Caf Paradiso Business Plan - Business Plan 2007/2008 Commercial-in-Confidence Date Sample Table of Contents 1.0 2.0 3.0 4.0 5.0 Executive Summary 1 1.1 Business Opportunity 1 1.2 Product/Service Offering 1 1.3 Marketing Plan 1 1.4 Management Team 1 1.5 Financial Plan 2 Business Opportunity 3 2.1 Business Opportunity 3 2.2 Vision and Mission 3 2.3 Goals and Objectives 3 2.4 Nature of the Business 4 Market Analysis 5 3.1 Situational & SWOT Analysis 5 Table 1: SWOT analysis and strategy development 5 3.2 Industry Analysis 6 3.3 Competitor Analysis 6 Table 2: Analysis of competitors Table 3: Analysis of competitors' products and services 7 7 Elements of Success 8 4.1 Target Market 8 4.2 8 Competitive Advantage and Unique Selling Proposition Marketing Plan 9 5.1 Marketing Objectives 9 5.2 Marketing Mix 9 Table 4: Value Propositions 6.0 5.3 Action Plan 11 5.4 Sales Analysis and Forecast 11 Figure 1 Sales forecast 11 Legal Matters and Risk Management 12 6.1 Business Structure and Business Name 12 6.2 Registrations, Licences and Permits 12 Table 5: Listing of registrations, licences and permits 12 Contracts and Agreements 13 Table 6: Listing of contracts and agreements 13 Risk Management 14 Table 7 Risk assessment 14 Insurances 15 Table 8 Listing of insurance policies 15 Intellectual Property 15 Table 9 Listing of intellectual property owned Table 10 Listing of permissions for use of intellectual property 15 15 6.3 6.4 6.5 6.6 7.0 9 Human Resource Management 16 7.1 Organisational Chart 16 7.2 Owner/Operator Skills and Experience 17 Table 11: Summary of owners' knowledge, skills, qualifications, and relevant experience 17 Industry Knowledge and Experience of Key Personnel 17 Table 12: Details of personnel with specific industry knowledge and experience 17 Human Resource Requirements 18 Table 13: Analysis of human resource requirements Table 14: Staff and wages estimate 18 18 Job Descriptions 18 7.3 7.4 7.5 7.6 Employment Conditions 18 7.7 Training and Development 19 Table 15: Analysis of qualifications/skills & competencies Table 16: External or internal on-the-job training courses 19 19 Workplace Health and Safety 19 7.8 8.0 Operations 20 8.1 Business Premises and Location 20 8.2 Plant and Equipment Requirements 20 Table 17: Listing of plant and equipment 20 Purchasing and Supply 21 Table 18: Listing of major suppliers 21 Operating and Production Processes 22 Table 19: Analysis of operating facilities and processes 22 8.5 Stock or Inventory 23 8.6 Information Communication Technology Systems 23 8.7 Operational Forecast 23 Figure 2 Operational targets Table 20: Analysis of operational performance (existing/planned) 23 24 8.3 8.4 9.0 Financial Plan 25 9.1 Start-Up Budget 25 Figure 3 Start-up budget 25 Annual Profit Budget 26 Figure 4 Year 1 financial highlights Figure 5 Year 2 financial highlights 26 26 Cash Flow Forecast 27 Figure 6 Projected cash flow by quarter 27 Balance Sheet 28 Figure 7 Projected opening balance sheet and year-end balance sheet 28 Break-Even Analysis 29 Figure 8 Break-even analysis 29 Financial Analysis 29 Figure 9 Financial ratio analysis Assumptions 29 30 9.2 9.3 9.4 9.5 9.6 10.0 Financial Worksheets 31 11.0 Action Plan 40 12.0 Refining the plan 41 Appendices for Business Plan 42 Appendix 1: Situational analysis - external environment 42 Appendix 2: Situational analysis - internal environment 43 1.0 Executive Summary 1.1 Business Opportunity Brendan and Margaret Elliott have entered into negotiations to purchase a caf business, called Caf Paradiso, because of its great location in the Mountain Glen Shopping Centre with the highest number of passing shoppers which is supported by a large and growing local population. There are a limited number of cafs within the centre and with both Brendan's and Margaret's experience with having successfully operated and owned a number of cafes in Australia and overseas they will be able to increase their market share from 35% to 40% in 12 months. The competitive advantages of the business are: location quality of food and service knowledge and experience of the industry available financial resources 1.2 Product/Service Offering The main activity of the company is the operation of the Caf Paradiso. Business activities include purchasing, storing, preparing, selling and serving our products to our valued customers. We expect to serve over 6,000 customers ('dine in' and 'take away') per month. The Caf is open from 8:00am to 5:00pm Monday to Saturday and from 8:00am until midday on Sunday. The caf comfortably seats 36 persons. The mission of the business is to satisfy customers' needs and wants for high quality coffee, delicious nutritious meals and excellent service. Our main point of differentiation from other cafes and coffee shops in the Centre is that one of the business owners is an internationally trained chef who will be able to produce fresh, light and healthy meals each day as well as develop new menu items to meet the changing needs and tastes of people who care about what they eat. The high quality coffee will target staff and shoppers in the Shopping Centre who enjoy good coffee that simply offers good value for money at highly competitive prices 1.3 Marketing Plan The objectives of the company are to: maintain market share through the change of ownership then grow market share to 40%, and generate a before tax net margin of 20%. The business will achieve these objectives by: retaining two key staff members of Caf Paradiso to maintain continuity of customer relationships during the changeover upgrading signage to be more visually appealing maintaining the existing price levels and controlling costs undertaking more aggressive marketing and promotion. 1.4 Management Team Brendan and Margaret Elliott, owners of Seaview Pty Ltd are both experienced Caf owners/managers having successfully operated a number of cafes in Australia and overseas. Brendan is a qualified chef and has previously worked for the Hilton and the Sofitel groups before owning his own caf. Margaret has a degree in Business Management (Hospitality) and she too has worked for the Hilton group of companies and for the Rydges group. Brendan and Margaret will work full-time in the business, retain two key staff from the previous owner to maintain the continuity of relationships with customers during the transition, and will employ an additional four staff. Two of those staff will work on a part-time basis. . 1.5 Financial Plan Our projected performance is summarised below: Turnover: Year 1 $536,650 Year 2 $580,000 Gross margin $378,690 (71%) Net profit (before tax) of $109,869 in the first year, growing to $131,175 in the second year of operation. The business is cash flow positive from the first month of operation Break-Even is estimated at a monthly sales level of $30,869 Return on Total Assets: 37.3% Return on Equity: 51.2% The purchase price of the business is $170,000. Total start-up cost has been calculated at $209,810 and is to be funded by way of a $104,905 bank loan and equity injection of $104,905 from Brendan and Margaret. It is proposed that the loan be paid back over a two year period from cash flow. 2.0 Business Opportunity 2.1 Business Opportunity Purchase of an established cafe within the Mountain Glen Shopping Centre that is part of a large, well developed master planned community which is still growing, incorporating a regional shopping centre, residential, retail and commercial development. The business is ideally located for a Caf, being situated on the main mall with a high passing trade due to its close proximity to two national supermarket chains and a number of well known retail fashion clothing chains. There are a limited number of cafes within the centre and Caf Paradiso has the best location, with the highest number of passing shoppers. Caf Parisdo's primary customers are shoppers and staff within the Shopping Centre who take a break from their shopping or work and enjoy fine coffee or other beverages as well as for people wanting a light, quick and healthy meal that provide a good alternative to the fast food options. The success of the business is based on its excellent location, quality of management and staff, great 'value for money' coffee and meals and superior service. 2.2 Vision and Mission Vision - The company's vision is 'to be the Caf of preference for Mountain Glen Shopping Centre customers'. Mission - The mission of the business is to satisfy customers' needs and wants for high quality coffee, delicious nutritious meals and excellent service. 2.3 Goals and Objectives Goal one: maintain continuity of customer relationships during the changeover by: Retaining two key staff members of Caf Paradiso Maintaining the existing price levels Goal two: maintain market share and sales through the change of ownership then grow market share to 40% in 18 months. The strategies to achieve this goal are: Increase the number of customers Increase the average sales size Increase repeat trade from customers Undertaking more aggressive marketing and promotion Goal three: generate a before tax net margin of 20% for the next two financial years by: Eliminating high cost purchases Improving cost control Improving stock control Page 8 2.4 Nature of the Business Caf Paradiso will serve take away beverages (especially fine coffee) and moderately priced good quality light meals to the casual dining market within the shopping centre precinct. The caf is profitable, has a strong positive cash flow and may be seen as a strong viable and growing business. Seaview Pty Ltd was recently established for the purpose of acquiring the existing caf business known as Caf Paradiso, located at the Mountain Glen Shopping Centre. Caf Paradiso was one of the first shops to open at the centre and enjoys an excellent location from which to operate. Seaview Pty Ltd will be acquiring the business name Caf Paradiso. Brendan and Margaret Elliott, owners of Seaview Pty Ltd are both experienced Caf owners/managers having successfully operated a number of cafes in Australia and overseas. Brendan is a qualified chef and has previously worked for the Hilton and the Sofitel groups before owning his own caf. Margaret has a degree in Business Management (Hospitality) and she too has worked for the Hilton group of companies and for the Rydges group. Brendan and Margaret will work full-time in the business and will employ an additional four staff. Two of those staff will work on a part-time basis. Page 9 3.0 Market Analysis 3.1 Situational & SWOT Analysis STRENGTH Sales & Marketing - Currently holds largest market share in the shopping STRATEGY Maintain and grow market share by improving marketing and promotions both within and outside the Shopping Centre Location within the Shopping Centre for Provide quality products and services to point of sales generate word of mouth endorsements and repeat business Skills - knowledge, skills and experience of Train and develop staff to deliver superior owners/managers in running successful caf quality of products and services businesses previously Financial - owners' access to financial Fund training, marketing and develop new resources and strong cash flow from menu items operations WEAKNESS STRATEGY Location - capped capacity due to floor Investigate the option of negotiating space acquisition of additional floor space from adjoining shops OPPORTUNITY Economy - Well positioned to take advantage of a strong economy, low interest rates and high disposable income Social Patterns - Population growth (residential development) and increased standard of living Physical Factors - Improved public transport and infrastructure WEAKNESS Environmental - Increased cost of utilities, such as water and electrical power STRATEGY Expand marketing and promotion and maintain prices at current market levels Increase advertising and investigate potential to increase floor space Increase advertising in these surrounding areas to attract new clients STRATEGY Look at alternatives to develop capacity to use gas and implement water saving policies and practices Table 1: SWOT analysis and strategy development See appendix for the situational analysis done on both the internal and external environments Page 10 3.2 Industry Analysis The caf market is a competitive market with franchised operators starting to emerge in the coffee shop segment (also offering light meals), which will over time increase concentration in this segment. While the level of competition is increasing, the shopping centre in which Caf Paradiso will be located has capped the number of cafs and coffee shops within the complex (by covenant in the Lease Agreement). To this extent, there will be limited competition and it is anticipated that all cafs and coffee shops within the complex will be quite profitable. Key points about the caf and restaurant industry: Greater concentration in higher than average household income areas Sensitive to changes in real household disposable incomes Trend towards singles, families and business people meeting and eating out Growth with households increasing purchasing frequency and the amount spent in each transaction in this area The current general trend is for cafes and restaurants to concentrate on offering value for money with an emphasis on family restaurants, as well as franchised opportunities. The industry will continue to benefit from higher incomes and time constraints on some households as well as lifestyle changes. This will include more dining out or take away food consumption. There are three key success factors in the caf industry that are essential for the business to do well in order to be competitive. These factors are based on the positioning of the business as well as its' place and physical appearance: Location of caf in terms of: o Proximity to surrounding attractions o Short distance to consumers o Convenience and accessibility Physical appearance in terms of: o Cleanliness of premises o Quality of food o Quality of service Clear market position 3.3 Competitor Analysis Our two main competitors are Club Caf and Coffee Extravaganza as they both have strong brand recognition, with high product quality and well-documented processes for how the business should be run which comes from being a national franchise business. However, they have the operating boundaries of the franchisor that doesn't give them the flexibility to change menu items so easily. This flexibility is something Caf Paradiso can take advantage of with having a chef who can develop new menu items to meet the changing preferences of customers. Zhavargo's Caf is able to be more flexible to market needs attracting the price conscious clientele with an average quality product but this is not the market space Caf Paradiso is competing in. Our competitors have no history of discounting and whilst the number of cafs within the centre is capped, pricing should remain very stable. The following tables outline an analysis of the caf's competitors, their products and targeted customers: Page 11 Table 2: Analysis of competitors Company Name Club Caf Coffee Extravaganza Zhavargo's Caf Size National franchise 20% market share National franchise - 20% market share Local suburban caf. Sales Mix (Product/ Service) Coffee, wine and beers and other beverages, light meals, cakes and desserts; liquor licence Coffee and other beverages, light meals. Focussing more on coffee and beverages Coffee and other beverages, light meals Years in Business 2 years - since the centre was opened 2 years - since the centre was opened 2 years - since the centre was developed Reputation Rating (1-10) 8 - Franchise chain has a sound reputation 8 - Franchise chain has a sound reputation 5 - 6. Variable quality Table 3: Analysis of competitors' products and services Marketing mix Club Cafe Coffee Extravaganza Zharvargo's Caf Product Quality Price High Upper end of the market High Upper end of the market Place/Distribution Franchise - Australia wide. Locally only the one outlet. Shop signage, loyalty cards, sideboards and well know brand Franchisees and staff trained up to the standards of franchisor Documented processes and standards to manage and get the most value out of the business Everything to the standard of the franchise from the quality of the product, service, fit-out of the premises and staff uniforms etc Franchise - Australia wide. Locally only the one outlet. Shop signage, loyalty cards, sideboards and well know brand Franchisees and staff trained up to the standards of franchisor Documented processes and standards to manage and get the most value out of the business Variable Low end of the market Only the local outlet. Promotion People Processes Physical evidence Everything to the standard of the franchise from the quality of the product, service, fit-out of the premises and staff uniforms etc Shop signage, sideboards Only the local outlet. Mainly in the head of the owner Standards vary in terms of quality of products, services, staff and physical surroundings Caf Paradiso will need to maintain current marketing activities and a high level of service and product quality to ensure its competitiveness. It needs to have a clear market position to target and promote the quality and value for money of products and services. Page 12 Page 13 4.0 Elements of Success 4.1 Target Market There is substantial population growth in the area as residential development continues and commercial development commences. The master planned community attracts a high socioeconomic demographic with high employment and higher than average per capita income. Caf Paradiso customers are the passing shoppers and shopping centre staff of all ages who enjoy a fine coffee (dine-in, or take away) and a healthy, value-for-money meal. The majority of the general public consulted in the shopping centre were families and young singles. The cafe will make it particularly easy for a young family to enjoy a meal by providing a range of children's meals and activities. Our take away beverages will also appeal to this group and the segments made up largely of singles between the ages of 18 - 40 who shop or work within the shopping centre precinct. They tend to have moderate incomes with high discretionary spending. The majority of customers who purchase coffee from Caf Paradiso are 'social drinkers', followed by customers who want their daily fix or a pick me up. They are wanting a convenient, friendly and relaxing environment to 'recharge their batteries' or socialise over a fine coffee, choice of beverages and quality fresh, light and healthy meals that provide an alternative to fast food options. The market need being satisfied is based on convenience, quality and value for the coffee drinkers as well the health conscious consumer who is concerned about what they eat. 4.2 Competitive Advantage and Unique Selling Proposition Our first and main competitive advantage that we possess is our location. Caf Paradiso is in the best possible location for a caf and has 3 years of the initial 5 year lease to run, plus the option of another 5 years. Our second competitive advantage is the quality and value of the wide variety of light and healthy meals offered by the business that cannot be matched by other businesses in the centre. In addition, one of the owners is an International Chef who can create new menu items overnight which gives the business the flexibility to sell products to meet the changing preferences of customers. Our third competitive advantage is the industry experience and expertise of both owners running successful caf and restaurant businesses in the past. These competitive advantages form the basis of our unique selling proposition with the slogan of \"Paradiso's - convenient, light and healthy\" and will also include widely promoting the culinary skills of our International Chef. Page 14 5.0 Marketing Plan 5.1 Marketing Objectives There are three key marketing objectives: To achieve sales of $536,650 for the first year and $580,000 for the second year. To achieve estimated 40% market share next 12 months. To position the business as a convenient place to eat light and healthy meals To be reviewed in 6 months. 5.2 Marketing Mix PRODUCT Healthy and light meals are the key point of differentiation for the business because the Caf has the capabilities and flexibility to develop new menu lines to meet the changing needs and tastes of customers, whereas the two franchise businesses in the centre must conform to the requirements of the franchisor. While the other products, in particularly fine coffee, are not unique they do offer excellent 'value for money' that fill the price points between the high and low ends of the other coffee and caf businesses in the centre. The caf will provide the relaxed and friendly environment that our customers seek when searching for a 'dine in' meals, beverages and cakes and desserts that offers excellent value for money, but do recognise that this is not unique as shown in table 4 below: Table 4: Value Propositions Features Benefits Cafe environment Fine coffee Relax and take a break Enjoyment & social connector Refresh and relax Health & well being Beverages Fresh & light meals International chef Cakes & desserts Quality and variety of meals Complements coffee & meals Importan ce (1 to 10) 8 7 Unique ? Y/N No No 4 8 No Yes 8 Yes 4 No Rating: 1 = Low, 10 = High PRICE We propose to offer high quality food and service at a price comparative to our major competitors - we will meet the market on price to retain market share if we need to. Our clientele have a medium to high disposable income and seek high quality products and good service, pricing will reflect the value of our products and services. The shopping centre has a 'captive market' and given the limited number of cafs in the Page 15 centre, prices have not been discounted in the market. There is no intention to discount to buy market share as Caf Paradiso currently holds the largest market share of approximately 35% and we intend to take it to 40%, whilst maintaining existing margins. PLACE (i.e. DISTRIBUTION) Customers access and purchase our products and services through our shop front. The location of the caf is at the southern end of the Mountain Glen Shopping Centre. Mountain Glen is a very large regional shopping centre drawing customers from up to 15 kilometres away and is surrounded by a 'market' of approximately 250,000 persons. It is situated on the main mall, near the major (national) supermarkets and retail fashion clothing chains. It has a high passing trade due to its close proximity to two national supermarket chains and a number of well known retail fashion clothing chains. The caf is 60 m and there is three years to run on the current 5 year lease. An option to take another 5 years is available under the lease. When the proposed commercial development goes ahead, the businesses located there are potential customers for a catering business. The business plan will be revisited at this time. PROMOTION In conjunction with Mountain Glen Centre Management we will be undertaking a range of promotions when we take over the cafe promoting the new ownership of the caf. These promotions will include offers of discounted meals and coffee, but they will only run for two weeks. We estimate that this will be sufficient time to allow a smooth transition to ourselves as new owners. Our regular advertising will consist of shopfront A-frame advertising boards, weekly newspaper advertising and a three monthly flyer drop in local mail boxes. As most of our business will be passing trade, shop front signage will be bright and appealing. We will develop and offer a loyalty card scheme to increase repeat business. Word of mouth advertising is very important and the best advertising we will be providing is the quality of our products and service. PEOPLE Both Brendan and Margaret Elliott have been successful owners and managers of cafs. Brendan is a French trained chef and his skills will be used new product lines to meet the changing needs and preferences of consumers which will be a point of differentiation for the business Margaret with her business and hospitality background will be responsible for the day to day operations of the Caf. Two key staff member who worked with the previous owner will be retained to help with the continuity of existing relationships with customers. PROCESS Major processes are flow-charted in the caf's procedure manual that are geared to providing quality and responsive services to clients as well as efficient and effective operations of the cafe. This includes sufficient numbers of staff are working during the peak periods to make sure customers are served in a timely manner. Further information about the processes in place are detailed in section 8 of this business plan. PHYSICAL EVIDENCE The caf is fully fitted out with table, chairs and dcor that projects the desire image of quality and value as well as aligns with the USP of 'Light and Healthy - Caf Paradiso'. This also Page 16 applies to uniforms for the staff. The cleanliness of the premise, tables and chairs will be maintained to a consistently high standard at all times. Page 17 5.3 Action Plan In conjunction with Mountain Glen Centre Management we will be undertaking a range of promotions when we take over the cafe promoting the new ownership of the caf. These promotions will include offers of discounted meals and coffee, but they will only run for two weeks. We estimate that this will be sufficient time to allow a smooth transition to ourselves as new owners. Our regular advertising will consist of shopfront A-frame advertising boards, weekly newspaper advertising and a three monthly flyer drop in local mail boxes. As most of our business will be passing trade, shop front signage will be bright and appealing. We will develop and offer a loyalty card scheme to increase repeat business. Word of mouth advertising is very important and the best advertising we will be providing is the quality of our products and service. In this area will be training the staff in customer service skills When the proposed commercial development goes ahead, the businesses located there are potential customers for a catering business. The marketing plan will be revisited at this time. 5.4 Sales Analysis and Forecast Our sales analysis has revealed that we can expect on average 6,000 customers (transactions) per month with a general mix of customers buying only coffee, usually 'take away' and those 'dining in' buying a light meal and coffee. Our sales forecast is based on an average industry selling price of $3.50 per cup for coffee and average light meal selling price of $13.00. We expect that the mix of coffee to meals will be approximately 1.5:1 and have based this on the cafs current figures. On this basis we have projected sales of $536,650 for the first year and $580,000 for the second year. Sales will spike in the build-up to Christmas and at times of seasonal celebration e.g. Mother's and Father's days, Easter etc. Our Sales Forecast by quarter is shown in the figure below. Sales performance will be analysed on the basis of sales ($) per employee. Figure 1 Sales forecast Page 18 6.0 Legal Matters and Risk Management 6.1 Business Structure and Business Name Seaview Pty Ltd has been established to carry on the business Caf Paradiso, with Brendan Elliott and Margaret Elliott being the shareholders and management of the company. ACN. 111111111 ABN. 38 111111111 The Business Name Caf Paradiso is an existing registered business name that is being acquired by Seaview Pty Ltd. BN. xxxxxxx Expires. September 2008 6.2 Registrations, Licences and Permits Table 5: Listing of registrations, licences and permits Description of Registration/Licence Registration of Company Registration of Business Name Australian Business Number (ABN, TFN, PAYG, GST) Food Business Licence Date Obtained Expiry Date July 1st 2007 Ongoing July 3rd 2007 July 2nd 2008 July 4th 2007 Ongoing Current licence - September 2006 3rd September 2007 Page 19 6.3 Contracts and Agreements Table 6: Listing of contracts and agreements Contract/Agreement Business Purchase Contract Franchise Contract or Agt Yes/No Yes No Shop Lease Yes Plant & Equipment Purchase/ Maintenance Advertising Contracts Intellectual Property Distribution Rights Purchase/Supply Contracts Service Contracts Loan Documentation Yes Agreements with Customers and Contractors Cooperative Agreements with other Businesses No No No No No Yes Current Status Awaiting copy from vendor's solicitor. Subject to due diligence and finance approval. Refer Business Purchase Contract. To be acquired as part of the business. Informal agreements Have held an initial discussion with the bank - awaiting a copy of the contract, loan application documentation and finalisation of the business plan. No No Page 20 6.4 Risk Management Table 7 Risk assessment Likelihood Impact Priority (L=low, VL=very low, M=medium. H=high, VH=very high) Fire - loss of property/life M H H Change in suppliers terms M M M Food poisoning VL VH H Use quality products, correct storage of food stuffs, train staff in hygiene principles as part of a Quality Control Process Supplier unable to supply L M M Arrange alternative suppliers, evaluate substitute products Major dispute with centre owner Loss of key person L M H VL M M Ensure formal lease agreement is in order. Develop and maintain a sound working relationship with the Centre Manager. Take out key person insurance, effect knowledge and skill transfer to other staff Risk Description Preventative Action Installation of smoke alarms and sprinkler system, fire extinguishers installed and regularly checked, regular staff training in emergency fire procedures including evacuation plans (shop & centre), Ensure insurances including fire, public liability and business interruption are adequate and in place Maintain good relationships with suppliers and maintain access to personal cash reserves Contingency Plans Immediate access to personal resources to rebuild shop and business quickly whilst waiting for insurance payments Utilise alternative suppliers or increase working capital (from personal cash reserves) Develop a complaint handling process. Investigate source of food poisoning and remediate Purchase from alternative suppliers or use suitable substitute products Engage lawyer for advice Short term contract for suitable replacement (until permanent staff can do the job). Call up insurance policy Page 21 6.5 Insurances Table 8 Listing of insurance policies Type of Insurance Business Package Insurer and Policy # QBE Annual Premium $ 1,400 Indemnity Insurance QBE $ 500 Key Person Insurance AMP $ 500 Workers Compensation WorkCover $ 200 Commencement Date Insurances will be arranged upon execution of the contract. Insurances will be arranged upon execution of the contract. Insurances will be arranged upon execution of the contract. Insurances will be arranged upon execution of the contract. Expiry Date The business package will include public liability, fire, theft, burglary and business interruption insurance. The above is based on quotes obtained from our Insurance Broker. Insurances will be finalised once the contract has been signed. Brendan and Margaret have life insurance and income protection policies already in place. 6.6 Intellectual Property Table 9 Listing of intellectual property owned IP Description Registered -yes/no Commencement Date Expiry Date The business does not hold any Intellectual Property at this stage. Table 10 Listing of permissions for use of intellectual property IP Description Registered -yes/no Commencement Date Expiry Date The business does not require any permission for use of Intellectual Property at this stage. The caf will not be providing either live or recorded music. Page 22 7.0 Human Resource Management The management of the business comprises Brendan and Margaret Elliott who between them have significant experience in the hospitality industry. Brendan is a qualified chef and has successfully managed a number of restaurants both here and overseas. Margaret has experience in the 'front' and 'back' offices of resort hotels and is highly respected in the industry for her management skills. The maximum staff requirement (including the owners) is estimated at 6 employees. Two of the employees will be employed on a part-time basis. The main skill sets required are food preparation, sales, customer service, front counter, stock control and management. It is planned to retain two staff members from the previous ownership and recruit two more appropriately qualified staff. We will be taking them through our in-house induction program prior to opening. Salaries and wages in the first year are estimated at $182,000 and $200,000 in the second year of operation. 7.1 Organisational Chart Owners/Managers Team Leader 1 Team Leader 2 Team 1 Team 1 Staff at Caf Paradiso will be organised into two teams. Team 1 will be headed by Margaret Elliott and will be responsible for customer service and administration. Brendan Elliott will head Team 2 which will be responsible for the food preparation and the kitchen. Margaret will have primary responsibility for staff, accounting, sales, marketing, and managing the operation of the Caf. Brendan will be responsible for HR, stock control, the kitchen and food preparation. Page 23 7.2 Owner/Operator Skills and Experience Table 11: Summary of owners' knowledge, skills, qualifications, and relevant experience Name Position Brendan Elliott Owner/Manager; Chef Margaret Elliott Owner/Manager; Business Manager; responsible for the day to day running of the Caf Knowledge, Skills, Qualifications and Experience French trained chef, international and local experience. Local restaurant and caf experience Degree in Business Management (Hospitality). Worked for two national franchise chains, with the last role involving turning around the underperforming restaurants of the Hotel/Motels 7.3 Industry Knowledge and Experience of Key Personnel Table 12: Details of personnel with specific industry knowledge and experience Name Staff Member 1 Staff Member 2 Staff M Position Knowledge/Experience Customer Service Worked with previous owners Customer Service Customer Worked with previous owners Page 24 7.4 Human Resource Requirements Table 13: Analysis of human resource requirements Full Time Staff Team 1 Team 2 Catering Total Permanent Part Time Casual Staff 2 2 1 1 4 2 Contractors The team of staff will be comprised of Brendan and Margaret, plus two service staff (counter and waiting), one assistant 'chef', and one 'kitchen hand'. Two of these staff will be casual and will work on a part-time basis. This equates to 5 full time equivalents (FTEs). Table 14: Staff and wages estimate Wages $ Number of Staff Administration Sales/Marketing Management Production Secretarial TOTAL Current Year Next Year 1 Next Year 2 Current Year Next Year 1 Next Year 2 3 2 3 2 4 2 $82,000 $100,000 $90,000 $110,000 $100,000 $120,000 5 5 6 $182,000 $200,000 $220,000 The above includes casual staff. Staff will be employed under the Hospitality Award. 7.5 Job Descriptions Under review. 7.6 Employment Conditions As per Hospitality Award. Page 25 7.7 Training and Development Table 15: Analysis of qualifications/skills & competencies Administration Accounting/ Bookkeeping Computer/EFTPOS Legal Matters Marketing/ Sales Management Personnel Production/Process Research/ Technology Secretarial Strategic Planning Other Actual (1-10) Forecast (1-10) 8 8 10 8 9 - 10 9 - 10 8 8 8 1 8 8 8 10 8 9 - 10 9 - 10 8 8 8 1 8 The skills and competencies are largely covered by Brendan and Margaret and professional expertise will be provided by our external lawyer and accountant. Table 16: External or internal on-the-job training courses Staff Member All team members (5 FTE) Training Course Details Induction Course Date Duration Prior to opening, then as required. 2 days Cost $2,400 7.8 Workplace Health and Safety The workplace health and safety plan is based on the advice and guidance provided by Workplace Health and Safety Queensland www.worksafe.qld.gov.au and their fact sheets for the restaurant and caf industry. Page 26 8.0 Operations 8.1 Business Premises and Location At present the only facility we will be using is the caf. It is ideally located within the shopping centre to attract passing customers and is also relatively close to our main suppliers i.e. grocer and bakery. The caf is fully fitted out and is fit for purpose. There is no need for a separate operating location at this point in time. There is an opportunity to roast coffee beans and manufacture the caf's own blends at a later date. If this occurs, it may be necessary to acquire operating premises to implement the idea. 8.2 Plant and Equipment Requirements Set out below is a listing of the minimum plant and equipment items that are required to successfully operate the Caf. A schedule of the plant and equipment (and their values) contained in the purchase price will be included in the contract documentation and will be subject to due diligence. The purchase price of the plant and equipment items listed below is stated in the contract at $50,000. The items to be acquired in the purchase price are two years old and will be subject to a Mortgage Debenture Charge as part collateral for the bank loan. We will undertake routine maintenance and plan the replacement of plant and equipment items on the basis of annual condition assessments. Table 17: Listing of plant and equipment Description of Plant / Equipment Item Quality coffee maker Number required Small commercial kitchen 1 1 Benches & cupboards, sinks/drains Cost and how financed Included in the purchase price. Included in the purchase price. Ongoing costs and Maintenance Under warranty Included in the purchase price. Replace as necessary Annual maintenance check Furniture - Chairs & tables 36 chairs 10 tables Included in the purchase price. Replace as necessary Signs 3 Included in the purchase price. Crockery, cutlery and linen POS Equipment (including software), computer 72 settings of crockery and cutlery 1 of each Included in the purchase price. Included in the purchase price. Replace within 6 months as part of promotional strategy Replace as necessary Under warranty Page 27 8.3 Purchasing and Supply Brendan has contacted all existing suppliers and has negotiated supply arrangements on very attractive terms. At this point there are no written contracts although three suppliers have indicated that they are currently preparing contracts for execution. Where suppliers do not provide formal contracts we will be requesting an exchange of letters to confirm the basic arrangements. In most instances local alternative suppliers exist. Where local alternative suppliers do not exist, we have identified alternative suppliers from nearby regions who have the capacity to meet the caf's needs in a timely manner at a reasonable cost. Table 18: Listing of major suppliers Product/ Service Fresh fruit and vegetables Volume Purchased $1,400 per week Tasty Meat & Delicatessen Supplies Fresh meat, manufactured meat, and delicatessen items Mountain Glen Bakery Supplies Trading Terms Alternate Suppliers 30 days Alternative local supplier 'The Greengrocer' $500 per week 30 days Alternative local supplier 'Mavs Meat Supplies' Fresh bread, rolls, and flour etc $1,200 per week 30 days Alternative local supplier 'The Daily Bread' Caf Supplies Pty Ltd Plant and equipment As required. 30 days No local alternative supplier Interstate options Hot Shot Coffee Supplies Coffee beans $150 per week 14 days No local alternative supplier Interstate options BWS (Drink Suppliers) Wines, beer, soft drinks $350 per week 30 days Uniforms R Us Staff uniforms & 4 per quarter badges Name Mountain Glen Fruit & Vegetable Supplies Caf Supplies Serviettes, tablecloths, promotional material A number of alternative suppliers exist Various 30 days Alternative local supplier 'Workwear' 30 days No local alternative supplier Interstate options Page 28 8.4 Operating and Production Processes Our major processes are sales, food and beverage preparation, table service and stock control (ordering, storing, controlling). Major processes are flow-charted in the caf's Procedures Manual. A copy of this is appended to the business plan. The processing of Point of Sale (POS) transactions is electronic, with transactions being automatically posted into the accounting system (which incorporates a stock control system). The table below represents the current and the planned level of operation and the standard of these operations. Table 19: Analysis of operating facilities and processes Detail Current Level of Operation/ Standard Meets Industry Standard Planned Level of Operation/ Standard Meets Industry Standard Plant/Office Capacity 'Dine in' seating for 36. Yes 36 + May need to increase floor space Yes Scheduling (operation, sequences & timing) Current schedules working well. Yes Efficient, effective & economical Yes Equipment/Tooling Requirements Equipment sufficient for our needs Yes Maintain and replace as required. Yes Layout of business premises Premises well designed and lay out excellent. Yes Review design and lay out if additional space acquired Yes Material Requirements All goods and produce readily available at reasonable prices Yes No change envisaged at this time. Yes Location Excellent Yes Excellent location Yes Distribution Customers come into the caf. Yes Customers come into the caf. Yes Quality Controls QA system working well Yes Ongoing continuous improvement Satisfies all industry requirements Staffing Levels Adequate at present Yes. All appropriately trained Appropriate Yes Purchasing lead times Excellent. Great service from suppliers Yes No change envisaged at this time. Yes Page 29 8.5 Stock or Inventory All stock at this stage will be stored 'on site' at the caf. Fresh produce such as vegetables are purchased in vacuum sealed bags or cartons and meat in vacuum sealed packs. These will be stored in a small commercial refrigerator. Other items such as coffee beans, canned and packaged products will be kept in the storage cupboards. Other perishables including cakes and cheese cakes will be kept in refrigerated display cabinets and will be stored for a maximum of three days. On average, we expect to turn stock over once per week. Stock will be controlled using our stock control system, which is a module of the accounting software package. 8.6 Information Communication Technology Systems ICT systems include the computerised EFTPOS system, linked to the accounting system. The EFTPOS system will process Direct Debit, Credit Card, and Cash transactions directly to the bank and the accounting system. The accounting system will process the payroll, stock control, general ledger transactions and maintain the Human Resource records. These systems effectively reduce manual accounting and processing to a minimum. They provide real time reports, thus enhancing productivity and management decision making. 8.7 Operational Forecast We have projected sales transactions at 17,900 for QTR 1, 19,500 for QTR 2, 15,900 for QTR 3, and 18,600 for QTR 4. Our average sale price is estimated to be $7.46 with the average cost of sales at $2.20. Our average number of employees is estimated at 5 with 6 required at peak times. This includes both full time and casual employees. Profit per person is projected at $4,448 per month. Our target for client satisfaction is a rating of 85% for the first year. Figure 2 Operational targets Page 30 Table 20: Analysis of operational performance (existing/planned) Rating out of 10 Operational Feature Current Expected (in next 6 months) Notes - Methods for Improvement Cost 8 9 Quality Wastage 7 8 9 8 Flexibility Skill Levels 9 7 10 8 Dependability Scheduling Downtime Safety 10 10 10 10 10 10 10 Change menu to match seasonal availability and cost of food items Ongoing QA audits and training Monitor stock control (orders & wastage) Workplace Agreement On the job training, mentoring and coaching None at present None at present None at present None at present Service 10 8 10 Technology 7 8 Innovation 7 9 Train staff and encourage excellence in service On the job training for the EFTPOS Evaluate changes in consumer tastes and behaviour and monitor the menus of the leading restaurants and cafs The current rating is based on our observation of the existing operation under the current owner. We propose to lift standards significantly within a few months of taking over. We believe that this is necessary and achievable. Page 31 9.0 Financial Plan Tables attached: Sales Forecast Start-up Budget Annual Profit Budget Profit and Loss Statement (2 years projected) Annual Cash Flow Budget Balance Sheet (2 years projected) Break-Even Analysis Financial Analysis 9.1 Start-Up Budget The start-up budget is estimated at $ 209,810 broken up into 'one off' costs of $187,300 and monthly expenses in advance of $ 22,510. Included in the 'one off' costs is goodwill valued at $120,000 and plant and equipment of $ 50,000. The start-up budget is shown in Figure 3 below. Figure 3 Start-up budget Page 32 Page 33 The Start-up budget is to be funded by way of equity injection of $104,905 by the owners and a loan over two years from the bank. The bank loan will be repaid out of the business' strong cash flow. If cash flow is reduced for any reason, Brendan and Margaret have personal financial resources to more than adequately cover the loan repayment. A Mortgage Debenture over the business is being offered as collateral along with the Directors personal guarantees. 9.2 Annual Profit Budget The projected profit for the first year of operation is $109,869, with the second year projected at $131,175. These projections have been based on the Annual Profit Budget (copy attached). Financial Highlights over the 2-year period are summarised in the figures below. Figure 4 Year 1 financial highlights Figure 5 Year 2 financial highlights Gross Margin is calculated at 71% for Year 1 and 71.5% for Year 2. Net Profit Margin (Before Tax) is calculated at 20.5%. for Year 1 and 22.6% for Year 2. The business is quite profitable and margins are sustainable over the medium to longer term. Page 34 9.3 Cash Flow Forecast The Cash Flow Forecast projects a very healthy cash surplus on trading for each month with the end-of-year 'cash from operations' calculated at $105,847 and an ending cash balance of $145,657. Brendan has negotiated very favourable credit terms of 30 days from all suppliers for the first 12 months, although in most cases these arrangements are not in writing. If all suppliers reduced their terms to 7 days cash flow for two trading months, the peak cash shortfall would be approximately $1,200 for about 2 months. Brendan and Margaret have significant liquid assets to call upon should this eventuate. On the figures provided and the arrangements negotiated, the business has a strong and positive cash flow. Figure 6 below shows the projected cash-flow by quarter. Figure 6 Projected cash flow by quarter Net Cashflow Budget by QTR 60,000 50,000 $ 40,000 Budget 30,000 20,000 10,000 0 Budget QTR 1 QTR 2 QTR 3 QTR 4 52,187 25,402 27,947 19,681 Page 35 9.4 Balance Sheet The opening Balance Sheet shows an equity position of $104,905 growing to $214,774 at the end of Year 1 and to $345,949 at the end of Year 2. By the end of Year 2 the business will be clear of any debt and be 'cashed up' to take advantage of further opportunities in the market place. Figure 7 Projected opening balance sheet and year-end balance sheet Page 36 9.5 Break-Even Analysis The Break-Even point has been calculated at 4138 transactions at an average selling price of $7.46. This equates to a contribution margin of $6.38 per transaction and a Break-even sales point of $30,869 per month. The projected level of sales for each month is well above the Break-even level (approximately 30% above). Figure 8 Break-even analysis Monthly unit sales Break-Even Chart Break -Even $ Monthly Sales 60,000 50,000 $ 40,000 30,000 20,000 10,000 0 1,655 2,483 3,310 4,138 4,966 5,793 6,621 Monthly Unit Sales 9.6 Financial Analysis The Return on Owners Equity calculated on the projected end of year financial performance and position indicates a return on investment of 51.2%. Return on Total Assets is calculated at 37.3%. Gross Profit Margin over the period is estimated at 71% with the Net profit Margin estimated at 20.5%. Figure 9 Financial ratio analysis The above ratios indicate a very solid financial performance over the period. Page 37 The Current Ratio and the Quick Ratio (Acid Test) are both very high reflecting the fact that the business has a very strong and positive cash flow. This is due to sales being predominantly cash, whilst purchases are bought on largely on 30 day terms. Liquidity is sound. The business also enjoys a sound financial position with the Debt to Equity ratio calculated at 37.2% and Debt to Total Assets at 27.1%. Assumptions Average sale price $7.46 per transaction Average cost $2.20 per transaction Sales transactions range from 5900 per month to 7500 in peak period Historical gross profit margin of 70% will hold. Seasonal fluctuations - Christmas and New Year are peak periods of sales activity (build up from November, the after New Year slow to February) The business operates on a cash basis for reporting and paying tax. PAYG (withholding) is remitted monthly on the Instalment Activity Sheet (IAS), with GST remitted quarterly in arrears on the Business Activity Statement (BAS). Page 38 10.0 Financial Worksheets The following documents have been attached: Sales Forecast Start-up Budget Annual Profit Budget Profit and Loss Statement (2 years projected) Annual Cash Flow Budget Balance Sheet (2 years projected) Break-Even Analysis Financial Analysis Page 39 Page 40 Start- Up Budget MONTHLY EXPENSES Salary of owner-manager All other salaries and wages Rent/lease Advertising & promotion Delivery expense Supplies (stock-in-trade) Telephone Other utilities (electricity, gas etc) Insurance Consumables Interest Maintenance Legal and Professional costs Projected Monthly Expenses Cash needed Start $8,000 $7,000 $2,200 $200 $8,000 $7,000 $2,200 $200 3.8% 3.3% 1.0% 0.1% $3,100 $300 $500 $3,100 $300 $500 1.5% 0.1% 0.2% $300 $460 $200 $250 $300 $460 $200 $250 0.1% 0.2% 0.1% 0.1% to % of Total Page 41 Miscellaneous Subtotal $22,510 One Off' Costs Fixtures and Equipment Fitout Installation charges Starting Inventory Deposits for utilities (electricity, gas etc) Legal and professional fees Registrations, licenses and permits Advertising and promotion for opening Cash Other Subtotal $22,510 10.7% $50,000 23.8% $3,000 $400 $2,750 $1,000 $550 $5,000 $124,600 $187,300 1.4% 0.2% 1.3% 0.5% 0.3% 2.4% 59.4% 89.3% Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 11.0 Action Plan Action Priority Date Initiated Date for Person/s follow up Responsible Work/ Stages to be done Deadlines Complete due diligence (including purchase contract) Review insurances and arrange as required Check that all necessary licences and permits are held Review business plan Prepare finance proposal Submit finance application 1 May 18th May 25th Accountant Lawyer June 5th 1 May 18th May 25th Insurance Broker June 5th 1 May 18th Brendan Elliott June 5th Arrange settlement date & handover May 25th 1 June 7th June 10th Accountant June 10th 2 June 11th June 15th Accountant June 15th 2 June 16th June 16th Accountant June 16th 2 June 25th Lawyer June 25th June 25th Page 50 12.0 Refining the plan This section would not be retained when presenting the business plan to other parties e.g. potential lenders and investors. Page 51 Appendices for Business Plan Appendix 1: Situational analysis - external environment External Environment Opportunity Threat Influence (1-10) ECONOMIC: Stage of the economic cycle Yes 7 Current interest rate Yes 7 Average disposable income Yes 6 Population growth and make-up Yes 5 Household structure (e.g. singles. families) Yes 6 Geographic distribution Yes 8 Level of education Yes 7 DEMOGRAPHIC TECHNOLOGY: Innovations in the manufacturing process Technological developments (substitute products) SOCIAL/CULTURAL Yes Corporate social responsibility 5 Environmentally friendly 'green' products Yes 6 Standard of living Yes 7 Percentage of work to leisure time Yes 5 POLITICAL/LEGAL: Regulatory environment and legislation Compliance with standards and codes ENVIRONMENTAL Climate Change & Carbon Trading Eco-efficient manufacturing PHYSICAL FACTORS: Climatic conditions Water restrictions Yes 6 Infrastructure - transport, communications and services Yes 8 Page 52 Appendix 2: Situational analysis - internal environment Page 53 Internal Environment Strength Weakness Factor (1-10) Yes 7 STRATEGY Competitive advantage - able to differentiate Key drivers of the business are known Yes 8 Strategy and resources for growth Yes 5 Detailed action plan Yes 8 Clear evidence of market need for your product/service Know your specific market & competitors in detail Know exactly who your target audience is and be able to describe them in detail Spend more resources on your current and most profitable customers Yes 7 Yes 8 Yes 6 Competitive and profitable pricing strategy Yes 8 Your marketing plan and budget Yes 8 SALES & MARKETING Yes Measure, learn from and adapt your marketing activities Yes 7 7 STRUCTURE Business structure - maximise wealth and minimise risk (e.g. sole trader, company, partnership, trust) Yes 5 Distribution and sales to target markets Yes 9 Yes for current Yes - limited level of demand capacity for expansion Yes 7 Are your buildings and facilities adequate? Is your equipment effective and up to date? 5 Able to protect your IP from being copied? SYSTEMS Information and management systems (e.g. CRM) Yes 5 Performance measurement and rewards Yes 5 Documented processes and systems Yes 6 Strong debt collection systems Yes 8 Purchasing systems and inventory management Yes 8 Yes 8 STAFFING & SKILLS Recruit the right people Training and development of staff Yes Staff motivation, satisfaction and remuneration Yes 7 7 Page 54 Page 55