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- 1. Running head: Financial Prospectus 1 13 Financial Prospectus Description of Venture I would be willing to plan and operate for a fast food restaurant. In order to start off, I would require a restaurant, heating system, ventilator, boiling equipment, some initial fund capital, some customers among other things. For the restaurant we will need the following: a scullery sink, hand washing sink, refrigerator, convection oven, a preparation table. We will in addition to all these need an ice machine. I will be willing to take not less than five employees. I would require facilities for this restaurant such as private dining, and washrooms. Additionally I will require service counter and the kitchen. The kitchen I intend to have is an open one. The wash rooms will always be kept as tidy as possible and at full service of water facilities. The restaurant will also be with adequate lighting systems, decorations, furniture and so on. For customers who will need privacy of handling, there will be private dining halls for them. The customers will order for food through the counter upon paying cash. The bill will be processed and the customer will wait to be served with food. 1. Development Concept Opening Kudler Restaurant would help exploit the available market opportunities and would offer employment opportunities for the area. It would offer to its clients a fun environment with affordable prices and services. Market analysis in the restaurant industry show that a well managed market has good opportunities for success in the intended geographical area.
- 2. Kudler Restaurant’s average target consists of a market comprising of people aged between 18 years and above but special sections for persons below this age will be provide to take care of even school going students. In order to have a successful venture we would alter our target somewhat due to the large and potential young school going population aged between 13 and 18 years. Of course we would have no age floors in targeting customers. We will be at all times committed to offering high quality products with lots of variety that would please everyone. Apart from the products will be first-rate customer service which will ensure that the customers enjoy the good experience of dining in an atmosphere full of fun. We will strive to promote Kudler Restaurant in quite a number of ways among them radio, national televisions and other social sites. We will make use of different holidays of the year such as Mothers Day, Veterans Day and Fathers Day inter alia. Our average price per meal is estimated at $10 which is considerably a reasonable price for college going students and the residents of the area. Management Biographies Carol W. NanasManaging Director Ms. Nanas has served on several Companies’ boards of directors. She has been the Managing Director for Applebee’s since 1998. Ms. Nanas is currently a director of Texas Chamber of Commerce and Industry Gideon T. Rayson Director Gideon T. Rayson is currently a member of the board of directors at O’Melveny & Myers LLP. For close to a decade he practiced corporate law and has a vast experience with tax
- 3. exempt transactions and a sound understanding of international finance. He is a recipient of Snowden Humanitarian Award. Douglas M. Pascal Director Douglas M. Pascal, 37, is the current advisor to the CEO of NBCUniversal. Prior to this he was appointed to the BoD of DineEquity. He has served as marketing director of National Health Properties between 2008 and 2012. He also sat at the board of directors at Richfield Hospitality Services, Inc and served as the deputy CFO for Regal Hotels between 2007 and 2009. Tom W. Ephraim Chief Financial Officer Mr. Ephraim recently served has served as the deputy president and chief operating officer for USHE which one of the most vibrant subsidiaries of NBCUniversal and a leading media and entertainment company. During his tenure as the chief operations officer he executed oversights of strategies, research, supply management, and logistics in general. Gregory K. Harman Human Resource Director Mr. Gregory K. Harman has worked as the human resources manager for KPMG LLP Washington and currently a practicing freelance lecturer. He doubles as consultant on human resource issues for the States of Ohio and Chicago. Competitive Product or Service Statement · Kudler restaurant will not only offer food, but will also be a source of entertainment for most of its customers. Our
- 4. employees will undergo rigorous training and after that they will be able to offer all customers a satisfying experience. We will ensure that we put in place a solid management crew, with at least one manager on the floor at all times. They will be charged with the responsibility of walking the floor and ensuring that all customers are happy, satisfied and are enjoying their stay in the restaurant. They will also make sure that all foods coming from the kitchen are standard, presentable and well packed according the customer demand. · Kudler Restaurant will offer its customers a fun and a casual place to dine. We feel this will constitute one of the principal benefits we have to offer to this market since that is considerably what a good number of customers would expect from a restaurant setting. Our food will be good with good prices and we will have a bar with television sets fixed in all sections of the restaurant. Construction and Preopening Budget The preopening budget is an outline that will help the business to predict the total cost of opening the venture. Some of these costs are one-time. Others include initial investments, and operating costs (Bort, 2010). Te budget will also act as a checklist for documenting all resources of Kudler. The resources include those allocated for the startup. Kudler Preopening Budget (First Year of Operation) Amount ($) Amount INVESTIGATORY
- 5. PROJECT AND SUPERVISION Travel and Miscellaneous 25,000 Development Fee 1,000,000 Appraisal 23,000 Travel Out-of-Pocket 20,0000 Environmental 13,000 Payroll 125,000 Transportation Study 15,000 SUBTOTAL __1,145,000 Legal 25,000 ________
- 6. PROFESSIONAL FEES & CONSTRUCTION SUBTOTAL ___101,000 Architect 14,000 Reimbursable 8,000 LAND Mechanical & Electrical 38,000 Land 588,000 Structural 45,000 Closing Costs 45,000 Civil 62,000 Brokerage Fees 28,000
- 7. Landscaping ____34,000 Legal For Acquisition 15,000 SUBTOTAL __167,000 Survey 18,000 ________ CONSTRUCTION COSTS SUBTOTAL __694,000 General Contract - Building 100,000 Remodeling Fees 150,000 INITIAL COSTS
- 8. New Building Construction Fees 1,860,027 Travel & Miscellaneous 12,000 Bond 9,000 Soils 13,650 Builder's Risk 18,000 Engineering Fees 20,500 Building Permit & Plan Review 28,500 Architectural Fees 16,680 Utility Tap Fees 10,000 Use Permit 10,000 SUBTOTAL 2,075,527 Model / Renderings
- 9. 14,250 ________ LAND IMPROVEMENTS SUBTOTAL ___87,080 Landscaping : Exterior 15,000 Landscaping : Interior 17,260 INTANGIABLES SUBTOTAL _32,260 Accounting 35,000 Permit Expediter
- 10. 8,000 PROFESSIONAL FEES: FF&E Consulting Fee 16,280 Interior Design 78,000 Liquor License 12,250 Kitchen 52,000 Title Insurance 25,000 Out-of-Pocket 8,000 Legal 16,250 SUBTOTAL 130,000
- 11. 112,780 Furniture, Fixtures & Equipment 729,500 Equipment: General Building Systems 25,000 FINANCING FEES: CONSTRUCTION Equipment: Operating 35,000 Interest 573,388.4 Supplies 628,000 Taxes 272,670.3 Pre-Opening 145,000 Insurance 25,000 Working Capital 32,000
- 12. ________ Contingency (10%) 190,950 871,058.7 Interest Reserve __4,500 PROJECT TOTAL 1,785,450 Operating Pro-Forma KUDLER RESTAURANT (First year of operation) $‘000’ Month 1 Month 2 Month 3 Month 4 Month 5
- 13. Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Sales of Food and Beverage 6500 6923 7372 7852 8362 8906 9351 9818 10309 10852 11222 12588
- 14. Other Sales 300 300 300 300 300 300 300 300 300 300 300 300 Total Sales 6800 7223 7672 8152 8662 9206 9651 10118 10609 11125 11522 12888 Cost of sales 2442 2383 2532 2690 2858 3038 3185 3339 3607
- 15. 3671 3700 3752 Gross profit 4556 4839 5141 5462 5804 6168 6466 6779 7108 7454 7822 9136 Operating Expenses Sales & Marketing Advertising 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 Commissions (5% of sales) 340 361 384 408
- 17. 100 100 100 100 100 100 100 100 100 100 100 Trade Shows 0 0 0 0 0 250 0 0 0 0 0 0 Travel (6% of Sales 408 433 460 489 520 552 579 607 637 668 691
- 18. 773 Salaries (sales personnel) 0 0 0 0 0 0 0 0 0 0 0 0 PR Taxes & Costs, sales 0 0 0 0 0 0 0 0 0 0 0 0 Total Selling Costs 1968 2014 2064 2117 2173 2632 2282 2333
- 19. 2387 2444 2487 2787 Net Operating Profit 2588 2825 3077 3345 3631 3536 4148 4446 4721 5010 5335 6349 Samples of Financial Statements to be Used KUDLER RESTAURANT PROFORMA BALANCE SHEET (First year of operation) ASSET Current Assets cash & cash Equivalents 36946 Receivables from Sales 7008 Other Receivables
- 20. 0 Inventory 8903 prepaid Expenses/Deposits 2000 Total Current Assets 54857 Fixed Assets Equipment & Machinery 15000 Less Accumulated Depreciation 2429 Net Fixed Assets 12571 TOTAL ASSETS 67428 LIABILITIES
- 21. Current Liabilities trade Payables 6424 Income Tax payable 8360 short-Term Notes 0 Total Current Liabilities 14784 Long-Term Liabilities Notes Payable, Banks 12566 Notes Payable, Others 0 Other Liabilities 0 Total Long-Term Liabilities 12566
- 22. TOTAL LIABILITIES 27349 PROPRIETORS' ACCOUNT Owners' Equity 15000 Less Withdrawals 25079 TOTAL NET WORTH 40079 TOTAL NET WORTH and LIABILITIES 67428 Current Ratio 3.7 Quick ratio 3.1 ROE
- 23. 1.7 Summary of Proposed Investment Terms No profits will be distributed as dividends until 60 % of the initial investment recovered. This is projected to occur in year three. However 40% of the profits will be distributed as dividends subject to the condition that at least 10% of the net profits are retained until the venture is bought or sold. No investment will be undertaken that requires more than 60% of the contributed capital. Return on Investment Analysis With an initial outlay of $708,181,500 and the required rate of return of 16% then the discounted cash flows are given as follows. Year Cash Flows $’000’ PVIF PVIF*CF $’000’ 1 113628 0.862 97947 2 142035 0.743 105532 3 184646 0.641 118358 4 230807 0.552
- 24. 127406 5 276968 0.476 131837 6 304665 0.410 124913 7 319898 0.354 113244 NPV CF 819236 The discounted payback schedule would be as follows: Year Discounted Cash Flows Cumulative D. Cash Flow 1 97947 97947 2 105532 203479 3 118358 321837 4 127406 449243 5 131837 581080
- 25. 6 124913 705993 7 113244 819237 The initial out lay would be recovered between the 6th and the 7th year of operation. QUOTE *360days =6years 1 month The investors would have their initial capital returned in 6 years and 1 month. 2. Statement of the Viability of the Venture as an Investment The Pro-forma financial statements are prepared with a 20% allowance for variations. The implication of this is that the capital invested can be recovered 20% length earlier than the projected 6 years. That would be as early as the 5th year. There will be quite sufficient profit balance after paying the owners of capital. This means that Kudler will be in touch with its leverages. The general trend in the restaurant industry points at an average profit margin of 35 and 43. We have estimated our profit margins at 16% and even though the margin may be down below the industry average, it is expected that the company margin will be hardly below the industry average. Then, the company will be able to harvest more from a margin twice as large. References Armstron, K. C. (2012). g. [http://www.qbox.wharton.upenn.edu/documents/mktg/research/ INTFOR3581%20-%20Publication% 2015.pdf "Structured analogies for forecasting"] (PDF). qbox.wharton.upenn.edu. Carlino, B. (2010). "BK co-founder McLamore dead at 70". Nation's Restaurant News. Retrieved 22 June 2014.
- 26. Ellis, K. (2008). . Production Planning and Inventory Control Virginia Tech. McGraw Hill. ISBN 978-0-390-87106-0. Ellis, K. (2010). Production Planning and Inventory Control (in English). McGraw-Hill. ISBN 0-412-03471-9. Terry, A., & Forrest, H. (2008). "Where's the Beef? Why Burger King Is Hungry Jack's in Australia and Other Complications in Building a Global Franchise Brand". Northwestern Journal of International Law and Business 28 (2): 171–214. ISSN 0196- 3228. University of Phoenix Faculty Material Financial Prospectus Expectations Prepare a 1,950- to 2,500-word paper with the following components of a financial prospectus for your venture. The Financial Prospectus must include the information you provided in the Venture Concepts Paper and Venture Budgeting and Forecasting Paper. The information from your previous assignments must be revised, as necessary, based on material covered in this class. Organize your prospectus into the following order: 1. Description of Venture 2. Development Concept 3. Management Biographies 4. Competitive Product or Service Statement (Market Analysis) 5. Construction and Preopening Budget 6. Operating Pro-Forma (Budget) 7. Samples of Financial Statements to be Used
- 27. 8. Summary of Proposed Investment Terms 9. Return on Investment Analysis 10. Statement of the Viability of the Venture as an Investment An explanation of each component of the prospectus may be found in the description of terms below. Description of Terms 1. Description of Venture a. An introductory illustration of the venture, with an overview of the brand and the product or service to be offered b. Details of the product or service are covered in item 4. 2. Development Concept a. The description focuses on components that must be built or created to support the venture. b. Include the components of any physical structure, equipment, or anything that requires development investment. 3. Management Biographies a. Use one page or less to describe the background of each of the principle owners. b. If this venture requires special technical expertise, include the biographies of whoever is going to bring this needed expertise to the organization. 4. Competitive Product or Service Statement a. A market analysis to show how this venture’s product or service competes with similar products or services in its market b. Include how the product or service may be produced efficiently by this venture to achieve targeted profit margins. 5. Construction and Preopening Budget a. The budget in the virtual organization, Kudler Foods, may be used as a model for this portion.
- 28. b. Include all of the costs associated with getting the venture to the point of performing its first sale. The budget, however, must include enough working capital to pay for its operations until the net profits may cover these expenses. 6. Operating Pro-Forma a. The operating budget for the first 12 months that this venture will be operating after startup and training periods b. If the venture requires phased operations when it first opens, these first few months need not be included in the pro-forma so that the pro-forma may illustrate a typical 12-month period as a new venture. 7. Samples of Financial Statements to be Used a. An inventory of the financial statements that will be used to measure the performance of the venture, using data from the pro-forma b. Include an Income Statement, Balance Sheet, and any other financial statements that would be significant and appropriate to illustrating the success of this venture. 8. Summary of Proposed Investment Terms a. A description of how investors will benefit from this venture 1) The capitalization plan of Kudler Foods virtual organization shows how the venture capital partners will receive there investment back as soon as 80% of the venture’s net profits may pay it, and then 10% of the net profits of the venture until they are bought out or the venture is dissolved. b. A description of what levels of investment will be accepted, if there are minimum or maximum levels of investment. 1) Privately held ventures usually offer membership units in a limited liability company at amounts equal to approximately 3% of the total startup cost, or whatever calculates to a round number such as $10,000 or $50,000. 2) Publicly traded ventures offer shares of stock typically
- 29. offered at a price that is the value of the venture once it is operational divided by the amount of shares to be in inventory, which is usually 1,000,000. 9. Return on Investment Analysis a. An illustration of how much investors will earn on the money that they invest in this venture b. This analysis typically begins with a payback analysis, which illustrates how soon the investors will be paid back their initial investment. c. After illustrating how soon the investor will be paid back and what dividends will be received according to the pro-forma, the actual ROI is expressed as a percentage using the following calculation: [annual dividends] / [initial investment]. 10. Statement of the Viability of the Venture as an Investment a. The selling statement that convinces venture capitalists and banks to invest in or loan money to the venture b. Include statements that confirm the feasibility of the pro- forma and statements that confirm how realistic the startup budget is.