B PLAN Ful Mehnat

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Executive Summary

Pita Pal is a new restaurant that serves fresh and healthy pita sandwiches.

Strategically located in sambra. Pita Pal will quickly become the premier lunch

destination in Belgaum, serving locals and students. Pita Pal will attract 35%new customers a year after the second year and will reach profitability by the

end of year two.

Keys to Success

Pita Pal has identified three keys that will be instrumental in its success. The

first is the design and implementation of strict financial cont rols, which will be

important, since the restaurant industry is quite competitive. The second

requirement is that it offers high-quality fresh and healthy food to clearly stand

out from the competition. The last key is the need to ensure proper visibility.

Pita Pal must have a effective, targeted marketing campaign to support the

opening of the store in order to ensure enough business.

Food

Pita Pal will offer the community an exciting menu of pita sandwiches, salads,

desserts and coffee beverages. Pita bread, Middle Eastern flat bread, is used as ahealthy, tasty foundation for a variety of sandwiches. The customers will have

the choice of Middle Eastern filling such as Hummus and Tabouli or more

traditional Indian filling.

Management

Pita Pal will be lead by Mr Rao, an MBA also worked in the restaurant industry.

He worked for 15 years at the restaurant before moving on to work and he

participated in number of Entrepreneurship Programs.

Through a combination of extensive business experience, valuable academic

course work, and the award of a starter loan from the school's Entrepreneurship

Program, Rao will develop a profitable niche lunch restaurant.


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Sales for year two and three are 4500000 and 5500000 respectively.

Profitability will be reached by the end of year two.

1.1 Mission

It is Pita Pal's mission to offer the finest, healthiest and best tasti ng pita

sandwiches in India. Pita Pal will offer the finest customer service; no customer

will leave who is dissatisfied.

1.2 Keys to Success

y Employ strict financial controls. This is extremely important in a retail foodestablishment.

y Offer the highest-quality lunch time fare.y Ensure sufficient visibility. A strong marketing campaign required.

1.3 Objectives

y To become the premier sandwich shop in downtown sambra.y To continually draw students off campus for lunch at a rate of 35% new

customers per year after the second year.

y To become profitable within the first two years.


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Company Summary

Pita Pal is based sole proprietorship. Formed by Mr. Rao. The company is

wholly owned by Mr. Rao. The business will be based in sambra and will serve

the lunch and early evening crowd.

2.1 Start-up Summary

As a start-up organization, Pita Pal will require a decent amount of equipment to

begin operations. The following is a somewhat complete list of the needed

equipment:

y Cash register;y Computer system, including printer, CD-RW, Internet connection;y Convection oven;y Refrigeration unit;y Blender/food processor;y Assorted knives, cutting boards, serving dishes, silverware, food containers;y Shelving units;y Tables, chairs, table clothes and other table accessories;y Lighting units;y Espresso machine and coffee maker (these items are subsidized by the coffee

vendor who sells the coffee/espresso beans).


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Start-up Funding

Start-up Expenses to Fund300000

Start-up Assets to Fund 680000

Total Funding Required 980000

Non-cash Assets from Start-up 100000

Cash Requirements from Start-up 500000

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expenses assets investment loans


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Assets

Cash Balance on Starting Date 80000

Total Assets 680000

Liabilities and Capital

Liabilities

Current Borrowing 500000

Long-term Liabilities 0

Accounts Payable (Outstanding Bills) 0

OtherCurrent Liabilities (interest-free) 0

Total Liabilities 500000

Planned Investment


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Entrepreneurship Program Loan 500000

Investor 2 1000000

Additional Investment Requirement 0

Total Planned Investment 1500000

Loss at Start-up (Start-up Expenses) (300000)

Total Capital 1200000

Total Capital and Liabilities 1200000

Total Funding 1500000

Start-up


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Requirements

Start-up Expenses

Legal 100000

Stationery etc. 20000

Brochures 20000

Consultants 25000

Rent 35000

Total Start-up Expenses 200000

Start-up Assets

Cash Required 180000

OtherCurrent Assets 0

Long-term Assets 500000

Total Assets 680000

Total Requirements 680000


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2.2Company Ownership

Pita Pal has been formed as a limited l iability company in Sambra (Belgaum).

The L.L.C. business formation has been chosen as a way of protecting the

owner from personal liability while avoiding double taxation associated with atraditional corporation.


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Services

Pita Pal is an out skirts based sandwich shop serving the lunch time hour as well

as early evening, weekdays from 10-6 pm. Pita bread is chosen for several

reasons: it is unusual, healthy, and quite versatile. Each customer will have their

choice of different fillings for the pita sandwiches. The ranges of options for

fillings (not an exhaustive list) are: tofu pate, falafel, hummus, baba ganouj,

tabouli, turkey, ham, chicken, pesto, assorted vegetables and assorted cheeses.

In addition to the pitas, there will be several different salad s available, both

green as well as pastas, assorted deserts, espresso and coffee.


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Market Analysis Summary

Pita Pal will be serving the Belgaum lunch time and early evening crowd. Two

distinct market segments will be targeted: students of kle and other societies and

Colleges and "towners." The students will be attracted to Pita Pal as a better

alternative to their on-campus meal plan. The towners will appreciate the

selection and change from the more traditional offerings currently availabl e in

Belgaum. Sambra has been chosen in Belgaum because its nearby NH4 and .

Currently, there are lots of different businesses that have hungry lunch time

workers.

The competitive environment that Pita Pal faces is not too stiff. Most of the

lunch time fare in Belgaum can be categorized as traditional offerings, diner

food. While this might appeal to older residents of the town, this does not

appeal to many college students and to a growing population of people who are

in search of more healthy food, Pita Pal should be a big hit.

4.1 Market Segmentation

Pita Pal has segmented the market into two distinct segments:

Students

this group is primarily from students of kle and other societies and Colleges and

"towners." From Belgaum. The students are looking for food vendors for two

main reasons, the first is the desire to get off campus, and the second is to have

an alternative to the on-campus food service.Demographic data and

behavioural traits for the students is as follows:

y 75% of the students are on some sort of financial aid;y 67% have a part-time job;y Ages 17-22;y 42% of the students were in the top 15% of their high school class;y 36% of the students were in the 85th percentile for the SAT;


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y 89% oft st ts eat out atleastt i e per week;y 75% oft e students are on t e school food program.

This information pertains to thestudents of kle and other societies. There will bea few communit college students who willtrickle in, but since their campus is

si miles away, there will not be a significant number of community college

students.

Towners

This group is the people thatli e and workin Belgaum, primarily in the sambra

and nearby area.

y Ages 24-55;y The average individualincome is $500;y 55% ofthe people have atleast some undergraduate schooling;y 44% ofthe people work within a seven minute walk from the sambray 76% ofthe group go out forlunch one to two times a week.

MarketAnalysis


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Year 1 Year 2 Year 3 Year 4 Year 5

PotentialCustomers Growth

Students 8% 2,285 2,468 2,665 2,878 3,108 7.99%

Towners 8% 45,989 49,668 53,641 57,932 62,567 8.00%

Total 8.00% 48,274 52,136 56,306 60,810 65,675 8.00%

4.2 Target Market Segment Strategy

The two different market segments that Pita Pal will be going after are distinct

enough that there will be two different marketing campaigns, one for each

group. This is necessary because the two groups respond to different forms of

communication. Students spend the majority of their day on campus, but

typically venture off campus during the day for lun ch. The marketing effort to

reach the students will be based on their forms of written media, The General,

student newspaper.

The towners can be reached through different sources of communication. These

are people who work in Belgaum and tend to patronize the other businesses.

These people are more in tune with the different business o rganizations that

exist belgaum. Pita Pal will attempt to communicate with this group via the

local newspaper.

4.3 Service Business Analysis

Pita Pal exists within the general restaurant industry. There are many different

categories within the restaurant industry. Pita Pal fits within two different niches

within the industry, fast food and fast casual. Their offerings are similar to fast

food in that orders are placed at the co unter and served within a few minutes,

and the menu is somewhat limited in selection. It is also similar to fast casual


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where the clientele tends to spend more time at a table relative to a fast food

restaurant. The food is more expensive than a normal fas t food restaurant and

there is a larger product offering.

For the restaurant industry, it is normal for a venture to reach profitability byyear two. If they reach it any earlier it is likely that they are cutting corners and

that profit is unlikely to be sustainable. If it takes more than two years than it is

quite questionable whether they will ever reach profitability.

y On-campus food service: At least for the students, this is an alternative interms of food offerings. Most of the students have a food plan. Because of

the poor food offerings and the need for variety, many of the students arelooking for other alternatives regardless of the fact that their food is already

paid for via the plan.


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Strategy and Implementation Summary

Pita Pal's business strategy will be to emphasize its healthy, custom food

alternatives. Most of the competitors cannot compete with Pita Pal's healthy

menu. Most places uses a lot of fried foods, compromising the nutritional valueof their food. Additionally, no one offers the same flexibility or ability to

customize the product offerings. This competitive edge will also be stressed in

the marketing campaign.

As mentioned earlier, Pita Pal's marketing strategy will be distinct for each of

the two market segments that it is seeking to attract.

The sales effort will be based on obtaining 100% satisfaction. Pita Pal will work

hard to ensure that every customer has a wonderful experience at Pita Pal.

Almost anything will be done to ensure any problems that ar ise are corrected.

5.1Competitive Edge

Pita Pal has two competitive edges that will help it succeed in its business. The

first edge is its healthy menu. Pita Pal takes pride in the fact that the only thing

fried on the menu is falafel. Everything else is oil free, or at least free of any

oils other than olive oil. In addition to the absence of oil based fats, much of its

offered ingredients are vegetables, ensuring a healthy meal.

The other competitive edge that Pita Pal will leverage is customization.

Customers are offered a laundry list of ingredients that they get to choose from.

It is Pita Pal's goal to serve the customer in whatever capacity is needed. This

takes the form of its competitive edge where it will build the patrons pita pocket

any way that they want.

5.2 Marketing Strategy

Pita Pal will employ a two pronged marketing strategy in an attempt to reach

potential customers within the two market segments. To reach the students, Pita

Pal must use resources that are successful in reaching the studen ts. Recognizing


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that the students spend the majority of their time on campus, Pita Pal will rely

on print advertisements and coupons within the student publications. The print

advertisements will serve to draw notice to Pita Pal, increasing the student's

awareness about this new restaurant alternative. Pita Pal will emphasize its

menu as a tasty, healthy alternative to the campus meal plan as well as other

local food vendors. Pita Pal will also use coupons as a way drawing in students.

Coupons are quite effective for students; most of them are on a fixed budget and

jump at the chance to save money by using a coupon.

Print advertising will be used for the towners; however, Pita Pal will choose a

different media source to reach these people. The readership lev els for the local

paper, The Sentinel are 67% of the targeted population. This will prove to be an

effective method for reaching this group. Since the majority of this market

segment works in Belgaum, flyers will be passed around the Belgaum calling

attention to Pita Pal's opening. Coupons will be used, but to a lesser degree with

this segment as they tend to have much lower response rates relative to the other

market segment.

5.3 Sales Strategy

As previously mentioned, Pita Pal will emphasize its 100% customer

satisfaction to win over customers. The fact that it advertises 100% satisfaction

is far less significant relative to its actions that ensure total satisfaction. This

effort is based on the philosophy that it is far cheaper to maintain a curr ent

customer than it is to attract a new customer. Additionally, it is far easier and

cheaper to remedy any problems with a customer as it occurs instead of dealing

with an unhappy customer. With this in mind, the organization has the firm

belief that if all customers leave the store happy, there will be a significant

increase in sales in the long term, directly correlated with the fact that customers

are being properly taken care of.


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This sales philosophy is a way of treating customers. While the service o ffered

customers is quite important, there is a need to have a quality product, otherwise

the service aspect is in vain in the long term because the customers are treated

well but do not perceive value in the food that they are buying. That being said,

Pita Pal must offer fresh, healthy, quality food in order to fully support its

customer-centered service. The menu has been devised in order to offer a wide

selection with menu items that are easy to prepare, remain fresh, and are cost

effective to serve. Having both a quality product and excellent service will

ensure realization of the sales forecast.

5.3.1 Sales Forecast

Pita Pal has decided to take a conservative viewpoint toward its sales forecast in

order to increase the likelihood of achieving the stated goals. Pita Pal has

reason to believe that the first three months of business will be fairly slow. It is

forecasted that business will steadily increase over the first two years.

Profitability is forecasted to be achieved toward the end of year two.

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Management Summary

Mr Rao is the driving force behind Pita Pal. Rao has lived in Belgaum for the

last three years while studying for his Bachelor of business administration from

Belgaum. Mr Rao introduction to the restaurant industry came at the early age

of 14 when he worked in his family's restaurant in Pune.

While pursuing his degree was a server at a fine dining restaurant called Arush,

where he received more insight into the restaurant industry. He enrolled in

the Entrepreneurship Program which combined coursework with speakers and

empirical experience. For lucky few, it also provided them with a low interest

loan which if the business fails does not personally obligate the borrower to

repay.

While Mr Rao became more and more active in this program, he began to

realize that he would not be truly happy unless he was operating his own

business. He also realized that he would be most effective if he worked within

the restaurant industry due to all of his experience as well as the wealth of

contacts that he had access to because of his parent's business. With this in

mind, at the end of the last semester of his last year, Rao applied for the a loan

through the Entrepreneurship Program and was pleasantly surprised that he

won. Rao has written a business plan in response to the application

requirements for the loans, however by the time the loan was awarded, many

months had passed and he felt the need to rewrite the plan before beginning the

business. He undertook this task and the business has begun.

6.1 Personnel Plan

Rao will be the main employee of Pita Pal. For the first two months of

operation, he will be the sole employee. During this period he will oversee the

finishing touches on the retail space, will de velop the product recipes, and will

establish vendor relationships. Month three will mark the first month of sales.


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Mr Rao will have at least two employees present during open hours. he will also

have one employee working 1.5 hours before opening to help w ith food prep

and both employees for .5 -1 hour after closing. As business ramps, Steve will

employ additional employees to help out with food prep, front restaurant help,

as well as back kitchen activities such as dishes and clean up.

Personnel Plan

Year 1 Year 2 Year 3

Mr rao 25000 30000 45000

employee 1 10000 12000 15000

employee 2 5000 7000 10000

employee 3 3000 3500 4000

employee 4 3000 3500 4000

Total People 5 5 5

Total Payroll 46000 56000 78000


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Financial Plan

The following sections will detail important financial information.

7.1 Important Assumptions

The following table will detail important Financial Assumptions.

General Assumptions


Plan Month 1 2 3

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00%

Other 0 0 0

Assumptions:

Average Percent Variable Cost 27%


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Estimated Monthly Fixed Cost 210000

7.3 Projected Profit and Loss

The following table and charts illustrate the Projected Profit and Loss

Pro Forma Profit and Loss

Year 1Year 2 Year 3

Sales 4600000 6000000 6500000

Direct Cost of Sales 1600000 2000000 2200000

OtherCosts of Goods 0 0 0

Total Cost of Sales 160000 2000000 2200000

Gross Margin 3000000 4000000 4300000

Gross Margin % 65.21% 66.66% 66.15%

Expenses 2204600

Payroll 46000 56000 78000

Sales and Marketing and Other

Expenses1600000 2000000 2200000

Depreciation 40000 40000 40000


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Rent 270000 270000 270000

Utilities 50000 50000 50000

Insurance 80000 80000 80000

Payroll Taxes 160000 160000 160000

Other 0 0 0

Total O perating Expenses 2204600 2656000 2807800

Profit Before Interest and Taxes 2395400 3344000 3692200

EBITDA 0 0 0

Interest Expense 0 0 0

Taxes Incurred 479080 668800 738440

Net Profit 1916320 2675200 3625360


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7.5 Projected Balance Sheet

The following table will indicate the Projected Balance Sheet.

Pro Forma Balance Sheet


Assets

Current Assets

Cash 180000 180000 180000

OtherCurrent Assets 0 0 0

Total Current Assets 180000 180000 180000

Long-term Assets

Long-term Assets 500000 500000 500000

Accumulated Depreciation 40000 40000 40000

Total Long-term Assets 460000 460000 460000

Total Assets 640000 640000 640000

Liabilities and Capital Year 1 Year 2 Year 3


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Current Liabilities

Accounts Payable 50000 65000 69000

Current Borrowing 0 0 0

OtherCurrent Liabilities 0 0

Subtotal Current Liabilities 50000 65000 69000

Long-term Liabilities 0 0 0

Total Liabilities 500000 500000 500000

Paid-in Capital

Retained Earnings

Earings 1916320 2675200 3625360

Total Capital 120000 120000 120000


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7.6 Business Ratios

The following table displays Business Ratios of this company as well as those

within the restaurant industry.

Ratio Analysis

Year 1 Year 2 Year 3Industry

Profile

Sales Growth 0.00% 111.58% 40.18% 6.96%

Percent of Total Assets

OtherCurrent Assets 0.00% 0.00% 0.00% 28.39%

Total Current Assets 28.83% 51.68% 83.97% 37.68%

Long-term Assets 71.17% 48.32% 16.03% 62.32%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 15.26% 18.15% 12.72% 19.17%

Long-term Liabilities 0.00% 0.00% 0.00% 29.21%

Total Liabilities 15.26% 18.15% 12.72% 48.38%

Net Worth 84.74% 81.85% 87.28% 51.62%


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Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 72.96% 72.96% 72.96% 59.31%

Selling, General &

Administrative Expenses124.93% 71.86% 58.72% 39.09%

Advertising Expenses 0.00% 0.00% 0.00% 2.75%

Profit Before Interest and Taxes -51.97% 1.56% 20.33% 1.59%

Main Ratios

Current 1.89 2.85 6.60 1.26

Quick 1.89 2.85 6.60 0.87

Total Debt to Total Assets 15.26% 18.15% 12.72% 54.38%

Pre-tax Return on Net Worth -149.91% 8.95% 76.14% 3.27%

Pre-tax Return on Assets -127.04% 7.32% 66.45% 7.17%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -51.97% 1.09% 14.23% n.a

Return on Equity -149.91% 6.26% 53.30% n.a


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Activity Ratios

Accounts Payable Turnover 10.44 12.17 12.17 n.a

Payment Days 27 26 26 n.a

Total Asset Turnover 2.44 4.68 3.27 n.a

Debt Ratios

Debt to Net Worth 0.18 0.22 0.15 n.a

Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios

Net Working Capital $3,812 $10,407 $44,401 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.41 0.21 0.31 n.a

Current Debt/Total Assets 15% 18% 13% n.a

Acid Test 1.89 2.85 6.60 n.a


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Sales/Net Worth 2.88 5.72 3.74 n.a

Dividend Payout 0.00 0.00 0.00 n.a

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