PAPA GEOS RESTAURANT BUDGET PROPOSAL FOR 2012 2016

PAPA GEO’S RESTAURANT BUDGET PROPOSAL FOR 2012 -2016 BUSN-278 Budgeting and Forecasting session. B Professor Brandon Foor De. Vry University

TABLE OF CONTENTS Objectives Budget Preparation Financial Statements Methods and Assumptions Competition Geographic Target Sales Forecast Capital Expenditures Budget Cash Flow NPV Rate of Return Payback Period Pro Forma Income Statement Pro Forma Cash Flow Pro Forma Balance Sheet

OBJECTIVES Ø Papa Geo’s Restaurant will be a single-location, sit-down Italian restaurant located in Orlando, Florida. Our objective is to generate an income of at lest $40, 000 per year, starting sometime in the second year of the operation, as well as profit that is at least 2% of sales Ø Restaurant targets middle to lower-middle class families with children, as well as adults and seniors, Ø Our Italian food will be served in buffet style Ø The company will operate from 10: 00 am to 9: 00 pm all 7 days a week

BUDGET PREPARATION Five year planning horizon is used. The initial up-front investment includes $900, 000 investment. In deciding on the initial investment, the Net Present Value (NPV) was calculated. The discount rate for the required rate of return is 10%. Discount factors for a five year period were taken from present value tables. This created the present value of cash inflows. The total was then taken and divided by the initial $900, 000. 00 investment. The Rate of Return (ARR) was calculated simply by using the cash inflows for the 5 year period and adding in the depreciation for the equipment. This amount was then divided by the initial investment. The Internal Rate of Return (IRR) was figured by taken the initial investment and dividing it by the annual cash inflows.

FINANCIAL STATEMENTS A Pro-Forma Financial statement is a financial statement that a company prepares to consider the effects of a potential activity. Pro forma describes a presentation of data, typically financial statements, where the data reflect the world on an 'as if' basis. That is, as if the states of the world were different from that which is in fact the case. Including the first year well have positive ending balances.

METHODS AND ASSUMPTIONS Information is based on research on locations that sell the same products. Italian buffet makes $9 billion sales in one year. Assumption that amount sold in one year will be about 144, 075. 22

COMPETITION As of today there are only 2, 728 Italian buffets in the whole United States. v Our price is lower then that fast food restaurants around us. v We are more clean and faster when it comes to seating down our customers for them to eat. v Also we have a vending machines to keep children busy while adults enjoy their meal. v

GEOGRAPHIC TARGET The target is middle to lower- middle class families with children, as well as adults and seniors. The area is within 15 minutes of the store has 10, 000 families, mostly form lower to middle class neighborhoods. Average family size is 4 people per household. The lower to middle class population is growing at about 6% per year over the next five years in this area.

SALES FORECAST Papa Geo’s Restaurant - 1 st Year Forecast Monthly Sales Growth Sales Other Monthly Totals YTD Totals Jan. -March 0% $9, 000. 00 $3, 006. 00 $12, 006. 00 April-June 366% $42, 000. 00 $2, 030. 07 $44, 030. 07 $56, 036. 07 July-Sep. Oct. -Dec. 100% $42, 700. 00 $1, 500. 00 $44, 200. 00 $100, 236. 07 98% $41, 993. 00 $1, 946. 15 $43, 939. 15 $144, 175. 22 Total sales forecasted for 5 years Year 1 Year 2 Year 3 Year 4 Year 5 0 $144, 075. 22 3% $148, 397. 47 4% $154, 333. 37 5% $162, 050. 04 6% $171, 773. 04

Capital Expenditures Budget Equipment Miscellaneous Furniture/Fixtures Facility Costs $68, 083. 53 $4, 810. 00 $397. 00 $45, 000. 00 $50, 207. 00

CAPITAL EXPENDITURES BUDGET Total Capital Expenditure is $50, 207 As stated we need to spend $68, 083. 53 on equipment that is needed to start the business. We also are going to spend $4, 810 on miscellaneous items such as dish sets, cups, silver ware, etc. And as for the furniture/ fixtures the amount is $397 these are important because we need an office desk to be able to work on paper work such as applications, bills, payroll, etc. The amount spent on the Capital Expenditure should cover the full five years

Cash Flow Budget Worksheet Pap Geo’s Restaurant 2012 Beginning Cash Balance: Cash Inflows (Income): Loan Proceeds Sales & Receipts Total Cash Inflows: Available Cash Balance: Cash Outflows (Expenses): 0 2013 $815, 005 2014 $827, 682 2015 $837, 698 2016 $711, 768 Total $3, 192, 153 900, 000 144, 075 $1, 044, 075 148, 397 $963, 403 154, 333 $982, 015 162, 050 $17, 988 $855, 686 171, 773 $19, 067 $730, 835 Advertising Health Insurance 20, 000 5, 000 1, 000 10, 000 5, 000 1, 000 60, 000 25, 000 Interest 11. 590 10. 662 9. 676 8. 630 7. 518 48. 077 Payroll Rent or Lease Utilities & Telephone Renovations Inventories Equipment Furniture Credit card fees 80, 000 1, 000 15, 000 1, 599 68, 084 397 400 80, 000 1, 000 80, 000 10, 0000 1, 000 80, 000 10, 000 1, 647 1, 713 1, 799 1, 907 412 428 450 477 400, 000 5, 000 15, 000 8, 665 68, 084 397 2, 166 Subtotal Other Cash Out Flows: Loan Principal Owner's Draw Subtotal: Total Cash Outflows: Ending Cash Balance: $214, 070 $119, 721 15, 000 16, 000 $15, 000 $299, 707 $815, 005 $16, 000 $135, 721 $827, 682 780, 629 $1, 680, 629 $118, 818 $117, 878 $116, 902 $687, 388 17, 500 8, 000 $25, 500 $144, 318 $837, 698 18, 040 8, 000 $26, 040 $143, 918 $711, 768 19, 090 8, 000 $27, 090 $143, 992 $586, 843 85, 630 24, 000 $109, 630 $797, 018 $3, 778, 995

NPV Analysis. . . 10% Year Cash Inflows Discount Factor Present Value 1 815, 005. 00 827, 682. 00 837, 698. 00 711, 768. 00 586, 843. 00 0. 9091 740, 921. 05 0. 8264 683, 996. 40 0. 7513 629, 362. 51 0. 603 429, 196. 10 0. 6209 364, 370. 82 2 3 4 5 3, 778, 996. 00 2, 847, 846. 88 Present Value of Cash inflows Initial Investment Net Present Value 2, 847, 846. 88 900, 000. 00 1, 947, 846. 88

RATE OF RETURN The Rate of Return is used to determine the rate allowed for the next five years to get the present value at a positive value. Rate of Return Total for equipment Depreciation Cash inflows Initial Investment ARR Initial Investment Annual Cash Inflows IRR 68, 083. 53 13, 616. 71 3, 778, 996. 00 900, 000. 00 4. 18 900, 000. 00 3, 778, 996. 00 0. 2382

Payback Period over 5 Years Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Capital Investment 900, 000. 00 Annual Cash Inflow 815, 005. 00 827, 682. 00 837, 698. 00 711, 768. 00 586, 843. 00 Payback Period 1. 104 Total Payback 6. 064 1. 087 1. 074 1. 264 1. 534

Pro-Forma Income Statement Papa Geo’s Restaurant REVENUE Gross sales Net Sales For 2012 through 2016 (all numbers in $000) 2012 2013 $144, 075 $148, 397 Selling $20, 000 $20, , 000 Advertising 20, 000 10, 000 Depreciation 13, 287 10, 629 8, 504 6, 803 5, 443 $53, 287 $40, 629 $38, 504 $36, 803 Salaries and wages Employee benefits Insurance Rent Utilities Interest Furniture & equipment $60, 000 5, 000 10, 000 11, 590 397 $60, 000 5, 000 1, 000 10, 662 0 $60, 000 5, 000 10, 000 1, 000 9, 676 0 $60, 000 5, 000 10, 000 1, 000 8, 630 0 $60, 000 5, 000 10, 000 1, 000 7, 518 0 Total Operating Expenses $88, 987 $87, 662 $86, 676 $85, 630 $84, 518 $142, 274 $801 160 $641 $128, 291 $11. 327 2, 265 $9, 061 $125, 180 $22, 952 4, 590 $18, 362 $122, 433 $31, 582 6, 316 $25, 266 $119, 961 $43, 307 8, 661 $34, 646 Other Total Selling Expenses General/Administrative Net Income Before Taxes NET INCOME (LOSS) $148, 132 $154, 015 2016 $171, 773 Salaries and wages $139, 617 2015 $162, 050 Gross Profit (Loss) OPERATING EXPENSES $143, 075 2014 $154, 333 $171, 773 $35, 443

PRO-FORMA INCOME STATEMENT v. A Pro-Forma Financial statement is a financial statement that a company prepares to consider the effects of a potential activity. v. Pro forma describes a presentation of data, typically financial statements, where the data reflect the world on an 'as if' basis. v. That is, as if the states of the world were different from that which is in fact the case.

Pro-Forma Cash Flow Statement Pap Geo’s Restaurant 2012 Beginning Cash Balance: Cash Inflows (Income): Loan Proceeds Sales & Receipts Total Cash Inflows: Available Cash Balance: Cash Outflows (Expenses): 0 2013 $815, 005 2014 $827, 682 2015 $837, 698 2016 $711, 768 Total $3, 192, 153 900, 000 144, 075 $1, 044, 075 148, 397 $963, 403 154, 333 $982, 015 162, 050 $17, 988 $855, 686 171, 773 $19, 067 $730, 835 20, 000 10, 000 5, 00 0 1, 000 60, 000 5, 000 10, 000 5, 000 1, 000 Interest 11. 590 10. 662 9. 676 8. 630 7. 518 48. 077 Payroll Rent or Lease Utilities & Telephone Renovations Inventories Equipment Furniture Credit card fees 80, 000 1, 000 15, 000 1, 599 68, 084 397 400 80, 000 1, 000 80, 000 10, 0000 1, 000 80, 000 10, 000 1, 647 1, 713 1, 799 1, 907 412 428 450 477 400, 000 5, 000 15, 000 8, 665 68, 084 397 2, 166 Advertising Health Insurance Subtotal Other Cash Out Flows: Loan Principal Owner's Draw Subtotal: Total Cash Outflows: Ending Cash Balance: $214, 070 $119, 721 15, 000 16, 000 $15, 000 $299, 707 $815, 005 $16, 000 $135, 721 $827, 682 780, 629 $1, 680, 629 25, 000 $118, 818 $117, 878 $116, 902 $687, 388 17, 500 8, 000 $25, 500 $144, 318 $837, 698 18, 040 8, 000 $26, 040 $143, 918 $711, 768 19, 090 8, 000 $27, 090 $143, 992 $586, 843 85, 630 24, 000 $109, 630 $797, 018 $3, 778, 995

PRO-FORMA CASH FLOW STATEMENT “ The cash budget [beginning cash balance + anticipated receipts - expected disbursements = ending cash balance] will provide information about any need for working capital, such as a line of credit, short term financing, or an infusion of capital from the owners of the business. The cash budget necessarily takes into account any payments on existing indebtedness, receipts of interest on customer financing arrangements, and any anticipated capital expenditures. ”

Pro Forma Balance Sheet Years 1 -5 Assets 2012 2013 2014 2015 2016 $963, 403 $982, 015 $855, 686 $730, 835 ($15, 713) $64, 067 $1, 011, 757 ($15, 713) $64, 067 $1, 030, 369 ($15, 713) $64, 067 $904, 04 ($15, 713) $64, 067 $779, 289 Current Assets: Cash Total Current Assets Fixed Assets: Furniture Equipment Less: Acc. Dep. Total Fixed Assets Total Assets $1, 044, 075 $397 $68, 083. 53 ($15, 713) $64, 067 $1, 160, 909. 53 Liabilities and Capital Current Liabilities: Accounts Payable Accrued Payroll Payable Insurance Payable Interest Payable Total Current Liabilities Long Term Liabilities Notes Payable Total Long-Term Liabilities Capital Owner's Equity Total Capital Total Liabilities and Capital Net Worth $2, 666 $80, 0000 $1, 000 $11, 590 $95, 256 $2, 666 $80, 000 $10, 662 $94, 328 $2, 666 $80, 000 $1, 000 $9, 676 $93, 342 $2, 666 $80, 000 $1, 000 $8, 630 $92, 296 $2, 666 $80, 000 $1, 000 $7, 518 $91, 184 $233, 631 $215, 771 $196, 283 $175, 021 $151, 821 $125, 000 $453, 887 $67, 373 $0 $310, 099 $165, 650 $0 $289, 625 $233, 642 $0 $267, 317 $319, 533 $0 $243, 005 $426, 872

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