Calculate NPV and Breakeven calculations for each of the alternatives and determine which strategic decision Mike must make for his business... Expand into the catering market, remain in street food, or neither?
Exhibit 1 Sam's Grill Sample Menu Items
Marinated Chicken & Veggie Kabob Grass-fed Hamburgers Beer Brat with Sauerkraut Mac & Cheese, Cole Slaw, Beans
Bottled Water
$5.00Pork & Brisket Sandwich
$10.00Grilled Chicken Legs $8.00*Loaded French Fries $3.00*Gatorade
$1.00
$12.00*
$5.00 $6.00* $2.00
*Price varied based upon the vendor fee charged by event management. Note: Mike targeted a minimum avg. ticket order of $10.00 and a 25%-35% food cost. Source: Mike Barney Owner, Sam's Grill (July 2017) Sample Street Food Menu
BBQ Lunch Garden Party for 30 people; Buffet Service Sample Catering Menu
Appetizer Garden Fresh Bruschetta Salad Mixed Field Greens Entree Slow Smoked Brisket Entree Slow Smoked Turkey Side Buttermilk Cornbread Side Mamas Tater Salad Side Cowboy Beans
BBQ Sauce Beverage Unsweetened Tea Beverage Fresh Squeezed Lemonade Services On-site Buffet
Quantity 1 tray
30 cnt 8 lbs 8 lbs 3 trays 7.5 lbs 7.5 lbs 0.75 gal 1.5 gal 1.5 gal
1 hour
Unit Price $120/tray
3.50/cnt 22.99/lb 22.99/lb
4.99/dzn 9.99/lb 7.50/lb
20.00/gal 5.50/gal 10.00/gal
125.00/hr
Sub-Total Tax at 10.95% Grand Total
Line Total $120.00
$105.00 $183.92 $183.92
$37.50 $74.93 $56.25 $15.00
$8.25 $15.00
$125.00
$924.77
$101.26 $1,026.33
Source: Mike Barney Owner, Sam's Grill (April 2017)
Exhibit3 - Estimated Investment Levels and Future Case Flow Projections (rounded) 2015 Options Estimated Investment Estimated Net Cash Flow Year 1 (2017) Estimated Net Cash Flow Year 2 (2018) $40,500 Estimated Net Cash Flow Year 3 (2019) $53,000 $9,000 $30,500 (A) Expand Street Food (B) Add Catering and Maintain Street Food $25,000 $51,450 $75,950 $117450 Exhibit 2 - Profit and Loss Statement (2014-2016) Ordinary Incomc/Expense (SUS) - Accrual Basis January through December 2014 2016 Comments Income Food Sales 18,000 24,568 86,921 Total Income 18.000 24,568 86,921 2014 8 special public events & casonal weekend street service, 2015 15 special public events, 2016 40 special public events Cost of Goods Sold Food Purchases 12,533 32,401 Goal: 30% of Food Sales thru purchasing efficiencies and sourcing co-operative Direct Labor Payroll (Cody paid 4,931 10,675 2015 Cody (450 hrs) & subcontract $3,613 (2015) and 56,470 (2016) labor 2016 Cody (650 hrs) & sub contract labor Business licenses/ 1,434 4,005 Permits/Insurance Per event basis Total CONGS 6,000 18,904 47,061 Gross Profit 12,000 5,664 39.840 Operating Expense (Fixed) Advertising & Promotion 1,105 2,131 Automobile Expenses 4,700ful and maintenance Bank Service Charges 287 210 Computer and Internet 228 1,000 Expenses Office Supplies 28 50 Professional Fees 2,04 2,300 Client meetings, Legal, Acct, R&D Propane 286 555 Reimbursement 109 Rent Expense 1,412 1,500l.cased kitchen space Repairs and Maintenance 92 Restaurant Supplies 1,454 549 Supplies 382 1,219 73 Utilities 255 Total Operating Expense 15,000 7,849 14,677 2014 Operating Expense not itemized Net Ordinary Income (2,185 25,074 Other Income/Expense Ask My Accountant 30 1,604 Total Other Expense 3 1,600 Net Operating Income (3,000 (2218 23,470 Sam paid himself a salary from Net Income after reinvesting back in business (2016) Source: Mike Barney - Owner, Sam's Grill (July 2017) Mike's research assumed/estimated: Total revenues for 2017 - option (A): $122,000 Total revenues for 2017 - option (B): $147,000 Discount Rate for (A) 5% and for (B) 15% 20%-25% (A) & 40%-45% (B) profit before taxes 20% YOY"nomal growth rate for street food revenue (2016-2019) +2% YOY inflation rate: +3% YOY contingency expense $3,500 revenue per catering event (2017) 5% YOY higher operating expenses for (B) vs. (A) 2017 COGS 50% (A) and 52% (B) of Total Income bef. inflation/contingency "Est. Investment" primarily kitchen equipment YOY: Year over Year Source: Mike Bamey-Owner, Sam's Grill (July 2017) 1 ! Uniforms ! i i ! ! ! " i " " ! ! Exhibit3 - Estimated Investment Levels and Future Case Flow Projections (rounded) 2015 Options Estimated Investment Estimated Net Cash Flow Year 1 (2017) Estimated Net Cash Flow Year 2 (2018) $40,500 Estimated Net Cash Flow Year 3 (2019) $53,000 $9,000 $30,500 (A) Expand Street Food (B) Add Catering and Maintain Street Food $25,000 $51,450 $75,950 $117450 Exhibit 2 - Profit and Loss Statement (2014-2016) Ordinary Incomc/Expense (SUS) - Accrual Basis January through December 2014 2016 Comments Income Food Sales 18,000 24,568 86,921 Total Income 18.000 24,568 86,921 2014 8 special public events & casonal weekend street service, 2015 15 special public events, 2016 40 special public events Cost of Goods Sold Food Purchases 12,533 32,401 Goal: 30% of Food Sales thru purchasing efficiencies and sourcing co-operative Direct Labor Payroll (Cody paid 4,931 10,675 2015 Cody (450 hrs) & subcontract $3,613 (2015) and 56,470 (2016) labor 2016 Cody (650 hrs) & sub contract labor Business licenses/ 1,434 4,005 Permits/Insurance Per event basis Total CONGS 6,000 18,904 47,061 Gross Profit 12,000 5,664 39.840 Operating Expense (Fixed) Advertising & Promotion 1,105 2,131 Automobile Expenses 4,700ful and maintenance Bank Service Charges 287 210 Computer and Internet 228 1,000 Expenses Office Supplies 28 50 Professional Fees 2,04 2,300 Client meetings, Legal, Acct, R&D Propane 286 555 Reimbursement 109 Rent Expense 1,412 1,500l.cased kitchen space Repairs and Maintenance 92 Restaurant Supplies 1,454 549 Supplies 382 1,219 73 Utilities 255 Total Operating Expense 15,000 7,849 14,677 2014 Operating Expense not itemized Net Ordinary Income (2,185 25,074 Other Income/Expense Ask My Accountant 30 1,604 Total Other Expense 3 1,600 Net Operating Income (3,000 (2218 23,470 Sam paid himself a salary from Net Income after reinvesting back in business (2016) Source: Mike Barney - Owner, Sam's Grill (July 2017) Mike's research assumed/estimated: Total revenues for 2017 - option (A): $122,000 Total revenues for 2017 - option (B): $147,000 Discount Rate for (A) 5% and for (B) 15% 20%-25% (A) & 40%-45% (B) profit before taxes 20% YOY"nomal growth rate for street food revenue (2016-2019) +2% YOY inflation rate: +3% YOY contingency expense $3,500 revenue per catering event (2017) 5% YOY higher operating expenses for (B) vs. (A) 2017 COGS 50% (A) and 52% (B) of Total Income bef. inflation/contingency "Est. Investment" primarily kitchen equipment YOY: Year over Year Source: Mike Bamey-Owner, Sam's Grill (July 2017) 1 ! Uniforms
