You are on page 1of 30

THE INSTITUTE OF FINANCE MANAGEMENT

THE FACULTY OF ACCOUNTING, BANKING & FINANCE

DEPARTMENT OF ACCOUNTING AND FINANCE

DIPLOMA IN ACCOUNTANCY

YEAR II

NAME: ALI NASSOR SALEH

REG. NO: UPA/DAC/17/92916

STREAM: A

BUSINESS PLAN ASSIGNMENT

LECTURER: Ms ASTRIDA LEONARD


Cinnamon's
TABLE OF CONTENTS

1.0 Executive Summary ...................................................................................... 4


1.1 Business Objectives......................................................................................................... 4
1.2 Mission Statement ........................................................................................................... 4
1.3 Keys to Success ............................................................................................................... 4
2.0 Company Summary ...................................................................................... 5
2.1 Ownership ....................................................................................................................... 5
2.2 Start-Up Plan ................................................................................................................... 5
2.3 Location and Facilities .................................................................................................... 5
3.0 Product and Services .................................................................................... 6
3.1 Product and Service Description ..................................................................................... 6
3.2 Competitive Comparison................................................................................................. 6
3.3 Sales Literature ................................................................................................................ 7
3.4 Sourcing and Fulfillment ................................................................................................. 8
3.5 Technology ...................................................................................................................... 8
3.6 Future Services ................................................................................................................ 9
4.0 Market Analysis Summary .......................................................................... 9
4.1 Industry Analysis............................................................................................................. 9
4.2 Market Segments ........................................................................................................... 10
4.2.1 Market Needs ...................................................................................................................................... 10
4.2.2 Market Trends ..................................................................................................................................... 10
4.2.3 Market Growth .................................................................................................................................... 11
4.3 Target Market Segment Strategy................................................................................... 11
4.3.1 Main Competitors ................................................................................................................................ 12
4.4 Positioning ..................................................................................................................... 12
5.0 Marketing Strategy and Implementation ................................................. 12
5.1 Strategy Pyramid ........................................................................................................... 12
5.2 Value Proposition .......................................................................................................... 13
5.3 Competitive Edge .......................................................................................................... 13
5.4 Marketing Strategy ........................................................................................................ 13
5.4.1 Positioning Statement .......................................................................................................................... 13
5.4.2 Pricing Strategy ................................................................................................................................... 13
5.4.3 Promotion Strategy .............................................................................................................................. 14
5.4.4 Distribution Pattern ............................................................................................................................. 14
5.4.5 Marketing Programs ............................................................................................................................ 14
5.5 Sales Strategy ................................................................................................................ 14
5.5.1 Sales Forecast ...................................................................................................................................... 14
5.5.2 Sales Programs .................................................................................................................................... 15
5.6 Milestones ..................................................................................................................... 15
6.0 Management Summary ..............................................................................16
6.1 Organizational Structure ............................................................................................... 17
6.2 Management Team ........................................................................................................ 17
6.3 Management Team Gaps ............................................................................................... 17
6.4 Personnel Plan ............................................................................................................... 17
7.0 Financial Plan .............................................................................................. 18
7.1 Important Assumptions ................................................................................................. 18
7.2 Start-Up Costs ............................................................................................................... 18
7.3 Source and Use of Funds ............................................................................................... 19

2
7.4 Break-Even Analysis......................................................................................................21
7.5 Projected Profit and Loss...............................................................................................22
7.6 Projected Cash Flow...................................................................................................... 23
7.7 Projected Balance Sheet.................................................................................................24
7.8 Business Ratios.............................................................................................................. 25
8.0 References....................................................................................................26

3
1.0 Executive Summary

Cinnamon’s Grill is a new eating establishment that will provide moderate entrees. Will be
a moderately priced 60 seat restaurant offering family style varieties of food and service.
We will offer wide range of delicious authentic Indian grilled cuisine. Our menu perfectly
combines the ancient traditions and authentic flavors of India and fuses it with a
contemporary ethnic edge as well as our signature lamp chops. The restaurant will be
family owned and operated by brothers Ahmed and Sameer. Together they have over 10
year’s collective years’ experience in the restaurant and catering industry.

Sales projections assume 1700 customers per week resulting in weekly sales of just over
300,000 Tshs or 750,000 Tshs annually. This equates to around 6,000,000 Tshs per square
foot in sales annually which positions Cinnamon’s Grill as a highly desirable concept for
ownership in a table service market where 4,000,000 Tshs to 6,500,000 Tshs per square foot
is considered moderately profitable and therefore a good investment. Total startup costs will
be 6,000,000 Tshs and 2,000,000 Tshs of which will be contributed by the owners and the
remainder will be secured by a proposed bank loan.

1.1 Business Objectives


Main objectives of the business plan for Restaurant are below:
▪ To be the premier Indian grill restaurant in Dar es Salaam.
▪ To provide quality meals at reasonable prices with exemplary service

1.2 Mission Statement


Provide with a unique combination of Indian tandoor/grilled food and relaxing dining
experience accompanied by soft number of Indian instrument music – similar to dining
at home. Our mission is to strive to achieve this goal by:
▪ by providing menu items incorporating quality ingredients at reasonable prices,
and
▪ We will be mindful of the well-being of our customers and staff– treating each and
every one with dignity and respect – just like we would at our own home!

1.3 Keys to Success


▪ The restaurant’s unique theme and contemporary – there currently is not a
competitor with a similar theme and the closest competitor with a similar target
demographic is 20 km away.
▪ Product quality - Not only great food but great service.
▪ Location. - Convenience is essential to us; we need to be close to our market because
we are not trying to get people to travel to reach us.

4
2.0 Company Summary
Cinnamon’s Grill will be located at Magomeni Usalama, Dar es salaam. The restaurant will
be wholly owned and operated by Ahmed and Sameer. The restaurant will serve a variety
of delicious authentic Indian grilled cuisine and grilled meat includes a long list of all kinds
of meat including chicken wings, lamb, chop, octopus, sausages, salmon, and many more.
The restaurant will be open 6 days a week with hours as follows:

Monday 11:00 am – 11.30 pm


Tuesday 11:00 am – 11.30 pm
Wednesday 11:00 am – 11.30 pm
Thursday 11:00 am – 11.30 pm
Friday Rest Day
Saturday 11:00 am – Midnight
Sunday 11:00 am – 11.30 pm

2.1 Ownership
Will be jointly owned by Ali and Ahmed. Ahmed began his restaurant career at the age
of 15 working in a quick-service food service operation and earned his way at college
as a server and bartender. After earning his degree, he worked for a regional Grill chain
restaurant and an independent fine dining restaurant. In these organizations he held the
positions of F&B Assistant Manager and then Manager.

With the high turnover of help for startup restaurants, we will rely on family to fill in
where required until we are off the ground and making a profit.

2.2 Start-Up Plan


The cost to open the restaurant is Tshs6,000,000. The majority of the expenses are in
furniture fixtures and equipment totally Tsh1,500,000. The location requires some
build-out and renovation totally Tshs750,000 and will require approximately 30 days to
complete. The brothers will sub-contract the work themselves.

Tshs4,000,000 of the start-up costs will be funded by the owners. The owner’s source
of funds is a combination of liquid assets and marketable securities, primarily from
their existing catering business.
2.3 Location and Facilities
The 2,500 square foot restaurant will be located in Magomeni Usalama and the
restaurant will feature a comfortable and open concept design. The restaurant is located
in a major traffic area, at the intersection of Kawawa road and Morogoro road
highway. The market has been carefully selected and tested for the necessary
demographics and retail traffic necessary to meet the goals laid down for profitability.
The busy Midtown commercial/residential location has been chosen based upon a
successful demographic model and a traffic count

5
Magomeni area has a population of over 49,000 according to projection census of
2017. The residential population in the immediate area is comprised of a mixture of
single family and multi-family housing. The medium household income is
Tshs500,000. The target demographic is both men and women between the ages of 25
to 65 years old. Generally, these individuals have more disposable income than
younger individuals

Figure 2.3 Demographic Chart of Magomeni Area


Source: Department of Statistics, Tanzania

3.0 Product and Services


Cinnamon’s Grill will feature authentic Indian dishes, an eclectic ambiance, and superior
service. Our ingredients and spices will be of the finest quality and prepared with exotic flare.
We will change our menu every 4 months, but maintain the 'favorites' for loyal patrons.
3.1 Product and Service Description
Cinnamon’s Grill will be open 6 days a week for lunch and dinner requiring multiple
shifts. The schedules will be written in a manner that will allow the ability to increase
or decrease hourly labor according to sales volume in order to maintain a consistent
labor cost control.

The restaurant layout, including the dining room, kitchen and serving line, has been
designed for efficiency and flexibility to accommodate the fluctuation in customer
traffic and peak meal periods.

3.2 Competitive Comparison


The Tanzanian food and beverage retail market are expected to grow by around 6
percent per annum. As such each and very restaurant is competing to grab the market
revenue
Local competitors within a 5 miles radius are as follows.

6
▪ D’Tandoor - This is a full-service family restaurant established in Prices seemed a
little higher than Cinnamon’s Grill but the meal serving was excessive and equal to
the price point and range from Tshs6,000.00 - Tshs 10,000 per entry.
▪ Mambooz - this is a chain restaurant offering standard fare. The food quality is
average. Entrées range from Tshs5,000 - Tshs12,000
▪ Overall both competitors don’t have any signature grill menu nor a grill concept
restaurant.

3.3 Sales Literature


For an initial start, we will print flyers focusing on our menu, sales promotion. This
primarily will be an advertisement of the restaurant. The flyer will be distributed as per
following.
▪ Give a way in-restaurant
▪ Personally, hand out at shopping malls
▪ Social media fan page and sharing as this medium plays a very prime role in
promoting the restaurant.

Following are samples of flyers.

Figure 3.3.1 (i) front page 1

7
Figure 3.3.1 (ii) back page 2

3.4 Sourcing and Fulfillment


From years of experience combined with their existing catering business, Ahmed and
Sameer have established relationships with qualified suppliers. These suppliers can
provide reasonably priced products, delivered according to the schedule.

3.5 Technology
With an ample of technology, computerized information systems can improve and link
food preparation and serving operations. Touch screen ordering programs ensure
accurate communication of customer orders. Timing systems monitor meal progress
and can alert staff if an order is running behind schedule. Reservations programs
maximize traffic flow and seating. Inventory management systems track supply levels
and can help reduce waste due to spoilage. Cost accounting programs help companies
determine the profitability of individual menu items. Handheld point-of-sale (POS)
devices allow servers to place orders and print checks tableside, improving accuracy
and reducing ordering time. Some handhelds can also print customer checks and
process credit card payments.

8
3.6 Future Services
Cinnamon’s Grill has future plans to provide catering services for family reunions,
weddings and other events desiring an authentic grill menu. This could potentially
become a large portion of gross sales are targeting Year 2 and at that point, a sales
agent would be hired to directly market the products for daily delivery or catered
functions.

4.0 Market Analysis Summary


The restaurant industry is a large and diverse business. Young adults have the potential of
providing large volume sales to the company during the peak hours of 1p.m. to 9 p.m. The
lunch business is driven by individuals. People who working around nearest Usalama
Business Park, Magomeni area will be looking for walk-in good food and convenience for
lunch. Apart from working people.

4.1 Industry Analysis


▪ Reasonable Prices for concept restaurant
▪ The Dining Experience
▪ Quick, healthy, authentic,
▪ An appetite for change
▪ Food away from home trend while outside eg. Office, leisure, college, family function

The restaurant industry is highly competitive, companies may consider population


density, household income, competition, visibility, accessibility, and traffic.

9
4.2 Market Segments
Cinnamon’s Grill will appeal to a consumer in both the residential and business
community. The location selected for Cinnamon’s Grill was chosen primarily to appeal
to the growing number of households in the area.

Dar es Salaam is located in mainland of Tanzania, it has population of 4,300,000


according to the 2017 Census Report of World Population Review of 2017. The
residential population in the immediate area is comprised of a mixture age group.

Figure 4.2 Population Chart of Dar es Salaam as per age group


Source: World Population Review

4.2.1 Market Needs


Growing preferences for healthier food options, concerns over environmental
sustainability, increased competition from this industry, heightened consumer
expectations, rapidly advancing technology are reinventing the traditional dining
experience and forcing change on how the industry operates.
Food away from home" trends
Demographic trends

4.2.2 Market Trends


▪ Generation has changed and impacted the entire span of the whole consumer
mind-set, regardless of demographic. They are constantly connected and have
high expectations regarding quality, sustainability, convenience, quick, healthy,
authentic, and reviewed or suggested.
▪ Inclination towards global cuisines - preferences for global/ethnic cuisines is
prompting restaurants to diversify their businesses.

10
▪ Preferences for healthier food options - are inclined to consume healthier and less
processed foods.
▪ Modification of menu - focusing on specialized menu to enhance quality standards,
speed, and service.
▪ Increase in food service
▪ Sustainable seafood
▪ Technological advancements - adopting new technologies for ordering, payment, and
loyalty programs to offer convenient.
▪ Generation Z –strategy to attract on high-tech service, louder music, high-speed

4.2.3 Market Growth


▪ Restaurants industry are looking for growth through increased market
penetration, innovative product development, new markets, diversified
businesses, and new business models. According to Department of Statistic
Tanzania in 2017, entrepreneur engaged in food and beverage services was
40,516 persons in 2015 compared to 35,743 persons in 2010 with annual
growth of 4.7 percent. This service recorded a total of 569,632 persons as paid
full-time employees with percentage share of 63.9 per cent in 2010 with annual
growth rate of 14.4 percent. The census results showed that there were 167,490
establishments operated in food and beverage services compared to 130,570
establishments in 2010 with annual growth rate of 5.1 percent.

Figure 4.3.3 Economy Chart on Restaurant Market Growth (Census 2016)


Source: Department of Statistics, Tanzania

4.3 Target Market Segment Strategy

Cinnamon’s Grill will provide locals a place to socialize and talk shop while enjoying
grilled cuisine and hearty food.

11
4.3.1 Main Competitors
The following restaurants are located within a 5 miles radius of Cinnamon’s Grill.

▪ D’Tandoor - This is a full-service family restaurant Prices are higher than


Cinnamon’s Grill and range from Tshs6,000-Tshs12,000 per entry.
▪ Mambooz - this is a chain restaurant offering standard fare. The food quality is
average. Entrées range from Tshs5,000 -Tshs10,000.

4.4 Positioning
Consumers believe that meals at home are healthier and higher quality than eating at
restaurants. At Cinnamon’s Grill we will position ourselves as the premier home-style
restaurant by preparing quality home cooked meals with simple wholesome ingredients.
Ahmed and Sameer will also provide home cooked fare that appeals to the current trends of
healthier food and offer menu selections which will appeal to this group. Cinnamon’s grill
will be positioned as the premier traditional home-style restaurant.

5.0 Marketing Strategy and Implementation


Cinnamon’s Grill intend to succeed by giving people a combination of excellent and food in an
environment. We will focus on establishing a strong identity in our community with a grand
opening by creating an appealing and entertaining environment with unbeatable quality at an
exceptional price. We will place the catering and lunch service flyers strategically on and near
the industrial are and university campus, park events, with local businesses.

5.1 Strategy Pyramid

Strategy: Be Dar es Salaam premier Grill Restaurant in Customer Satisfaction.

Tactics: First create awareness-- our signage on the front of restaurant will bring
customers to us and once inside, we will immediately acknowledge the
customer with and most sincere greeting and begin the service process
anticipating repeat customers.

Programs: Provide employee training on customer service and retention; offer


ongoing training programs for employees keeping them current on
industry trends and food safety. Keep track of Cinnamon’s Grill reviews
and offer employees incentives attracting and retailing customers. Employ
the use of surveys both at the table and online.

12
5.2 Value Proposition
Cinnamon’s Grill will be able to offer signature grill menus for a reasonable price in a
comfortable ‘home-like’ setting. The average check price is expected to be between
Tshs4,000-Tshs9,000 which appears in line with industry standards below Tshs12,000
this to hit the customers. As this is a new concept restaurant, to attract the customers we
will;
▪ Market the benefit, not the product.
▪ Ensure customer satisfaction.
▪ Develop long relationships.
▪ Market the company.

5.3 Competitive Edge


Cinnamon’s Grill competitive edge is in its people. We truly believe business is not
only as good as your products (meals) but the quality of your staff as well. Our food
quality is a reflection of us. The magic grill!
5.4 Marketing Strategy
We will create an "identity" oriented marketing strategy with executions particularly in
social media, mouth to mouth and event marketing strategies. We will utilize a marketing
plan to build customer traffic. We will achieve these goals by using the following:

• Social Media Marketing – Facebook, WhatsApp and Twitter offer a unique


opportunity growing up quickly.
• Word of Mouth Marketing- Word of Mouth is one of the ancient ways people
learned about what to purchase
• Event Marketing - Creating events is a great way to drive sales. Customers
often need a reason to celebrate dining out and events can often offer the
perfect reason e.g. Valentine’s Day, Mother’s Day, Deepavali, Xmas.

5.4.1 Positioning Statement


Cinnamon’s Grill is a finest place in town to enhance your dining experience wide
range of delicious grill cuisine represents splendor, beauty, and elegance in every
dish. The only magic grill provides sumptuous feast menu that bursts with flavor.

5.4.2 Pricing Strategy


As a new start-up we can currently control employee cost by hiring family members
who will work for low and reduced wages.

13
5.4.3 Promotion Strategy
▪ Location- The restaurant will be located in a strip center at the busy
intersection of Kawawa road. With easy access from and to Morogoro road
and located on the “going home side” of the intersection. We will have
Signage on Morogoro road as well as signage over our entrance.
▪ Word of Mouth – We already have a database of existing catering customers
and will rely heavily on this method to attract and grow new business.
▪ Event Marketing -We plan on joining our local networking for our grand
opening
▪ Social Media – We will share with as much as friends on Facebook, Twitter,
WhatsApp

5.4.4 Distribution Pattern


Varieties of grill and Indian cuisine menus will be available at Cinnamon’s Grille only
location at, Magomeni, Usalama. Customers will have ample parking at Lowe ground car
park which per entry is Tshs500 only. Cinnamon’s Grill will use their website as an
advertising medium, offering coupons, information, and upcoming specials.
5.4.5 Marketing Programs
▪ Our initial marketing campaign will consist of contacting our databases clients
and notifying them of our grand opening.
▪ Loyalty and Birthday Club members will have notified of upcoming special
menu items and to alert them of our catering service.
5.5 Sales Strategy
Our sales strategy requires consistently high-quality food, service, speed and
atmosphere. We can accomplish this by hiring employees who genuinely enjoy their
jobs. Continually assessing the quality of all aspects mentioned above. Interacting with
our customers personally

5.5.1 Sales Forecast


We are expecting a conservative 5% increase in sales revenues annually over the
next 3 years. The growth is adjusted for inflation. With the addition of catering
revenues, sales will increase by 12.93% in Year 2 and 6.02% in Year 3.

14
The following table shows expected Sales Forecast for the next 3 years:

Table 5.5.1 Annual Sales Forecast

Annual Sales Forecast 2020 2021 2022


Sales TSHS TSHS TSHS
Food and Beverage
4,528,422.00 7,079,843.00 10,133,835.00
Revenues
Additional Revenues 0.00 81,600.00 102,000.00
Total Sales 4,528,422.00 7,161,443.00 10,235,835.00
Controllable Costs
COGS 402,113.00 414,176.00 426,602.00
Payroll 669,987.00 823,057.00 1,040,027.00
Total Prime Cost 1,072,100.00 1,237,234.00 1,466,628.00
Subtotal Direct Cost of
756,322.00 924,209.00 1,069,207.00
Sales

Sales Forecast
1,400,000.00
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00

2020 2021 2022

5.5.1 Bar Chart Sales Forecast

5.5.2 Sales Programs


We will encourage our employees to grow our customer base and provide
incentives and regular bonuses to employees for referrals and repeat customers.
These initiatives are still in the planning stages as we gear up to hire and staff. They
will play an active role in our employee culture.

5.6 Milestones
Our initial milestones are as follows:

15
Table 5.6 Milestones

Milestone Date
Sign Lease 2/1/2020
Complete Interior Decor 3/1/2020
Complete Kitchen / Wait Station Needs 3/1/2020
Hire Back Staff 3/1/2020
Hire Front Staff 3/1/2020
Secure a Point of Sale System 4/1/2020
Secure Lending for Initial Start-Up, Working Capital and Cash Flow 4/1/2020

Chart 5.6 Milestone Chart

6.0 Management Summary


At the present time Ahmed and Sameer runs all operations for Cinnamon’s Grill. Other key
personnel are the management at each location. Candidates have already been identified for
the first additional

16
6.1 Organizational Structure
Cinnamon’s Grill expects to hire 19 employees. Together, Ahmed and Sameer will
personally select each candidate. They’ve adopted an effective interview process
designed to staff the restaurant with highly qualified people for each position.

6.2 Management Team


The restaurant will be jointly owned by Ahmed and Ali. Ahmed began his restaurant career
at the age of 15 working in a quick-service foodservice operation. After earning his degree,
he worked for a regional restaurant and an independent fine dining restaurant. In these
organizations he held the positions of F & B Assistant Manager and then Manager.
Ahmed Dev received his Culinary Degree from the KDU, Penang. After graduation she
was employed by a local chain restaurant and then at a Five Star Hotel in Penang.
Kumar will initially be employed as the Kitchen Manager.

6.3 Management Team Gaps


Initially brothers will fill in many of the management gaps. Over time, they have plans
to hire a Manager and a Kitchen manager. The Dev brothers will purchase have
considered a POS (point of sale system) that it simplifies communications between the
kitchen and the wait staff. Orders go Cinnamon’s Grill the computer, directly to the
kitchen printer. Another benefit of a restaurant POS programs is that it can track
everything from food usage, to the most popular menu items. Because the POS system
acts as a time clock, it can also help prepare payroll – which will save some money in
the bookkeeping department. Along with the daily operations of running a restaurant, a
POS system can organize profit and loss statement and sales tax.

6.4 Personnel Plan


This operation is an independent full-service restaurant operating for both lunch and
dinner.

Table 6.4 Personnel Plan

Personal Plan 2020 2021 2022


Owner / General Manager 0 0 0
Asst. Manager / Cashier 25,872 26,648 27,448
Line Cooks 38,304 39,453 40,637
Prep Cooks 60,480 62,294 64,163
Servers / Cashiers 46,848 48,253 49,701
Kitchen Helper 24,024 24,745 25,487
Accounts Executive 8,640 8,899 9,166
Sales Agent 0 20,000 20,600
Catering Employees 0 18,432 23,731
Total 204,168 248,725 260,933

17
7.0 Financial Plan
The over-all financial plan for growth allows for use of the significant cash flow generated
by operations. Every opportunity will be seized to accelerate expansion past the critical
dates in this plan if cash flow from new stores exceeds projections. Plan for the worst, but
manage for the Best.

The following sections outline our financial plan:


▪ Cost of Start-Up
▪ Profit and Loss
▪ Cash Flow
▪ Balance Sheet
▪ Financial Ratios

7.1 Important Assumptions


▪ Meal Price range from Tshs4500 – Tshs9500
▪ Average lunch price: 7000
▪ Average dinner price: 9000
▪ The restaurant is located in Magomeni , Usalama area and is comprised of 2,500
square feet
▪ The restaurant will employ 19 employees
▪ Tshs860, 000 -1,200,000 revenue targets; Industry average for casual restaurant
average of Tshs860, 000.
▪ Annual 3% increase for inflation and 5% annual increase in revenues
▪ Year 2 Assumes Catering Business in Place. Assumes 4 parties monthly @
Tshs7000 per plate and Tshs9000 persons. Catering will escalate to 8 parties
monthly in month 20 and then 10 parties monthly thereafter. Also assumes
additional increase in staffing (4 persons to be hired at 6 hours @ Tshs8000 per
hour.
7.2 Start-Up Costs
Total startup costs will be Tshs6,000,000, Tshs2,000,000 of which will be contributed by
the owners and the remainder will be secured Cinnamon’s Grill a proposed bank loan.

18
Table 7.2 Start-Up Costs
Start-Up
Requirement

Start-Up Expenses

Graphic Logo and Name Creation 50,000.00

SSM Registration + Lease Deposit 18,200.00

Contingency 20,000.00

Outdoor Sign 150,000.00

Building Improvements 700,000.00

Working Capital 900,000.00

Pre-Opening Expenses 350,000.00

Total Start-Up Expenses 1,052,500.00

Start-Up Assets

Cash required (142,000.00)

Startup inventory 110,500.00

Other Current Asset -

Long term Asset -

Total Assets 3,500,000.00

Total requirement 4,000,000.00

7.3 Source and Use of Funds


Total start-up costs are estimated to be Tshs600,000. The majority of the costs are
associated with the restaurant equipment, inventory and furniture and furnishings for the
dining room. Total costs for these items are reported to be Tshs1,052,500. The costs are
associated with build out and renovation of the restaurant to provide updated plumbing
and creating additional space in the dining area by removing a non-supporting wall:
Tshs100,000. Additional startup expenses are in the form of working capital and
contingency Tshs920,000.
Ahmed and Sameer will contribute Tshs2,000,000 and are requesting an additional
Tshs7,000,000 in the of a bank loan.

19
Table 7.3 Source and Use of Funds
Start-Up Funding

Start-up Expenses to Fund


252,500.00
Start-up Assets to Fund
110,500.00
Total Funding Required
363,000.00

Assets
Non-cash Assets from Start-up
-
Cash Requirements from Start-up
(142,000.00)
Additional Cash Raised
-
Cash Balance on Starting Date
(142,000.00)
Total Assets
(142,000.00)

Liabilities and Capital

Liabilities
Current Borrowing
189,000.00
Long-term Liabilities
Accounts Payable (Outstanding Bills)
Other Current Liabilities (interest-free)
Total Liabilities
189,000.00

Capital
Planned Investment
Ahmed
87,000.00
Sameer
87,000.00
Other
Additional Investment Requirement
Total Planned Investment
174,000.00

Loss at Start-up (Start-up Expenses)


(252,500.00)
Total Capital
(78,500.00)

Total Capital and Liabilities


110,500.00

Total Funding
363,000.00

20
7.4 Break-Even Analysis
Total fixed costs associated with the restaurant are Tshs669, 186 and represent the annual
expenses. The variable cost (overhead) is estimated to be Tshs6,000 per meal. Based on
the assumption of Tshs9,500 as the average meal price, the breakeven revenue then is
Tshs1, 108,970 or 97,535 meals (units).

This is further depicted in the Table Below and the Graph that follow:

Table 7.4 Break-Even Analysis

Break-Even Analysis
Fixed Cost 669,186.01
Variable Cost 4.51
Number of Units 13,934
Avg. Unit Price 11.37
Net Units Sales Fixed Cost Variable Cost Total Cost Total Profit
-
- - (669,186.00)
669,186.00 669,186.00
13,934.00 62,826.00 (573,588.00)
158,424.00 669,186.00 732,012.00
27,867.00 125,653.00 (477,990.00)
316,849.00 669,186.00 794,839.00
41,801.00 188,479.00 (382,392.00)
475,273.00 669,186.00 857,665.00
55,734.00 251,306.00 (286,794.00)
633,697.00 669,186.00 920,492.00
69,668.00 314,132.00 (191,196.00)
792,122.00 669,186.00 983,318.00
83,601.00 376,958.00 (95,598.00)
950,546.00 669,186.00 1,046,144.00
97,535.00 439,785.00 -
1,108,970.00 669,186.00 1,108,971.00
111,468.00 502,611.00 95,598.00
1,267,395.00 669,186.00 1,171,797.00
125,402.00 565,438.00 191,196.00
1,425,819.00 669,186.00 1,234,624.00
139,335.00 628,264.00 286,793.00
1,584,243.00 669,186.00 1,297,450.00
153,269.00 691,090.00 382,391.00
1,742,668.00 669,186.00 1,360,276.00
167,202.00 753,917.00 477,989.00
1,901,092.00 669,186.00 1,423,103.00
181,136.00 816,743.00 573,587.00
2,059,517.00 669,186.00 1,485,929.00
195,070.00 879,570.00 669,185.00
2,217,941.00 669,186.00 1,548,756.00
209,003.00 942,396.00 764,783.00
2,376,365.00 669,186.00 1,611,582.00
222,937.00 1,005,222.00 860,381.00
2,534,790.00 669,186.00 1,674,408.00
21
Break-even Analysis
3,000,000.00

2,500,000.00

2,000,000.00

1,500,000.00

1,000,000.00

500,000.00

-
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Sales Fixed Cost TotalCost

Chart 7.4 Break-even Analysis

7.5 Projected Profit and Loss


The profit and loss demonstrate modest increases in revenues over Cinnamon’s Grill are
expected years with adjustments for inflation.

Table 7.5. Pro Profit and Loss

Pro Forma Profit and Loss Year 1 Year 2 Year 3


TSHS TSHS TSHS
Income
Sales 8,028,422 10,161,443 12,235,835
Cost of Goods Sold -2,500,113 -2,514,176 -2,426,602
Gross Profit 5,528,309 7,647,267 9,809,233

Expenses
Accounting / Legal 220,000 220,360 220,731
Bad Debts 150,711 160,482 170,276
Shrinkage 90,000 92,700 95,481
Credit Card Fees 20,568 21,185 21,821
Insurance 175,000 177,250 179,568
Miscellaneous 44,112 45,435 46,798
Payroll Taxes 0 0 0
Registration SSM and Licenses 57,356 57,577 57,804
Rent 468,000 470,040 472,141
Salaries 712,341 712,711 713,093
Wages 569,987 523,057 540,027
Total Expenses 2,508,075 2,480,797 2,517,740
Net Profit 3,020,234 5,166,470 7,291,493

22
7.6 Projected Cash Flow
The statement of cash flow shows the incoming and outgoing cash of the business.

Table 7.5.2 Pro Cash Flow

Pro Forma Cash Flow Year 1 Year 2 Year 3

Cash Received

Cash from Operations 148,101 30,995 11,402


Cash Sales 1,028,422 1,161,443 1,235,835
Cash from Receivables 0 0
Subtotal Cash from Operations 1,176,523 1,192,438 1,247,237
Additional Cash Received 189,000

Sales Tax
Owners Investment 174,000
Subtotal Cash Received 1,539,523 1,192,438 1,247,237
Expenditures
Expenditures from Operations 765,113 414,176 426,602
Cash Spent 710,176 731,481 753,426
Bills Paid
Subtotal Spent on Operations 1,475,289 1,145,658 1,180,028

Additional Cash Spent


Sales Tax
Loan Payment 33,240 35,378 37,654
Subtotal Additional Cash Spent 33,240 35,378 37,654
Subtotal Expenditures 1,508,529 1,181,036 1,217,681
Net Cash Flow 30,994 11,402 29,556
Cash Balance 30,994 42,397 71,953

23
7.7 Projected Balance Sheet

Table 7.7 Proforma Balance Sheet

Pro Forma Balance Sheet


2020 2021 2022
Assets

Current Assets
Cash 1,630,000 1,860,150 2,710,111
Accounts Receivable 650,000 860,250 1,280,219
Inventory 140,000 140,700 150,803
Other Current Assets 129,500 135,975 146,173
Total Current Assets 2,549,500 2,997,075 4,287,306

Long Term Assets


Long Term Assets 3,144,500 3,151,725 3,163,104
Accumulated Depreciation 0 0 0
Total Long Term Assets 3,144,500 3,151,725 3,163,104
Total Assets 5,694,000 6,148,800 7,450,410

Liabilities and Capital


Current Liabilities
Accounts Payable 290,000 300,450 320,734
Current Borrowing 105,500 107,575 150,693
Other Current Liabilities 280,500 290,925 320,169
Subtotal Current Liabilities 676,000 698,950 791,596
Long Term Liabilities 189,000 198,450 213,334
Total Liabilities 865,000 897,400 1,004,930
Paid In / Invested Capital 223,000 234,150 251,711

Retained Earnings
Earnings
Total Capital 223,000 234,150 251,711
Total Liabilities and Capital 1,088,000 1,131,550 1,256,641
Net Worth 223,000 234,150 251,711

24
7.8 Business Ratios

These business ratios are future estimates based upon current assumptions.

Table 7.8 Ratio Analysis

Ratio Analysis
Industry
Year 1 Year 2 Year 3
Profile
Main Ratios
Quick Ratio 1.49 1.49 1.49 1.06
Current Ratio 3.92 3.92 3.92 1.46
Current Liabilities to Net
0.26 0.26 0.26 0.4
Worth
Current Liabilities to Inventory 4.21 4.21 4.21 5.85
Total Liabilities to Net Worth 1.24 1.24 1.24 1.24
Fixed Assets to Net Worth 1.2 1.2 1.2 1.11

Collection Period
Inventory Turnover 28.7 28.2 27 29.44
Assets to Sales 48.60% 45.20% 45.70% 49.10%
Working Capital to Sales 16.80% 15.60% 15.80% 14.00%
Accounts Payable to Sales 2.80% 2.60% 2.60% 2.80%
Return on Sales 0.10% 5.00% 7.50% 1.00%
Return on Assets 0.20% 11.10% 16.40% 2.10%
Return on Equity 0.60% 25.00% 36.70% 4.70%
Interest Coverage 0.8 7.6 15.5 1.66

Income Statement
Gross Sales 100.00% 100.00% 100.00% 100.00%
Gross Profit 60.90% 64.30% 65.50% 56.00%
Operating Income 0.10% 5.00% 7.50% 2.10%
Net Profit After Tax

Balance Sheet
Cash 12.60% 12.60% 12.60% 12.60%
Accounts Receivable 5.00% 5.00% 5.00% 5.00%
Inventory 2.80% 2.80% 2.80% 3.00%
Total Current Assets 46.30% 46.30% 46.30% 49.50%
Total Fixed Assets 28.90% 28.90% 28.90% 25.70%
Other Non-Current Assets 24.80% 24.80% 24.80% 24.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Accounts Payable 5.80% 5.80% 5.80% 5.80%
Total Current Liabilities 0.00% 0.00% 0.00% 17.60%
Total Long Liabilities 37.80% 37.80% 37.80% 37.80%
Net Worth 44.60% 44.60% 44.60% 44.60%

25
8.0 References

1. Miss Astrida Leonard, our module lecturer.

2. https://en.wikipedia.org/wiki/Nibong_Tebal

3. https://www.dosm.gov.my/v1/index.php?r=column/cthree&menu_id=UEg1NkpJUFYzRzBKclE
4V2JEb2I3QT09

4. https://www.penang.gov.my/images/penerbitan/sosioekonomi/Penang-in-Numbers-2018-
2019.pdf

1. 4. https://www.bloomberg.com/news/articles/2018-04-14/americans-spending-on-dining-out-
just-overtook-grocery-sales-for-the-first-time-ever

5. QSR magazine as of May 20, 2018, accessed on June 9, 2019; Franchise Help accessed on June
10, 2019; Nerac accessed on June 10, 2019; PR Newswire as of August 10, 2018, accessed on
June 8, 2019

6. http://www.restaurant.org/Restaurant/media/Restaurant/SiteImages/News%20and%20Research/
Whats%20Hot/What-s_Hot_Concept_Trends_1.jpg

7. http://www.bplans.com/sports_bar_business_plan/financial_plan_fc.php

8. http://digitalscholarship.unlv.edu/cgi/viewcontent.cgi?article=1591&context=thesesdissertations

26