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Chicken Chief Restaurant Financial Appraisal Project
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  • 1. Page |1Chicken Chief Restaurant A Proposal To: Sir Arfeen. SANOBER YOUSUF 61 AFREEN MASOOD 04 MUAZZ SHAIKH 63 M. YOUSUF 47 M. ARSALAN 31
  • 2. Page |2Table of ContentsExecutive Summary .....................................................................................................................5 Objectives ...............................................................................................................................6 Mission ...................................................................................................................................6 Keys to Success .......................................................................................................................6Project Profile.............................................................................................................................8 Opportunity Rationale .............................................................................................................8 Project Brief ............................................................................................................................8 Proposed Business Legal Status ..............................................................................................9 Project Capacity and Rationale ...............................................................................................9 Project Investment ...................................................................................................................9 Project Cost ........................................................................................................................9 Project Financing ................................................................................................................9 PROPOSED LOCATION ...................................................................................................... 10 Market Analysis..................................................................................................................... 11 Consumer Analysis ................................................................................................................ 11 Consumer Needs................................................................................................................ 11 Consumer Demographics .................................................................................................. 12 Consumer Psychographics ................................................................................................ 12 Consumer Behavior ........................................................................................................... 12 Involvement Level .............................................................................................................. 13 Market Segmentation............................................................................................................. 13 Students ............................................................................................................................. 13 Business Travelers ............................................................................................................. 13 Young Professionals .......................................................................................................... 13 Exhibition Visitors ............................................................................................................. 14 Target Market Segment Strategy............................................................................................ 14 Market Need ...................................................................................................................... 15 Market Trend..................................................................................................................... 15 Industry Analysis ................................................................................................................... 15Production Process ................................................................................................................... 16LAND & BUILDING REQUIREMENTS ................................................................................... 20Land.......................................................................................................................................... 21 Construction.......................................................................................................................... 21 Specifications .................................................................................................................... 21 Schedule of the Area .......................................................................................................... 22 Utility Requirements.............................................................................................................. 22Human Resource Requirement .................................................................................................. 24Financial Analysis..................................................................................................................... 26 Investment Criteria ................................................................................................................ 27 Budgets ................................................................................................................................. 28 Sales Budget ...................................................................................................................... 28 Raw Material Budget......................................................................................................... 29 Labour Budget................................................................................................................... 33 Overhead Budget ............................................................................................................... 34 Calculation of OH ............................................................................................................. 35
  • 3. Page |3 Sales & Admin Budget ....................................................................................................... 38 Cash Budget ...................................................................................................................... 39 Depreciation Schedule .......................................................................................................... 40 Loan Amortization................................................................................................................. 41 Cash Flow Equity & Debt ..................................................................................................... 42 Cash Flow Equity .................................................................................................................. 43 Income Statement .................................................................................................................. 44 Investment Appraisal ............................................................................................................. 45Conclusion ................................................................................................................................ 46
  • 4. Page |4
  • 5. Page |5Executive Summary Chicken Chief is a locally owned fast food outlet that will be positioned as aninternational franchise through our creative approach to the companys image and detailpresentation. Chicken Chief will provide a combination of excellent food at value pricing, withfun packaging and atmosphere. Chicken Chief is the answer to an increasing demand for snack-type fast food, to be consumed while window shopping and walking around inside a shoppingmall. In todays highly competitive environment, it is becoming increasingly difficult todifferentiate one fast food outlet from another. Karachi, a city, is now becoming the modelmetropolis for Pakistan. Our main priority is to establish one outlet in a commercial areaHassan Square; it is the central zone area of Karachi, which connects the major and standardareas. There is a huge demand of customers for fast food restaurant. Later, our effort will be afurther development of more retail outlets in the surrounding area. This plan is prepared to obtain a location for the initial launch of this concept. Additionalfinancing will need to be secured. The financing, in addition to the capital contributions fromshareholders, will allow Chicken Chief to successfully open and expand through year two. Theinitial capital investment will allow Chicken Chief to provide its customers with a value-driven,entertaining experience through the creativity of its founders. Chicken Chief will enticeyoungsters to bring their friends and family with our innovative environment, fresh-cut fries, andselection of unique dipping sauces.
  • 6. Page |6Objectives § To establish a presence as a successful local fast food outlets and gain a market share in Karachi s fast food industry. § To make Chicken Chief a destination spot for people. § To expand into a number of outlets by year three, and sell the franchise to neighboring metropolitan cities, such as Islamabad, Lahore, Multan etc.Mission Our main goal is to be one of the most successful fast food outlets in Karachi, startingwith one retail outlet located at Hassan Square. Chicken Chief will strive to be a premier local fast food brand in the local marketplace.We want our customers to have the total experience when visiting our outlet(s) and website asthey will learn about this fascinating new "pop culture." We will sell merchandise from pre-packaged sauces and t-shirts, to potato cutters, all with our official brand attached to them. Ourmain focus will be serving high-quality food at a great value.Keys to SuccessTo succeed in this business we must: § Create a unique, innovative, entertaining menu that will differentiate us from the rest of the competition. § Control costs at all times, in all areas and implement a conservative approach to growth policy. Although, we provide more than enough fund to open more than one outlet, we want to be on the safe side of the business.
  • 7. Page |7§ Sell the products that are of the highest quality, as well as keeping the customers happy with all of our product categories from food to store merchandising.§ Provide 100% satisfaction to our customers and maintaining the level of excellent services among other competitors.§ Encourage the two most important values in fast food business: brand and image, as these two ingredients is a couple of main drivers in marketing communications.§ Get access to high-traffic shopping malls near the target market.§ Promote good values of company culture and business philosophy.
  • 8. Page |8Project ProfileOpportunity Rationale The world is going to be modernized and globalize. Food is the basic need of a life and ifit is ready for eat so it is a desirable for all women are also taking part in working with males.They have started to go side by side with men therefore women does not have more time to makeor cook something at home. Restaurant has solved their problem to provide fast food. Thedemand of restaurant is increasing all over the world and as well as reached in Pakistan.Pakistani women are also involving in jobs and therefore core of restaurant is increasing. Readyfood is desirable of all those who have though schedule working. Restaurant t also becomesdesirable for students, teachers, bachelor persons, travelers and for those who want to celebratesome memorable days outside the home. McDonald and KFC is the example of fast foodgrowing restaurant. Several kinds of restaurant are opening in Pakistan, which is an alert of highgrowth and demand of a restaurant. It is much expecting that the demand graph of consumptionof fast food items will increase highly in future.Project Brief Our project is to start a restaurant in which we will provide the quick and quality servicesto the consumers for which he or she is expected from rest of the restaurants. We will providethem a fast food meal which is highly concentrated from quality. We will provide warm andinviting environment and variety of comfortable seating arrangements to accommodate anyone.Our mission will be a satisfaction of consumer at lower price. We will open a restaurant in anybusy area of Karachi such as Hassan Square. Our basic meals consist of burgers and broastwhich will be served in different categories.
  • 9. Page |9Proposed Business Legal Status The business legal status of our proposed project will be Partnership, and the partnerswill invest 60% of the total requirement and remaining 40% of the requirement will be financedthrough debt.Project Capacity and Rationale Karachi city is going to be fast and modern. Everyone wants to save time and money. Wehave detailed research from outlets, restaurants, customers and especially from the located foodhouses where we are going to establish our business. We have finally decided that the monthlyconsumptions of burgers menu will be as follows:Products Quantity Per Month Per YearBeef Burger 2500 30000Zinger Burger 2000 24000Project InvestmentProject CostParticulars PKRCapital Investment Requirement 8739264Working Capital Required 4669519Total Project Investment Required 13408783Project FinancingFinance Source Proportion PKRDebt 40% 5363513Equity 60% 8045270Total 100% 13408783
  • 10. P a g e | 10PROPOSED LOCATION Proposed location for Chicken Chief in Karachi is near Hassan Square . Following arethe reasons of choosing this location.CENTRAL ZONE: It is the central zone area of Karachi, which connects the major and standardareas like NORTH NAZIMBAD, SHAHRAHE FAISAL, GULSHANE IQBAL and AIR PORT.There is a huge demand of customers for fast food restaurant. Furthermore, HASSAN SQUAREis the commercial area that s why the demand curve is greater than the supply curve which ismentioned in market analysis. This restaurant will not be specific for particular area.Consumption demand will be from different directions.PROXIMITY TO RM AND MARKETS: An important consideration for this location is the proximityto sources of raw material and nearness to the market for final products. As well as total cost ofraw material for transportation will be minimized.AVAILABILITY OF INFARASTRUCTURE: Availability of infrastructure like power, transportation,water, fuel and communications facilities will be very comfortable.LABOUR SITUATION: Everyone wants to get a job at nearest to the city. We can heir goodreputed, well mannered, skilled and technical employees, who will help us to achieve our goal.LESS COMPETITION: We have a great chance to get success in uncompetitive market is thislocation because less numbers of competitors are present at this location.GOVERNMENT POLOCIES: Government policies are also permitted us to establish a business athere because we are free from the restrictions which are forced to the industries for ecologicalreasons.OTHER FACTORS: Other factors like climate conditions and general living conditions are veryimportant for selecting a location. Fortunately our location is best for all these factors.
  • 11. P a g e | 11Market Analysis Consumer expenditure for dining out especially towards fast food rose throughout thedeveloping and developed countries of the world. The increasing number of fast food chain andrestaurants in Pakistan significantly in Karachi has shown enormous growth in this industry. Atweekend, much broader appeal towards fast food exists because our core target market enjoysevening and night. Most of the times, white-collar do not like to bring lunch at office and prefer to enjoy ourmenu in the vicinity. Students also have money given by their parents to buy lunch and naturallyfast foods are their prime choice. When they are going through daily tough routine then theyneed a quick bite to accommodate their activities. Our targeted market is becoming habitual ofeating outside and for today s world; eating fast food is no more luxury.Consumer AnalysisConsumer Needs Þ Convenience Þ Taste Þ Quality Þ Affordability Þ Feel good about what they are eating Þ Friendly, fun, casual, relaxed atmosphere
  • 12. P a g e | 12Consumer Demographics Þ Age : 15 to 50* Þ Income : Pocket Money Income 2k and above 15 k and above Þ Occupation : Students, Service (Full time to part-time) and Business professionals. Þ Location : College students not living at home, students who take courses at night, people who work long hours, and families interested in healthy eating choices Þ Gender : Male/Female*** Potential consumers are singles, youngsters, high school, college and recently enrolleduniversity students.** Due to the unconsciousness towards dietary concerns, males will have more potential.Consumer Psychographics Þ Health conscious Þ Limited time for lunch and dinnerConsumer Behavior Þ Eat meals outside their home several times a week Þ Live active lifestyles Þ People who are striving to maintain a more balanced diet
  • 13. P a g e | 13Involvement Level Þ Limited Involvement Þ Prefer a healthy alternative to fast foodMarket SegmentationStudents By creating an environment that is appealing to students, we secure a naturalprogression between the student and the young professional. Through word of mouth, ChickenChief expects an increase of five percent annually from this segment.Business Travelers More and more business and travelers visits Hassan Square because of Expo Center andCivic Center situated near our restaurant. We anticipate a 20% annual growth rate in thissegment. As our relationships grow with the local hotels, so too will the word of mouthrecommendations from the hotel staff as well as the patronizing of our restaurant by theirfamilies and friends. Our future plan is to publish a simple website in order to create awarenesstowards healthy foods which we will deliver.Young Professionals Young professionals will include working full/part time professionals. We will targetyoung professional through word of mouth and direct marketing.
  • 14. P a g e | 14Exhibition Visitors Exhibition visitors will came from Expo Center to visit. Over thousands of visitors cameat exhibition so we predict that at least 8% will be our customers.Target Market Segment Strategy Chicken Chief intends to serve lots of youngsters and teenagers in Karachi. There areseveral important reasons of choosing this group. Our goal is to become renowned fast foodrestaurant and this age group has significant potential among our market segment. These agegroups can be captured by brand building efforts because they earn fixed income or limitedpocket money and make their decision on price/value relationship. Secondary target market will be rest of our market segment between the age of25 to 35years. Their budgets are more flexible and they want more than just a price/value relationship.
  • 15. P a g e | 15Market Need Þ Enjoys in eating out Þ Fast service Þ Prefers fried food along with variety in flavors Þ Global lifestyle Þ Fun and entertaining experience Þ Attractive, friendly and clean environmentMarket Trend In the past and to some extent currently, Pakistani prefers Western chain of restaurants,like McDonald, Pizza Hut, and KFC etc. However, when local restaurant starts to deliver sametaste in more reasonable price as compared with international chains then market trend haveshifted towards local brands. Success of Bove Chick, Role Corner, and Hot n Spicy are the primeexample of such trend.Industry Analysis Competition in the market has risen after the entry of multinational food chains duringthe last two decades. However, their business was become slowly during the early years ofcurrent recession. However, food industry has recovered from recession as much faster thanother industries. However, recent bombing tragedies, political and religious conflicts have putthe whole industry at high risk.
  • 16. P a g e | 16Production Process
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  • 18. P a g e | 18
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  • 20. P a g e | 20LAND & BUILDING REQUIREMENTS
  • 21. P a g e | 21LAND & BUILDINGLand Requirement of land is approximately 250 sq. yards. As per current market analysis, costof land at Hassan Square is Rs. 26000 per sq. yard. So, the cost of land for Chicken Chief will beapproximately Rs. 65 lacs.ConstructionThe basic aim to open a Chicken Chief restaurant is to given an ideal eating place with pleasantatmosphere. So we will construct our restaurant in a way that it would catch the attention of ourcustomers.SpecificationsWalls: 1 foot 1.5 inches thick, coated with hot bitumen, 2 coat and 2 sheets of polyethylene to allexternal walls.Floors: Marble floors with 4 inches marble skirting.Roof: R.C.C. roof slab (1:2:4) as per design.Internal Finish: Cement mortar (1:2) ceilings; Cement mortar (1:4) walls.Internal & External Paint: Emulsion paints weather shield of off-white color.Wash Room: Marble tiles for floors and glazed titles for walls.Opening: Whole front will be of glass and wire gauze windows on the inside.
  • 22. P a g e | 22Schedule of the AreaTotal area = Approx.60 sq yards = 10 MarlasTotal covered area = 1000 square feet = 7.4 MarlasEstimated cost of construction = Rs. 1000/sq. footTotal estimated cost of construction = 7.4 x 135 x 1000Documentation Fees = Rs. 1000Total Construction Cost = Rs. 1,000,000The total cost includes cost of construction of building, glass & lighting.Total sitting capacity = 50 personsUtility Requirements Utilities will be needed to at the time of input are as follows; § Power § Water, Sewerage & Fire § Steam § Gas § Telephone
  • 23. P a g e | 23
  • 24. P a g e | 24Human Resource Requirement
  • 25. P a g e | 25Human Resource Employees Salary /Designation Requirement Salary Month Per YearManager 1 25000 25000 300000Kitchen Supervisor 1 8000 8000 96000Chef 1 12000 12000 144000Chefs Helper 2 5000 10000 120000Waiters 4 5000 20000 240000Accountant 1 12000 12000 144000Cashier/Receptionist 1 8000 8000 96000Kitchen Cleaners 1 5000 5000 60000Hall Cleaners 2 5000 10000 120000Guard 1 8000 8000 96000Total Employees 15 118000 1416000
  • 26. P a g e | 26Financial Analysis
  • 27. P a g e | 27Investment Criteria
  • 28. P a g e | 28BudgetsSales Budget
  • 29. P a g e | 29Raw Material Budget
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  • 31. P a g e | 31
  • 32. P a g e | 32
  • 33. P a g e | 33Labour Budget
  • 34. P a g e | 34Overhead Budget
  • 35. P a g e | 35Calculation of OH
  • 36. P a g e | 36
  • 37. P a g e | 37
  • 38. P a g e | 38Sales & Admin Budget
  • 39. P a g e | 39Cash Budget
  • 40. P a g e | 40Depreciation Schedule
  • 41. P a g e | 41Loan Amortization
  • 42. P a g e | 42Cash Flow Equity & Debt
  • 43. P a g e | 43Cash Flow Equity
  • 44. P a g e | 44Income Statement
  • 45. P a g e | 45Investment Appraisal
  • 46. P a g e | 46Conclusion Chicken Chief will capitalize on the strong demand for high-quality fast food. The ownershave provided the company with sufficient start-up capital. With successful management aimedat establishing and growing a loyal customer base, the Chicken Chief will see its 30% increasein sales in second year. Chicken Chief will maintain a healthy gross margin, which combinedwith reasonable operating expenses, will provide enough cash to finance further growth.Financial appraisal of ten years forecasted cash flows shows that the initial investment of Rs.13,408,783.00 in Chicken Chief restaurant is acceptable on the financial grounds.Net PresentValue, Internal Rate of Return, Modified Internal Rate of Return, Pay Back Period andDiscounted Pay Back Period are the financial appraisal tools used in this analysis. Followingtable will summarize the results of financial appraisal.Financial Appraisal Tools ResultsNPV 2676742IRR 19.12%MIRR 17.72%PBP 5.72 YearsD-PBP 9.0934 Years The most important indicator for Chicken Chief Restaurant is the inventory turnover.Chicken Chief has to make sure that food inventory turnover stays at approximately minimumfour turns per month, or we risk loss through spoilage and the another most important indicatorsfor Chicken Chief is daily seating "counts" and weekly sales numbers. As per our forecastedsales budget and purchase budget, this minimum target is efficiently achieved and there is nochance of food spoilage due to the low turnover.