Executive Summary

Executive Summary

This business plan was created to secure investors. La Salsa Fresh Mexican Grill is one of the hottest franchises to team up with and offers enormous potential in Oregon. Currently, La Salsa is in all of the neighboring states of Oregon and is still expanding. The Santa Barbara Restaurant Group (SBRG) franchises the La Salsa chain.

There are two main reasons that La Salsa will succeed in Eugene: first is thelack of direct competition (nothing like it in town), the secondis the high demand for a product like this in Eugene. Eugene is in preparation for a large population growth period, the current population of the greater Eugene/ Springfield metro areais over 300,000 according to Census 2000 and expanding.

The creation of a Limited Liability Corporation (LLC) will shield owners and investors from personal liability. Over the next three years Benjamin D. Strock plans to expand La Salsain Oregon, developing between3to 10restaurants under the LLC. This business plan only includes thefirst store plans which will help create more concrete goals. Per store revenues for La Salsa range between $400,000 to $1,000,000 depending heavily on location. Estimated start-up costs from SBRG are between $300,000 and $400,000, and require an initial investment of around $600,000. Half of this money will be financed by a small business loan, and the other half will come from private investors. Net profits will be high, yielding an estimated $85,000 a year per store (possibly much more).

The franchisor, SBRG will control most ofpricing, training, buildingand advertising in exchange for between 8% and 10% of gross sales. Hopefully, the first La Salsa in Oregonwill be built and running within three months of the initial financing assuming that a location has been agreed upon by franchisor, franchisee and investors.

1.1 Mission

La Salsa Fresh Mexican Grill willestablish itself as the premier casual Mexican dining restaurant in Eugene while maintaining uncompromising principles as we grow to more than three restaurants. The six following guiding principles will help us measure the appropriateness of our decisions.

Provide a great work environment and treat employees with dignity and respect.

Embrace diversity as an essential component in the way that we do business.

Apply the highest standards of excellence to the food production, preparation, and service to our customers.

Build lastingrelationships with theguests.

Contribute positively to communities and our environment.

Recognize that profitability is essential toour futuresuccess.

1.2 Objectives

1. Set up a LLC to limit investor and personal liability.

2. Complete construction less than three months after financing.

3. Reach positive net profit in first quarter.

4. Become amarket leader in Eugene.

5. Average $60,000 plus in revenues monthly.

6. Increase annual sales between 3-7%.

1.3 Keys to Success

1. Location, Location, Location.

2. Obtaining bank financing at reasonable interest rates, and securing individual investors.

3. Finding and hiring qualified motivated employees.

4. Controlling the effective use of marketing dollars to stimulate sales.

5. Providing extraordinary food with unparalleled taste.

Company Summary

The parent company claims that,

"La Salsa is one of the fastest growing fresh Mexican chains nationwide. The hallmark toour fresh style isour unique open-display kitchen, where customers can enjoy seeing their food prepared right in front of their eyes. We are also famous forour one-of-a-kind fresh Salsa Bar, wherewe encourage guests to customize their salsa...selecting a range of flavors from hot and wild to robust, yet mild. We never use microwaves, can openers, or lard. And signature to La Salsa's superior taste is charbroiled cooking with skinless, all white-meat chicken, tender steak, big succulent shrimp and flavorful Mahi Mahi. Popular menu items include gourmet burritos, handcrafted tacos and veggie specialties. It's a high-quality menu with a fresh attitude that's made La Salsa a West Coast favorite since 1979."2.1 Company Ownership

A Limited Liability Corporation (LLC)will be formed to limit personal liability of the owner and investorsin La Salsa. Once theLLC is formed its first holding will be in franchising La Salsa. It is Benjamin D. Strock's intention to offer limited outside ownershipin the LLC on an equity, debt, or combination basis in order to facilitate a more rapid expansion of the La Salsa concept. A 12% priority return will be offered to all shareholders on their investment. BenjaminD. Strock will be themanaging shareholder of thecorporation.

2.2 Start-up Summary

The Santa Barbara Restaurant Group, owners of the La Salsa chain, have estimated overall start-up costs between $300,000 to $400,000. The numbers in the start-up cost table are meant to reflect these estimates. The allocation into each category may not be exact, but the approximate costs have been estimated slightly higher than those ofthe Santa Barbara Restaurant Group. Overestimated costs will leave room for miscalculations, so that funding will be available and will ensure that everything runs smoothly.

Start-up Requirements

Start-up Expenses

Legal$5,000

Stationery etc.$2,000

Brochures$1,000

Franchise Fee$20,000

Insurance$1,000

Rent$5,000

Development Fee$10,000

Expensed Equipment$17,000

Other$100,000

Total Start-up Expenses$161,000

Start-up Assets

Cash Required$102,000

Start-up Inventory$50,000

Other Current Assets$0

Long-term Assets$287,000

Total Assets$439,000

Total Requirements$600,000

Start-up Funding

Start-up Expenses to Fund$161,000

Start-up Assets to Fund$439,000

Total Funding Required$600,000

Assets

Non-cash Assets from Start-up$337,000

Cash Requirements from Start-up$102,000

Additional Cash Raised$0

Cash Balance on Starting Date$102,000

Total Assets$439,000

Liabilities and Capital

Liabilities

Current Borrowing$0

Long-term Liabilities$300,000

Accounts Payable (Outstanding Bills)$0

Other Current Liabilities (interest-free)$0

Total Liabilities$300,000

Capital

Planned Investment

Richard & Ginny Strock$100,000

Benjamin D. Strock$20,000

Investor 3$80,000

Investor 4$100,000

Additional Investment Requirement$0

Total Planned Investment$300,000

Loss at Start-up (Start-up Expenses)($161,000)

Total Capital$139,000

Total Capital and Liabilities$439,000

Total Funding $600,000

2.3 Company Locations and Facilities

The first option for locationis close to Sacred Heart Hospital on 13thAvenuein Eugene, Oregon. This location will be important because the University of Oregon campus is close, as is thehospital. Students and hospitalemployees will have a new lunch spot which is much needed. The best location currently available is next to the Napoli Restaurant & Bakery, but it is only 800 square feet. In order to make this location feasible a partial/full buyout of Napoli Bakery is desirable. The bakery is not overly successful and will hopefully be cooperative in this process.

If the first restaurant is not located on 13th Ave. there are a few high traffic strip mall locations available. Located on the corner of 18th Ave. and Willamette Street, next to a mini-mall, Blockbuster Video, Little Caesar's Pizza, and Hong Kong Chinese restaurant. South Eugene High School (open campus)is also very close by. There are 1367 square feetavailable,plenty of parking, high traffic and high visibility. This location rents for $970 a month, and appears to have excellent profit potential. Traffic counts from 1997 were approximately 15,000 for each direction on 18th Ave., and 11,000one way onWillamette St. Overallrevenues would most likely stayconsistent with 13thAve. location, but it is conceivable that without the effect of demand decline during the summer months next to University of Oregon, overall revenues could be substantially higher in this location.

As the company gains community recognitionLa Salsa will expandto one or bothof the neighboring shopping malls (Valley River Centeror Gateway). Once the Eugene/ Springfield market is developedexpansion to other Oregon cities-on-the-rise such as Corvallis, Bend, Medford, or Ashland is anticipated. Portland is not a strong candidate considering competition is alreadyfierce in that region.

Market Analysis Summary

Market segmentation isdescribed in the next section.

3.1 Market Segmentation

The 2000 Census of Eugene/ Springfield says there are currently over 300,000 people populating this metropolitan area. Using basic demographic characteristics of age, gender, income, location, food preferences, ethnicity,an estimate of 150,000 potential customers was used in developing this plan.

The University of Oregonwas established in 1876,andcurrently has over 20,000 students. It is expected to gradually increase in size as it has over the previous years.

Across the street from the Universityis Sacred Heart Hospital, whichcurrently employs over 3,500 people (according to a hospital information representative) though it is likely moving to North Eugene in the near future. If this happens the current hospital will remain open only as an emergency room. This move and change will take time, hence the growth rate is listed as -50%.

Both of the proposed initial locations are close to university student residential areas. At the 18th Ave.and Willamette St.location high school students might be substituted for Sacred Heart Hospital employees as a source of mid-day customers. South Eugene High School has over 1,500 students.

Market Analysis

Year 1Year 2Year 3Year 4Year 5

Potential CustomersGrowthCAGR

Eugene/ Springfield3% 150,000 154,500 159,135 163,909 168,826 3.00%

University of Oregon3% 20,000 20,600 21,218 21,855 22,511 3.00%

Sacred Heart Hospital-50% 3,500 1,750 875 438 219 -49.99%

South Eugene High School2% 1,500 1,523 1,546 1,569 1,593 1.52%

Total2.50% 175,000 178,373 182,774 187,771 193,149 2.50%

3.2 Target Market Segment Strategy

The target market for the quick casualdining industry is very broad and should incorporate most demographic regions. Almost all ages, genders, races, and incomes should be considered potential customers.

3.2.1 Market Trends

Eugene is a rapidly developing city and is building theinfrastructure for a larger metropolitan area. Currently,in this expansionaryeffort, Eugeneis working on the following projects....

Building anew public library near the city center.

Broadway St. is being renovated and reopened to traffic.

Anew Federal Courthouse in is being built adjacent to downtown.

Low-income housing covering five square city blocks in downtown has been recently funded by St. Vincent DePaul.

The highway off-ramps to Eugene have recently beenearmarked to be renovated at an estimated $88 million.

The University of Oregon isspendingbetween $80 and $100 million on additions to the football stadium.

Projectssuch as these are promising for the future of Eugene and show that the city is preparing for expansionarytimes.

3.2.2 Market Needs

In Eugene there are no high-quality,quick food Mexican restaurants. Most local Mexican restaurants use canned foods, lard, and shredded meats. Our food will be 100% fresh prepared in front of our customers' eyes. Our salsa bar will allow customers to customize their food to their specific tastes.

3.3 Main Competitors

Quick Service Mexican-

Burrito Boy- This is probably the most popular quick Mexican restaurant in town.We will offer much higher food quality and service. The atmosphere will be much cleaner and more comfortable. The food will be prepared in front of the customer, with no lard, canned foodor shredded meats. Menu prices will bevery similar, though the final products will not be.

Santa Fe Burrito- Located on Willamette St. between 25th and 26th Avenues,Santa Fe Burrito is another low quality quick Mexican restaurant in Eugene. This store is very dirty andis anold Taco Bell. Using canned foods and some lard products, thisrestaurant provides a far-from-fresh feeling. They have a decent location that might be negotiable for buyout,thereby eliminatinga weakcompetitor andpicking up apretty good location.

Burrito Amigos- Not located near the university campus, this chain has been trying to expand. Currently, they have three or more stores. They create, almost,the taco stand feeling. Again there would be no comparison in quality of food. Though they will probably continue to attract the traditional style Mexican food consumer.Alternatively, La Salsa's food could almost be considered"gringo" Mexican food.

Ritta's Burritos- These folks started out with one mobile stand and did some catering business, thenopened a full-time store in Eugene, but thisMama andPapabusinesscould not cover costs. Currently they set up a stand on the University of Oregon campus once a week, and during the summer they are located at the Saturday Market and do very well. They always have a really long line, but one is left to wonder if that is because there is no real competition in this area. Once again using shreddedmeats andsome canned foods.

Las Brasas- Las Brasas is located on BlairStreet a few miles away from campus. From the outside Las Brasas looksreally smalland could be confused as a taco stand. People like their food, but due to location and size,they are not likely to be acompetitivethreat to La Salsa.

Other Quick Service Mexican-

La Salsawill most likelynot be a direct competitor with drive-thru fast-food Mexican restaurants like Taco Bell and Taco Time. The chicken, steak, shrimp, and Mahi Mahi will all be prepared fresh in front of the customers. Quality of produce will be much higher as will the atmosphere, so consequently the menu price range will behigher than fast-food, matching the dietary needs and gastronomical expectationsof the potential customer. We will offer a completely different menuand should not be comparedto traditional fast-food Mexican.

Sit-Down Mexican-

La Salsa with its fresh and extraordinary taste will offer menu items at a fraction of the cost of sit-down dining (perhaps 20%-50% cheaper). There will also be no charge for service that usually comes with being waited on. Another importantdifference is the quick servicewithout compromisinghighquality food.

Strategy and Implementation Summary

The next sections will help in understanding the competition, and the ways in whichLa Salsaplans to gain market share.

4.1 Marketing Strategy

Advertising costs can overwhelm a new business, so keeping marketing simple and creativewillbechallenging. Cost effective marketing is one of our keys to success, andfortunately a large portion of it will be taken care of by Santa Barbara Restaurant Group.

A combination of local media and event marketing will be utilized at each location. Radio is most effective, followed by local print media. When the La Salsaconstructionin Eugene is finished, broader media will be employed. Print media, radio andcollegeevents advertising will be the most effectiveway ofgenerating publicity.

The following are a list of possible places to advertise with:

Qwest Eugene/ Springfield Yellow Pages Pricing-

Customer Service

1/8 page-$258.50/ month Black/ Whiteand$402/ monthColor

1/4 page-$507/ month Black/ Whiteand$740/ month Color

1/2 page-$986/ month Black/ White and $1501/ monthColor

Register-Guard Newspaper-

Contact: Dave

Anadvertisement 2 columns wide once a week runs for $57.02 on weekdays and $62.44 each weekend day.

They offer a "Restaurant Special"- 13 weeks withone ad per week, including ad on Register-Guard website, directory listing, voice message listing, and is included in the non-subscriber paper touching nearly all of Eugene/ Springfield.

AT&T Cable Television Advertising-

Contact: Kristi

A wide variety of pricing options are available, cable advertising is a proven good way to reach potential customers.

Clear Channel Broadcasting KPNW-KODZ-KDUK

Contact: Kim

Clear Channel Broadcastingowns news radio, oldies, and new rock stations in Eugene/ Springfield and offers many advertising plans. The price range seems to be between $850-$1500 per month for between40 and 80 time slots.

4.1.1 Pricing Strategy

All menu items are moderately priced. Antypical customer will spend between $5-8 including food and drink. The menu prices are dictated by the Santa Barbara Restaurant Group and there is little room for modification. A student discountmight be offered.

4.1.2 Promotion Strategy

If the site location ends up beingnear 13th Ave. nextto the University of Oregon campus, advertising close to and on campus would be very appropriate. This is an area with limited parking where most of the traffic will come by foot. It will be very important to gain recognition from students and hospital employees. Promotional events close to campus, at sporting events, in the dormitories, and through the campus newspaper will tremendously increase sales.

On the other hand, if the store has a high traffic location with ample parking more traditional forms of restaurant promotion and advertisingwill be used.

4.2 Sales Forecast

Supplies in the restaurantindustry, particularly fresh produce and meats and seafood,are constantly subject to changes in theprices,so, while we attempt to maintainconsistency,menu prices are also subject to change. The sales forecasts start out at a moderate level and build until the end of the school year where we hope to have the strongest sales. Due to location (by campus)it is probable that sales will see a sharp decline during the summer months (off months). As students begin to come back to school again in the middle of September the sales will pick up again. If the proper locationis found the sales may not decrease as much as expected, becauseif parking is available we could appeal to a larger market. If it is not located near campus the sales might be more consistent, but it would yield close tothe same in revenues.

The location next to Blockbuster Video Rentaland Little Caesar's Pizzawould offer a chance of more consistent sales and rental costs could also be considerably cut. This is a high traffic location next to a wealthy residential neighborhood. It would be nice tocompensate forthe sales decline during the summer months next to campus. This location offers a lot of possibilities.

Two La Salsafranchisees who haveprovided helpfulinformation ontheir sales revenues.One, located in Phoenix, Arizona,said that he hasa lotcompetitionin town (Quedoba, Chipotle's, Baja Fresh, etc.). His rough sales were at a very similarlevelas predicted in the Sales Forecast table.The numbers used seem to beconsistent with experiencein this industry.

In Eugene, thestrongest competitorshave notarrived intown yet. If La Salsa is established first it will gain the loyalty of the community, and sales could be considerably higher than those predicted in the Sales Forecast Table.

Sales Forecast

Year 1Year 2Year 3

Sales

Meal Deals$266,169 $284,801 $304,737

A La Carte$139,720 $149,500 $159,965

Burrito/ Taco$249,068 $266,503 $285,158

Other$37,151 $39,752 $42,534

Total Sales$692,108 $740,556 $792,394

Direct Cost of SalesYear 1Year 2Year 3

Meal Deals$69,204 $74,048 $79,232

A La Carte$29,341 $31,395 $33,593

Burrito/ Taco$77,211 $82,616 $88,399

Other$6,316 $6,758 $7,231

Subtotal Direct Cost of Sales$182,072 $194,817 $208,454

Management Summary

Benjamin D. Strock will run all businessoperations forLa Salsa Fresh Mexican Grill, except for the final accounting which will be reviewed by an accountingprofessional monthly.

Other key personnel are the day to day manager and cooks. There is not expected to be any shortage of qualified and available staff and management from local labor pools in each market area.

5.1 Organizational Structure

Benjamin D. Strock willbe in charge of store operations. Each store will have a general manager who oversees the day to day operation of their store. They will be rewarded by incremental profit sharing. It will be in their best interest to see that things run properly.

Future organizational structuremay include a director of store operations when store locations exceedthree and/orwe expand to other Oregon cities. This will provide a supervisory level between the executive level and the store management level.

At thatjuncture, a full-time accountantwill need to beadded. Also, a sales/marketing director will be added to oversee the expansion effort both to support the growth of existing business and to execute the franchise expansion strategy.

5.2 Management Team

BENJAMIN D. STROCK5.3 Personnel Plan

When you walk into the typical La Salsa, there isone cashier (usually the manager) and two or three cooks working at all times. Depending on the volume of sales more cooks might be needed. This is estimated into the personnel plan under Other.

At first there will not be a marketing manager, and Benjamin D. Strock will take care of this. As we grow the need for a marketing representative will be higher.

Benjamin D. Strock will receive $3,000 dollars a month formanagement of the first restaurants. When profits begin to rise, as owner and recipient of a percentage of profits, he may no longer be included on the payroll.

Personnel Plan

Year 1Year 2Year 3

Production Personnel

Manager$36,417 $37,508 $38,633

Cooks (3)$58,264 $60,013 $61,813

Other$34,417 $35,448 $36,512

Subtotal$129,098 $132,969 $136,958

Sales and Marketing Personnel

Marketing$12,168 $12,531 $12,907

Other$0 $0 $0

Subtotal$12,168 $12,531 $12,907

General and Administrative Personnel

Benjamin Strock$36,501 $37,594 $38,722

Accountant$12,140 $12,503 $12,878

Other$0 $0 $0

Subtotal$48,641 $50,097 $51,600

Other Personnel

Name or Title$0 $0 $0

Other$0 $0 $0

Subtotal$0 $0 $0

Total People00 0

Total Payroll$189,907 $195,597 $201,465

Financial Plan

The following sections present the financial plan for La Salsa Fresh Mexican Grill. Year end totals for the first three years are present in each section. First year monthly figures are presented in the appendix.

6.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:

We assumethat the economy gets back on its feet and returns to 'normal', after the currentrecession.

We assume access to equity capital and financing sufficient to maintain our financial plan as shown in the tables.

General Assumptions

Year 1Year 2Year 3

Plan Month123

Current Interest Rate10.00% 10.00% 10.00%

Long-term Interest Rate7.00% 7.00% 7.00%

Tax Rate30.00% 30.00% 30.00%

Other0 0 0

6.2 Break-even Analysis

The break-even analysis is based on planned fixed costs estimates.

Break-even Analysis

Monthly Revenue Break-even$20,895

Assumptions:

Average Percent Variable Cost26%

Estimated Monthly Fixed Cost$15,398

6.3 Projected Profit and Loss

In order not to underestimate costs, costslisted are considerably higher than what will most likely be experienced. This makes the profits and margins appear less attractive, but realize there are many ways to cut costs.

The Santa Barbara Restaurant Group requires royalties of 4% of gross sales to cover national and local advertising costs. This is included in the Profit/Loss table under Corporate Marketing Fee. The Franchise Fee is6% of gross sales and islabeled Franchise Fee on the Profit/Loss table.

Pro Forma Profit and Loss

Year 1Year 2Year 3

Sales$692,108 $740,556 $792,394

Direct Cost of Sales$182,072 $194,817 $208,454

Production Payroll$129,098 $132,969 $136,958

SBRG Franchise Fee$41,526 $44,433 $47,544

Other Production Expenses$12,000 $12,000 $12,000

Total Cost of Sales$364,696 $384,219 $404,956

Gross Margin$327,412 $356,336 $387,439

Gross Margin %47.31% 48.12% 48.89%

Operating Expenses

Sales and Marketing Expenses

Sales and Marketing Payroll$12,168 $12,531 $12,907

Advertising/ Promotion$12,000 $12,000 $12,000

SBRG Corporate Marketing Fee$27,684 $29,622 $31,696

Travel$1,800 $1,800 $1,800

Miscellaneous$1,200 $1,200 $1,200

Total Sales and Marketing Expenses$54,852 $57,153 $59,603

Sales and Marketing %7.93% 7.72% 7.52%

General and Administrative Expenses

General and Administrative Payroll$48,641 $50,097 $51,600

Sales and Marketing and Other Expenses$0 $0 $0

Depreciation$12,000 $12,000 $12,000

Leased Equipment$0 $0 $0

Utilities$2,400 $2,400 $2,400

Insurance$2,400 $2,400 $2,400

Rent$36,000 $36,000 $36,000

Payroll Taxes$28,486 $29,340 $30,220

Other General and Administrative Expenses$0 $0 $0

Total General and Administrative Expenses$129,927 $132,237 $134,620

General and Administrative %18.77% 17.86% 16.99%

Other Expenses:

Other Payroll$0 $0 $0

Consultants$0 $0 $0

Contract/Consultants$0 $0 $0

Total Other Expenses$0 $0 $0

Other %0.00% 0.00% 0.00%

Total Operating Expenses$184,779 $189,390 $194,223

Profit Before Interest and Taxes$142,632 $166,947 $193,216

EBITDA$154,632 $178,947 $205,216

Interest Expense$20,194 $18,690 $17,020

Taxes Incurred$36,731 $44,477 $52,859

Net Profit$85,707 $103,779 $123,337

Net Profit/Sales12.38% 14.01% 15.57%

6.4 Projected Cash Flow

In the followingchart and table it is imperative to realize the importance of having cash on hand. If the company were to run into any problems the cash on hand will ensure that the business stays running.

Pro Forma Cash Flow

Year 1Year 2Year 3

Cash Received

Cash from Operations

Cash Sales$692,108 $740,556 $792,394

Subtotal Cash from Operations$692,108 $740,556 $792,394

Additional Cash Received

Sales Tax, VAT, HST/GST Received$0 $0 $0

New Current Borrowing$0 $0 $0

New Other Liabilities (interest-free)$0 $0 $0

New Long-term Liabilities$0 $0 $0

Sales of Other Current Assets$0 $0 $0

Sales of Long-term Assets$0 $0 $0

New Investment Received$0 $0 $0

Subtotal Cash Received$692,108 $740,556 $792,394

ExpendituresYear 1Year 2Year 3

Expenditures from Operations

Cash Spending$189,907 $195,597 $201,465

Bill Payments$336,482 $432,352 $454,852

Subtotal Spent on Operations$526,389 $627,949 $656,317

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out$0 $0 $0

Principal Repayment of Current Borrowing$0 $0 $0

Other Liabilities Principal Repayment$0 $0 $0

Long-term Liabilities Principal Repayment$21,479 $23,032 $24,697

Purchase Other Current Assets$0 $0 $0

Purchase Long-term Assets$0 $0 $0

Dividends$0 $36,000 $36,000

Subtotal Cash Spent$547,868 $686,981 $717,014

Net Cash Flow$144,240 $53,574 $75,381

Cash Balance$246,240 $299,814 $375,195

6.5 Projected Balance Sheet

The projected balance sheet is shown below.

Pro Forma Balance Sheet

Year 1Year 2Year 3

Assets

Current Assets

Cash$246,240 $299,814 $375,195

Inventory$19,201 $20,545 $21,984

Other Current Assets$0 $0 $0

Total Current Assets$265,441 $320,360 $397,179

Long-term Assets

Long-term Assets$287,000 $287,000 $287,000

Accumulated Depreciation$12,000 $24,000 $36,000

Total Long-term Assets$275,000 $263,000 $251,000

Total Assets$540,441 $583,360 $648,179

Liabilities and CapitalYear 1Year 2Year 3

Current Liabilities

Accounts Payable$37,214 $35,385 $37,564

Current Borrowing$0 $0 $0

Other Current Liabilities$0 $0 $0

Subtotal Current Liabilities$37,214 $35,385 $37,564

Long-term Liabilities$278,521 $255,488 $230,791

Total Liabilities$315,735 $290,874 $268,355

Paid-in Capital$300,000 $300,000 $300,000

Retained Earnings($161,000)($111,293)($43,514)

Earnings$85,707 $103,779 $123,337

Total Capital$224,707 $292,486 $379,823

Total Liabilities and Capital$540,441 $583,360 $648,179

Net Worth$224,707 $292,486 $379,823

6.6 Business Ratios

The following table outlines some of the more important ratios from the Restaurant/ Eating Places industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5812.

Ratio Analysis

Year 1Year 2Year 3Industry Profile

Sales Growth0.00% 7.00% 7.00% 7.60%

Percent of Total Assets

Inventory3.55% 3.52% 3.39% 3.60%

Other Current Assets0.00% 0.00% 0.00% 35.60%

Total Current Assets49.12% 54.92% 61.28% 43.70%

Long-term Assets50.88% 45.08% 38.72% 56.30%

Total Assets100.00% 100.00% 100.00% 100.00%

Current Liabilities6.89% 6.07% 5.80% 32.70%

Long-term Liabilities51.54% 43.80% 35.61% 28.50%

Total Liabilities58.42% 49.86% 41.40% 61.20%

Net Worth41.58% 50.14% 58.60% 38.80%

Percent of Sales

Sales100.00% 100.00% 100.00% 100.00%

Gross Margin47.31% 48.12% 48.89% 60.50%

Selling, General & Administrative Expenses34.92% 34.10% 33.33% 39.80%

Advertising Expenses1.73% 1.62% 1.51% 3.20%

Profit Before Interest and Taxes20.61% 22.54% 24.38% 0.70%

Main Ratios

Current7.13 9.05 10.57 0.98

Quick6.62 8.47 9.99 0.65

Total Debt to Total Assets58.42% 49.86% 41.40% 61.20%

Pre-tax Return on Net Worth54.49% 50.69% 46.39% 1.70%

Pre-tax Return on Assets22.66% 25.41% 27.18% 4.30%

Additional RatiosYear 1Year 2Year 3

Net Profit Margin12.38% 14.01% 15.57% n.a

Return on Equity38.14% 35.48% 32.47% n.a

Activity Ratios

Inventory Turnover8.68 9.80 9.80 n.a

Accounts Payable Turnover10.04 12.17 12.17 n.a

Payment Days27 31 29 n.a

Total Asset Turnover1.28 1.27 1.22 n.a

Debt Ratios

Debt to Net Worth1.41 0.99 0.71 n.a

Current Liab. to Liab.0.12 0.12 0.14 n.a

Liquidity Ratios

Net Working Capital$228,227 $284,974 $359,614 n.a

Interest Coverage7.06 8.93 11.35 n.a

Additional Ratios

Assets to Sales0.78 0.79 0.82 n.a

Current Debt/Total Assets7% 6% 6% n.a

Acid Test 6.62 8.47 9.99 n.a

Sales/Net Worth3.08 2.53 2.09 n.a

Dividend Payout0.00 0.35 0.29 n.a

Appendix

Sales Forecast

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Sales

Meal Deals0%$12,588 $19,188 $24,319 $26,688 $28,044 $28,428 $23,302 $18,116 $15,604 $20,116 $24,240 $25,536

A La Carte0%$6,582 $9,534 $12,048 $13,560 $14,431 $14,880 $12,910 $10,796 $9,658 $12,796 $11,622 $10,903

Burrito/ Taco0%$8,844 $14,592 $20,100 $23,244 $25,104 $26,832 $22,792 $19,268 $16,804 $21,268 $24,672 $25,548

Other0%$1,378 $2,192 $3,015 $3,752 $4,042 $4,352 $3,490 $2,932 $2,072 $2,746 $3,610 $3,570

Total Sales$29,392 $45,506 $59,482 $67,244 $71,621 $74,492 $62,494 $51,112 $44,138 $56,926 $64,144 $65,557

Direct Cost of SalesMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Meal Deals26%$3,273 $4,989 $6,323 $6,939 $7,291 $7,391 $6,059 $4,710 $4,057 $5,230 $6,302 $6,639

A La Carte21%$1,382 $2,002 $2,530 $2,848 $3,031 $3,125 $2,711 $2,267 $2,028 $2,687 $2,441 $2,290

Burrito/ Taco31%$2,742 $4,524 $6,231 $7,206 $7,782 $8,318 $7,066 $5,973 $5,209 $6,593 $7,648 $7,920

Other17%$234 $373 $513 $638 $687 $740 $593 $498 $352 $467 $614 $607

Subtotal Direct Cost of Sales$7,631 $11,887 $15,597 $17,630 $18,791 $19,574 $16,428 $13,449 $11,647 $14,977 $17,005 $17,456

Personnel Plan

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Production Personnel

Manager$3,000 $3,000 $3,008 $3,015 $3,023 $3,030 $3,038 $3,045 $3,053 $3,061 $3,068 $3,076

Cooks (3)$4,800 $4,800 $4,812 $4,824 $4,836 $4,848 $4,860 $4,872 $4,885 $4,897 $4,909 $4,921

Other$2,000 $2,000 $3,008 $3,015 $3,023 $3,030 $3,038 $3,045 $3,053 $3,061 $3,068 $3,076

Subtotal$9,800 $9,800 $10,828 $10,854 $10,882 $10,908 $10,936 $10,962 $10,991 $11,019 $11,045 $11,073

Sales and Marketing Personnel

Marketing$1,000 $1,003 $1,005 $1,008 $1,010 $1,013 $1,015 $1,018 $1,020 $1,023 $1,025 $1,028

Other$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal$1,000 $1,003 $1,005 $1,008 $1,010 $1,013 $1,015 $1,018 $1,020 $1,023 $1,025 $1,028

General and Administrative Personnel

Benjamin Strock$3,000 $3,008 $3,015 $3,023 $3,030 $3,038 $3,045 $3,053 $3,061 $3,068 $3,076 $3,084

Accountant$1,000 $1,000 $1,003 $1,005 $1,008 $1,010 $1,013 $1,015 $1,018 $1,020 $1,023 $1,025

Other$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal$4,000 $4,008 $4,018 $4,028 $4,038 $4,048 $4,058 $4,068 $4,079 $4,088 $4,099 $4,109

Other Personnel

Name or Title$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total People0 0 0 0 0 0 0 0 0 0 0 0

Total Payroll$14,800 $14,811 $15,851 $15,890 $15,930 $15,969 $16,009 $16,048 $16,090 $16,130 $16,169 $16,210

General Assumptions

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Plan Month123456789101112

Current Interest Rate10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Long-term Interest Rate7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%

Tax Rate30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Other0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Sales$29,392 $45,506 $59,482 $67,244 $71,621 $74,492 $62,494 $51,112 $44,138 $56,926 $64,144 $65,557

Direct Cost of Sales$7,631 $11,887 $15,597 $17,630 $18,791 $19,574 $16,428 $13,449 $11,647 $14,977 $17,005 $17,456

Production Payroll$9,800 $9,800 $10,828 $10,854 $10,882 $10,908 $10,936 $10,962 $10,991 $11,019 $11,045 $11,073

SBRG Franchise Fee6%$1,764 $2,730 $3,569 $4,035 $4,297 $4,470 $3,750 $3,067 $2,648 $3,416 $3,849 $3,933

Other Production Expenses$1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Total Cost of Sales$20,195 $25,418 $30,993 $33,519 $34,971 $35,951 $32,114 $28,478 $26,286 $30,412 $32,899 $33,462

Gross Margin$9,197 $20,088 $28,489 $33,725 $36,650 $38,541 $30,380 $22,634 $17,852 $26,514 $31,245 $32,095

Gross Margin %31.29% 44.14% 47.89% 50.15% 51.17% 51.74% 48.61% 44.28% 40.45% 46.58% 48.71% 48.96%

Operating Expenses

Sales and Marketing Expenses

Sales and Marketing Payroll$1,000 $1,003 $1,005 $1,008 $1,010 $1,013 $1,015 $1,018 $1,020 $1,023 $1,025 $1,028

Advertising/ Promotion$1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

SBRG Corporate Marketing Fee4%$1,176 $1,820 $2,379 $2,690 $2,865 $2,980 $2,500 $2,044 $1,766 $2,277 $2,566 $2,622

Travel$600 $600 $600 $0 $0 $0 $0 $0 $0 $0 $0 $0

Miscellaneous$100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100

Total Sales and Marketing Expenses$3,876 $4,523 $5,084 $4,798 $4,975 $5,093 $4,615 $4,162 $3,886 $4,400 $4,691 $4,750

Sales and Marketing %13.19% 9.94% 8.55% 7.13% 6.95% 6.84% 7.38% 8.14% 8.80% 7.73% 7.31% 7.25%

General and Administrative Expenses

General and Administrative Payroll$4,000 $4,008 $4,018 $4,028 $4,038 $4,048 $4,058 $4,068 $4,079 $4,088 $4,099 $4,109

Sales and Marketing and Other Expenses$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Depreciation$1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Leased Equipment$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Utilities$200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200

Insurance$200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200

Rent$3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Payroll Taxes15% $2,220 $2,222 $2,378 $2,384 $2,390 $2,395 $2,401 $2,407 $2,414 $2,420 $2,425 $2,432

Other General and Administrative Expenses$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total General and Administrative Expenses$10,620 $10,630 $10,796 $10,812 $10,828 $10,843 $10,859 $10,875 $10,893 $10,908 $10,924 $10,941

General and Administrative %36.13% 23.36% 18.15% 16.08% 15.12% 14.56% 17.38% 21.28% 24.68% 19.16% 17.03% 16.69%

Other Expenses:

Other Payroll$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Consultants$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Contract/Consultants$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Other Expenses$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other %0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Total Operating Expenses$14,496 $15,153 $15,880 $15,609 $15,802 $15,936 $15,474 $15,038 $14,778 $15,308 $15,615 $15,691

Profit Before Interest and Taxes($5,298)$4,936 $12,609 $18,116 $20,848 $22,605 $14,906 $7,597 $3,074 $11,207 $15,630 $16,404

EBITDA($4,298)$5,936 $13,609 $19,116 $21,848 $23,605 $15,906 $8,597 $4,074 $12,207 $16,630 $17,404

Interest Expense$1,740 $1,730 $1,719 $1,709 $1,699 $1,688 $1,678 $1,667 $1,657 $1,646 $1,635 $1,625

Taxes Incurred($2,111)$962 $3,267 $4,922 $5,745 $6,275 $3,968 $1,779 $425 $2,868 $4,198 $4,434

Net Profit($4,927)$2,244 $7,622 $11,485 $13,404 $14,641 $9,259 $4,151 $992 $6,692 $9,796 $10,346

Net Profit/Sales-16.76% 4.93% 12.81% 17.08% 18.72% 19.65% 14.82% 8.12% 2.25% 11.76% 15.27% 15.78%

Pro Forma Cash Flow

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Cash Received

Cash from Operations

Cash Sales$29,392 $45,506 $59,482 $67,244 $71,621 $74,492 $62,494 $51,112 $44,138 $56,926 $64,144 $65,557

Subtotal Cash from Operations$29,392 $45,506 $59,482 $67,244 $71,621 $74,492 $62,494 $51,112 $44,138 $56,926 $64,144 $65,557

Additional Cash Received

Sales Tax, VAT, HST/GST Received0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Current Borrowing$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities (interest-free)$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Long-term Liabilities$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Other Current Assets$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Long-term Assets$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Investment Received$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Received$29,392 $45,506 $59,482 $67,244 $71,621 $74,492 $62,494 $51,112 $44,138 $56,926 $64,144 $65,557

ExpendituresMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Expenditures from Operations

Cash Spending$14,800 $14,811 $15,851 $15,890 $15,930 $15,969 $16,009 $16,048 $16,090 $16,130 $16,169 $16,210

Bill Payments$363 $11,044 $15,768 $22,330 $41,154 $42,603 $43,377 $32,561 $26,551 $24,497 $36,855 $39,379

Subtotal Spent on Operations$15,163 $25,855 $31,619 $38,220 $57,084 $58,572 $59,386 $48,609 $42,641 $40,627 $53,024 $55,589

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Principal Repayment of Current Borrowing$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Liabilities Principal Repayment$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Long-term Liabilities Principal Repayment$1,733 $1,743 $1,754 $1,764 $1,774 $1,784 $1,795 $1,805 $1,816 $1,826 $1,837 $1,848

Purchase Other Current Assets$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Long-term Assets$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Dividends$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Spent$16,896 $27,598 $33,372 $39,984 $58,859 $60,357 $61,180 $50,415 $44,456 $42,453 $54,861 $57,437

Net Cash Flow$12,496 $17,908 $26,110 $27,260 $12,762 $14,135 $1,314 $697 ($318)$14,473 $9,283 $8,120

Cash Balance$114,496 $132,404 $158,514 $185,773 $198,536 $212,671 $213,985 $214,682 $214,364 $228,837 $238,119 $246,240

Pro Forma Balance Sheet

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

AssetsStarting Balances

Current Assets

Cash$102,000 $114,496 $132,404 $158,514 $185,773 $198,536 $212,671 $213,985 $214,682 $214,364 $228,837 $238,119 $246,240

Inventory$50,000 $42,369 $30,482 $17,156 $19,393 $20,670 $21,531 $18,071 $14,794 $12,811 $16,475 $18,706 $19,201

Other Current Assets$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Current Assets$152,000 $156,865 $162,886 $175,670 $205,166 $219,206 $234,202 $232,056 $229,476 $227,175 $245,312 $256,825 $265,441

Long-term Assets

Long-term Assets$287,000 $287,000 $287,000 $287,000 $287,000 $287,000 $287,000 $287,000 $287,000 $287,000 $287,000 $287,000 $287,000

Accumulated Depreciation$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000 $12,000

Total Long-term Assets$287,000 $286,000 $285,000 $284,000 $283,000 $282,000 $281,000 $280,000 $279,000 $278,000 $277,000 $276,000 $275,000

Total Assets$439,000 $442,865 $447,886 $459,670 $488,166 $501,206 $515,202 $512,056 $508,476 $505,175 $522,312 $532,825 $540,441

Liabilities and CapitalMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Current Liabilities

Accounts Payable$0 $10,525 $15,045 $20,960 $39,736 $41,145 $42,284 $31,673 $25,748 $23,271 $35,542 $38,096 $37,214

Current Borrowing$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Current Liabilities$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Current Liabilities$0 $10,525 $15,045 $20,960 $39,736 $41,145 $42,284 $31,673 $25,748 $23,271 $35,542 $38,096 $37,214

Long-term Liabilities$300,000 $298,267 $296,523 $294,770 $293,006 $291,232 $289,448 $287,653 $285,848 $284,032 $282,205 $280,368 $278,521

Total Liabilities$300,000 $308,791 $311,568 $315,730 $332,742 $332,377 $331,732 $319,326 $311,596 $307,303 $317,747 $318,464 $315,735

Paid-in Capital$300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000

Retained Earnings($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)($161,000)

Earnings$0 ($4,927)($2,683)$4,940 $16,425 $29,829 $44,470 $53,730 $57,880 $58,872 $65,565 $75,361 $85,707

Total Capital$139,000 $134,073 $136,317 $143,940 $155,425 $168,829 $183,470 $192,730 $196,880 $197,872 $204,565 $214,361 $224,707

Total Liabilities and Capital$439,000 $442,865 $447,886 $459,670 $488,166 $501,206 $515,202 $512,056 $508,476 $505,175 $522,312 $532,825 $540,441

Net Worth$139,000 $134,073 $136,317 $143,940 $155,425 $168,829 $183,470 $192,730 $196,880 $197,872 $204,565 $214,361 $224,707