Feasibility StudyIdentification and exploration of business
scenariosThroughout the restaurant industry there is a wide variety
of service styles. Determining which style of service best suits
our talents and needs is the first process of opening a business.
Each service style caters to specific markets and in order to
ensure success our service style must please our target market.Fast
Food, also known as quick service restaurants, caters to people in
fast paced environments. This style of restaurant primarily serves
food such as burgers, fries, chicken sandwiches, etc. that are made
in bulk, wrapped, and kept warm until served. This doesnt allow
foods to be made fresh with high quality ingredients along with
having the healthiest selection of food. Fast Food restaurants have
minimal seating, if any as they might have a drive-thru option
available. Our concept for Confections by Design Bakery is looking
on building relationships with our customers on a personal level.
The fast food service style does not fit this image. Our caf plans
to make our products fresh with healthy options, therefore fast
food is not the best choice.Fast casual restaurants do not offer
full tableside service but some places may have some aspects of
tableside service available. This is a new and upcoming concept
that is a combination between fast food and casual dining. Fast
casual dining also focuses on healthier food options as well as
fresh ingredients. These restaurants cater to people who would like
to receive their food in a timely manner to get in and out of the
restaurant rather than sitting around waiting for food and service,
such as in casual or fine dining. This style of service would fit
perfectly for the needs of our target market. Having a fast casual
style allows customers to come at any time of day and receive
quality food without having to commit a lot of time to dining.
Casual Dining is a style of service where a restaurant serves
moderately-priced food in a casual atmosphere. Casual dining
restaurants provide full table service as well as a fully stocked
bar. Our concept for Confections by Design Bakery is a smaller caf
instead of a full service restaurant, having a full casual dining
restaurant would not be a realistic service to pursue. Fine dining
restaurants are full service restaurants offering only the highest
quality food, service, and experience. Even though Confections by
Design Bakery will focus on providing quality food and service,
making Confections by Design Bakery into a fine dining restaurant
would be inappropriate. Especially considering the style of food we
would provide and the target market we are trying to appeal to.
Type and Quality of Products Marketed Confections by Design
Bakery will consist of two different departments; the bakery and
the sandwich bar. The bakery carries a variety of goods such as
bagels, breads, muffins, pastries, cookies, and cupcakes. There
will also be select sandwiches made from the bakerys bagels and
breads. The bakery department is generally geared toward the
breakfast crowd and for those with a sweet tooth at any time of the
day. The sandwich bar will appeal more to the lunch crowd, offering
the freshest ingredients along with a healthy selection.
Confections by Design Bakery will also offer a variety of beverages
featuring espressos, coffee, juice, tea, and fountain beverages.
How will the business make money?Confections by Design Bakery will
earn its profit by simply being the best caf around. This is
determined by not only the quality of the food but also by the
customer service provided. Confections by Design Bakery plans on
having a small, close, and well-trained staff that can meet the
public and the companys needs. Having a small staff creates a
family like atmosphere with the caf. By inviting the public into
what we consider our home, makes the customer feel special and we
are able to create strong, loyal, relationships with them.Technical
Processes, Size, Location, Kinds of InputsConfections by Design
Bakery plans to have a generous size caf, but nothing that is too
large or overwhelming. There will be some comfortable indoor
seating along with a few tables outside for when the weather is
nice. The target markets for Confections by Design Bakery will be
families and businesses. The best location for these markets would
be the Kentlands. The Kentlands is an up and coming community with
many families and now businesses within a 5 mile radius.
Relationship to the surrounding geographical areaBringing our
business into the Kentlands community is going to create
competition for surrounding businesses similar to Confections by
Design Bakery; however, this will bring more revenue into the
community. Confections would be located in an area which already
has buildings available instead of building a new place and
requiring heavy construction in the area. This saves the community
the hassle of having to work and travel around our business and
hopefully make a good impression on the Kentlands
community.Industry Description
The restaurant industry is one of the seven service industries
in the hospitality industry (other categories include lodging,
event planning, theme parks, transportation, cruise line, and
tourism industries). Food and beverage facilities are essentially
retail stores that carry and prepare food items. They are
facilities that prepare food and drink to order for customers in
exchange for money. Meals can be consumed on premises, but
restaurants also offer offsite delivery or carryout services.
According to the statistics provided from the National Restaurant
Association, there are approximately 970,000 food service locations
nationwide with a projected sales of $632 billion in 2012; the
typical sales is $1.7 billion per day (Facts at a Glance).The types
of restaurants are categorized based upon menu style, preparation
methods and pricing. The four major categories in the restaurant
industry are fast food, fast casual, casual dining, and fine dining
restaurants. Target markets in the restaurant industry are
versatile; consumers can be categorized by age, food preference,
cultural background etc. Some on the market segments includes young
adults, seniors, tourists, vegetarians, business people, sports
fans, lunch break crowd, happy hour crowd, etc. Our concept is fast
casual, the type of restaurant that does not offer full table
service but offers a friendlier atmosphere with higher quality of
food. Most fast casual establishments offer counter service
accompanied with food. The menu is usually limited and extends to
over the counter displays with various options in the way the food
is prepared. This restaurant concept was popularized in the mid
1990s; however, it did not become trendy until the 2010s. The
reason behind this change in trends was because consumers started
to prefer food service that offers healthier food options compared
to fast food and with a relatively low cost as compared to casual
and fine dining. The success of a restaurant is based on a variety
of factors that include food quality, customer service, location,
menu price, etc. One of these factors is trend which can be defined
as the direction in which something tends to move. In the
restaurant industry, it is focused more on the kinds of food being
served. The National Restaurant Association identifies the trend in
the next year or two to focus on childrens nutritional menus and
sourcing ingredients from local farms. Consumers nowadays focus
more on the nutritional value of food and how ingredients are
harvested. Factors that contribute to this trend including the
ingredients freshness, methods which they are grown, and the
distance the ingredients have traveled before they are made onto
the table. The Restaurant Life Cycle
The restaurant life cycle of restaurants has four stages:
Introduction, growth, maturity and decline.
The introductory stage is when a new product or service enters
the marketplace, in this case our bakery cafe. The nature of
hospitality products is typically intangible which can make market
testing difficult before introduction. Ideally the product should
be developed on the basis of consumer research. This stage may also
be one of high costs. Typically, the introduction often begins with
a soft opening that may be a few days to a few weeks before the
official opening. Word of mouth brings some customers or small
groups to test the products and services offered in the restaurant.
The growth stage of the restaurant industry differs from
manufacturing industry; if the menu items in a newly opened
restaurant are not successful, the managers will simply take the
items off the menu and offer new ones. In manufacturing industry,
if a product is not successful then the entire plan is terminated.
The growth stage of the hospitality unit is one of excitement and
disappointment. Sales may be growing monthly or there may not be
enough seats in the restaurants. Customers who tried the facility
in the introductory stage have told others who are now trying it.
Business is booming, but there are many marketing issues at hand.
It is during the growth stage that the previous relationship with
marketing pays off. Consumers come back for the food and service
and they will tell others about it. The growth stage is also a time
of product refinement. Continuous customer research and feedback
should assist in eliminating flaws and fine tuning our products to
the target market. An important note during this stage is that it
is not a good time to raise product prices. The mature stage of the
product life cycle can continue for a long time or it can end
quickly. If the product has successfully and correctly gone through
the introductory and growth stages, the market should now be pretty
well in place. In the mature stage, the restaurant has to run
harder just to stand still. With other competitions sharing the
same target market, the concept and facility could be getting old.
The best way to avoid this is to keep and increase the loyal
customers during the growth stage. The best way to stay in business
is to stay close to the customer, find new markets, seek and solve
customers problems, and do it better than the competition. If the
restaurant is not maintained during the mature stage it will enter
the decline stage. For example, the menu items may lose their
freshness, consumers may change, or it is time for the restaurant
to go. Decline has a tendency to progress faster than growth stage.
During the beginning of this stage, managers face declining revenue
by cutting expenses. The managers may decrease the front and back
of the house employees to cut labor costs, use cheaper raw
ingredients, and decrease menu prices. However, these actions cause
more revenue decline and result in unhappy customers, which results
in even more revenue decline (Shoemaker).
Industry Competitiveness
According to the National Restaurant Association 2012 Restaurant
Industry Fact Sheet, seven out of ten eating and drinking
establishments are single unit operations. This means that
franchises make up almost thirty percentage of the industry. The
first year success rate for restaurants is roughly ten percent.
However, since franchises have better operation systems and are
well known for their reputations, their success rate has increased
to forty percent. The 2009 average unit sales were $837,000 for
full service restaurants and $738,000 for quick service
restaurants. Although the unit sales for full service are higher,
the profit margin may not be as high as compared to quick service
restaurants. Quick service restaurants serve food at lower prices
and have high guest turnover ratios. Their labor costs and food and
beverage costs are also lower which means that their profit margin
may also be higher. The major competitors at the Kentlands in
Gaithersburg are Panera Bread, Chipotle, Cosi Sandwich, Liz Bakery,
and Whole Foods Market. Panera Bread, Cosi Sandwich and Liz Bakery
are considered direct competitors while Chipotle and Whole Foods
are indirect competitors. Panera Bread is a chain of franchised
bakery cafes categorized as quick service restaurants in the United
States and Canada. Panera started in 1981 when the co-CEO purchased
the St. Louis Bread Company with twenty of its cafes in the area.
By 1999, Panera had expanded into a national restaurant, operating
over fifteen hundred cafes over forty states. Panera competes on
many levels including fast casual dining and specialty foods. Its
main competitors include McDonalds, Starbucks Coffee, and Subway.
To stay profitable in the highly competitive restaurant industry,
Panera regularly reviews and revises their menu to sustain the
interest of regular customers, satisfying changing customer
preferences and being responsive to various seasons of the year.
Panera develops a competitive advantage in changing their menu over
competitors who do not change their menu frequently and customers
often lose interest in their menu offerings. Cosi is an American
restaurant chain that primarily offers gourmet sandwiches and
salads. The concept was based on a cafe in Paris, France. Founded
in 1996, theyre all over the World with one hundred and four
locations just in the United States. These restaurants also feature
a full service espresso bar and many chains may even serve alcohol.
One attraction is that all Cosis breads are baked in an open flame
oven in full view of the customers. The menu also serves breakfast
items such as bagels, salads, soups, and desserts. The top
competitors of Cosi on a national and local basis are Panera Bread
Company, Starbucks Corporation, and ABP Corporation. Liz Bakery is
an independent bakery specialized in custom cakes such as wedding
cakes, quinceaneras, sculpted cakes and cupcakes. We consider Liz
Bakery as our direct competitor because our cake selections are
similar to their offerings. One advantage Liz Bakery has over ours
is its reputation; the bakery has been in the Kentlands area longer
than we will have been and it has a loyal customer base. Our
competitive advantage over them is that we offer a variety of
specialty items. There are two other establishments, Whole Foods
Market and Chipotle, which are considered our indirect competitors.
Whole Foods Market has almost everything we sell; what
distinguishes it from our bakery cafe is that Whole Foods is a
market. Our bakery cafe also offers the experience that consumers
will not find in Whole Foods. And as for Chipotle, it is also
considered as a fast casual dining restaurant. One of its
competitive advantages is that it has many target markets with many
loyal customers.
Bargaining Power
The suppliers of ingredients, equipment, labor, and expertise
services provided have power over the restaurant industry. The
bargaining power is the price for the materials and services
provided. The restaurant industry has many suppliers that vary in
different sizes and specialties. Restaurant owners will choose the
suppliers who can correspond to their needs. One indication that
suppliers have bargaining power is that the suppliers can contract
with only certain independent or franchise operations and can set
the amount of ingredients the operation must order. Small
independent units may not be able to purchase from certain vendors
because they do not have the financial power to purchase in large
quantities. If our bakery cafe offers menu items that are
ingredient driven (for example, fresh local produce and proteins),
this will increase supplier power as the suppliers can demand
higher prices for their products and increase our food cost. The
Bargaining power of customers plays an important role in the
restaurant industry. When the buyer power is strong, the buyers can
certainly set the price they are willing to afford. Consumers of
fast casual restaurants will like to have high quality food and a
better experience offered at a reasonable price. It is dangerous
for fast casual restaurants to raise prices because of the low
prices offered by competitors and the expectations of their
consumers. One of the reasons that fast casual restaurants were
able to succeed during the recent recession is because the owners
were able to maintain reasonable prices to offer their
consumers.The threat of new potential entrants in fast casual
restaurants is extremely high. There are fewer barriers for entry
into this market because it requires relatively low capital.
Restaurantowner.com identifies that an approximate cost to start a
restaurant business is $225,000. Another factor that can influence
more potential entrants is the possibility to create a better
dining experience. Fast casual restaurants not only need to offer a
better dining experience, but they also need to serve good food. If
the restaurants are able to revolutionize their consumers
experience, it will be extremely easy to enter into the fast casual
segment. To succeed in this extremely competitive market, a fast
casual restaurant must have a competitive advantage. A restaurant
can obtain this advantage by lowering menu prices while creating
product differentiation, exploiting relationships with suppliers,
and distributing products differently. It is reasonable to assume
that most fast casual restaurants offer similar menu items in the
same price range. The restaurant owner must lower their menu prices
and/or improve customer service. Competition increases in this
industry because the number of restaurants is constantly increasing
and they are battling for the same group of customers. A fast
casual restaurant should always try to increase their revenue by
expanding their targeting market. Market Potential
The product we offer will be sold in both the product and
service market; our menu items such as sandwiches, baked goods, and
drinks are the products and our dining experience is the
service.
The demand for fast casual restaurants in the restaurant
industry has been constantly growing. This concept meets the
customers demand of eating on the run and provides healthier
options. In recent years consumers favor healthy food options. The
food quality and preparation methods at the traditional fast food
restaurants have been scrutinized in recent years. The food options
provided in these establishments have been shown to have negative
health consequences.
However, consumers desire of healthier food options does not
supersede the need of quick service dining. Consumers prefer food
that can be eaten quickly during a lunch break or picked up on the
way home. Fast casual restaurants have found a niche where the
consumers needs of healthy food overlap with quick service. This is
an opportunity for restaurateurs because fast casual restaurants
are targeting two potential markets; quick service and casual
dining. Although restaurants in this category do not offer full
tableside service, their food quality is just as high and the food
takes shorter time to prepare. The price for a typical meal is
anywhere from eight to fifteen dollars. Although this price is
higher than what is offered at fast food restaurants, consumers are
willing to pay more for higher quality and healthier food.
In order to become a branded product our restaurant concept must
become a franchise. Franchising is the practice of using a firms
business model. The franchisee must pay a fee to the franchisor in
order to use the franchisors business concept, logo, menu, design,
etc. It is less risky than independent operations because a
franchisors concept has been proven to be successful. To be
established as a successful operation, a business must successfully
operate for a few years to prove to potential clients that its
concept is worth purchasing.
According to Los Angeles Times, the market share of fast casual
dining establishments in early 2012 was at six percent. Although
the market share is not as high as the other kinds of food
establishments, it is the only segment in the restaurant industry
that has shown growth in the last five years.
Access to Market Outlets
Our target markets are mainly focused on families and
businesses. To promote and advertise our products and services we
are planning on using a variety of social media, including
Facebook, groupons, direct mails, etc. Our plan is to use
approximately 3.5% of our monthly income for advertising.
The Restaurant Industry Distribution System
Intermediaries(Middlemen)Sources(Growers, manufacturers, and
processors)
Retailers(Restaurants)
Consumers(Guests)
The industry distribution system has the following components:
sources, intermediaries, retailers, and consumers. A source is a
supplier at the beginning of a products channel of distribution.
For instance, a farmer is a source our restaurant can use for fresh
fruits in our baked goods. This supplier typically sells items to
an intermediary that resells them to hospitality operations.
Intermediaries are also known as vendors, which retailers such as
restaurants and grocery stores order items from. Items retailers
order from vendors are in larger quantities and are offered in
wholesale prices. The only way consumers can purchase these items
is through the retailers (Product Life Cycle).
Proposed Business Concept
Our proposed business will be a small bakery located at The
Kentlands in Gaithersburg, MD. The Kentlands are less than 5 miles
from I-270 and around 25 miles from downtown Washington DC. There
is plenty of public transportation accessible from this location.
Our selected location allows us to access nearly two thousand homes
in the Kentlands neighborhood along with numerous office buildings
within a 5 mile radius. The main utilities used in these properties
are gas, power, and water.In order to obtain a food service
facility license a menu, HACCP flow charts for each menu item,
insurance documentation, and a set of complete plans are ready to
be submitted to the Maryland Department of Health and Human
Services. Our bakery will be offering a variety of products that
use a number of high quality ingredients from local bakery
suppliers. We have selected to use local suppliers because of their
quite competitive pricing and high quality ingredients when
compared to other imported suppliers.
Ingredients and Vendors
Major suppliers of local raw materials are: Restaurant depot
George R. Ruhl & Son, INC (Bakery supply) Hoffmans Meats (Deli
supply) Costo Sams ClubSome ingredients for basic items are listed
below:Ingredients Unit price QuantityTotal Cost
Flour $ 13.50 /50lb5$ 67.50
High Gluten Flour$ 15.00 /50lb5$ 75.00
Eggs$ 11.50 /90ct6$ 69.00
Baking Powder$ 6.00 /5lb1$ 6.00
Butter$ 9.00 /lb50$ 450.00
Sugar$ 25.00 /50lb5$ 125.00
Cream$ 4.00 /qt15$ 48.00
Yeast$ 3.00 /lb2$ 6.00
Baking Soda $ 13.00 /lb2$ 26.00
Chocolate$ 184.00 /40lb2$ 368.00
Milk $ 2.89 /gallon6$ 17.34
Lettuce $ 2.39 /2 heads30$ 71.70
Tomatoes$ 6.00 /3 lb8$ 48.00
Sprouts$ 2.24 /box4$ 8.96
Onions$ 5.37 /10lb3$ 16.11
Avocado $ 4.47 /5ct8$ 35.76
Bell Peppers$ 6.98 /2lb4$ 27.92
Ham$ 6.27 /lb15$ 94.05
Turkey Breasts$ 7.49 /lb15$ 112.35
Pepperoni$ 5.69 /lb15$ 85.35
Sausage$ 3.57 /lb10$ 35.70
Provolone Cheese$ 3.04 /lb10$ 30.04
Cheddar Cheese $ 4.94 /lb10$ 49.40
Swiss Cheese$ 4.94 /lb10$ 49.40
Mozzarella Cheese$ 3.38 /lb10$ 33.80
Pepperjack Cheese$ 4.94 /lb10$ 49.40
Horseradish Dijon$ 3.35 /bottle 6$ 20.10
Honey Mustard$ 2.44 /bottle6$ 14.64
Mayonnaise $ 6.73 /bottle6$ 40.38
Thousand Island $ 6.48 /bottle6$ 38.88
Canned Tuna $ 8.46 /10cans3$ 25.38
Pickles $ 4.24 /jar2$ 8.48
Olives $ 3.49 /jar2$ 6.98
Vinegar$ 1.79 /bottle1$ 1.79
Bacon $ 3.13 /lb5$15.65
Coffee Beans$ 14.88 /bag24$357.12
Tea Bags$ 4.98 /box3$14.94
Coke Products $ 0.31 /can192$ 59.52
Apple Juice$ 0.50 /bottle48$ 24.00
Orange Juice$ 0.50 /bottle48$ 24.00
Lemonade$ 0.42 /bottle48$ 20.16
Milk $ 0.72 /bottle48$ 34.56
Business OwnershipA partnership between four managing owners has
been formed to run our bakery. Since the four owners have managed
restaurants in the area, they are familiar with local buying
sources, suppliers, and methods. The managers also have leadership
skills and have the ability to supervise personnel while reflecting
the style and character of the bakery. Two full time bakers are
needed to maintain the operation of the baked goods. They have to
work early in the morning to begin preparing our fresh baked
breads, cakes, bagels, and pastries. We will need two cake
decorators, one full-time and one part-time, to manage all special
ordered cakes and cupcakes. The lead cake decorator needs to arrive
early in the morning to begin preparing items for the morning and
creating a list for the afternoon. The part-time cake decorator
will help with the afternoon and weekend shifts. Five clerks are
required to maintain the daily operation; order taking, making
sandwiches/soups, busing tables, and keeping dining area clean.
Three Prep workers are needed for preparation of sandwiches and
soups, at the same time keep working areas organized. Prospective
employees are students from Montgomery College, University of
Maryland and residents from the local area.
Wages and Job Descriptions
The following are the wage rates and skill level requirements
for all the positions: Job TitleWage RateSkill Level
Owners/ Managers$ 4,000.00/month At least 2 year experience in
management / supervising positions in hospitality industry.
Bakers $10.00/hour Formal culinary schools trained in baking and
pastry field Able to work in early morning shift Able to work alone
under pressure 2 years prior experience
Cake Decorators$10.00/hour Formal culinary schools trained in
baking and pastry field Able to work in early morning shift Able to
work alone under pressure 2 years prior experience
Clerks $7.50/hour Proficiency in Math Proficiency in handling
money transaction Proficiency in using a calculator and automated
cash register Must be able to speak, read, and write in English 1
year prior experience
Prep workers$7.50/hour Proficiency in Math Proficiency in
handling money transaction Proficiency in using a calculator and
automated cash register Must be able to speak, read, and write in
English 1 year prior experience
Financial StudiesThe main monthly expenses for our bakery is a
rent payment at $2,720 a month in The Kentlands on Main Street, a
payment on our equipment loan, and accounts payable to our vendors.
The building was previously used as a retail store and is 960
square feet. We will need to renovate inside and purchase or lease
all equipment needed to run a bakery. This listing was found on
Showcase.com and advertised storefronts in The Kentlands and the
surrounding areas. Some of our main purchases will include, but are
not limited to:
Double rack ovens$39,108 (three)Proof box$34,589Microwave$942
(two)Pastry racks and sheet pans$500 (20)Ranges$2,535Prep
tables$600 (4 maple tops) 1193 (3 stainless steel)Walk in
freezer$6,391Walk in refrigerator$5,051Reach in refrigerator$2,981
(two)Ice maker$1,683Mixers$13,831 (floor model) 1,340 (2 countertop
model)Dough sheeter$6,482Refrigerated display cases$7,579
(two)Three tub sink$829Sandwich station$3,618Espresso
machine$8,100Soda machine$4,115Bread slicer$2,332Scales$600
(two)Table and chairs$337 (five)
Our estimated main equipment costs are $251,428. We will add
approximately $100,000 to this estimate to cover the costs of
renovation and any unforeseen extra equipment needed. If there are
any funds leftover we will roll them into the purchase of supplies
and ingredients. We will need approximately $25,000 for those
purchases. Equipment prices were estimated from various commercial
kitchen websites such as galasource.com and
Bakeryequipment.com.
Our menu was designed by one of the founding partners. The
creative edge from comes from her extensive restaurant background
from working in various restaurants and bakeries in the past. She
spent a lot of time researching market prices and comparing
competitors prices from Panera Bread and Einstein Bros Bagels. Our
forecasted sales for any given week within the first year are:
Food Sales Number Cost Sales
Turkey Bistro285.59156.52
Ham and Swiss Mix175.4993.33
Avocado Club Mex356.29220.15
The Firecracker425.89247.38
The Italian Bistro286.39178.92
The Veggie Mex185.2995.22
The Tuna Avalanche145.3975.46
Cup of Soup521.8998.28
Bowl of Soup352.99104.65
Bread Bowl Soup284.19117.32
Side Salads701.99139.3
Breakfast Club 534.09216.77
Sausage Lovers353.89136.15
Simply Eggs283.1989.32
Single Bagel1250.99123.75
Half a dozen Bagels625.59346.58
Bakers dozen Bagels359.99349.65
Bag of Bagels3813.99531.62
Tub of Cheese372.89106.93
Assorted Breads1253.69461.25
Assorted Pastries1501.99298.5
Assorted Muffins1501.59238.5
Cookies1751.39243.25
One Cupcake1751.39243.25
Half a dozen Cupcakes706.59461.3
Dozen Cupcakes5311.99635.47
Catered Cakes52.5251312.5
Total Food Sales7321.32
Beverage Sales
Reg Coffee371.6962.53
Large Coffee491.9997.51
Reg Tea261.4938.74
Large Tea331.7959.07
Reg Soda801.59127.2
Large Soda901.89170.1
Juices312.6983.39
Milk251.7944.75
Cappuccino212.9962.79
Cinnamon Latte283.0986.52
Vanilla Latte283.0986.52
Caramel Latte313.1998.89
Mocha Latte363.29118.44
White Mocha Latte363.29118.44
Chai Tea322.9995.68
Espresso Shot281.2535
Total Beverage Sales1385.57
Total Sales8706.89
Collectively our forecasted sales for one week are $7,394.39
from our standing menu and approximately $1312.50 from our catered
menu of special order cakes for a total of $8,706.89. Respectively
our estimated forecasted sales per month are $37,700.83 and per
year is $452,758.28. We should budget approximately 3.5% of our
monthly sales from our menu for advertising, which is approximately
$1318 a month. Each month our sales will fluctuate between items
sold. For example in the winter time we will sell more hot coffee
then cold drinks, whereas in the summer time we will sell more
coffee as iced or frozen drinks. These are simply the averages
estimated for any given week or month within our first year of
being open. By the end of the third year, we hope to double our
sales volume.
Estimated Start-Up Costs and Contributions
The partners will each contribute a set amount towards the
investment of the company at $15,000 each. With $60,000 in capital,
we would need research possible banks for a loan amount of
approximately $295,000 for our renovation needs. All ingredients
and supplies for our bakery will be placed on accounts payable to
the suppliers after a down payment of 5% of the sales to each
supplier. We plan on having a staff of approximately 12 employees,
two bakers, two cake decorators, three prep cooks, and five clerks.
The bakers and lead cake decorator will be employed full time while
the other workers will be employed part time. Estimated wages for
our employees will be approximately $5,200 each biweekly pay
period.We will look into various local banks for a business loan
for our equipment and renovations. Banks based locally generally
like to help out the community in which they do business in. The
Bank of America, Capital One Bank, M&T Bank, and PNC are the
major local banks in the area. We will arrange meetings with each
bank to see who has the best offer the fits our needs. We are
hoping to find financing around 4.25% for a long term goal.
Break Even AnalysisOur estimated sales for one month are $37,700
with a food cost percentage of 25% putting our cost of sales at
$9,672. Our estimated fixed costs are the loan payment at $3,500,
rent payment at $2,720, estimated depreciation costs of $3,457, and
insurance payment of $167. This comes to a total of $9,844 in fixed
costs. Our estimated variable costs are cost of sales at $9,672,
wages at $11,258, advertising at $1,318, utilities at $450, and
payroll taxes at $1,352 for a total of $24,050 in variable costs.
Our variable cost percentage would be about 64%, giving us a
contribution margin of 36%. The formula for the breakeven point is
FC / (100% - VC% or 1 - VC) = 9844 / .36 = $27,344. Our bakery
would need to make $27,344 in sales in order to break even each
month.Estimated Financial StatementsFollowing are the estimated
financial statements for the first months to the end of our first
year in business. We will use these statements to forecast sales
and obtain market research to continue to improve our business. We
have an estimated depreciation rate of 16.5% over a course of ten
years for our equipment. Our estimated interest rate on our loan
from the bank is 4.25% over the course of 15 years. The purpose of
forecasting financial statements is so the owners can make budget
plans for the first few months after opening. Once the business has
been opened, the forecasted statements can be replaced with actual
data. We can compare our estimates to our data recorded from the
first few months to see if we are headed in the right direction. We
will make adjustments where needed to ensure we stay as close to
our target goals as possible.
Balance SheetEnding of our first monthASSETS
Current
Cash $60,000.00
Inventory 7,297.23
Accounts Receivable 10,715.77
Total Current Assets 78,013.00
Noncurrent
Furniture 7,664.00
Equipment 243,761.00
Prepaid Insurance 2,000.00
Total Noncurrent Assets 253,425.00
Total Assets $331,438.00
LIABILITIES
Current
Accounts Payable $7,600.00
Wages 11,258.00
Utilities 450.00
Advertising 1,318.00
Current Portion LT Debt 3,500.00
Total Current Liabilities 24,126.00
Noncurrent
Loan Payable 295,000.00
Less Current Portion Due 2,500.00
Total Noncurrent Liabilities 292,500.00
Total Liabilities 316,626.00
EQUITY
Owner's Capital 14,812.00
Total Equity 14,812.00
Total Liabilities and Equity $331,438.00
Income StatementEnding of our First YearREVENUE
Food Sales $380,708.64
Beverage Sales 72,049.64
Total Revenue $452,758.28
COST OF SALES
Cost of Food 95,177.16
Cost of Beverage 20,894.40
Total Cost of Sales 116,071.56
Gross Profit 336,686.72
OPERATING EXPENSES
Payroll 135,200.00
Payroll Taxes 16,224.00
Marketing 15,816.00
Utilities 5,400.00
Total Operating Expenses 172,640.00
INCOME BEFORE FIXED EXPENSES 164,046.72
FIXED EXPENSES
Loan 42,000.00
Rent 32,640.00
Depreciation 41,485.00
Insurance 2,000.00
Total Fixed Expenses 118,125.00
NET INCOME $45,921.72
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