BUSINESS IDEAS Forum

7.0 Financial Plan

Sales -- Sagebrush Sam's is basing its projected sales on the assumption that the first unit will open on July 1, 2001. The second restaurant will open on July 1, 2002, followed by the last one opening on January 1, 2003. We have projected sales on the low side using $3 million dollars per year per restaurant. We did not factor in any sales growth for subsequent years.

Cost of Goods Sold -- The cost of goods sold was determined by taking actual Profit and Loss statements from various restaurant concepts and then using our pricing structure and guest counts to arrive at costs.

Management Payroll -- Figures are based upon the use of five managers per unit at our maximum bonus and salary levels. If we use four managers per restaurant, this will lower our payroll.

Fixed and Variable Expenses -- The various fixed and variable expenses were determined by taking actual numbers from several different reastaurant concepts.

Marketing Fees -- These funds will be used for the production of various marketing materials.

Advertising -- These funds will be used, if necessary, to maintain our sales at projected levels. If we are running significantly ahead of our sales projections, then these funds may not be necessary.

Management Fees -- We will use these dollars for accounting and payroll services of our firm. As we grow in size, this cost burden will shrink per store due to efficiencies in volume.

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7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices. Interest rates, tax rates, and personnel burden are based on conservative assumptions. Some of the more important underlying assumptions are:

• We assume a strong economy, without a major recession.
• We assume, of course, that there are no unforeseen changes in consumers' tastes or interests to make our concept less competitive.

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7.2 Key Financial Indicators

Food costs must be kept at, or below, 35%.

Unit level employee costs must be kept at, or below, 17%.

One of the other important indicators is inventory turnover. In the restaurant business, turnover exceeds 50 per year, with product being purchased and sold often within the week. The only exception to this will be our sirloin steaks, which will be aged at the unit for 21 days.

Above all, controls must be instituted and maintained over multiple store locations.

Sagebrush Sam's will use state-of-the-art restaurant control and inventory systems. All systems will be computer-based, allowing for accurate off-premises control.

Benchmarks

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7.3 Break-even Analysis

VARIABLE COSTS

• 35.00% - Cost of goods sold.
• 17.00% - Employee payroll.
• .25% - Credit card charges.
• .33% - Marketing fees.
• 2.00% - Management fees.
• 2.00% - Advertising.
• 2.00% - Management bonus.
• 3.03% - Employee payroll taxes and benefits.
• 1.50% - Paper and cleaning.
• 63.11% - Total variable costs.

ANNUAL FIXED COSTS

• $170,000 - Management salaries.
• $37,000 - Management payroll taxes and benefits.
• $16,410 - Group insurance.
• $137,100 - Controllable expenses minus credit card charges and paper/cleaning.
• $40,208 - Other expenses minus marketing fees, advertising, and management fees.
• $85,000 - Depreciation.
• $485,718 - Total fixed costs.

Break-even Analysis

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7.4 Projected Profit and Loss

Projected Profit and Loss Income Statement for the entire company for three years. Estimates for each month of the first year are in the appendix tables.

Note that we predict we will exceed our objective of 65% gross margin by the year 2000.

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7.5 Projected Cash Flow

The chart and table below show our cash flow projections. Monthly figures are in the appendix tables.

Cash

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7.6 Projected Balance Sheet

The accompanying table presents our year end balance sheet estimates from our first three years.  Year one monthly information is included in the appendix tables.

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7.7 Business Ratios

These business ratios are future estimates based upon current assumptions.  Standard industry comparisons are for SIC code 5812, retail eating places.

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