Catering decorating services

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Catering decorating services

  1. 1. Pre-Feasibility Study Prime Minister’s Small Business Loan Scheme CATERING & DECORATING SERVICES 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 KPK 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) 5610572 helpdesk-khi@smeda.org.pk Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk September 2013
  2. 2. Pre-Feasibility Study Catering & Decoration Service. Contents 1. DISCLAIMER ......................................................................................................................... 3 2. PURPOSE OF THE DOCUMENT ......................................................................................... 4 3. INTRODUCTION TO SMEDA .............................................................................................. 4 4. INTRODUCTION TO SCHEME ........................................................................................... 5 5. EXECUTIVE SUMMARY ..................................................................................................... 5 6. BRIEF DESCRIPTION OF PROJECT ................................................................................... 5 7. CRITICAL FACTORS ............................................................................................................ 6 8. INSTALLED AND OPERATIONAL CAPACITIES ............................................................ 6 9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ........................................................ 7 10. POTENTIAL TARGET MARKETS ................................................................................... 7 11. PROCESS FLOW ................................................................................................................ 7 12. PROJECT COST SUMMARY ............................................................................................ 7 12.1 Project Economics ........................................................................................................ 8 12.2 Project Financing .......................................................................................................... 8 12.3 Project Cost................................................................................................................... 8 12.4 Space Requirement ....................................................................................................... 9 12.5 Machinery and Equipment............................................................................................ 9 12.6 Human Resource Requirement ................................................................................... 10 12.7 Revenue Generation ................................................................................................... 10 12.8 Other Costs ................................................................................................................. 11 13. CONTACTS - SUPPLIERS .............................................................................................. 11 14. ANNEXURES ................................................................................................................... 12 14.1 Annexure 1 – Income Statement ........................................................................... 12 14.2 Annexure 2 – Balance Sheet ................................................................................. 13 14.3 Annexure 3 – Cash Flow Statement ..................................................................... 14 14.4 Useful Project Management Tips ......................................................................... 15 14.5 Useful Links ............................................................................................................. 16 15. KEY ASSUMPTIONS....................................................................................................... 17 2 September 2013
  3. 3. Pre-Feasibility Study Catering & Decoration Service. 1. DISCLAIMER This information memorandum is to introduce the subject matter and provide a general idea and information on the said matter. 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 taken 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 3 September 2013
  4. 4. Pre-Feasibility Study Catering & Decoration Service. 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, and 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 it’s successful management. Apart from carefully studying the whole document one must consider critical aspects provided later on, which form 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 successful 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. 4 September 2013
  5. 5. Pre-Feasibility Study Catering & Decoration Service. 4. INTRODUCTION TO SCHEME Prime Minister’s ‘Small Business Loans Scheme’, 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 through National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Small business loans with tenure upto 7 years, 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 medium income area in cities like Karachi, Lahore, Rawalpindi, Hyderabad, Faisalabad, Multan etc. Product(s) 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 150 events per year and initial utilization upto 67 % Total Cost Estimates is Rs.2,104,000 with fixed investment of Rs. 1,369,000 and working capital of Rs. 735,000. Given the cost assumptions IRR and payback are 39 % and 3 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 medium 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. 5 September 2013
  6. 6. Pre-Feasibility Study Catering & Decoration Service.  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 08 people. Financial analysis shows 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 Food In depth Management 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 100 events will be catered during a year with an average of 400 guests per event. The proposed business can also serve up to 1000 or more guests per event. Marquee and other decorative arrangement for big events can be outsourced to multiple Decorators. Events Weddings Mehndi & Mayun Anniversaries Corporate Others Total No. of Events in a Year 30 30 10 07 23 100 6 September 2013 % 30 30 10 07 23 100
  7. 7. Pre-Feasibility Study Catering & Decoration Service. 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 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 accessory 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 Minister’s Small Business Loan Scheme. Various cost and revenue related assumptions along with results of the analysis are outlined in this section. 7 September 2013
  8. 8. Pre-Feasibility Study Catering & Decoration Service. The projected Income Statement, Cash Flow Statement and Balance Sheet are attached as appendix 12.1 Project Economics All the figures in this financial model have been calculated for catering of 100 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 through such events are based on given assumptions are calculated to be Rs. 19.2 million. The following table shows Internal Rate of Return, Net Present Value and Payback Period. Table 1 - Project Economics Description Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV) Details 39% 3.0 3,843,234 Returns on the scheme and its profitability are highly dependent on regular occurrence of such events, good marketing practices, quality of services and more importantly good quality and taste of food served. 12.2 Project Financing Following table provides details of the equity required and variables related to bank loan; Description Total Equity (10%) Bank Loan (90%.) Markup to the Borrower (%age/annum) Tenure of the Loan (Years) Details Rs.210,400 Rs.1,893,600 8% 07 12.3 Project Cost Following requirements have been identified for operations of the proposed business. Table 1: Capital Investment for the Project Capital Investment Construction & Renovation Amount (Rs.) 105,000 8 September 2013
  9. 9. Pre-Feasibility Study Catering & Decoration Service. Machinery & Equipment Office Equipment & Furniture Advance Rent Vehicles Preliminary Expenses Total Capital Costs Initial Working Capital Total Project Cost 165,000 174,000 150,000 675,000 100,000 1,369,000 735,000 2,104,000 12.4 Space Requirement Space required for Catering & Decoration Service 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 2: Space Requirement Area Required For Office & Storage Total Rent No. 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 Catering Services. Table 3: List of Machinery and Equipment Cost Rs/unit 40,000 20,000 15,000 60,000 30,000 Description Burners / fittings / Others Daigs / Kadhai / Others Storage Racks Deep Freezers Other Kitchen Utensils Total 9 September 2013 Total Rs. 40,000 20,000 15,000 60,000 30,000 165,000
  10. 10. Pre-Feasibility Study Catering & Decoration Service. Table 4: Office Equipment & Furniture Costs Quantity Computer & UPS Printer Tables Chairs Sofa Set Split AC Others Total Cost 1 1 2 6 1 1 1 Amount 50,000 15,000 8,000 3,000 20,000 45,000 10,000 50,000 15,000 16,000 18,000 20,000 45,000 10,000 174,000 12.6 Human Resource Requirement Table 5: Human Resource Requirement Description Owner Head Cook Cooks / Karigars Helpers Driver Total Staff Nos. 1 1 2 4 1 9 Salary per month 25,000 20,000 15,000 10,000 10,000 Total 25,000 20,000 30,000 40,000 10,000 125,000 The table above provides details of human resource 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 100 events/year with an average of 400 guests will be organized. The Standard Menu will be of two items only. 10 September 2013
  11. 11. Pre-Feasibility Study Catering & Decoration Service. Events Nos. 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 Total Sales Revenue in a Year 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 19,200,000 12.8 Other Costs An essential cost to be borne by the business is the promotional expense to attract more clients. Average monthly expenditure in this head is assumed to be Rs. 20,000. 13. CONTACTS - SUPPLIERS KITCHEN 'N' RESTAURANT SYSTEMS 102-A, Allama Iqbal Road Butt Lane, Garhi Shahu, Lahore, Punjab, Pakistan Phone: 9242-36366590 / 36305989 Fax: 9242-36305989 KITCHEN CARE # 103, Golden Plaza F-7, Blue Area, Islamabad, Capital, Pakistan Phone: 9251-32875226 Fax: 9251-32277176 PRESTIGE KITCHENS Kehkashan Shopping Arcade Block-7, Clifton, Karachi 75600, Sindh, Pakistan Phone: 9221-35862978 / 35862839 Fax: 9221-5871814 KITCHEN EQUIPMENTS Syed Qaiser Imam 554 Buffer Zone, Karachi Phone: 03333045358 11 September 2013
  12. 12. Pre-Feasibility Study 14. Catering & Decoration Service. ANNEXURES 14.1 Annexure 1 – Income Statement 12 September 2013
  13. 13. Pre-Feasibility Study Catering & Decoration Service. 14.2 Annexure 2 – Balance Sheet 13 September 2013
  14. 14. Pre-Feasibility Study Catering & Decoration Service. 14.3 Annexure 3 – Cash Flow Statement 14 September 2013
  15. 15. 14.4 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 be arranged in advance  Equipment Suppliers: Should be asked for training/orientation and after sales services under the 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 improves 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.  Sales & Distribution Network: Expert's advise and distribution agreements are required.  Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never be allowed to compromise quality. Price during introductory phase may be lower and used as a promotional tool. Product cost estimates should be carefully documented before price setting. Government controlled prices shall be displayed. Human Resources Owner Head Cook Cooks / Karigars Helpers Driver
  16. 16. Pre-Feasibility Study Catering & Decoration Service.  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 Minister’s Office www.pmo.gov.pk Small & Medium Enterprises Development Authority (SMEDA) www.smeda.org.pk National Bank of Pakistan (SBP) 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 16 September 2013
  17. 17. Pre-Feasibility Study Catering & Decoration Service. www.sindh.gov.pk Government of Khyber Pakhtoonkhwa www.khyberpakhtunkhwa.gov.pk Government of Balochistan www.balochistan.gov.pk Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk Government of Azad Jamu Kashmir www.ajk.gov.pk Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk Security 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 Pakistan Institute of Fashion Design(PIFD) www.pifd.edu.pk Pakistan Fashion Design Council (PFDC) www.pfdc.org 15. KEY ASSUMPTIONS 17 September 2013
  18. 18. Pre-Feasibility Study Catering & Decoration Service. Description Debt Equity Ratio Interest Rate Loan Tenure Sales Price Growth Rate Depreciation Rate Weighted Average Cost of Capital Prepaid Rent Period Increase in Staff Salaries Increase in Office expense 90:10 8% 7 Years 10% 10% 9.2% 6 Months 10% 10% 18 September 2013

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