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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
INTRODUCTION TO BUSINESS FINANCE
GROUP 1
AREEB SALEEM - 1524
MAHEEN SIDDIQI - 1470
MAHEEN SIDDIQUI - 1487
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
PREFACE:
This is the final project report of the course Introduction to Business Finance facilitated by Mr. Iqbal
Nayani. This is the feasibility report of starting a new business of a Barbeque Restaurant with finance
from SMEDA. The purpose of this report is to show the estimated profitability and financial position of
the company. We have also described about Project and Products, the Critical factors of the business
and the Process flow of the business. We have shown some tables related to Raw material cost, Human
resources, Space requirement, Furniture and Fixtures used, Revenue Generation, Working Capital
Requirement, Project cost and Utility charges. Also showing the profitability and financial position are
the Income Statement and Balance Sheet respectively. We have also done the analysis of financial
statements which include ratios and its graphical representation as well.
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
AKNOWLEGEMENT:
First of all, we thank Almighty Allah who praise us with the ability to think, work and deliver what we are
assigned to do. Secondly, we must be grateful to our course facilitator who helps us in this project. We
also acknowledge him that throughout our studies for helping and guiding us. We also would like to
thank him for showing us some example that related to the topic of our project. It is a great honor to
work with him.
`
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
TABLE OF CONTENTS
1. DISCLAIMER..........................................................................................................................5
2. INTRODUCTION TO SMEDA.........................................................................................................6
3. INTRODUCTION TO SCHEME.......................................................................................................6
4. EXECUTIVE SUMMARY............................................................................7
5. BRIEF DESCIRPTION OF PROJECT AND PRODUCT.......................................................................7
6. CRITICAL FACTORS..................................................................................8
7. PROCESS FLOW..........................................................................................................................8
8. INSTALLED AND OPERATIONAL CAPACITY...................................................................................8
9. RESTAURANT COST SUMMARY........................................................................................9
9.1 PROJECT FINANCING................................................................................................................9 9.2 PROJECT COST ..........................................................................................................................10 9.3 SPACE REQUIREMENT................................................................................................................10 9.4 MACHINERY AND EQUIPMENT ....................................................................................................10 9.5 FURNITURE AND FIXTURES ........................................................................................................11 9.6 RAW MATERIAL REQUIREMENTS ...............................................................................................11 9.7 HUMAN RESOURCE REQUIREMENT ...........................................................................................12 9.8 REVENUE GENERATION .............................................................................................................12 9.9 UTILITIES REQUIREMENT............................................................................................................13 9.10 WORKING CAPITAL REQUIREMENT..........................................................................................14 10. ANNEXURE....15
10.1 INCOME STATEMENT ..................................................................................................................15 10.2 BALANCE SHEET ........................................................................................................................16 10.3 RATIO ANALYSIS.17
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
DISCLAIMER:
This information memorandum is to introduce the subject matter and provide a general idea and
information on the subject. Although, the material included in this document is based on data or
information gathered from various reliable sources; however, it is based upon certain assumptions
which may differ from case to case. The information has been provided on as is where is basis without
any warranties or assertions as to the correctness or soundness thereof. Although, due care and
diligence has been taken to compile this document, the contained information may vary due to any
change in any of the concerned factors, and the actual results may differ substantially from the
presented information. SMEDA, its employees or agents do not assume any liability for any financial or
other loss resulting from this memorandum in consequence of undertaking this activity. The contained
information does not preclude any further professional advice. The prospective user of this
memorandum is encouraged to carry out additional diligence and gather any information which is
necessary for making an informed decision including taking professional advice from a qualified
consultant / technical expert before taking any decision to act upon the information. For more
information on services offered by SMEDA, please contact our website: WWW.SMEDA.ORG.PK
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
INTRODUCTION TO SMEDA:
The Small and Medium Enterprises Development Authority (SMEDA) was launched by Govt. Of Nawaz
Sharif in October 1998 with having a clear objective to support economy and giving a drive to the
economy by building up of Small and Medium Enterprises (SMEs).SMEDA is relatively a new
organization with a futuristic structure. Having a clear mission "To assist in employment generation
and value addition to the national income, through development of the SME sector, by helping
increase the number, scale and competitiveness of SMEs", SMEDA has carried out Sectoral Research
to make out accurate policy, access to finance, business development services, fully planned strategic
initiatives and institutional collaboration and networking initiatives. Simultaneously to the feasibility
studies, provision of business development services to the SMEs by SMEDA has also started to engine
the growth. These services include identification of experts and consultants and delivery of need based
capacity building programs of different types in addition to business guidance through help desk
services.
INTRODUCTION TO SCHEME:
Young entrepreneurs was highly supported by Prime Ministers Youth Business Loan which was
offering subsidized financing at 8% mark-up per annum for one hundred thousand (100,000)
beneficiaries, through well reputed institutions, primarily by the National Bank Of Pakistan (NBP) and
the First Women Bank Ltd. (FWBL), having a budget of Rs. 5.0 Billion for the year 2013-14.Small business
loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 1 year grace period,
and a debt : equity of 90 : 10 will be distributed to SME beneficiaries across Pakistan, covering; Punjab,
Sindh, Khyber Pakhtunkhwa, Baluchistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally
Administered Tribal Areas (FATA).
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
EXECUTIVE SUMMARY:
The Barbecue Restaurant can be a very profitable and fastest growing business and it is proposed to be
established at a location that has a continuous flow of traffic, convenient parking, preferably near
densely populated middle income areas or flat complexes so that variety of customers can easily get
attracted. Major cities like Karachi, Hyderabad, Sukkur, Larkana, Multan, Lahore, Gujranwala,
Faisalabad, Sialkot, Gujarat, Rawalpindi, Peshawar, Hub and Quetta etc. are suitable to house the
project. Common menu items at the proposed Barbecue restaurant includes fish, steaks, beef
sandwiches, Kebab item, French fries, salad and cold drinks which are mainly preferable.
The installed capacity of Barbecue Restaurant is to serve 335 clients per day; however, the restaurant would initially start business with 140-150 clients. 12 personnel would be required to manage the operations of Barbecue restaurant. Total Cost Estimates are Rs. 2.20 million with a fixed investment of Rs. 1.88 million and an initial working capital requirement of Rs. 0.32 million. Given the cost assumptions, internal rate of Return (IRR) and payback are 54% and 2.25 years respectively.
BRIEF DESCRIPTION OF PROJECT AND
PRODUCT:
Barbecue is famous all across the country, and is available in a variety of regional styles as Desi People
love to have it. Many customers enjoy stopping at smaller barbecue businesses because they typically
offer affordable prices, quick service and good-quality barbecue items. Here, Barbecue restaurants
provide dine-in as well as take-away facility. In Pakistan, there are many similar or small Barbecue
outlets which dont provide dine in facility but serve good quality food for take-away. Individually-
owned Barbecue restaurants are very famous and common all over the country which requires relatively
low capital. We are inaugurating a Barbecue Outlet which is based on following variables:
Technology: The proposed setup with used Barbecue cooking machinery including grilling machine, instant Marinator, fryers, and pre-processing equipment would serve popular Barbecue.
Location: The business is predicted to be established as a Barbecue restaurant, with seating capacity on rented premises of around 500 sq ft., near a heavily populated area suitable for Barbecue lovers. We are starting our business from Karachi and it is located at HYDERI near DEHLI MUSLIM.
Product: Mainly we have planned to offer popular Barbecue items, including Chicken and Beef burgers, Chicken Tikka, Russian salad, Kebab items, beef sandwiches and steaks have been selected to be served separately or as combo meals through the restaurant. It has installed capacity of serving 335 customers per day but is estimated to start with 140-150 customers per day.
Target Market: The middle income segment of Karachi is mainly targeted. Specifically we are
targeting youngsters and families who love to have get-togethers.
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
CRITICAL FACTORS:
Whether an entrepreneur is opening a new Barbecue Restaurant or trying to expand an existing
Barbecue outlet, there are winning principles that can improve the chances of success. Some key
success factors are as follows:
Selecting the right location and layout
Hiring well experienced staff especially cooks and servers
Quality & Hygiene
Creating the right menu
Menu pricing
Operational food quality consistency
Knowing the competition
PROCESS FLOW:
INSTALLED & OPERATIONAL
CAPACITIES:
In the Barbecue Restaurant business, the installed capacities are mainly dependant on the location and
layout of the outlet, service style, food concept and the target market. The restaurant is expected to
serve around 335 customers in a day. At start up, the operational capacities are estimated to be around
140-150 clients. Once the business gains popularity and acceptance, sales are expected to increase with
the same installed capacity.
Drive through
Customer
Walk-in Customer (Family)
PLACE ORDER
Front Desk Or
Waiter
Order in Queue
Main Course Meal
Preparation
Sidelines Preparation
Packing
Serving
Take-Away
Dine-In (Family)
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
RESTAURANT COST SUMMARY:
A detailed financial model has been developed to analyze the commercial viability of this Restaurant
under Prime Minister Youth Loan Program. Various costs and revenue related assumptions along with
results of the analysis are outlined in this section. The projected Income Statement and Balance Sheet
are attached as annexure.
9.1 PROJECT FINANCING:
Following table provides details of the equity required and variables related to bank loan;
TABLE NO.1 FINANCING OF RESTAURANT
Description Details
Total Equity (10%) Rs. 220,000
Bank Loan (90%) Rs. 1,980,000
Markup to the Borrower (%age/annum) 08%
Tenure of the loan (Years) 08
Grace period (Year) 1
9.2 PROJECT COST:
Following requirements have been identified for operations of the proposed business.
f
TABLE NO. 2 COST OF PROJECT
Capital Investment Amount (Rs.)
Restaurant Building 233,000
Restaurant Furniture & Fixtures 181,850
Machinery & Equipment 933,000
Advance Rent and Gas Security 505,000
Preliminary Expenses 25,500
Total Capital Cost 1,878,350
Initial Working Capital 321,650
Total Project Cost 2,200,000
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
9.3 SPACE REQUIRMENT:
The land requirement is 500 sq. ft. The cost per sq. Ft is Rs. 466. It is recommended that the Barbecue
outlet be established in an open area or any other area with high retail consumer traffic. As per the
proposed service style, the floor space needs to be carefully allocated to allow for maximum space for
food preparation and store. The allocation of space between different sections would be as follows:
TABLE NO. 3 SPACE REQUIREMENTS
SPACE REQUIREMENT (in ft.) Area (sq. ft.) Total Cost (Rs.)
Kitchen and Preparation 300 139,800
Store 100 46,600
Front desk / Reception 25 11,650
Family Area 75 34,950
Total 500 233,000
9.4 MACHINERY & EQUIPMENT:
Machines are easily available in the local market but the entrepreneur also has the choice to select from international brands. The machines can be purchased through international vendors with a minimum
delivery period of 3 months while refurbished machines are also available. The typical Barbecue restaurant as outlined above would require the following machine / equipment for its operations:
TABLE NO.4 MACHINERY AND EQUIPMENT
Description Quantity Cost
(Rs/Unit) Total (Rs.)
Deep Freezers 2 40,000 80,000
Grilling Machine 2 307,500 615,000
Deep Fryer (with 2 baskets) 2 40,000 80,000
Hot Plates for Burgers, Kabab & Sandwiches
1 33,000 33,000
Potato Cutter 2 3,500 7,000
Peeler 1 7,000 7,000
Microwave Oven 2 10,000 20,000
Generator (5 kva) 1 71,000 71,000
Keg rack & other 2 10,000 20,000
Total 933,000
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
9.5 FURNITURE AND FIXTURES:
The Restaurant is envisaged to operate as a take-away Barbecue restaurant and a limited seating
arrangement around the outlet for families, would be provided to entertain a maximum of 40 customers
at a time. The following table gives the details of the furniture and fixtures requirement for the front
and back-house operations.
TABLE NO. 5 FURNITURE AND FIXTURES
Description Quantity Cost (Rs.) Amount (Rs.)
Dining Table (Square) 10 3,500 35,000
Chairs (Standard 14) 40 1,500 60,000
Kitchen Cutlery set 2 2,500 5,000
Dining Cutlery ( Plate, Fork, Knife, Spoon, Glass)
60 150 9,000
Hot Water Geyser Large 1 18,000 18,000
Lights/CFLs 15 250 3,750
Wall lights/ Tube lights 6 750 4,500
Portable Emergency light 5 2,500 12,500
Working tables/Counter 1 15,000 15,000
Counter chairs 2 1,800 3600
Office Counter & Chair set 1 8,000 8,000
Chairs for Take away Customers 5 1,500 7,500
Total 181,850
9.6 RAW MATERIAL REQUIREMENT:
It is assumed that material inventory for 5-6 days would be kept at the restaurant. The Raw Material
cost is estimated to increase by 12% annually. The cost of material required is as under:
TABLE NO. 6 RAW MATERIAL REQUIREMENTS
Description Cost (Rs.)
Material For Beef/Chicken Burger 21,165
Material for Beef Sandwiches 9,772
Material for Kabab items (Seekh, Behari, Shami Kebab) 20,324
Material for Chicken Tikka 19,323
Soft drinks, Fries, Chapati, Salad etc 15,432
Packaging material 1,134
Total Raw Material cost 87,150
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
9.7 HUMAN RESOURCE REQURIMENT:
The human resource requirement is as follows:
TABLE NO. 7 HUMAN RESOURCE REQURIMENT
Description No. of
Employees Salary per
Month (Rs.) Total Monthly
salary (Rs.)
Owner / Manager 1 30,000 30,000
Kitchen Supervisor 1 12,000 12,000
Cook 3 11,000 33,000
Servers 4 8,000 32,000
Dishwashers 2 8,000 16,000
Cleaner 1 6,000 6,000
Total Staff 12 129,000
Considering the size of the proposed establishment, it is assumed that the owner would be managing the overall affairs of the Barbecue setup. Owner will process and check bills, invoices, and cash and also maintain accounts etc. It is essential to hire experienced cooks, trained in operating machinery for the Restaurant. The proposed project would need a total of 12 persons to handle the restaurant operations. Salaries of all employees are estimated to increase at the rate of 10% annually.
9.8 REVENUE GENERATION:
The Sales are expected to increase by 12% every year. The 12% annual increase in revenue is expected to result from a part increase in customer traffic and part increase in product price. The prices used to calculate the gross revenue earned are based on the billing rate at which the entrepreneur will charge the customer. The item-wise estimated revenue for the restaurant is as follows:
TABLE NO.8 REVENUE
Items Description Unit Sales Price (Rs./Unit)
First year sales (No.)
First year sales Revenue (Rs.)
Chicken Tikka No 550 1,800 990,000
Chicken Burger No 120 4,320 518,400
Beef Burger No 100 3,600 360,000
Beef Cheese Burger No 120 3,600 432,000
Beef Sandwich No 110 1,500 165,000
Beef Club Sandwich No 140 360 504,000
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
Katakat No 150 1,440 216,000
Beef Steaks No 280 720 201,600
Chicken Steaks No 250 1,800 450,000
Behari Kebab (4 per plate) No 160 2,800 448,000
Behari Kebab (8 per plate) No 320 1,000 320,000
Seekh Kebab (4 per plate) No 150 2,500 375,000
Seekh Kebab (8 per plate) No 300 1,500 450,000
Chapli Kebab (4 per plate) No 150 2,500 375,000
Chapli Kebab (8 per plate) No 300 1,550 465,000
Malai Boti No 280 900 252,000
Beef Boti No 250 850 212,500
Chicken Behari Boti No 200 1,200 240,000
Beef Boti Roll No 80 1,500 120,000
Chicken Roll No 80 1,600 128,000
Beef Chatni Roll No 70 1,800 126,000
Salad & Raita No 35 + 40 3,500 262,500
Puri Paratha No 15 6,000 90,000
Chapati No 10 4,998 49980
Fries No 60 1,300 78,000
Kheer No 45 2,500 112,500
Beverages No 30 71284 2138520
Total Revenue 10,080,000
9.9 UTILITIES REQUIRMENTS:
The following table presents the estimated breakup of utilities on a monthly basis:
TABLE NO. 9 UTLITIES REQUIRMENTS
Description Monthly Charges (Rs.)
Electricity 38,000
Gas 20,000
Telephone 2,500
Water 2,500
Total 63,000
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
9.10 WORKING CAPITAL REQUIREMENT:
It is estimated that an additional amount of Rs. 321,650 will be required as cash in hand to meet the initial working capital requirements / contingency cash. The requirement is based on the rent, utilities and salaries expenses for at least one month and 5-6 days raw material inventory. The following table gives the break up.
TABLE NO. 10 WORKING CAPITAL REQUIREMENT
Description Days Charges (Rs.)
Utilities 30 63,000
Salaries 30 129,000
Raw Material 5 87,150
Rent 30 42,500
Total 321,650
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
DESIHOLIC BARBECUE
COMMON SIZE INCOME STATEMENT
YEARS YEAR 2015 YEAR 2016 2015 % 2016%
REVENUE/SALES
10,080,000
11,289,600 100% 100%
LESS: COST OF GOOD SOLD
RAW MATERIAL COST 6,274,800
7,027,776
(62.25%) (62.25%)
LABOUR & SALARY 1,548,000
1,702,800
(15.35%) (15.08%)
UTILITIES 756,000
831,600
(7.5%) (7.36%)
TOTAL COST OF GOOD SOLD
(8,578,800)
(9,562,176)
GROSS PROFIT
1,501,200
1,727,424 14.89% 15.30%
LESS: OPERATING EXP.
RENT EXP. 510,000
561,000
(5.05%) (4.96%)
OFFICE & MISC. EXP. 360,000
396,000
(3.57%) (3.50%)
AMORTIZATION EXP. 5,100
5,100
(0.05%) (0.04%)
DEPRICIATION EXP. 134,785
121,352
(1.33%) (1.07%)
MAINTAINANCE EXP. 20,993
18,893
(0.20%) (0.16%)
SUB TOTAL
(1,030,878)
(1,102,345)
OPERATING INCOME
470,322
625,079 4.66% 5.53%
FINANCIAL CHARGES (08%/ANNUM)
(158,400)
(158,400) (1.57%) (1.40%)
EARNING BEFORE TAX
311,922
466,679 3.09% 4.13%
TAX
(5000)
(7000) (0.05%) (0.06%)
NET PROFIT
306,922
459,679 3.04 % 4.07%
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
DESIHOLIC BARBECUE
BALANCE SHEET
YEAR 2014 YEAR 2015 YEAR 2016
ASSETS
FIXED ASSET AMOUNT (PKR) AMOUNT (PKR) AMOUNT (PKR)
MACHINERY & EQUIPMENT 933,000 839,700 755,730
BUILDING 233,000 209,700 188,730
OFFICE FIXTURE & FURNITURE 181,850 163,665 147,298
TOTAL FIXED ASSETS 1,347,850 1,213,065 1,091,758
CURRENT ASSET
CASH & BANK BALANCE 234,500 363,927 910,147
RAW MATERIAL INVENTORY 87,150 97,608 109,321
PREPAID RENT 505,000 505,000 505,000
TOTAL CURRENT ASSETS 826,150 966,535 1,524,468
PRELIMINARY EXPENSES 25,500 20,400 15,300
TOTAL ASSETS 2,200,000 2,200,000 2,631,526
LIABLITIES & OWNER EQUITY
NON CURRENT LIABLITIES
LONG TERM LOAN 1,980,000 1,980,000 1,821,600
TOTAL NON CURRENT LIABLITY 1,980,000 1,980,000 1,821,600
OWNER EQUITY
OWNER EQUITY 220,000 220,000 809,926
TOTAL OWNER EQUITY 220,000 220,000 809,926
TOTAL LIABILITIES & OWNER EQUITY 2,200,000 2,200,000 2,631,526
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
DESIHOLIC BARBECUE
RATIOS
DEBT RATIO (2015):
FORMULA: TOTAL LIABILITIES/TOTAL ASSETS = 1,980,000 / 2,200,000 = 0.9 Times.
EQUITY RATIO (2015):
FORMULA: TOTAL OWNERS EQUITY / TOTAL ASSETS
= 220,000/2,200,000
=0.10 OR 10%
DEBT TO EQUITY RATIO(2015):
FORMULA: Total Liabilities/Owner Equity = 1,980,000/220,000 = 9 : 1
ASSET TURNOVER RATIO (2015):
FORMULA: NET SALES/ TOTAL ASSETS = 10,080,000 / 2200,000 = 4.58 = 5 Times
FIXED ASSET TURNOVER RATIO (2015):
FORMULA: Net Sales / TOTAL FIXED ASSETS
= 10,080,000 / 1,078,280
= 9.3 = 9 Times
INVENTORY TURNOVER RATIO (2015):
FORMULA: COGS / AVG. INVEMTORY
= 8,578,800 / 92,379
= 92.8 = 93 Times
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Feasibility Study Barbecue Restaurant (Rs.2.20 Million)
INVENTORY TURNOVER IN DAYS:
FORMULA: 360 DAYS / INVENTORY TURNOVER IN TIMES
= 360 days / 93 times
= 3.87 = 4 days
GROSS PROFIT RATE (2015):
FORMULA: GROSS PROFIT / TOTAL SALES
= 1,501,200 / 10,080,000
= 0.148 OR 15%
NET PROFIT RATE (2015):
FORMULA: NET INCOME / TOTAL SALES
= 306,922 / 10,080,000
= 0.03 OR 3%
RETURN ON ASSET (2015):
FORMULA: NET INCOME/TOTAL ASSETS x 100
= 306,922 / 2,200,000 x 100
= 0.139 x 100
= 13.9 OR 14%
OPERATING PROFIT RATIO (2015):
FORMULA: EARNING BEFORE TAX/NET SALES
= 311,922/10,080,000
= 0.030 OR 3%
RETURN ON EQUITY (2015): FORMULA: Net Income/Owner's Equity = 306,922/220,000
= 1.39
COST OF GOODS SOLD RATIO (2015):
FORMULA: COGS / NET SALES
= 8,578,800 / 10,080,000
= 85%
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