Papa Geo’s Restaurant Budget Proposal For 2012-2016

1. Papa Geo’s RestaurantBudget Proposal For 2012-2016  BUSN-278 Budgeting and Forecasting sessionB Professor Brandon Foor DeVry University

2. Table of Contents • Objectives • Budget Preparation • Financial Statements • Methods and Assumptions • Competition • Geographic Target • Sales Forecast • Capital Expenditures Budget • Cash Flow • NPV • Rate of Return • Payback Period • Pro Forma Income Statement • Pro Forma Cash Flow • Pro Forma Balance Sheet

3. Objectives • Papa Geo’s Restaurant will be a single-location, sit-down Italian restaurant located in Orlando, Florida. Our objective is to generate an income of at lest $40,000 per year, starting sometime in the second year of the operation, as well as profit that is at least 2% of sales • Restaurant targets middle to lower-middle class families with children, as well as adults and seniors, • Our Italian food will be served in buffet style • The company will operate from 10:00 am to 9:00 pm all 7 days a week

4. Budget Preparation • Five year planning horizon is used. • The initial up-front investment includes$900,000 investment. • In deciding on the initial investment, the Net Present Value (NPV) was calculated. • The discount rate for the required rate of return is 10%. Discount factors for a five year period were taken from present value tables. • This created the present value of cash inflows. The total was then taken and divided by the initial $900,000.00 investment. • The Rate of Return (ARR) was calculated simply by using the cash inflows for the 5 year period and adding in the depreciation for the equipment. • This amount was then divided by the initial investment. • The Internal Rate of Return (IRR) was figured by taken the initial investment and dividing it by the annual cash inflows.

5. Financial Statements • A Pro-Forma Financial statement is a financial statement that a company prepares to consider the effects of a potential activity. • Pro forma describes a presentation of data, typically financial statements, where the data reflect the world on an 'as if' basis. • That is, as if the states of the world were different from that which is in fact the case. • Including the first year well have positive ending balances.

6. Methods and Assumptions • Information is based on research on locations that sell the same products. • Italian buffet makes $9 billion sales in one year. • Assumption that amount sold in one year will be about 144,075.22

7. Competition • As of today there are only 2,728 Italian buffets in the whole United States. • Our price is lower then that fast food restaurants around us. • We are more clean and faster when it comes to seating down our customers for them to eat. • Also we have a vending machines to keep children busy while adults enjoy their meal.

8. Geographic Target • The target is middle to lower- middle class families with children, as well as adults and seniors. • The area is within 15 minutes of the store has 10,000 families, mostly form lower to middle class neighborhoods. • Average family size is 4 people per household. • The lower to middle class population is growing at about 6% per year over the next five years in this area.

9. Sales Forecast

11. Capital Expenditures Budget • Total Capital Expenditure is $50,207 • As stated we need to spend $68,083.53 on equipment that is needed to start the business. • We also are going to spend $4,810 on miscellaneous items such as dish sets, cups, silver ware, etc. • And as for the furniture/ fixtures the amount is $397 these are important because we need an office desk to be able to work on paper work such as applications, bills, payroll, etc. • The amount spent on the Capital Expenditure should cover the full five years

14. Rate of Return • The Rate of Return is used to determine the rate allowed for the next five years to get the present value at a positive value.

17. Pro-Forma Income Statement • A Pro-Forma Financial statement is a financial statement that a company prepares to consider the effects of a potential activity. • Pro forma describes a presentation of data, typically financial statements, where the data reflect the world on an 'as if' basis. • That is, as if the states of the world were different from that which is in fact the case.

19. Pro-Forma Cash Flow Statement • “ The cash budget [beginning cash balance + anticipated receipts - expected disbursements = ending cash balance] will provide information about any need for working capital, such as a line of credit, short term financing, or an infusion of capital from the owners of the business. • The cash budget necessarily takes into account any payments on existing indebtedness, receipts of interest on customer financing arrangements, and any anticipated capital expenditures.”

21. Works Cited • Yellow pages Website Retrieved from: http://www.yellowpages.com/orlando-fl/italian-buffet-restaurants?g=Orlando%2C+FL&q=Italian+buffet+Restaurants#e:/k:refinements-headingtext/l:HeadingText/f:refinements%255Bheadingtext%255D%255B%255D%3DBuffet+Restaurants%26refinements%255Bfacet_clicked%255D%3DHeadingText/o: on 5/12/2012 • Manta Website Retrieved from: http://www.manta.com/mb_35_C432C7N1_000/buffet_eating_places_#?tab=charts-emp_pie on 5/12/2012   • Vince’s Restaurant and pizza Retrieved from, http://www.vincesrestaurantandpizza.com/chicago-il-lunch- buffet.htm on 5/12/2012   • Mohammed Rafi, How Do Restaurant Buffets Make Money, February 27,2007 Retrieved from http://www.pricingforprofit.com/pricing-strategy-blog/how-do-restaurant-buffets-make-money.htm , on 5/12/2012 • Business dictionary Website,Retrived from • http://www.businessdictionary.com/definition/sales-forecast.html#ixzz1uiAkavRz,on 5/12/2012 • Katom Restaurant supply, Inc. website, Retrieved from • http://restaurant-supplies.katom.com/cat/pizza- conveyor-ovens.html, on 5/17/2012 • Acity Discount Website, Retrieved from http://www.acitydiscount.com/Used-Cornelius-Beverage-8-Head-Drink-PEPSI-Soda-Fountain-w-Ice-Dispenser-ED175.0.129672.1.1.htm?PPCID=1&link=cse_Soda-Dispensers-Carbonated&gclid=CIf29KvQh7ACFUMCQAodPgK5lAon 5/17/2012 • Gameroom Champ website, Retrieved from, http://www.gameroomchamp.com/arcade-games/?ibp-adgroup=adwords&gclid=CMvOsfXWh7ACFdEDQAodcHXmngon5/17/2012 • Investopedia website, Retrieved from http://www.investopedia.com/ on 5/26/2012 • Dictionary website, Retrieved from http://financial-dictionary.thefreedictionary.com/pro+forma+statement on 6/03/2012