilities $6 000,00 $6 000,00 $6 000,00 Insurance $2 400,00 $2 400,00 $2 400,00 Rent $60 000,00 $60 000,00 $60 000,00 Payroll Taxes $7 509,00 $8 103,00 $9 058,00 Other $0,00 $0,00 $0,00 Total Operating Expenses $128 272,00 $133 022,00 $140 345,00 Profit Before Interest and Taxes $5 746,00 $61 271,00 $111 907,00 EBITDA $5 746,00 $61 271,00 $111 907,00 Interest Expense $0,00 $0,00 $0,00 Taxes Incurred $1 723,80 $18 381,30 $33 572,10 Net Profit $4 022,20 $42 889,70 $78 334,90 Net Profit/Sales 2,42% 17,76% 25,05% Balance Sheet The projected balance sheet for our proposed Chinese dessert shop is relatively solid. Achievement of the objectives should enable us meet our debt obligations. While the projections may be somewhat aggressive, it is believed the location factor and dessert shop concept itself would result in success. The calculations do not include assets of depressions, and decisions on whether to get new or used kitchen equipment will be indicate the figures later. Pro Forma Balance Sheet   Year 1 Year 2 Year 3 Assets       Current Assets       Cash $30 969,00 $72 316,00 $151 467,00 Inventory $3 834,00 $5 637,00 $7 220,00 Other Current Assets $0,00 $0,00 $0,00 Total Current Assets $34 803,00 $77 953,00 $158 687,00 Long-term Assets       Long-term Assets $0,00 $0,00 $0,00 Accumulated Depreciation $0,00 $0,00 $0,00 Total Long-term Assets $0,00 $0,00 $0,00 Total Assets $34 803,00 $77 953,00 $158 687,00 Liabilities and Capital Year 1 Year 2 Year 3 Current Liabilities       Accounts Payable $11 774,00 $11 774,00 $11 774,00 Current Borrowing $0,00 $0,00 $0,00 Other Current Liabilities $0,00 $0,00 $0,00 Subtotal Current Liabilities $11 774,00 $11 774,00 $11 774,00 Long-term Liabilities $0,00 $0,00 $0,00 Total Liabilities $11 774,00 $11 774,00 $11 774,00 Paid-in Capital $300 000,00 $300 000,00 $300 000,00 Retained Earnings -$281 000,00 -$276 971,00 -$234,08 Earnings $4 029,00 $42 890,00 $78 335,00 Total Capital -$276 971,00 $65 918,00 $144 253,00 Total Liabilities and Capital $34 802,00 $77 953,00 $158 687,00 Net Worth $23 029,00 $65 918,00 $144 253,00 Pro Forma Balance Sheet   Year 1 Year 2 Year 3 Assets Ratio Analysis   Year 1 Year 2 Year 3 Sales Growth 0.00% 45.37% 29.50% Percent of Total Assets       Inventory 11.04% 7.20% 4.50% Other Current Assets 0.00% 0.00% 0.00% Total Current Assets 100.00% 100.00% 100.00% Long-term Assets 0.00% 0.00% 0.00% Total Assets 100.00% 100.00% 100.00% Current Liabilities 33.84% 15.47% 9.00% Long-term Liabilities 0.00% 0.00% 0.00% Total Liabilities 33.89% 15.40% 9.15% Net Worth 66.00% 84.50% 90.98% Percent of Sales       Sales 100.00% 100.00% 100.00% Gross Margin 80,14% 81,27% 80,70% Selling, General & Administrative Expenses 78.23% 62.70% 55.56% Advertising Expenses 1.56% 1.56% 0.90% Profit Before Interest and Taxes 3.86% 25.77% 35.76% Main Ratios       Current 2.98 6.58 10.96 Quick 2.64 6.21 10.59 Total Debt to Total Assets 33.93% 15.34% 9.20% Pre-tax Return on Net Worth 24.98% 92.75% 77.68% Assumptions 1. Slow-growth economy, no major recession 2. No unprecedented changes in technology that would our products instantly obsolete 3. Access to financing and equity capital so as to sustain our financial plan. 4. All values are expressed in dollar terms. As evidenced by this budget plan, Gouger Chinese dessert shop anticipates to hit profitability from the first year of operation. Significant investments will be made in the business and three more shops will be opened by Year 3. Thereafter the restaurant shall seek partnerships with each store, and the staff rewarded for their store’s profitability. References Dessert Story. (2013). The Dessert Story. Retrieved from: http://www.dessertstory.co/about-us/ Gelatissimo. (2013). Dessert Ideas. Retrieved from: http://www.gelatissimo.com.au/dessert-ideas/ Nimemsn. (2013). Cibo Espresso. Retrieved from: http://yourrestaurants.com.au/guide/?action=venue&venue_url=cibo_espresso_406563 Cibo Espresso. (2013). Cibo Espressp. Retrieved from: http://www.ciboespresso.com.au/index.php/cibo/my_cibo Walker, J. R. (2008). The restaurant from concept to operation. Hoboken, N.J., John Wiley & Sons. Callabaut, J., Paelinck, C., & Lam, D. (2000). Understanding the Chinese Consumers: A new way of approaching marketing in chinese culture. Belgium, Garant. Pavesic, Dave. (2005). "A Sweet Deal: How to Market and Merchandize Desserts to Boost Startup Sales and Profits." Hospitality Faculty Publications. Paper 2. RS&G. (2004). Restaurant startup & growth. Parkville, Mo, RS & G. Appendices Personnel Plan   Year 1 Year 2 Year 3 Amount in Dollars Amount in Dollars Amount in Dollars Chef 28700 31600 34800 Baker 3900 4300 6700 Host 4350 4340 4350 Dessert Shop Assistants 7200 7900 8725 Busser 5700 5700 5756 Total People 7 11 13 Total Payroll 49850 53840 60331 Start-up Funding Start-up Expenses to Fund 281000 Start-up Assets to Fund 19000 Total Funding Required 300000 Assets Non-cash Assets from Start-up 0 Cash Requirements from Start-up 19000 Additional Cash Raised 0 Cash Balance on Starting Date 19000 Total Assets 19000 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 Investor 1 300000 Other 0 Additional Investment Requirement 0 Total Planned Investment 300000 Loss at Start-up (Start-up Expenses) -281000 Total Capital 19000 Total Capital and Liabilities 19000 Total Funding 300000 Sales Forecast   Year 1 Year 2 Year 3 Dessert Sales $144 000,00 $216 000,00 $280 800,00 POP Sales $2 650,00 $3 445,00 $5 167,00 Carry Out $5 100,00 $6 240,00 $9 360,00 Weekly Lessons $14 400,00 $15 840,00 $17 424,00 Total Sales $166 150,00 $166 150,00 $166 150,00 Direct Cost of Sales Year 1 Year 2 Year 3 Dessert Sales $28 800,00 $43 200,00 $56 160,00 POP Sales $398,00 $936,00 $775,00 Carry Out $765,00 $936,00 $1 404,00 Weekly Lessons $2 160,00 $2 160,00 $2 160,00 Subtotal Direct Cost of Sales $32 123,00 $47 232,00 $60 499,00 Pro Forma Cash Flow   Year 1 Year 2 Year 3 Cash Received       Cash from Operations       Sales $166 150,00 $241 525,00 $312 751,00 Subtotal Cash from Operations $166 150,00 $241 525,00 $312 751,00 Additional Cash Received       Sales Tax, VAT, HST/GST Received $0,00 $0,00 $0,00 New Current Borrowing $0,00 $0,00 $0,00 New Other Liabilities (interest-free) $0,00 $0,00 $0,00 New Long-term Liabilities $0,00 $0,00 $0,00 Sales of Other Current Assets $0,00 $0,00 $0,00 Sales of Long-term Assets $0,00 $0,00 $0,00 New Investment Received $0,00 $0,00 $0,00 Subtotal Cash Received $166 150,00 $241 525,00 $312 751,00 Expenditures Year 1 Year 2 Year 3 Expenditures from Operations       Cash Spending $50 063,00 $54 019,00 $60 387,00 Bill Payments $104 118,00 $146 159,00 $173 213,00 Subtotal Spent on Operations $154 181,00 $200 178,00 $233 600,00 Additional Cash Spent       Sales Tax, VAT, HST/GST Paid Out $0,00 $0,00 $0,00 Principal Repayment of Current Borrowing $0,00 $0,00 $0,00 Other Liabilities Principal Repayment $0,00 $0,00 $0,00 Long-term Liabilities Principal Repayment $0,00 $0,00 $0,00 Purchase Other Current Assets $0,00 $0,00 $0,00 Purchase Long-term Assets $0,00 $0,00 $0,00 Dividends $0,00 $0,00 $0,00 Subtotal Cash Spent $154 181,00 $200 178,00 $233 600,00 Net Cash Flow $11 969,00 $41 347,00 $79 151,00 Cash Balance $30 969,00 $72 316,00 $151 467,00 Pro Forma Profit and Loss   Year 1 Year 2 Year 3 Sales $166 150,00 $241 525,00 $312 751,00 Direct Cost of Sales $32 132,00 $47 232,00 $60 499,00 Other Production Expenses $0,00 $0,00 $0,00 Total Cost of Sales $32 132,00 $47 232,00 $60 499,00 Gross Margin $134 018,00 $194 293,00 $252 252,00 Gross Margin % 80,66% 80,44% 80,66% Expenses       Payroll $50 063,00 $54 019,00 $60 387,00 Sales and Marketing and Other Expenses $2 300,00 $2 500,00 $2 500,00 Depreciation $0,00 $0,00 $0,00 Leased Equipment $0,00 $0,00 $0,00 Utilities $6 000,00 $6 000,00 $6 000,00 Insurance $2 400,00 $2 400,00 $2 400,00 Rent $60 000,00 $60 000,00 $60 000,00 Payroll Taxes $7 509,00 $8 103,00 $9 058,00 Other $0,00 $0,00 $0,00 Total Operating Expenses $128 272,00 $133 022,00 $140 345,00 Profit Before Interest and Taxes $5 746,00 $61 271,00 $111 907,00 EBITDA $5 746,00 $61 271,00 $111 907,00 Interest Expense $0,00 $0,00 $0,00 Taxes Incurred $1 723,80 $18 381,30 $33 572,10 Net Profit $4 022,20 $42 889,70 $78 334,90 Net Profit/Sales 2,42% 17,76% 25,05% Pro Forma Balance Sheet   Year 1 Year 2 Year 3 Assets       Current Assets       Cash $30 969,00 $72 316,00 $151 467,00 Inventory $3 834,00 $5 637,00 $7 220,00 Other Current Assets $0,00 $0,00 $0,00 Total Current Assets $34 803,00 $77 953,00 $158 687,00 Long-term Assets       Long-term Assets $0,00 $0,00 $0,00 Accumulated Depreciation $0,00 $0,00 $0,00 Total Long-term Assets $0,00 $0,00 $0,00 Total Assets $34 803,00 $77 953,00 $158 687,00 Liabilities and Capital Year 1 Year 2 Year 3 Current Liabilities       Accounts Payable $11 774,00 $11 774,00 $11 774,00 Current Borrowing $0,00 $0,00 $0,00 Other Current Liabilities $0,00 $0,00 $0,00 Subtotal Current Liabilities $11 774,00 $11 774,00 $11 774,00 Long-term Liabilities $0,00 $0,00 $0,00 Total Liabilities $11 774,00 $11 774,00 $11 774,00 Paid-in Capital $300 000,00 $300 000,00 $300 000,00 Retained Earnings -$281 000,00 -$276 971,00 -$234,08 Earnings $4 029,00 $42 890,00 $78 335,00 Total Capital -$276 971,00 $65 918,00 $144 253,00 Total Liabilities and Capital $34 802,00 $77 953,00 $158 687,00 Net Worth $23 029,00 $65 918,00 $144 253,00 Pro Forma Balance Sheet   Year 1 Year 2 Year 3 Assets Ratio Analysis   Year 1 Year 2 Year 3 Sales Growth 0.00% 45.37% 29.50% Percent of Total Assets       Inventory 11.04% 7.20% 4.50% Other Current Assets 0.00% 0.00% 0.00% Total Current Assets 100.00% 100.00% 100.00% Long-term Assets 0.00% 0.00% 0.00% Total Assets 100.00% 100.00% 100.00% Current Liabilities 33.84% 15.47% 9.00% Long-term Liabilities 0.00% 0.00% 0.00% Total Liabilities 33.89% 15.40% 9.15% Net Worth 66.00% 84.50% 90.98% Percent of Sales       Sales 100.00% 100.00% 100.00% Gross Margin 80,14% 81,27% 80,70% Selling, General & Administrative Expenses 78.23% 62.70% 55.56% Advertising Expenses 1.56% 1.56% 0.90% Profit Before Interest and Taxes 3.86% 25.77% 35.76% Main Ratios       Current 2.98 6.58 10.96 Quick 2.64 6.21 10.59 Total Debt to Total Assets 33.93% 15.34% 9.20% Pre-tax Return on Net Worth 24.98% 92.75% 77.68% Read More