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Pre-Feasibility Study

(Catering and Decorating)

Small and Medium Enterprises Development Authority


Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7

helpdesk@smeda.org.pk
REGIONAL OFFICE
Punjab

REGIONAL OFFICE
Sindh

REGIONAL OFFICE
Khyber Pakhtunkhwa

REGIONAL OFFICE
Balochistan

3rd Floor, Building No. 3,


Aiwan-e-Iqbal Complex,
Egerton Road Lahore,
Tel: (042) 111-111-456
Fax: (042) 36304926-7
helpdesk.punjab@smeda.org.pk

5th Floor, Bahria


Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 35610572
helpdesk-khi@smeda.org.pk

Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 111-111-456
Fax: (091) 5286908
helpdesk-pew@smeda.org.pk

Bungalow No. 15-A


Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 2831623, 2831702
Fax: (081) 2831922
helpdesk-qta@smeda.org.pk

Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost
May, 2014

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

Table of Contents
1. DISCLAIMER......................................................................................................................... 2
2. PURPOSE OF THE DOCUMENT ......................................................................................... 3
3. INTRODUCTION TO SMEDA ............................................................................................. 3
4. INTRODUCTION TO SCHEME ........................................................................................... 4
5. EXECUTIVE SUMMARY ..................................................................................................... 4
6. BRIEF DESCRIPTION OF PROJECT................................................................................... 4
7. CRITICAL FACTORS............................................................................................................ 5
8. INSTALLED AND OPERATIONAL CAPACITIES ............................................................ 5
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT........................................................ 6
10. POTENTIAL TARGET MARKETS ...................................................................................... 6
11. PROCESS FLOW ................................................................................................................... 6
12. PROJECT COST SUMMARY ............................................................................................... 6
12.1
Project Economics ......................................................................................................7
12.2
Project Financing ........................................................................................................7
12.3
Project Cost .................................................................................................................7
12.4
Space Requirement ....................................................................................................8
12.5
Machinery and Equipment .........................................................................................8
12.6
Human Resource Requirement ................................................................................9
12.7
Revenue Generation ..................................................................................................9
12.8
Other Costs ..................................................................................................................9
13. CONTACTS - SUPPLIERS .................................................................................................. 10
14. ANNEXURES ....................................................................................................................... 11
14.1
Annexure 1 Income Statement ............................................................................11
14.2
Annexure 2 Balance Sheet ..................................................................................12
14.3
Annexure 3 Cash Flow Statement ......................................................................13
14.4
Useful Project Management Tips ..........................................................................14
14.5
Useful Links ..............................................................................................................15
15. KEY ASSUMPTIONS .......................................................................................................... 16

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general
idea and information on the subject. Although, the material included in this document is
based on data / information gathered from various reliable sources; however, it is based
upon certain assumptions which may differ from case to case. The information has been
provided on as is where is basis without any warranties or assertions as to the
correctness or soundness thereof. Although, due care and diligence has been exercised
to compile this document, the contained information may vary due to any change in any
of the concerned factors, and the actual results may differ substantially from the
presented information. SMEDA, its employees or agents do not assume any liability for
any financial or other loss resulting from this memorandum in consequence of
undertaking this activity. The contained information does not preclude any further
professional advice. The prospective user of this memorandum is encouraged to carry
out additional diligence and gather any information which is necessary for making an
informed decision, including taking professional advice from a qualified consultant /
technical expert before taking any decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

2. PURPOSE OF THE DOCUMENT


The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the document /
study covers various aspects of project concept development, start-up, production,
marketing, finance and business management.
The purpose of this document is to facilitate potential investors in Catering and
Decorating Services by providing them with a general understanding of the business
with the intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error, and certain industrial norms that become a guiding source regarding
various aspects of business set-up and its successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which shall form the basis of any investment decision.

3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify
policy, access to finance, business development services, strategic initiatives, and
institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment has
been a hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types in addition to business guidance through help desk services.

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

4. INTRODUCTION TO SCHEME
Prime Ministers Youth Business Loan program, for young entrepreneurs, with an
allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide
subsidised financing at 8% mark-up per annum for one hundred thousand (100,000)
beneficiaries, through designated financial institutions, initially by the National Bank of
Pakistan (NBP) and the First Women Bank Ltd. (FWBL).
Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 01
year grace period and a debt: equity of 90:10 will be disbursed to SME beneficiaries
across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit
Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

5. EXECUTIVE SUMMARY
Catering and Decoration Services Business is proposed to be located in a middle
income area in cities like Karachi, Lahore, Rawalpindi, Hyderabad, Faisalabad, Multan
etc.
Services include catering of food & services to events such as weddings, mehndi &
mayun, corporate Events etc and decoration of event site (this service is to be
outsourced).
Capacity: Maximum 100 events per year and initial utilization upto 50%
Total Cost Estimates is Rs. 1.22 million with fixed investment of Rs. 0.92 million and
working capital of Rs. 0.304 million
Given the cost assumptions IRR and payback are 27 % and 3.8 years respectively
The most critical considerations or factors for success of the project are:
1. Procurement of Raw material
2. Location- proximity to marriage halls, business hubs etc
3. Quality Food

6. BRIEF DESCRIPTION OF PROJECT

Location: The recommended area for the proposed catering and decorating
service business is the middle income locality in cities like Karachi, Lahore,
Rawalpindi, Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc. This
business can also be undertaken in all small 2nd tier towns in addition to
suburban towns of large cities.

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

Product: The proposed project will offer high quality food & catering services to
events such as weddings, anniversaries and corporate events etc.

Target Market: Target customer for catering business would be event


management companies, corporate and individual clients, marriage hall & lawns
etc.

Employment Generation: The proposed project will provide direct employment


to 06 people. Financial analysis shows that the business shall be profitable from
the very first year of operation

7. CRITICAL FACTORS

Procurement of raw material


Location - proximity to marriage halls, business hubs etc
Quality of food, with precautionary measures of salient hygienic features
Strict management control
Professionalism and courteous customer service
Skilled Staff / Cooks
Planning & Organizing
Time Management
Contract with suppliers for decoration

8. INSTALLED AND OPERATIONAL CAPACITIES


For the proposed project, it is assumed that on an average 50 events will be catered
during a year with an average of 400 guests per event. The proposed business can also
serve up to 1,000 or more guests per event. Marquee and other decorative arrangement
for big events can be outsourced to multiple decorators.
Table 1: Project Economics

Events
Weddings
Mehndi & Mayun
Anniversaries
Corporate Events
Others
Total

No. of Events in a Year


15
15
5
3
12
50

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

%
30
30
10
07
23
100

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT


The Pakistani economy is becoming increasingly service-oriented and over the past
several decades the food service industry is growing substantially. There has been a
mushroom growth of marriage halls, event management complexes in the past decade
across all major cities and towns therefore there is a potential for proposed catering and
decorative service business to be established in cities like Karachi, Lahore, Rawalpindi,
Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc.

10.

POTENTIAL TARGET MARKETS

The recommended areas for the proposed business will be cities like Karachi, Lahore,
Rawalpindi, Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc. This business
can also be done in all small 2nd tier towns in addition to suburban towns of large cities.
Target customers for the said business would be Corporate and Individual clients, Event
Management Companies, Marriage Halls & Lawns etc.

11.

PROCESS FLOW

For a regular event, following process is to be followed:

12.

Hiring and scheduling of Staff


Ordering and serving arrangements for menu items
Ordering equipment as needed from event rental companies
Obtaining licenses and permits, if needed, for use of the site etc.
Coordinating all ancillary services with the client and the vendors

PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of
Catering & Decoration Service Business under the Prime Ministers Youth Business
Loan program. Various cost and revenue related assumptions along with results of the
analysis are outlined in this section.
The projected Income Statement, Cash Flow Statement and Balance Sheet are
attached as appendix

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

12.1 Project Economics


All the figures in this financial model have been calculated for catering of 50 events in a
year, whereas decoration service for such events will be outsourced in order to control
the capital expenditure at initial stage. Revenue generated in year 1 through such
events is based on given assumptions and calculated to be Rs. 9.6 million.
The following table shows Internal Rate of Return, Net Present Value and Payback
Period.
Table 2: Project Economics
Description
Internal Rate of Return (IRR)
Payback Period (years)
Net Present Value (NPV) Rs.

Details
27%
3.8
3,026,629

Returns and profitability are highly dependent on regular occurrence of events, good
marketing practices, quality of services and more importantly good quality and taste of
food.
12.2 Project Financing
Following table provides details of the equity required and variables related to bank
loan;
Table 3: Project Financing
Description
Total Equity (10%)
Bank Loan (90%.)
Markup to the Borrower (%age/annum)
Tenure of the Loan including Grace Period (Years)
Grace Period (Years)

Details
Rs.122,200
Rs.1,099,800
8%
08
01

12.3 Project Cost


Following requirements have been identified for operations of the proposed business.
Table 4: Capital Investment for the Project

Capital Investment
Construction & Renovation
Machinery & Equipment
Office Equipment & Furniture
Advance Rent (Deposit)
Vehicles
Preliminary Expenses

Amount (Rs.)
135,000
150,000
83,000
150,000
350,000
50,000

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

Total Capital Cost


Initial Working Capital
Total Project Cost

918,000
304,000
1,222,000

12.4 Space Requirement


Space required for Catering & Decoration Services Business is 750 sq. ft. Management
office will require 150 sq. ft. and 600 sq. ft. will be used for storage and cooking. It is
also assumed that preparation of Bar-B-Que items will be prepared on site as and when
required.
Table 5: Space Requirement

Area Required
For Office & Storage
Total Rent

Area
(Sq. ft.)

Monthly Rent
Charges (Rs.)

750

25,000
25,000

Yearly
Rent(Rs.)
300,000
300,000

12.5 Machinery and Equipment


Following table provides list of machinery and equipment required for the proposed
Catering & Decoration Services Business.
Table 6: Machinery and Equipment

Total
Rs.

Description
Burners / Fittings / Others
Daigs / Kadhai / Others
Storage Racks
Deep Freezers
Other Kitchen Utensils
Total

25,000
20,000
15,000
60,000
30,000
150,000

Table 7: Office Equipment & Furniture Costs

Quantity
Computer & UPS
Printer
Tables
Chairs
Sofa Set
Others
Total

Cost
1
1
2
6
1
1

Amount
25,000
10,000
8,000
2,000
10,000
10,000

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

25,000
10,000
16,000
12,000
10,000
10,000
83,000

Pre-Feasibility Study

12.6

Catering and Decorating Services (Rs.1.22 Millions)

Human Resource Requirement


Table 8: Human Resource Requirement

Description

Nos.

Owner
Head Cook
Cook / Karigar
Helper
Driver
Total Staff

01
01
02
01
01
06

Salary per
employee per
month (Rs.)
20,000
18,000
12,000
10,000
10,000

Total monthly
Salary (Rs.)
20,000
18,000
24,000
10,000
10,000
82,000

The table above provides detail of human resources required to run a Catering and
Decoration Services Business. Salaries of all employees are estimated to increase at
10% annually.
12.7 Revenue Generation
The revenues are based on assumption that 50 events/year with an average of 400
guests will be organized. The standard menu will be of two items only.
Table 9: Revenue Generation

Events
Banquet Arrangement (Per Head)
Shamiana / Kanats (Per Head)
Marquee Set up (Per Head)
Stage
Water (Per Head)
Food Standard Menu (Per Head)
Total Sales Revenue per event
Total Sales Revenue in a Year

Nos.
400
400
400
1
16
400

Sales
Price (Rs.)
90
15
90
20,000
250
225

Revenue (Rs.)
36,000
6,000
36,000
20,000
4,000
90,000
192,000
9,600,000

12.8 Other Costs


An essential cost to be borne by the said business is the promotional expense to attract
more clients. Average monthly expenditure in this head is assumed to be 1% of Net
Sales.
Working Capital Requirements: It is estimated that an additional amount of
approximately Rs. 304,000 will be required as cash in hand to meet the initial working
capital requirements during operations. The requirement is based on the rent, utilities
and salaries expenses for at least two months. The following table gives the break up.

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

Table 10 Working Capital Requirement

Utilities
Salaries
Rent
Total

13.

Months
02
02
02

Monthly Charges (Rs.)


90,000
164,000
50,000
304,000

CONTACTS - SUPPLIERS
KITCHEN 'N' RESTAURANT SYSTEMS

102-A, Allama Iqbal Road Butt Lane, Garhi Shahu, Lahore, Punjab, Pakistan
Phone: +92-42-36366590 / 36305989
Fax: +92-42-36305989

KITCHEN CARE

# 103, Golden Plaza F-7, Blue Area, Islamabad, Capital, Pakistan


Phone: +92-51-32875226
Fax: +92-51-32277176

PRESTIGE KITCHENS

Kehkashan Shopping Arcade Block-7, Clifton, Karachi 75600, Sindh, Pakistan


Phone: +92-21-35862978 / 35862839
Fax: +92-21-5871814

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10

Pre-Feasibility Study

14.

Catering and Decorating Services (Rs.1.22 Millions)

ANNEXURES
14.1 Annexure 1 Income Statement

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11

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

14.2 Annexure 2 Balance Sheet

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12

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

14.3 Annexure 3 Cash Flow Statement

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13

Pre-Feasibility Study

14.4

Catering and Decorating Services (Rs.1.22 Millions)

Useful Project Management Tips

Technology

List of Equipment
Burners / Fittings / Others
Daigs / Kadhai / Others
Storage Racks
Deep Freezers
Other Kitchen Utensils

Energy Requirement: Should not be overestimated or installed in excess and


alternate source of energy for critical operations should be arranged in advance.

Equipment Suppliers: Should be asked for training/orientation and after sales


services under a contract with the suppliers.

Quality Assurance Equipment & Standards:


Products/Service
quality
standards need to be defined and a monitoring system for compliance to be
instituted. This will improve credibility.

Marketing

Product Development & Packaging:


Expert's help may be engaged for
product/service and packaging design & development.

Ads & P.O.S. Promotion:


Business promotion and dissemination through
banners and launch events is highly recommended. Brochures from good quality
Decoration Service Providers need to be obtained and kept for further use.

Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never
be allowed to compromise on quality. Price during introductory phase may be lower
and used as a promotional tool. Product cost estimates should be carefully
documented before price setting.

Human Resources
Owner
Head Cook
Cook / Karigar
Helpers
Driver

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

14

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

Adequacy & Competencies:


Skilled and experienced staff should be
considered an investment even to the extent of offering share in business profit.

Performance Based Remuneration:


Attempt to manage human resource
cost should be focused through performance measurement and performance based
compensation.

Training & Skill Development:


Encouraging training and skill of self &
employees through experts and exposure of best practices is route to success.
Least cost options for Training and Skill Development (T&SD) may be linked with
compensation benefits and awards.

14.5 Useful Links

Prime Ministers Office


www.pmo.gov.pk

Small & Medium Enterprises Development Authority (SMEDA)


www.smeda.org.pk

National Bank of Pakistan (NBP)


www.nbp.com.pk

First Women Bank Limited (FWBL)


www.fwbl.com.pk

Government of Pakistan
www.pakistan.gov.pk

Ministry of Industries & Production


www.moip.gov.pk

Ministry of Education, Training & Standards in Higher Education


http://moptt.gov.pk

Government of Punjab
www.punjab.gov.pk

Government of Sindh
www.sindh.gov.pk

Government of Khyber Pakhtoonkhwa


www.khyberpakhtunkhwa.gov.pk

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

15

Pre-Feasibility Study

Catering and Decorating Services (Rs.1.22 Millions)

Government of Balochistan
www.balochistan.gov.pk

Government of Gilgit Baltistan


www.gilgitbaltistan.gov.pk

Government of Azad Jammu Kashmir


www.ajk.gov.pk

Trade Development Authority of Pakistan (TDAP)


www.tdap.gov.pk

Securities & Exchange Commission of Pakistan (SECP)


www.secp.gov.pk

Federation of Pakistan Chambers of Commerce and Industry (FPCCI)


www.fpcci.com.pk

State Bank of Pakistan (SBP)


www.sbp.org.pk

15. KEY ASSUMPTIONS


Description
Debt Equity Ratio
Interest Rate
Loan Tenure (With 01 year grace period)
Sales Price Growth Rate
Depreciation Rate
Weighted Average Cost of Capital
Prepaid Rent Period
Increase in Staff Salaries
Increase in Office expense

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -

90:10
8%
8 Years
10%
10%
9.2%
6 Months
10%
10%

16