The project is based on company numbers for the "Cheesecake Factory". Attached you will find the project outline/requirements, the project itself (excel spreadsheet) and the instructor's feedback. This is everything that pertains to the project. Please note a written analysis, including references, is required along with the spreadsheet. I already completed Phase I and Phase II but there are corrections to be made based on teacher's comments and the outline as you see fit.

ACC604 COURSE PROJECT BUSINESS PLAN: FINANCIAL PROJECTIONS rev. April 2011 by D. Schwartz Objectives of the Project This project is designed to provide students with the opportunity to gather and analyze the data needed to prepare the financial section of a business plan, and to synthesize the data into the form of a written report accompanied by projected income statements, cash flow statements, and balance sheets for the first two years of a four-year business plan. The Purpose of Your Business Plan Business plans are developed for various purposes, such as providing potential investors or lenders with a credible projection of revenue, profit, and capital requirements. The failure rate for small businesses is extremely high, often because the entrepreneur underestimated the amount of capital that would be required. The question to be answered by this business plan project: \"How much capital (cash) will I need to invest, and when (in what months) will it be needed?\" The answer will appear on the Cash Flow Statement in the form of any negative ending cash balance that results after all data other than owner investment has been entered. The Business You have spent the last 15 years in a high-paying but stressful job in a technology company, and have now decided to start a business of your own. Being an excellent cook, your plan is to open a specialty restaurant in an upscale suburban shopping mall. (You may select any nationality cuisine or other specialty you wish.) Your restaurant will serve lunch and dinner during the hours 11:00 a.m. to 9:00 p.m., seven days a week. Revenue is expected to average $10 per lunch patron, and $20 per dinner patron. Though you plan to do some advertising, you are counting on word-of-mouth recommendation by very satisfied customers as the primary source of your clientele. Your restaurant will accept cash or major credit card only, no checks or charge accounts. You have found available restaurant space in a suitable location that you can lease for a term of 5 years at a monthly rental of $2,000 plus 3% of gross revenue. There is space for 10 tables seating four persons each, and an additional 10 tables seating two persons. You estimate that kitchen equipment, tables, chairs, and table settings will cost $60,000 to be financed by $12,000 in down payment and a $48,000 bank loan at 10% interest, the principal to be repaid in 48 monthly installments. Redecorating and remodeling is expected to cost $40,000, with another $10,000 for sales registers, computer system, and office equipment - all to be paid for in cash. An additional $10,000 in leasehold improvements and $5,000 in office equipment is anticipated for the second year of operation. For the purpose of calculating depreciation expense, you estimate that all equipment and furniture will have a useful life of 5 years which equates to a 20% annual straight-line depreciation rate. Your savings are primarily in tax deferred retirement accounts, and cannot be used to start a new business. However, you have sufficient equity in your home to obtain a line-of-credit loan of up to $75,000 at 8% interest, and will draw against the line as additional cash investment is needed by the business. (Being a personal loan, it will not appear on the books of the business.) Eventually, the business will apply for an unsecured line of credit loan of its own, but at least two years of successful operations are required in order to qualify. So the only borrowing the corporation can do in its first two years is the $48,000 long term loan secured by kitchen equipment. You will be managing the operation and also doing most of the gourmet cooking during the first several months. Though you will not be on the payroll as a salaried employee, you do plan to draw $4,000 a month for personal living expenses. (It is suggested that one-half this amount be treated as \"Officers Salaries\" to be entered on the Income Statement, and the other half as \"Payroll Expense\" to be entered as a \"cook\" on the Payroll schedule.) The company will elect to file federal and state income taxes as an \"S Corporation\" to achieve limited liability protection and pass-through income tax treatment. As such, the corporation will pay no income tax. Instead, stockholders report their share of any profit or loss on their individual income tax returns. Assume the cost to set up the corporation will be $1,000 in attorney's fees and $800 in California state franchise tax. The corporation will continue to pay a minimum franchise tax of $800 each year thereafter. Payrolls will be prepared semi-monthly by Paychex, a payroll service, at an estimated monthly fee of $200, which covers quarterly and year-end federal and state tax returns, W-2's and 1099's. Other check disbursements and daily deposits will be recorded weekly in Peachtree computer accounting software by your niece who recently received an \"A-\" in her high school bookkeeping course. She will be paid $200 per month. Near the end of the 12th month of each year, a CPA will make any necessary adjustments to the computer figures, and compile year-end financial statements and prepare federal and state tax returns for an estimated yearly fee of $2,000. REQUIRED Write a report entitled BUSINESS PLAN FINANCIAL SECTION for (NAME OF YOUR COMPANY). The report should be written in Word, 12 pt Times Roman font, single spaced, and have a title page. Except for the title page, page numbers should be centered in the footer of each page. The report should contain the sections shown below. Each major section should contain a secondlevel heading. Under APA style format, first-level headings are centered, in bold, on a new page. Second-level headings should be left-justified, bold, with initial caps (first letter of each word in upper case) as in the headings below. Third-level headings are similar to second-level, except underscored instead of bold. If any text, charts or other information is copied directly from the instructions or any other source and presented as your own work, it is considered plagiarism and subject to severe penalties. 2 Title page The title page should contain the title BUSINESS PLAN FINANCIAL SECTION for [name of your restaurant] prepared by [your name] and the [date]. Students in online classes should avoid pictures or other graphic images that result in large files. Purpose of this business plan A paragraph that explains the purpose of this business plan. (See \"The Purpose\" on the first page, but state in your own words.) About (name of your company) One or two paragraphs describing your proposed business, including the type of clientele it expects to attract. (A much more comprehensive description would normally be contained in other non-financial sections of a business plan.) Avoid hype, you are not selling anything to anybody. Summary This paragraph should state the total amount of invested cash required during the first year, followed by two exhibits. The first exhibit should be a bar chart showing projected Sales and Net Income for each of the two years. The second exhibit should be a bar chart showing the amount of equity cash investment you will need to make in each of the first twelve months. Basis for Financial Projections This is the main section of the project report. It should be written after the financial exhibits have been prepared and tested for reasonableness by comparing key financial ratios for the second year with industry norms based on the National Restaurant Association Operating Percentages (See National Restaurant Association operating percentages on Page 6.) Note that the first year's ratios for a startup business would not be representative, and that the financial ratios on websites such as money.msn.com are based on large chain restaurant companies and may not be representative of a small independent restaurant. This section should contain for each of the bulleted line items below a third-level heading followed by one or more paragraphs in which you provide a detailed explanation of how you arrived at your projected amounts for Year 1 and for Year 2. Explanations for Sales (Meals) projections, and for Payroll Expense (number of employees and monthly wages) should be especially detailed. (See also \"Using the Excel Template\" on Page 6.) If the Excel program is calculating the amount, do NOT say that, but rather provide a brief explanation of the calculation. If a published reference is used, refer to the author or publication and year at the end of a sentence or paragraph. For example: (General Electric, 2009). Also, be sure to list the citation in APA style in the References section of your report (see examples on page 11). It is unlikely that a sufficiently detailed explanation of how projections were arrived at can be accomplished in a report that has less than five single-spaced pages, excluding the title page, the references page, and the appendices. Most \"A\" papers are seven or eight pages and include tables, relevant screen shots, and the like. Sales Projections Cost of Food and Beverage Sales (Cost of Goods Sold) Food and beverage inventory (based on industry average inventory turnover ratio) Payroll Expense, including Officers Salaries and Employee Benefits 3 Rent Expense (Occupancy Cost) per lease agreement Advertising Expense Depreciation Expense Other operating expenses (consider Restaurant Association's industry average) Breakeven Analysis When startup companies are still operating at a loss, owner/managers are particularly interested in knowing the amount of sales revenue needed to break even. Even after the business begins to show monthly profits, it is important for managers to know the breakeven point and its related \"margin of safety\" in the event of an abrupt sales decline. In this section, provide a paragraph that explains the concept of breakeven analysis and shows the formula and the calculation for each of the two years in total (not individual months) of (1) breakeven sales in dollars, and (2) margin of safety. For the purpose of these calculations, assume that the Cost of Food and Beverage Sales (Cost of Goods Sold) is variable, and all other expenses are fixed. References List in proper APA (American Psychological Association) style the citation to any publication or website used to obtain your research data. (See APA Reference Style Sheet at the end of these project instructions.) At least two references are required. Appendix for Financial Exhibits An Appendix section should contain a title page followed by the financial statement exhibits in Exhibit number order, i.e., Exhibit A-1, B-1, B-2, etc. If you have difficulty copying Excel worksheets into your Word document, it is acceptable to use printouts of the Excel worksheets, or in the case of online classes, to submit a separate Excel file called Bplan Appendix [your last name]. Grading The project will be graded as follows: 85% on content 10% on writing quality 5% on format Note: A commendable grade of 95% is the maximum that can be earned if all the requirements are met but not exceeded. Higher grades are earned only if the work product exceeds expectations, for example by more comprehensive research in support of projections. Project Phases and Due Dates (unless changed by the instructor) Phase I Onground classes: due the second Monday or Tuesday of class Online classes: due as a Week 1 assignment 1. Find and print the restaurant industry average inventory turnover ratio from http://money.msn.com. Turn in a single page Word file entitled References that contains the citation in appropriate APA citation style to your source for the restaurant industry 4 average inventory turnover ratio. See APA Reference Style - Examples at the end of these instructions for samples of appropriate APA reference style. Also turn in the web page printout (not required for online classes.) Money.msn.com is a website that contains financial ratios for the specified public company alongside the average for the industry to which that company belongs. Here's how to navigate to the Key Ratios for restaurants which includes Inventory Turnover Ratio. : a. http://money.msn.com b. Highlight "Investing" in the green bar near the top of your screen c. Click on "stocks" in the row directly beneath the green bar, also near the top of your screen d. About a third of the way down on the next screen, there's a column titled "RESEARCH A STOCK;" type Cheesecake Factory (or any public restaurant corporation) in the small dialog box, click the "Financial results" radio button, then click the "GO" button near the dialog box. e. Highlight "Fundamentals" and click on "Key Ratios". f. Click on"MGMT EFFICIENCY" g. The screen will display the Inventory Turnover ratio, among others, for the company, along with the average for the industry and for the S&P 500 companies. In online classes, save the Word file with the file name \"[Your last name] BPlan References\Rocky, the main problems are ignoring the red warning about negative cash balances on the Cash Flow statement, and having expenses in Yedar 2 that are often less than Year 1, especially payroll. Rocky, the main problems are ignoring the red warning about negative cash balances on the Cash Flow statement, and having expenses in Yedar 2 that are often less than Year 1, especially payroll