8.0 Financial Management
8.1 Revenue and Costs
Dream Dishes will generate revenue from food offerings, drinks, and special events. Whereas the goal is to create a premier restaurant, Dream Dishes will strive to offer affordable and competitive prices for all the offerings.
The significant cost drivers include the restaurant’s scaling capacity, offering quality meals, and paying salaries and wages within the recommended industry standards. Its costs will be driven by the need to offer a limited menu and minimal cost for supplies.
Additionally, the restaurant will be limited in costs since its owners will have a small salary.
8.2 Key Assumptions
The following are some key assumptions to consider in the financial plan of Dream Dishes:
- The price of meals ranges between $8 and $15
- The average price for lunch meals is $8.79
- The average price for dinner at the restaurant is $13.74
- The restaurant sits in 3,400 square feet of space in Downtown Fort Worth, Texas
- The revenue target for Dream Dishes is $860,000 – $1,200,000
8.3 Start-up Costs
The projected start-up costs for Dream Dishes will be $363,000, with the owners contributing $174,000 and the rest acquired through a bank loan.
Here’s a breakdown of the start-up costs:
Table 2: Start-up Costs
| Start-Up Expenses | Amount |
| Logo and associated graphics | $1,000 |
| Business licenses and lease deposit | $1,200 |
| Contingencies | $10,000 |
| Outdoor Signage | $3,000 |
| Building décor and improvement | $50,000 |
| Working capital | $172,500 |
| Pre-opening expenses
|
$14,800 |
| Total Start-up expenses | $252,500 |
|
START-UP ASSETS |
|
| Décor (artwork) | $800 |
| Cooler (walk-in) | $8,000 |
| Dishwasher | $7,000 |
| Steel freezers (2) | $6,000 |
| Cold station | $3,000 |
| Blender | $900 |
| Ice maker | $4,000 |
| Steel hood | $11,000 |
| Beverage cooler | $3,500 |
| Sandwich prep ins | $5,600 |
| Kitchen small wares | $1,500 |
| Restaurant Range | $3,600 |
| Shelving systems | $500 |
| Reach in coolers | $7,200 |
| Worktables (3) | $1,200 |
| Steel tables (2) | $800 |
| Fire protection system | $4,000 |
| SS 3 bowl sink | $1,500 |
| Oval tables (20) | $20,000 |
| Café chairs (8) | $5,000 |
| Track lighting (20) | $1,000 |
| Table cloths | $1,200 |
| Art, décor | $2,000 |
| Fireproof safe | $500 |
| Cash register + POS | $4,000 |
| Ofc PC | $1,200 |
| Total Start-up Assets | $110,500 |
| Total Required Start-up Capital | $363,000 |
8.4 Source and Use of Funds
The projected start-up costs for Dream Dishes will be $363,000, with the owners contributing $174,000 and the rest acquired through a bank loan.
Table 3: Source and Use of Funds
| Source of Funds | |
| Owners’ contribution | $174,000 |
| Bank Loans | $189,000 |
| Total Source of Funds | $363,000 |
| Use of Funds | |
| Building | $ – |
| Leasehold and improvements | $ 50,000 |
| Capital equipment | $ 110,000 |
| Administration expenses | $ 14,800 |
| Opening inventory | $ – |
| Promotions expenses | $ 4,000 |
| Other expenses | $ 1,200 |
| Contingency fund | $10,000 |
| WORKING CAPITAL | $ 172,500 |
| Total Use of Funds | $363,000 |
8.5 Break-even Analysis
The total fixed costs for Dream Dishes are estimated to be around $669,186, representing the annual expenses. The overhead (the variable) cost is projected to be $4.51 for each meal. Considering the assumed average meal price, Dream Dishes is expected to break even after 97,535 meals or $1,108,970.
The table below provides a detailed break-even analysis for Dream Dishes:
Table 4: Break-even analysis
| Fixed cost: $669,186.91
Variable cost: $4.51 Number of units: 13,934 Average unit price: $11.37 |
|||||
| Net Units | Net revenue | Fixed Costs | Variable Costs | Total Costs | Total Profit |
| 0 | $0 | $669,186 | $0 | $669,186 | -$669,186 |
| 13,934 | $158,424 | $669,186 | $62,826 | $732,012 | -$573,588 |
| 27,867 | $316,849 | $669,186 | $125,653 | $784,839 | -$477,990 |
| 41,901 | $475,273 | $669,186 | $188,479 | $857,665 | -$382,392 |
| 55,734 | $633,697 | $669,186 | $251,306 | $920,492 | -$286,794 |
| 69,668 | $792,122 | $669,186 | $314,132 | $983,318 | -$191,196 |
| 83,601 | $950,546 | $669,186 | $376,958 | $1,046,144 | -$95,598 |
| 97,935 | $1,108970 | $669,186 | $439,785 | $1,108,971 | $0 |
| 111,468 | $1,267,395 | $669,186 | $502,611 | $1,171,797 | $95,598 |
| 1125,402 | $1,425,819 | $669,186 | $565,438 | $1,234,624 | $191,196 |
| 139,335 | $1,584,243 | $669,186 | $628,264 | $1,297,450 | $286,783 |
| 153,269 | $1,742,668 | $669,186 | $691,090 | $1,360,276 | $382,391 |
| 167,202 | $1,901,092 | $669,186 | $753,917 | $1,423,103 | $477,989 |
| 181,136 | $2,059,517 | $669,186 | $816,743 | $1,485,929 | $573,587 |
| 195,070 | $2,217,941 | $669,186 | $879,570 | $1,548,756 | $669,185 |
| 209,003 | $2,376,365 | $669,186 | $942,396 | $1,611,582 | $764,783 |
| 222,937 | $2,534,790 | $669,186 | $1,005,222 | $1,674,408 | $860,381 |
8.6 Financial Projections
8.6.1 Projected Profit and Loss
With adjustments for inflation, the profit and loss for Dream Dishes depict a relative increase in revenue over a period of 3 years, as shown in the table below:
Table 5 Projected Profit and Loss
| Y1 | Y2 | Y3 | |
| Income | |||
| Sales | $1,028,422 | $1,161,443 | $1,235,835 |
| Cost of Goods | ($402,113) | ($414,176) | ($426,602) |
| Gross Profit | $626,309 | $747,267 | $809,234 |
| Expenses | |||
| Accounting/Legal | $12,000 | $12,360 | $12,731 |
| Bad debts | $25,711 | $26,482 | $27,276 |
| Shrinkage | $90,000 | $92,700 | $95,481 |
| Credit card fees | $20,568 | $21,185 | $21,821 |
| Insurance | $75,000 | $77,250 | $79,568 |
| Miscellaneous | $44,112 | $45,435 | $46,798 |
| Payroll taxes | $0 | $0 | $0 |
| Licenses and Permits | $7,356 | $7,577 | $7,804 |
| Rent | $68,000 | $70,040 | $72,141 |
| Salaries | $12,341 | $12,711 | $13,093 |
| Wages | $269,987 | $323,057 | $340,027 |
| Total Expenses | $635,075 | $668,798 | $716,739 |
| Net Profit | $1,234 | $58,469 | $92,494 |
8.6.2 Pro Forma Cash Flow
Table 6: Pro Forma Cash Flow
| Pro Forma Cash Flow | Y1 | Y2 | Y3 |
| Cash Received | |||
| Cash from operations | $148,101 | $30,995 | $11,402 |
| Cash sales | $1,028,422 | $1,161,443 | $1,235,835 |
| Cash receivables | $0 | $0 | $0 |
| Subtotal cash from operations | $1,176,523 | $1,192,438 | $1,247,237 |
| Additional cash received | $189,000 | ||
| Sales Tax | |||
| Owners Investment | $174,000 | ||
| Subtotal Cash Received | $1,539,523 | $1,192,438 | $1,247,237 |
| Expenditures | |||
| Expenditure from operations | $765,113 | $414,176 | $426,602 |
| Cash Spent | $710,176 | $731,481 | $753,426 |
| Bills Paid | |||
| Subtotal Spent on Operations | $1,475,289 | $1,145,658 | $1,180,028 |
| Additional Cash Spent | |||
| Sales Tax | |||
| Loan Payment | $33,240 | $33,378 | $37,654 |
| Subtotal Additional Cash Spent | $33,240 | $33,378 | $37,654 |
| Subtotal Expenditures | $1,508,529 | $1,181,036 | $1,217,681 |
| Net Cash Flow | $30,994 | $11,402 | $29,556 |
| Cash Balance | $30,994 | $42,397 | $71,953 |
8.6.3 Pro Forma Balance Sheet
Table 7:Pro Forma Balance Sheet
| Pro Forma Balance Sheet | Y1 | Y2 | Y3 |
| Assets | |||
| Cash Assets | $63,000 | $66,150 | $71,111 |
| Accounts Receivables | $25,000 | $26,250 | $28,219 |
| Inventory | $14,000 | $14,700 | $15,803 |
| Other Current Assets | $129,500 | $135,975 | $146,173 |
| Total Current Assets | $239,500 | $243,075 | $261,306 |
| Long Term Assets | |||
| Long Term Assets | $144,500 | $151,725 | $163,104 |
| Accumulated depreciation | $0 | $0 | $0 |
| Total Long-Term Assets | $268,500 | $281,925 | $303,069 |
| Total Assets | $500,000 | $525,000 | $564,375 |
| Total Liabilities and Capital | |||
| Current Liabilities | |||
| Accounts Payable | $29,000 | $30,450 | $32,734 |
| Current Borrowing | $1,500 | $1,575 | $1,693 |
| Other Current Liabilities | $28,500 | $29,925 | $32,169 |
| Subtotal Current Liabilities | $59,000 | $66,596 | $0 |
| Long Term Liabilities | $189,000 | $198,450 | $213,334 |
| Total Liabilities | $277,000 | $290,850 | $312,664 |
| Paid-In/ Invested Capital | $223,000 | $234,150 | $251,711 |
| Retained Earnings | |||
| Total Liabilities and Capital | $500,000 | $525,000 | $564,375 |
| Net Worth | $223,000 | $234,150 | $251,711 |