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Pre-Feasibility Study


                       FAST FOOD RESTAURANT




           Small and Medium Enterprise Development Authority
                                                Government of Pakistan
                                                      www.smeda.org.pk
                                               HEAD OFFICE
                                  st
     Waheed Trade Complex, 1 Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore
                             Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756
                                                  helpdesk@smeda.org.pk
     REGIONAL OFFICE                     REGIONAL OFFICE               REGIONAL OFFICE             REGIONAL OFFICE
         PUNJAB                               SINDH                         NWFP                     BALOCHISTAN
     Waheed Trade Complex,
 1st Floor, 36-Commercial Zone,             5TH Floor, Bahria                Ground Floor            Bungalow No. 15-A
       Phase III, Sector XX,           Complex II, M.T. Khan Road,        State Life Building     Chaman Housing Scheme
Khayaban-e-Iqbal, DHA Lahore.                    Karachi.                The Mall, Peshawar.           Airport Road, Quetta.
       Tel: (042) 111-111-456            Tel: (021) 111-111-456         Tel: (091) 9213046-47     Tel: (081) 831623, 831702
 Fax: (042) 5896619, 5899756               Fax: (021) 5610572             Fax: (091) 286908           Fax: (081) 831922
      helpdesk@smeda.org.pk            helpdesk-khi@smeda.org.pk     Helpdesk-pew@smeda.org.pk   helpdesk-qta@smeda.org.pk


                                                         December, 2006
Pre-Feasibility Study                                                Fast Food Restaurant




DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter
and provide a general idea and information on the said area. All the material included in
this document is based on data/information gathered from various sources and is based on
certain assumptions. 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 does not assume any liability for any financial or other loss resulting from this
memorandum in consequence of undertaking this activity. Therefore, the content of this
memorandum should not be relied upon for making any decision, investment or otherwise.
The prospective user of this memorandum is encouraged to carry out his/her own due
diligence and gather any information he/she considers necessary for making an informed
decision.


The content of the information memorandum does not bind SMEDA in any legal or other
form.


DOCUMENT CONTROL
 Document No.           PREF-11
 Revision               1
 Prepared by            SMEDA-Sindh
 Approved by            Provincial Chief – Sindh
 Issue Date             December, 2006
 Issued by              Library Officer




PREF-11/December, 2006/
Pre-Feasibility Study                                                     Fast Food Restaurant


1      PROJECT PROFILE
1. 1       Purpose of the Documents
This document is developed to provide the entrepreneur with potential investment
opportunity in setting up and operating a medium sized fast food restaurant offering a
variety of food items to the general public. This pre-feasibility gives an insight into various
aspects of planning, setting up and operating a fast food restaurant for the general
populace. The document is designed to provide relevant details (including technical) to
facilitate the entrepreneur in making the decision by providing various technological as
well as business alternatives. The document also allows flexibility to change various
project parameters to suit the needs of the entrepreneur.

1. 2       Project Brief
Fast food is food which is prepared and served quickly at outlets called fast-food
restaurants. It is a multi-billion dollar industry which continues to grow rapidly in many
countries. A fast-food restaurant is a restaurant characterized both by food which is
supplied quickly after ordering, and by minimal service. The food in these restaurants is
often cooked in bulk in advance and kept warm, or reheated to order. Many fast-food
restaurants are part of restaurant chains or franchise operations, and standardized
foodstuffs are shipped to each restaurant from central locations. There are also simpler
fast-food outlets, such as stands or kiosks, which may or may not provide shelter or chairs
for customers. Because the capital requirements to start a fast-food restaurant are relatively
small, particularly in areas with non-existent or medium income population, small
individually-owned fast-food restaurants have become common throughout Pakistan.
Generally restaurants, where the customers sit down and have their food orders brought to
them, are also considered fast food.

1. 3       Opportunity Rationale
The Fast Food Restaurant Market is a growing industry in Pakistan relying heavily on the
changing lifestyle patterns, population growth of the target age group and the related
increase in employment of women. With today's hectic lifestyles, time-saving products are
increasingly in demand the most obvious being the fast food. The rate of growth in
consumer expenditures on fast food has led most other segments of the food-away-from-
home market for much of the last one decade.

Demand for convenience has driven expenditures where people want quick and convenient
meals; they do not want to spend a lot of time preparing meals, traveling to pick up meals,
or waiting for meals in restaurants. As a result, consumers rely on fast food. Knowing this,
fast food providers are coming up with new ways to market their products that save time
for consumers.




PREF-11/December, 2006/
Pre-Feasibility Study                                                   Fast Food Restaurant


Consumers want to combine meal-time with time engaged in other activities, such as
shopping, work, or travel, therefore allocating less time for food, hence the growing need
for fast food.

1. 4       The Fast Food Industry
The fast-food industry is popular in Pakistan, the source of most of its innovation, and
many major international chains are based there. The presence of multinational fast food
chains like McDonalds, KFC, Pizza Express, Pizza Hut, Subway etc. have somewhat
catered to the high income segment therefore developing a niche as upscale fastfood
restaurants. Multinational corporations such as these typically modify their menus to cater
to local Pakistan tastes and most overseas outlets are owned by native franchisees to ensure
that cultural, ethnic, and community values are taken care of.

Additionally, multinational fast-food chains are not the only or even the primary source of
fast food in most cities of Pakistan. Many regional and local chains have developed around
the main cities of Pakistan (for example Khan Broast in Karachi) to compete with
international chains and provide menu items that appeal to the unique regional tastes and
habits at comparatively low costs. In Pakistan, multinational chains are considerably more
expensive; they usually are frequented because they are considered chic and somewhat
glamorous and because they usually are much cleaner than local eateries. However much
of the middle-income segment (which forms a major chunk of fastfood goers) prefers
visiting local outlets that offer low cost fast food, hence more frequent visits.

1.4.1 Increasing Number of Fast Food Outlets
The rapid rate at which the fast food industry continues to add outlets is as much a
reflection of consumer demand for convenience as it is a reflection of demand for fast food
itself. Expanding the number of outlets increases accessibility, thus making it more
convenient for consumers to purchase fast food. Especially in recent years, much of the
expansion has been in the form of "satellite" outlets. These tend to be smaller in size, with
little or no seating capacity, and are often in nontraditional locations, such as office
buildings, department stores, airports, and gasoline stations; locations chosen specifically
to maximize convenience and consumer accessibility.

1.4.2 Consumer Appeal
Fast-food outlets have become popular with consumers for several reasons. One is that
through economies of scale in purchasing and producing food, these companies can deliver
food to consumers at a very low cost. In addition, although some people dislike fast food
for its predictability, it can be reassuring to a hungry person in a hurry or far from home.




PREF-11/December, 2006/
Pre-Feasibility Study                                                                 Fast Food Restaurant


Multinational Fast food chains like McDonald's rapidly gained a reputation for their
cleanliness, fast service and a child-friendly atmosphere where families on the road could
grab a quick meal, or seek a break from the routine of home cooking. Prior to the rise of
the fast food chain restaurant, people generally had a choice between greasy-spoon diners
(kiosk) where the quality of the food was often questionable and service lacking, or high-
end restaurants that were expensive and impractical for families with young children.

Modern, stream-lined convenience of the fast food restaurant provides a new alternative
and appealed to consumers' instinct for ideas and products associated with progress,
technology and innovation.

Fast food restaurants have rapidly become the eatery "everyone can agree on", with many
featuring child-size menu combos, play areas and whimsical branding campaigns, designed
to appeal to younger customers. Parents can have a few minutes of peace while children
played or amused themselves with the toys included in the premsises.

Many consumers see multinational fast food restaurants as symbols of the wealth, progress
and well-ordered openness of Western society and therefore become trendy attractions in
many cities around Pakistan, particularly among younger people with more varied tastes.

1.4.3 Focusing on Consumer Convenience
Fast Food outlets tend to focus on the “work while you eat” philosophy similar to the
McDonald Outlet at Quaid e Azam Internation Aiport (Karachi) wherein seating space is
also available for passengers in transition or the KFC outlets in large shopping malls like
the Millenium Shopping Mall in Karachi promoting the concept of “Shop While You Eat.”

1.4.4 Increasing Market for Fast Food – The Population Boom
Pakistan, currently ranked as 6th in terms of total population, is characterized by a high
population growth rate of 1.9% (Pakistan Economic Survey 2005) and is set to take the top
three positions in terms of total population with already 153.4 Million people registered in
2005.1 With this, the per capita income has increased to US$ 736 while the productive age
group (15 to 64) years is said to take the major chunk of population (67% of total
population) by 2020. 2

The growth rate in food consumption is also augmented by the rapid increase in the
employment rate for males / female population aging between 20 to 29 years (fast food
goers) hence the greater income contribution to the overall income generated is expected to
be higher.


1
    2005 World Population Data Sheet, Population Reference Bureau, Washington; 2005
2
    Population Projections 1998-2023, Planning Commission; NIPS




PREF-11/December, 2006/
Pre-Feasibility Study                                                                            Fast Food Restaurant




                                      Population Pyramid 1998 & 2020*




        *Population Census Organization; Population Projections 1998-2023, Planning Commission; NIPS



1.4.5 The Future of the Industry
The Pakistani economy is becoming increasingly service-oriented, and over the past
several decades, the foodservice industries that offer the highest levels of convenience
have been rewarded with strong sales growth. In the face of rising population, incomes and
increasingly hectic work schedules, a nearly insatiable demand for convenience will
continue to drive fast food sales. Fast Food Outlets will strive to find ways to make their
products even more accessible.

Even if incomes stagnate or attitudes change, consumers are unlikely to return to meal
preparation at home on a large scale. This suggests that even if consumers choose to spend
more time at home, for family or other reasons, much of the meal preparation will still
occur elsewhere.

Many more table service restaurants, which traditionally focus on full-service in house
dining, will likely try to capture part of this market by offering take-out, and possibly
experimenting with home delivery.

The value of consumer time, as well as the demand for consistent, high-quality food
products, will continue to shape the fast food industry. Fast food, once considered a
novelty, has become an increasingly significant part of the young generation’s diet. The
role of convenience in this dietary shift cannot be over-emphasized, and the future growth




PREF-11/December, 2006/
Pre-Feasibility Study                                                     Fast Food Restaurant


of the rest of the foodservice industry will be driven in large part by its ability to find new
ways to save consumers’ time.
1. 5        Key Success Factors / Practical Tips for Success
Whether you are opening a one-of-a-kind restaurant or trying to grow your existing
restaurant into a multi-unit chain, there are winning principles that can help shape your
restaurant and improve its chances of succeeding.

       i) Conceive the “Winning” Concept

          A well-defined concept stands a much better chance of long term success than
          some vague notion. To start, it is wise to first set specific goals and decide on the
          ways you will measure your restaurants success.

       ii) Longetivity

          This can be described as the art of being able to maintain success over time while
          adjusting to meet the changing demands and buying habits of the customer. To
          open a restaurant successfully and become profitable is one thing, but to maintain
          that success over a long period of time is “winning.”

       iii) Consistency

          To not simply open a restaurant, but to truly develop a winning concept requires
          implementing systems and procedures to ensure consistency of your operation.

       iv) Market Appeal

          All restaurants want to be busy but winning concepts seem to have a broad appeal
          and well developed “points of difference” that enable them to dominate their
          market niche. To be the first place the customer thinks of going when choosing to
          dine out is the goal of the winning concept.

       v) Expandability

          Consistency of quality and service, and operating systems and management
          procedures established in the first unit can result in more expandable opportunities
          where all systems are already developed and waiting to be implemented.

       vi) Menu Pricing

          One of the most important factors in the strategic planning of a restaurant is in the
          development of the menu. It involves designing an appealing selection of menu




PREF-11/December, 2006/
Pre-Feasibility Study                                                         Fast Food Restaurant


           items that are competitively priced in the marketplace. Menu pricing is a very
           tricky task because you need to price items so that you can operate profitably and,
           just as important, offer your targeted guests a good price/value relationship.

       vii) Selecting Prime Location

           The specific location within your target area also is critical. If you are situated in an
           infrequently traveled area no where near complimentary businesses or at the back
           of a mall, you limit your earning potential. Even if you are the only outlet in town
           you must gauge the likelihood of outsiders visiting your restaurant. If the restaurant
           is right off of a major freeway heavily traveled by truckers and road trippers you
           may be highly successful despite a remote location.

       viii)    Market Research

           This is probably the most critical factor for running a successful fast food
           restaurant. You need to visit fast food outlets, franchises and other chains to see
           how your ‘concept’ would fit into the neighborhood you are planning to target.
           Talk to customers to know their preferences, some detailed meetings with
           restaurant managers / owners over dinner would do the trick in obtaining best
           practices and critical information that otherwise could have been overlooked.

           Keep in mind that because a concept works in one area does not mean it will be
           well-received by customers in your location. Tastes are subject to location
           preference and more often target market. In high scale urban areas (like PECHS,
           KDA etc.) you are more likely to be successful with a niche concept than in a dense
           middle income areas (like Gulistan e Jauhar). Another thing to consider is
           competition. If your market is saturated with similar restaurants and the population
           may not be large enough to support more restaurants, you may want to rethink your
           concept.

1. 6           Proposed Business Legal Status
Although the legal status of business tends to play an important role in any setup, the
proposed fast food business is assumed to operate on a sole proprietorship basis which may
extend to partnership in case of addition of new products that might add significant
business to the existing setup.




PREF-11/December, 2006/
Pre-Feasibility Study                                                    Fast Food Restaurant


2      OPENING A SUCCESSFUL RESTAURANT
From burger stands to barbeque steakhouses more and more restaurants are popping up in
cities every day. Since restaurants are such a common business venture, people must enjoy
running them. However, all of those advantages come at a price - building a restaurant
from scratch is not an easy task. It is a hard and expensive process, and the reality is that
many restaurants fail in their first year of business due to improper planning. But rest
assured, there are ways to reduce the risk of becoming another statistic. Following are
some of the handy tips that can help run a successful fast food establishment.

2. 1       How to Start a Restaurant?

2.1.1 Work in a Restaurant
One of the best ways to reduce the risk of owning a failed restaurant is to have some
restaurant experience before you start. Many successful restaurateurs have said that the
best way to prepare for owning a restaurant is by working in one, hopefully in an eatery
similar to one you'd like to open. You'll learn more than just how to serve food with a
smile; you can learn restaurant marketing, menu development, payroll, and other
significant components of the restaurant world. Working in the restaurant industry and
learning the basics is an important first step to becoming an owner.
2.1.2 Know Your Target Market
Who do you see eating at your restaurant? Are you targeting the family crowd, teenagers or
seniors? Knowing your target market before you start planning will not only help you
solidify your menu; it will help determine your location, décor and the overall atmosphere
of your restaurant. A family-style restaurant, which caters to parents and their kids, may
not appeal to seniors. On the other hand, an upscale, quiet restaurant offering a two-hour
dining experience wouldn't be appealing to teenagers or families with small children.
2.1.3 Select a Service Style & Food Concept
What type of restaurant do you see yourself owning? Typically, your service style will
either be fast-food, which offers food types that range from burgers, fries, soups and
sandwiches; mid-scale, which has full course meals at value prices; or upscale, offering
full service meals with high-class ambiance and, in turn, higher prices.

After narrowing your establishment to one of these three options, you can narrow your
style of food choices. Is there a particular type of cuisine that you see yourself serving? Do
you prefer pizza or soup? Sandwiches or Chinese? Choosing your food concept goes hand-
in-hand with your choice in service style.
2.1.4 Develop a Business Plan
Like any other type of company, a restaurant will need a concise business plan. This plan
should include but is not limited to: the overall concept and goal of the restaurant; specific




PREF-11/December, 2006/
Pre-Feasibility Study                                                     Fast Food Restaurant


financial information and projections; a description of the target market; the menu and
pricing; equipment and employee details; advertising and marketing plan; and a potential
exit strategy.
2.1.5 Create ‘the Menu” and not “a menu”
The menu can make or break a restaurant, and should be in accordance with the overall
concept of the restaurant. Revisit the business plan to make sure the menu is attractive to
the target market, is affordable within specified budget, and complements the restaurant's
design concept. For example, if the restaurant is family-friendly, you will need a kids
menu. If it is supposed to be an upscale establishment, a lot of thought will have to go into
the dessert list.
2.1.6 Choose a Location & Layout
It is important to find a location that has a continuous stream of traffic, convenient parking,
and is in proximity to other businesses (especially if you're catering to the lunch crowd). It
is necessary to revisit the business plan to make sure you are close to your target market. If
you are opening a fast food restaurant, it may not be the best idea to open it in the vicinity
of upscale homes but preferably near flats. In addition, make sure that the monthly rent is
in-line with the business plan's projected profit so that you do not become building-poor.

Once you find your location, the layout and design of the interior should be taken into
account. You should already have a concept of your restaurant in your business plan; bring
this concept into the design of the dining room. When designing your kitchen area, think
about what's on your menu in order to determine what is needed for the food preparation
area.
2.1.7 Getting the Appropriate Funding
The business plan will help you recognize how much money you will need to start your
restaurant. If you are unsure about how much money you will need upfront, talking to
other restaurant owners can help you project your expected start-up costs. There are
numerous ways restaurateurs raise capital to start their business, including taking
advantage of government programs that cater to upstart small business owners; liquidating
assets or using them as collateral for a loan; or encouraging a family or friend to become
the creditor.
2.1.8 Be Familiar With Safety Regulations
Restaurants are regulated and subject to inspection, and failing to be up to speed with these
regulations could be detrimental to the fast food outlet. Therefore it is necessary to consult
with old restaurateurs to become familiar with what one must do to meet the necessary
legal requirements.
2.1.9 Hiring Employees
One of the biggest challenges restaurants face is a lack of qualified labor. In order to get
and retain qualified employees, make sure your pay scales relate clearly to the job's duties




PREF-11/December, 2006/
Pre-Feasibility Study                                                      Fast Food Restaurant


and responsibilities. In addition, find out what other restaurants are paying their employees
so that you can be competitive in the job market, without spending too much on payroll.
However try linking your payroll with the bottom line and see how much money can be
squeezed out for the employees.
2.1.10 Advertise & Market
Every business needs a comprehensive marketing plan, and restaurants are no exception.
After determining your marketing budget, price out billboard advertising, flyers in
newspapers, and local cable TV advertising. Ask your customers how they found out about
you, so that you can record where your advertising and marketing money are best spent.
Opening up food stalls and setting up tasting booths at local neighborhood events or
having an event at the restaurant benefiting a students / event, can be an inexpensive way
to achieve positive word-of-mouth.

2. 2         Choosing a Location
Not every food-service operation needs to be in a retail location, but for those that do
depend on retail traffic like fast food outlets, here are some factors to consider when
deciding on a location:

          Anticipated sales volume. How will the location contribute to your sales volume?
          Accessibility to potential customers. Consider how easy it will be for customers
           to get into your outlet. If you are relying on strong pedestrian traffic, consider
           whether or not nearby businesses will generate foot traffic for you.
          The rent-paying capacity of your business. If you've done a sales-and-profit
           projection for your first year of operation, you will know approximately how much
           revenue you can expect to generate, and you can use that information to decide how
           much rent you can afford to pay.
          Restrictive ordinances. You may encounter unusually restrictive ordinances that
           make an otherwise strong site less than ideal.
          Traffic density. With careful examination of food traffic, you can determine the
           approximate sales potential of each pedestrian passing a given location. Two
           factors are especially important in this analysis: total pedestrian traffic during
           business hours and the percentage of it that is likely to patronize your food service
           business.
          Visibility is a location’s ability to be seen and recognized. Good visibility can
           create opportunities for the impulse eating decision that is critical for fast food
           operators, and it allows the exposure full-service restaurants require.
          Customer parking facilities. In case you allow for parking the site should provide
           convenient, adequate parking as well as easy access for customers.
          Proximity to other businesses. Neighboring businesses may influence your store's
           volume, and their presence can work for you or against you.




PREF-11/December, 2006/
Pre-Feasibility Study                                                      Fast Food Restaurant


          History of the site. Find out the recent history of each site under consideration
           before you make a final selection. Who were the previous tenants, and why are they
           no longer there?
          Terms of the lease. Be sure you understand all the details of the lease, because it's
           possible that an excellent site may have unacceptable leasing terms.
          Future development. Check with the local planning board to see if anything is
           planned for the future that could affect your business, such as additional buildings
           nearby or road construction.

2. 3         Deciding on the Layout
Layout and design are major factors in your restaurant's success. You'll need to take into
account the size and layout of the dining room, kitchen space, storage space and counter.
Typically, restaurants allot 40 to 60 percent of their space to the dining area, approximately
30 percent to the kitchen and prep area, and the remainder to storage and office space.

          Dining area. This is where you'll be making the bulk of your money, so don't cut
           corners when designing your dining room. Visit restaurants in your area and
           analyze the décor. Watch the diners; do they react positively to the décor? Is it
           comfortable or are people shifting in their seats throughout their meals? Note what
           works well and what doesn't.

Much of your dining room design will depend on your concept. It will help you to know
that 40 to 50 percent of all sit-down customers arrive in pairs; 30 percent come alone or in
parties of three; and 20 percent come in groups of four or more.

To accommodate the different groups of customers, use tables for four that can be pushed
together in areas where there is ample floor space. This gives you flexibility in
accommodating both small and large parties. Place booths for four to six people along the
walls.

          Production area. Too often, the production area in a restaurant is inefficiently
           designed--the result is a poorly organized kitchen and less than top-notch service.
           Keep your menu in mind as you determine each element in the production area.
           You'll need to include space for receiving, storage, food preparation, cooking,
           baking, dishwashing, production aisles, trash storage, employee facilities and an
           area for a small office where you can perform daily management duties.

Arrange your food production area so that everything is just a few steps away from the
cook. Your design should also allow for two or more cooks to be able to work side by side
during your busiest hours.




PREF-11/December, 2006/
Pre-Feasibility Study                                                     Fast Food Restaurant


2. 4         Designing & Decor
Since customers ultimately drive restaurant design trends, many of your restaurant design
ideas will come from your clientele. Successful restaurant design ideas are bred with an
understanding of the types of experiences your customers are looking for and the promise
your brand has made to them. You may know what types of menu items they crave, but do
you know what kinds of restaurant design ideas create an atmosphere that will welcome
them time and time again?

          Step One: The restaurant designer’s process begins with a thorough understanding
           of the eatery’s menu, location, customers, architectural preferences and lighting
           concerns. More than just a design powwow, the restaurant designer’s process
           includes budget considerations, timelines and coordination with city officials to
           secure necessary building permits.

          Step Two: The most effective restaurant design considers the flow of waiter staff
           from the kitchen to the dining area or from the dining area to the restrooms. The
           restaurant designer’s process contemplates the overall circulation within the
           restaurant for maximum efficiency

          Step Three: With the floor plan in hand and a concept in mind, the next stage in
           the restaurant designer’s process is interior design. Sketches may depict color
           schemes, furniture placement, window treatments, artistic lighting and other
           aspects of the ambiance. This is also the part of the restaurant designer’s process
           where we consider paints, wallpapers, foliage and artwork.

2. 5         Creating a Menu
Though menu variety has increased over the years, menus themselves are growing shorter.
Busy consumers don't want to read a lengthy menu before dinner; dining out is a
recreational activity, so they're in the restaurant to relax. Keep your number of items in
check and menu descriptions simple and straightforward, providing customers with a
variety of choices in a concise format. Your menu should also indicate what dishes can be
prepared to meet special dietary requirements. Items low in fat, sodium and cholesterol
should also be marked as such.

2. 6         Restaurant Size
That depends to some extent on how you answered the fundamental question mentioned
above. For the sake of discussion, a restaurant can be understood in two parts; the front-
house component and the back-house component, which we will call the engine. The back-
house areas include, the cook-line, the food preparation areas, refrigerated any dry storage
areas, office and the dishwashing area. The front-house functions are typically dining
areas (interior and exterior), waiting area, to-go area, restroom, and private dining areas.




PREF-11/December, 2006/
Pre-Feasibility Study                                                      Fast Food Restaurant


The speed of product delivery; the size of the engine, a casual or formal atmosphere, and
numbers of patrons you want to accommodate will all factor in to the amount of space you
need for your restaurant. The goal is trying to maximize the number of patrons one can
serve, out of the smallest most efficient back-house possible.

2. 7         Hiring the Right Employees
Choosing employees who will do a good job is not only important to the success of your
business, but will also contribute to the image of your establishment, provided they are
properly trained.

There are several categories of personnel in the restaurant business: manager, cooks,
servers, busboys, dishwashers and cleaners. When your restaurant is still new, some
employees' duties may cross over from one category to another. For example, your servers
may double as the cleaners. Be sure to hire people who are willing to be flexible in their
duties.

          Manager / Owner. The most important employee in most restaurants is the
           manager. The best candidate is you or a person who has already managed a
           restaurant or restaurants in the area and will be familiar with local buying sources,
           suppliers and methods. The manager should have leadership skills and the ability to
           supervise personnel while reflecting the style and character of the restaurant.

          Chefs and cooks. When you start out, you'll probably need three cooks - two full
           time and one part time. But one lead cook may need to arrive early in the morning
           to begin preparing soups, bread and other items to be served that day. One full-time
           cook should work days, and the other evenings. The part-time cook will help during
           peak hours, such as weekend rushes, and can work as a line cook during slower
           periods, doing simple preparation. Cooking schools can usually provide you with
           leads to the best in the business, but look around and place newspaper ads before
           you hire. Customers will become regulars only if they can expect the best every
           time they dine at your restaurant. To provide that, you'll need top-notch cooks and
           chefs.

          Servers. The servers will have the most interaction with customers, so they need to
           make a favorable impression and work well under pressure, meeting the demands
           of customers at several tables while maintaining a pleasant demeanor. There are
           two times of day for wait staff: very slow and very busy. Schedule your employees
           accordingly. The lunch rush, for example, starts around 11:30 a.m. and continues
           until 1:30 or 2 p.m. Restaurants are often slow again until the dinner crowd arrives
           around 6:30 to 7 p.m.




PREF-11/December, 2006/
Pre-Feasibility Study                                                     Fast Food Restaurant


2. 8         A Good Fast Food Restaurant Experience
Based on some surveys conducted with fast food goers following are some of the factors
that contribute to a good fast food experience:

          Location
          Characteristics
          Welcome
          Food server
          Food.
          Environment (parking, restrooms, lighting).
          Dessert Variety
          Smile factor.
          Time factor.
          Profit factor (beverages offered, dessert menus presented).

Measuring good service is subjective, but generally what is expected from a server when
reviewing restaurants.

          The server should greet diners within 3 minutes of their being seated.
          The server should neat and clean.
          The server should not be too chatty or familiar.
          The server should know the menu and be able to answer questions.
          The server should bring drinks within 3 minutes of being ordered.
          The appetizer (if any) should be served within 5 minutes of ordering.
          Entrees should be served within 20 minutes of ordering.
          Water or beverage glasses should be refilled regularly.
          The server should silently survey the table and assess our needs without constantly
           interrupting to ask, "Do you need anything else?"
          The bill should be brought promptly when requested, and change should be
           returned promptly.
          Plates should be removed at the proper time, and the table should be cleared of
           bread and butter before dessert is served.

2. 9         Legal Requirements
The Pakistan Hotels and Restaurant Acts Act 1976 is the law which requires the owners of
all types of restaurants to register and obtain a license with the government. The restaurant
owner is required to apply to the controller for registration of the restaurant.




PREF-11/December, 2006/
Pre-Feasibility Study                                                   Fast Food Restaurant


Application for registration and determination of fair rates shall be made to the controller
in Form “G” together with a certificate of medical fitness in Form “I” from a registered
medical officer of the civil hospital in respect of the staff of the restaurant.

For registration of a restaurant, the owner of the restaurant is required to conform to the
standard of health, hygiene and comfort which standards have been set out in Schedule II
of the act.

On receipt of application, the controller will carryout inspection of the aforementioned
premises and once satisfied will initiate the registration process. Once registered the owner
of the restaurant will apply to the controller for license as per the Act which needs to be
renewed on a yearly basis for the prescribed fee.

2. 10      Project Investment
This section will provide the total cost of the project.

                            Item                                Cost (Rs.)
        Construction Cost (all inclusive)                        1,307,000
        Dining & Office Furniture                                 542,250
        Equipment & Machinery                                     967,000
        Advance Rent                                             1,200,000
        Preliminary Expenses                                      50,000
        Working Capital                                          1,036,000
        Total                                                    5,102,250




PREF-11/December, 2006/
Pre-Feasibility Study                                                               Fast Food Restaurant


2. 11      Proposed Product Mix
The proposed project is assumed to provide customers with a variety of fast food items as
outlined in the following menu:

Broast                                    Price          Chinese                                    Price
Chicken Broast (Qtr.)                      65            Hot & Sour Soup (2 Servings)                 75
Chicken Broast (Half)                      125           Hot & Sour Soup (4 Servings)                140
Chicken Broast (Full)                      250           Chicken Corn Soup (2 Servings)               75
                                                         Chicken Corn Soup (4 Servings)              140
Burgers                                   Price          Plain Rice                                   40
Chicken Burger                             50            Chicken Fried Rice                           80
Chicken Cheese Burger                      55            Vegetable Fried Rice                         60
Beef Burger                                40            Egg Fried Rice                               70
Beef Cheese Burger                         45            Beef Fried Rice                              80
Zinger Burger                              80            Beef Chilli (w/o rice)                       75
                                                         Chicken Chilli (w/o rice)                    85
Sandwiches                                Price                                                     Price
Chicken Sandwich                           55            French Fries (per plate)                     25
Egg Sandwich                               40            Cole Slaw                                    15
Beef Sandwich                              45            Soft Drinks (Large)                          50
Club Sandwich                              80            Soft Drinks (Regular)                        15


Based on the above the fast food restaurant can offer low cost combo meals to its
customers for increased value. Following are the proposed combo deals that can be further
modified to meet increasing demand:

Combos                                               Items                                         Price

Combo Deal 1                    Zinger Burger / French Fries / Regular Drink                       105
Combo Deal 2                 Chicken Broast (Qtr.) / French Fries / Regular Drink                   90
Combo Deal 3              Chicken Burger, Broast (Qtr.), French Fries, Regular Drink               135
Combo Deal 4                    Club Sandwich / French Fries / Regular Drink                       105

Family Deal 1     Full Broast / Zinger Burger / Club Sandwich / French Fries (4) / Large Drink     535
Family Deal 2    Zinger Burger (2) / Club Sandwich (2) / Broast (Half) / Large Drink / Fries (2)   515
Jumbo Deal                         5% discount on purchase above Rs. 1,000/-

It desirable to have a vast variety of food items to capture a larger target audience but
initially the entrepreneur needs to be careful in choosing the right product mix that has the
greatest acceptability such that the sales volume generated are able to cover the initial
setup costs and desired profit margins. Once the fast food restaurant achieves a steady sales
pattern further food items like Barbeque can be added and similarly for desserts ice cream
would be the best potential. In case circumstances demand items other than the proposed
menu the entrepreneur should make immediate changes to the menu before he starts
loosing out customers.




PREF-11/December, 2006/
Pre-Feasibility Study                                                     Fast Food Restaurant


 One important factor to consider here is that the entrepreneur must have the requisite skills
 to decide on whether to introduce a new product line (like Barbeque, Pizza) or add a new
 item to the existing product line both of which might require the purchase of additional
 kitchen equipment. Hence the experience of the entrepreneur will play an important role in
 determining the course of action.

 2. 12      Recommended Project Parameters
    Capacity               Human Resource                Equipment                 Location
300 Customers per                                     Local / American /         Middle Income
                                 21
      day                                                  Chinese                Level Area
                                      Financial Summary
                                                                                Cost of Capital
  Project Cost           IRR           NPV             Payback Period
                                                                                  (WACC)
  Rs. 5,102,250          57%     Rs. 13,076,676            2.5 Years                17.5%


 2. 13      Proposed Location
 The recommended area for the proposed business setup will be in a densely populated
 middle income area (for example Gulistan-e-Jauhar, Karachi). The main reason for such a
 location is the presence of target market and customer traffic which are the prerequisites
 for the success of the restaurant.

 3    MACHINERY & EQUIPMENT
 Understanding the customer’s individual needs and the capability to satisfy these
 completely is a vital part of the restaurant’s success. This is in turn dependent on the
 machinery and equipment used to produce good quality fast food. Fast Food Machines are
 easily available in the market wherein the owner has to choose between expensive brands
 and cheaper ones depending on how much he can afford to give quality to his customers.
 Secondhand equipment of world leading brands such as SPINZER, FRYMASTER,
 HENNY PENNY, LINCOLN, AYRKING, KEATING, MIRROR, CARPIGIANI,
 LINCAT, MORRETTI, ILSA, ROUND-UP, SANYO, ELETTROBAR are available while
 cheaper Chinese brands have gained popularity over the years. The machines can be
 ordered through international vendors with a minimum delivery period of 3 months while
 refurbished / reconditioned machines are also available. Some outlets closing their
 business also tend to sell their machinery at low prices but the durability and reliability
 factor must be taken into consideration while buying such machines.

 The typical fast food restaurant as outlined above would require the following machine /
 equipment for its operations:




 PREF-11/December, 2006/
Pre-Feasibility Study                                                           Fast Food Restaurant


                  Item Details                  Quantity     Unit Price (Rs.)      Total Price(Rs)
 Freezers (12 cf)                                   3             25,000               75,000

 New Broast Machine (15 Pound
                                                    1             650,000              650,000
 Capacity)*
 Deep Well Frier (Single Valve With 2
                                                    2             40,000               80,000
 Baskets)
 Hot Plate for Burgers, Kebab, Sandwiches
                                                    1             33,000               33,000
 (30” x 22”)
 Bin Marry Soup Container (2 Valve With
                                                    1             50,000               50,000
 Steel Cabinet)

 Potato Cutter (8mm)                                1              3,000                3,000

 Pillar (4.5 Kg Potato Peeling Capacity)            1              6,000                6,000

 Microwave                                          1             10,000               10,000

 Working Tables                                     2             20,000               40,000

 Keg Racks & Shelves                                2             10,000               20,000

 Total                                              15               -                 967,000
* Available from Spinzer USA, Delivery Time Three Months, Reconditioned Available at Rs. 200,000 with
the same specs and Delivery Time


3. 1       Machinery Maintenance
All machines require routine cleaning and maintenance after every three months and an
annual service which costs around 1% to 5% of the total cost depending upon the use of
the machine and operator's skill. We have assumed an average of 2.5% of the depreciated
cost as the annual maintenance cost.

3. 2       Dining Furniture & General Fixtures
The restaurant is expected to entertain a minimum of 300 customers in a day, which
requires a good seating layout to avoid any confusion and problems during rush hours. The
following table gives the details of the dining tables and chairs that would serve
approximately 100 customers (maximum capacity) at a time:




PREF-11/December, 2006/
Pre-Feasibility Study                                                   Fast Food Restaurant


           Item Details            Quantity          Unit Price (Rs.)   Total Price(Rs)
    Dining Table – Square
                                       25                  6,000           150,000
    (2X2)
    Chairs (Standard 14”)             100                  1,500           150,000

    Kitchen Cutlery Set                2                   2,500            5,000

    Dining Cutlery* (Plate,
                                      150                   150             22,500
    Fork, Knife, Spoon, Glass)
    Air Conditioner Split Units
                                       2                  31,000            62,000
    (6 Ton)
    Hot Water Geyser Large             1                  20,000            20,000

    Halogen Lights                     25                   250             6,250

    Wall Lights (Large)                4                   1,500            6,000

    Portable Emergency Light           4                   2,500            10,000

    Generator (1.5 KVA)                1                  90,000            90,000

    Counter Chairs                     2                   1,500            3,000

    Office Table & Chair Set           1                  10,000            10,000

    Waiting Chairs for Take
                                       5                   1,500            7,500
    Away Customers

    Total                             322                 168,400          542,250
*Cutlery to be 1.5 times the maximum capacity (i.e. 100 customers)

4      LAND & BUILDING REQUIREMENT
4. 1        Land Requirement
The land requirement is around 2,000 sq.ft. in densely populated area where all utilities
and facilities are properly available. It is recommended that the fast food outlet be opened
on the ground floor of flats or shopping mall wherein the consumer traffic will be a
maximum. The more the shop is near the main road the better sales potential it will have.




PREF-11/December, 2006/
Pre-Feasibility Study                                                                 Fast Food Restaurant


4. 2        Dedicated Area Requirement
The floor space needs to be carefully allocated to allow for maximum dining space for
customers in rush hours. The allocation of space between different sections would be as
follows:

                                                      Civil Works & Décor*
                           %             Size                                        Total Construction
       Details                                         (Cost in Rs / square
                        (Sq. Feet)    (Sq. Feet)                                         Cost (Rs)
                                                               feet)
 Dining                   63 %           1,250                    700                     875,000

 Waiting                   4%              80                     700                     56,000

 Kids Play                 3%              70                     800                     56,000

 Kitchen &
                          25 %            500                     450                     225,000
 Preparation

 Office                   1.5%             30                     450                     13,500

 Stores                    3%              70                     450                     31,500

 Total                   100 %           2,000                   3,550                   1,257,000
* Includes interior decoration as well as fancy fittings, lightings, hangings etc.
4. 3        Recommended Mode
The proposed premises will be acquired on a rental basis with 6 month deposit and 6
months advance rent after which rent will be payable on a monthly basis. The monthly rent
is approximately Rs. 50/ Sq Feet for the ground floor which would amount to Rs. 100,000
per month for the proposed fast food outlet (2,000 Sq Ft.)

4. 4        Reception & Owner Office
To allow for maximum space for dining and security concerns (Cash control) it is
recommended that the owner should manage the reception counter as well as all cash
handling emanating from the tables. Therefore a total of Rs. 50,000 would be required to
erect the reception and cash counter along with the take-away order taking booth.

The Office Furniture & Equipment will be depreciated at the rate of 10% per annum
according to the diminishing balance method for the projected period.

5      HUMAN RESOURCE REQUIREMENT
The human resource requirement for the general and management staff are as follows:




PREF-11/December, 2006/
Pre-Feasibility Study                                                  Fast Food Restaurant




                                                  Monthly Salary         Total Salary
       Designation / Type         Number
                                                      (Rs.)                 (Rs.)
    Owner                            1                    -                    -
    Kitchen Supervisor               2                 6,000                12,000
    Shift Supervisor
                                     3                 8,000                24,000
    (including reliever)
    Cook                             4                 4,000                16,000
    Servers                          6                 3,000                18,000
    Take Away Order Taker
                                     1                 6,000                 6,000
    / Cashier
    Dishwasher                       2                 2,500                 5,000
    Cleaner                          1                 2,500                 2,500
    Guard (12 Hour)                  1                 6,000                 6,000
    Total                            21                38,000               89,500

Considering the size of the proposed establishment it is assumed that the owner would be
managing the overall affairs of the fast food setup. He will be required to process and
check bills, invoices, receivables management, maintain accounts, etc. for record. The
owner will also ensure safe custody of store keys.

The cashier will only be responsible for receiving payment and handing over change while
the owner would be managing the cash drawer for control purposes. It is important to note
that many food outlets tend to lose out due to inadequate cash control by the owners
especially during rush hours where the counter staff can easily slip out one or two
payments.

6      FINANCIAL ANALYSIS & KEY ASSUMPTIONS
The project cost estimates for the proposed fast food outlet have been formulated on the
basis of discussions with relevant stakeholders and experts. The cost projections cover the
cost of land, building, inventory, equipment including office furniture etc. The specific
assumptions relating to individual cost components are given as under:

6. 1          Revenue & Cost Projections
The Sales are expected to increase by 15% every year while the cost of raw materials is
assumed to increase by 10%. The 15% annual increase in revenue is expected to result
from a part increase in population increase and part increase in product price.




PREF-11/December, 2006/
Pre-Feasibility Study                                                   Fast Food Restaurant




The prices used to calculate the gross revenue earned are based on the billing rate at which
the entrepreneur will charge the customer. The prices are also inclusive of the General
Sales Tax.

Furthermore it is assumed that the following sales breakup will form the revenue streams
for the fast food outlet

                              Revenue Stream               % of Total Sales
                  Dine In                                       60%

                  Take Away                                     20%

                  Home Delivery                                 20%

                  Total Revenue                                 100%


The minimum delivery order size is assumed to be Rs. 250/- per order with 3 delivery
riders being employed at the charge out rate of Rs. 25 per delivery order wherein no
transportation fuel is provided by the fast food outlet. For Take Away and Home Delivery
another 1% of sales added cost due to packing is assumed.
6. 2       Rent Cost
The rent for the assumed premises will be Rs. 100,000/- per month. It is assumed that Rs.
1,200,000 will be given in advance before possession of premises. This will include 6
months deposit and 6 month advance rent. The rent would be payable on a monthly basis
and is expected to increase at the rate of 10% per annum for the projected period.

6. 3       Utilities Requirement
The following table presents the assumed breakup of utilities on a monthly basis:

                        Utility                     Monthly Charges (Rs.)
        Electricity                                          25,000
        Water                                                2,000
        Gas                                                  15,000
        Telephone                                            10,000
        Total                                                52,000




PREF-11/December, 2006/
Pre-Feasibility Study                                                     Fast Food Restaurant




As depicted above the most of the fast food machines require considerable gas during the
preparation process. The preheating procedure of the equipment before commencement of
preparation also consumes considerable gas. It is assumed that utilities expenses will be
increased by 10% every year.

6. 4       Depreciation on Building & Equipment
Depreciation on Shop, Equipment, Machinery and Fixtures is assumed to be at the rate of
10% per annum based on the diminishing balance method for the projected period.

6. 5       Working Capital & Pre Operating Costs
It is estimated that an additional amount of approximately Rs. 1,036,000 will be required
as cash in hand to meet the working capital requirements / contingency cash for the initial
stages. The requirement is based on the rent, utilities and salaries expenses for at least four
months and 3 days raw material inventory. The following table gives the break up.

                                Item              4 Months Cost (Rs.)
                    Utilities                            208,000
                    Salaries                             358,000

                    Raw Material Inventory               70,000

                    Rent                                 400,000

                    Total                               1,036,000


The provision for pre operating costs is assumed to be Rs. 50,000 which will be amortized
equally over a 5 year period.

6. 6       Account Receivables
All sales will be made strictly on cash basis. It is not advisable to operate a fast food
restaurant on credit basis.

6. 7       Miscellaneous Outlet Expenses
A monthly figure of Rs. 6,000 (200 per day) is assumed to be incurred for miscellaneous
expenses which are expected to increase at the rate of 10% per annum for the projected
period.




PREF-11/December, 2006/
Pre-Feasibility Study                                                    Fast Food Restaurant


6. 8       Financial Charges
It is assumed that long-term financing for 5 years will be obtained in order to finance the
fast food setup which would mainly include construction & décor of Building, Purchase of
machinery & equipment, purchase of inventory etc. This facility would be required at a
rate of 15% (including 1% insurance premium) per annum with 60 monthly installments
over a period of five years. The installments are assumed to be paid at the end of every
month.

6. 9       Taxation
The tax rate applicable to sole proprietorship is the same as that of the salaried individual.
Therefore, we are assuming that the tax rate would be the same for the proposed fast food
setup.

6. 10      Cost of Capital
The cost of capital is explained in the following table:

                 Particulars                                   Rate
                 Required return on equity                    20.0 %
                 Cost of finance                              15.0 %
                 Weighted average cost of capital             17.5 %

The weighted average cost of capital is based on the debt/equity ratio of 50:50.

6. 11      Owner’s Withdrawal
It is assumed that the owner with withdraw from the business once the desired profitability
is reached from the start of operations. The amount would depend on business
sustainability and availability of funds for future growth.




PREF-11/December, 2006/
Pre-Feasibility Study                                             Fast Food Restaurant



6. 12      Key Assumptions

                        Item                             Assumption(s)
Sales Increase                               15 % per year
Increase in Cost of Raw Materials            10 % per year
Increase in Staff Salaries                   10 % per year
Increase in Utilities (Electricity / Water / 10 % per year
Gas)
Increase in Rent                             10 % per year
Increase in Office Expenses                  10 % per year
Debt / Equity Ratio                          50 : 50
Depreciation
        o Shop Building & Fixtures           10 % per annum (Diminishing Balance)
        o Kitchenware & Machinery            10 % per annum (Diminishing Balance)
        o Furniture                          10 % per annum (Diminishing Balance)
Equipment Annual Maintenance Cost            2.5% of Written Down Value
Raw Food Inventory - Meat                    3 Days
Raw Food Inventory – Spices & Sauce          7 Days
Lease Period                                 5 Years
Lease Installments                           Monthly
Financial Charges (Lease Rate)               15 % per annum
Tax Rate                                     Income Tax on Salaried Individuals




PREF-11/December, 2006/
Pre-Feasibility Study                                                            Fast Food Restaurant




INCOME STATEMENT:


                                                                    FAST FOOD RESTAURANT


Projected Income Statement (Rs.)              Year 1     Year 2       Year 3     Year 4      Year 5      Year 6      Year 7       Year 8     Year 9     Year 10


Revenue                                     10,015,200 11,517,480 13,245,102 15,231,867 17,516,647 20,144,145 23,165,766 26,640,631 30,636,726 35,232,235

Net Sales                                   10,015,200 11,517,480 13,245,102 15,231,867 17,516,647 20,144,145 23,165,766 26,640,631 30,636,726 35,232,235
   Raw Material Cost                        4,910,141  5,401,155   5,941,270 6,535,397   7,188,937 7,907,831   8,698,614 9,568,475 10,525,323 11,577,855
   Labor & Salaries                         1,074,000  1,181,400   1,299,540 1,429,494   1,572,443 1,729,688   1,902,657 2,092,922   2,302,214 2,532,436
   Utilities                                  624,000   686,400     755,040   830,544     913,598  1,004,958   1,105,454 1,215,999   1,337,599 1,471,359
Cost of Sales                                6,608,141  7,268,955  7,995,850  8,795,435  9,674,979 10,642,477 11,706,725 12,877,397 14,165,137 15,581,650
Gross Profit                                3,407,059  4,248,525   5,249,252 6,436,432   7,841,668 9,501,668 11,459,042 13,763,234 16,471,589 19,650,584

General Administrative & Selling Expenses
 Rent Expense                               1,200,000   1,320,000   1,452,000   1,597,200   1,756,920   1,932,612   2,125,873   2,338,461   2,572,307 2,829,537
 Office & Miscellaneous Expenses              72,000      79,200      87,120      95,832     105,415     115,957     127,552     140,308     154,338   169,772
Amortization Expenses                         10,000      10,000      10,000      10,000      10,000        0           0           0           0         0
Depreciation Expense                         281,625     253,463     228,116     205,305     184,774     166,297     149,667     134,700     121,230   109,107
Maintenance Expense                           21,758      19,582      17,624      15,861      14,275      12,848      11,563      10,407      9,366     8,429
Subtotal                                    1,585,383   1,682,244   1,794,860   1,924,198   2,071,384   2,227,713   2,414,655   2,623,875  2,857,241  3,116,846
Operating Income                            1,821,677   2,566,281   3,454,392   4,512,234   5,770,284   7,273,955   9,044,386   11,139,359 13,614,348 16,533,738

Financial Charges (15% Per Annum)            357,889    298,344      229,228    149,001      55,878         0           0           0          0          0

Earnings Before Taxes                       1,463,788   2,267,936   3,225,164   4,363,233   5,714,406   7,273,955   9,044,386   11,139,359 13,614,348 16,533,738
Tax                                          365,947     566,984     806,291    1,090,808   1,428,602   1,818,489   2,261,097   2,784,840   3,403,587 4,133,435
Net Profit                                  1,097,841   1,700,952   2,418,873   3,272,425   4,285,805   5,455,466   6,783,290   8,354,519 10,210,761 12,400,304

Monthly Profit After Tax                     91,487     141,746      201,573    272,702      357,150    454,622      565,274     696,210    850,897    1,033,359




PREF-11/December, 2006/
Pre-Feasibility Study                                                                 Fast Food Restaurant




BALANCE SHEET:

                                                                       FAST FOOD RESTAURANT


Projected Balance Sheet (Rs.)    Year 0      Year 1      Year 2      Year 3       Year 4       Year 5       Year 6       Year 7       Year 8       Year 9      Year 10

Assets
   Current Assets
          Cash & Bank Balance   1,036,000   2,055,062   3,589,528   5,747,452   8,655,889    12,464,053   18,085,816   25,018,772   33,507,992   43,839,983   56,349,394
          Prepaid Rent          1,200,000   1,200,000   1,200,000   1,200,000   1,200,000    1,200,000     1,200,000    1,200,000    1,200,000   1,200,000    1,200,000
   Total Current Assets         2,236,000   3,255,062   4,789,528   6,947,452   9,855,889    13,664,053   19,285,816   26,218,772   34,707,992   45,039,983   57,549,394

   Fixed Assets
      Fast Food Machinery        967,000     870,300     783,270     704,943     634,449      571,004      513,903      462,513      416,262      374,636      337,172
      Shop                      1,307,000   1,176,300   1,058,670    952,803     857,523      771,770      694,593      625,134      562,621      506,359      455,723
      Office Fixtures            542,250     488,025     439,223     395,300     355,770      320,193      288,174      259,356      233,421      210,079      189,071
   Total Fixed Assets           2,816,250   2,534,625   2,281,163   2,053,046   1,847,742    1,662,967    1,496,671    1,347,004    1,212,303    1,091,073     981,966

   Preliminary Expenses          50,000      40,000      30,000      20,000      10,000          -             -            -           -            -            -

Total Assets                    5,102,250   5,829,687   7,100,690   9,020,498   11,713,631   15,327,020   20,782,486   27,565,776   35,920,295   46,131,056   58,531,360

Owner's Equity                  2,551,125   3,648,966   5,349,918   7,768,791   11,041,216   15,327,020   20,782,486   27,565,776   35,920,295   46,131,056   58,531,360

Long Term Liability             2,551,125   2,180,721   1,750,772   1,251,707    672,415         0            0            0            0            0            0

Total Equity & Liabilities      5,102,250   5,829,687   7,100,690   9,020,498   11,713,631   15,327,020   20,782,486   27,565,776   35,920,295   46,131,056   58,531,360




PREF-11/December, 2006/
Pre-Feasibility Study                                                                        Fast Food Restaurant




CASH FLOW STATEMENT:

                                                                              FAST FOOD RESTAURANT


Projected Statement of Cash Flows (Rs.)     Year 0       Year 1      Year 2       Year 3        Year 4      Year 5       Year 6       Year 7       Year 8       Year 9      Year 10

Cash Flow From Operating Activities

   Net Profit                                 0         1,097,841   1,700,952    2,418,873     3,272,425   4,285,805   5,455,466    6,783,290    8,354,519    10,210,761   12,400,304
   Add: Depreciation Expense                  0          281,625     253,463      228,116       205,305     184,774     166,297      149,667      134,700      121,230      109,107
       Amortization Expense                   0          10,000      10,000       10,000        10,000      10,000         0            0            0            0            0

Net Cash Flow From Operations                 0         1,389,466   1,964,415    2,656,989    3,487,729    4,480,579   5,621,763    6,932,957    8,489,220    10,331,991   12,509,411

Cash Flow From Financing Activities

Receipt of Long Term Debt                 2,551,125
Repayment of Long Term Debt                             (370,404)   (429,949)    (499,065)     (579,292)   (672,415)       0            0            0            0            0
Owner's Equity                            2,551,125

Net Cash Flow From Financing Activities   5,102,250     (370,404)   (429,949)    (499,065)     (579,292)   (672,415)       0            0            0            0            0

Cash Flow From Investing Activities

Construction Cost                         (1,307,000)
Office Furniture                           (967,000)
Equip & M/C                                (542,250)
Advance Rent                              (1,200,000)
Preliminary Expenses                        (50,000)

Net Cash Flow From Investing Activities   (4,066,250)      0           0            0             0           0            0            0            0            0            0

NET CASH FLOW                             1,036,000     1,019,062   1,534,466    2,157,924    2,908,437    3,808,164   5,621,763    6,932,957    8,489,220    10,331,991   12,509,411



Cash at the Beginning of the Period           0         1,036,000   2,055,062    3,589,528    5,747,452    8,655,889   12,464,053   18,085,816   25,018,772   33,507,992   43,839,983




PREF-11/December, 2006/
Pre-Feasibility Study                                                                         Fast Food Restaurant




                                                                                 FAST FOOD RESTAURANT
                                                                                   Cost & Revenue Sheet
                                              300
Broast                  Cost      Price    Unit Sales            Total Cost     Total Sales      Chinese                          Cost Price Unit Sales          Total Cost Total Sales
Chicken Broast (Qtr.)    35        65          36        0.12      1260            2340          Hot & Sour Soup (2 Servings)      25    75       6       0.02      150        450
Chicken Broast (Half)    70        125         18        0.06      1260            2250          Hot & Sour Soup (4 Servings)      50   140       3       0.01      150        420
Chicken Broast (Full)   140        250          6        0.02       840            1500          Chicken Corn Soup (2 Servings)    25    75       6       0.02      150        450
                                                                                                 Chicken Corn Soup (4 Servings)    50   140       3       0.01      150        420
Burgers                 Cost      Price    Unit Sales            Total Cost     Total Sales      Plain Rice                        12    40       3       0.01       36        120
Chicken Burger           20        50          24        0.08       480            1200          Chicken Fried Rice                20    80      12       0.04      240        960
Chicken Cheese Burger    25        55          36        0.12       900            1980          Vegetable Fried Rice              18    60       6       0.02      108        360
Beef Burger              18        40          18        0.06       324             720          Egg Fried Rice                    18    70       3       0.01       54        210
Beef Cheese Burger       23        45          18        0.06       414             810          Beef Fried Rice                   20    80       3       0.01       60        240
Zinger Burger            40        80          24        0.08       960            1920          Beef Chilli (w/o rice)            30    75       6       0.02      180        450
                                                                                                 Chicken Chilli (w/o rice)         35    85       9       0.03      315        765
Sandwiches              Cost      Price    Unit Sales            Total Cost     Total Sales                                       Cost Price Unit Sales          Total Cost Total Sales
Chicken Sandwich         20        55          21        0.07       420            1155          French Fries (per plate)          8     25       5                  40        125
Egg Sandwich             12        40           6        0.02        72             240          Cole Slaw                         6     15       5                  30         75
Beef Sandwich            20        45           3        0.01        60             135          Soft Drinks (Large)               40    50      10                 400        500
Club Sandwich            35        80          30        0.1       1050            2400          Soft Drinks (Regular 250ml)       9     15     375                3375        5625
                                            TOTAL                  8040           16650                                                       TOTAL                5438       11170


                         Daily   Monthly   Additional              Final
Total Sales (Rs)        27,820   834,600       -                  834,600
Total RM Cost (Rs.)     13,478   404,340     4,838                409,178
Gross Profit (Rs.)      14,342   430,260                          425,422       0.509731129


Sales Break Down        Orders Value (Rs) Packing Cost          Delivery Cost    Add Cost
Daily Basis                               1% of Sales            25 / Order

Dine In (60%)            180     500,760       -                     -
Take Away (20%)          60      166,920     1,669                   -             1,669
Delivery (20%)           60      166,920     1,669                 1,500           3,169
Total                    300     834,600     3,338                 1,500           4,838




PREF-11/December, 2006/

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198 foodfeasibility

  • 1. Pre-Feasibility Study FAST FOOD RESTAURANT Small and Medium Enterprise Development Authority Government of Pakistan www.smeda.org.pk HEAD OFFICE st Waheed Trade Complex, 1 Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756 helpdesk@smeda.org.pk REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE PUNJAB SINDH NWFP BALOCHISTAN Waheed Trade Complex, 1st Floor, 36-Commercial Zone, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A Phase III, Sector XX, Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme Khayaban-e-Iqbal, DHA Lahore. Karachi. The Mall, Peshawar. Airport Road, Quetta. Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702 Fax: (042) 5896619, 5899756 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922 helpdesk@smeda.org.pk helpdesk-khi@smeda.org.pk Helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk December, 2006
  • 2. Pre-Feasibility Study Fast Food Restaurant DISCLAIMER The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. 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 does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal or other form. DOCUMENT CONTROL Document No. PREF-11 Revision 1 Prepared by SMEDA-Sindh Approved by Provincial Chief – Sindh Issue Date December, 2006 Issued by Library Officer PREF-11/December, 2006/
  • 3. Pre-Feasibility Study Fast Food Restaurant 1 PROJECT PROFILE 1. 1 Purpose of the Documents This document is developed to provide the entrepreneur with potential investment opportunity in setting up and operating a medium sized fast food restaurant offering a variety of food items to the general public. This pre-feasibility gives an insight into various aspects of planning, setting up and operating a fast food restaurant for the general populace. The document is designed to provide relevant details (including technical) to facilitate the entrepreneur in making the decision by providing various technological as well as business alternatives. The document also allows flexibility to change various project parameters to suit the needs of the entrepreneur. 1. 2 Project Brief Fast food is food which is prepared and served quickly at outlets called fast-food restaurants. It is a multi-billion dollar industry which continues to grow rapidly in many countries. A fast-food restaurant is a restaurant characterized both by food which is supplied quickly after ordering, and by minimal service. The food in these restaurants is often cooked in bulk in advance and kept warm, or reheated to order. Many fast-food restaurants are part of restaurant chains or franchise operations, and standardized foodstuffs are shipped to each restaurant from central locations. There are also simpler fast-food outlets, such as stands or kiosks, which may or may not provide shelter or chairs for customers. Because the capital requirements to start a fast-food restaurant are relatively small, particularly in areas with non-existent or medium income population, small individually-owned fast-food restaurants have become common throughout Pakistan. Generally restaurants, where the customers sit down and have their food orders brought to them, are also considered fast food. 1. 3 Opportunity Rationale The Fast Food Restaurant Market is a growing industry in Pakistan relying heavily on the changing lifestyle patterns, population growth of the target age group and the related increase in employment of women. With today's hectic lifestyles, time-saving products are increasingly in demand the most obvious being the fast food. The rate of growth in consumer expenditures on fast food has led most other segments of the food-away-from- home market for much of the last one decade. Demand for convenience has driven expenditures where people want quick and convenient meals; they do not want to spend a lot of time preparing meals, traveling to pick up meals, or waiting for meals in restaurants. As a result, consumers rely on fast food. Knowing this, fast food providers are coming up with new ways to market their products that save time for consumers. PREF-11/December, 2006/
  • 4. Pre-Feasibility Study Fast Food Restaurant Consumers want to combine meal-time with time engaged in other activities, such as shopping, work, or travel, therefore allocating less time for food, hence the growing need for fast food. 1. 4 The Fast Food Industry The fast-food industry is popular in Pakistan, the source of most of its innovation, and many major international chains are based there. The presence of multinational fast food chains like McDonalds, KFC, Pizza Express, Pizza Hut, Subway etc. have somewhat catered to the high income segment therefore developing a niche as upscale fastfood restaurants. Multinational corporations such as these typically modify their menus to cater to local Pakistan tastes and most overseas outlets are owned by native franchisees to ensure that cultural, ethnic, and community values are taken care of. Additionally, multinational fast-food chains are not the only or even the primary source of fast food in most cities of Pakistan. Many regional and local chains have developed around the main cities of Pakistan (for example Khan Broast in Karachi) to compete with international chains and provide menu items that appeal to the unique regional tastes and habits at comparatively low costs. In Pakistan, multinational chains are considerably more expensive; they usually are frequented because they are considered chic and somewhat glamorous and because they usually are much cleaner than local eateries. However much of the middle-income segment (which forms a major chunk of fastfood goers) prefers visiting local outlets that offer low cost fast food, hence more frequent visits. 1.4.1 Increasing Number of Fast Food Outlets The rapid rate at which the fast food industry continues to add outlets is as much a reflection of consumer demand for convenience as it is a reflection of demand for fast food itself. Expanding the number of outlets increases accessibility, thus making it more convenient for consumers to purchase fast food. Especially in recent years, much of the expansion has been in the form of "satellite" outlets. These tend to be smaller in size, with little or no seating capacity, and are often in nontraditional locations, such as office buildings, department stores, airports, and gasoline stations; locations chosen specifically to maximize convenience and consumer accessibility. 1.4.2 Consumer Appeal Fast-food outlets have become popular with consumers for several reasons. One is that through economies of scale in purchasing and producing food, these companies can deliver food to consumers at a very low cost. In addition, although some people dislike fast food for its predictability, it can be reassuring to a hungry person in a hurry or far from home. PREF-11/December, 2006/
  • 5. Pre-Feasibility Study Fast Food Restaurant Multinational Fast food chains like McDonald's rapidly gained a reputation for their cleanliness, fast service and a child-friendly atmosphere where families on the road could grab a quick meal, or seek a break from the routine of home cooking. Prior to the rise of the fast food chain restaurant, people generally had a choice between greasy-spoon diners (kiosk) where the quality of the food was often questionable and service lacking, or high- end restaurants that were expensive and impractical for families with young children. Modern, stream-lined convenience of the fast food restaurant provides a new alternative and appealed to consumers' instinct for ideas and products associated with progress, technology and innovation. Fast food restaurants have rapidly become the eatery "everyone can agree on", with many featuring child-size menu combos, play areas and whimsical branding campaigns, designed to appeal to younger customers. Parents can have a few minutes of peace while children played or amused themselves with the toys included in the premsises. Many consumers see multinational fast food restaurants as symbols of the wealth, progress and well-ordered openness of Western society and therefore become trendy attractions in many cities around Pakistan, particularly among younger people with more varied tastes. 1.4.3 Focusing on Consumer Convenience Fast Food outlets tend to focus on the “work while you eat” philosophy similar to the McDonald Outlet at Quaid e Azam Internation Aiport (Karachi) wherein seating space is also available for passengers in transition or the KFC outlets in large shopping malls like the Millenium Shopping Mall in Karachi promoting the concept of “Shop While You Eat.” 1.4.4 Increasing Market for Fast Food – The Population Boom Pakistan, currently ranked as 6th in terms of total population, is characterized by a high population growth rate of 1.9% (Pakistan Economic Survey 2005) and is set to take the top three positions in terms of total population with already 153.4 Million people registered in 2005.1 With this, the per capita income has increased to US$ 736 while the productive age group (15 to 64) years is said to take the major chunk of population (67% of total population) by 2020. 2 The growth rate in food consumption is also augmented by the rapid increase in the employment rate for males / female population aging between 20 to 29 years (fast food goers) hence the greater income contribution to the overall income generated is expected to be higher. 1 2005 World Population Data Sheet, Population Reference Bureau, Washington; 2005 2 Population Projections 1998-2023, Planning Commission; NIPS PREF-11/December, 2006/
  • 6. Pre-Feasibility Study Fast Food Restaurant Population Pyramid 1998 & 2020* *Population Census Organization; Population Projections 1998-2023, Planning Commission; NIPS 1.4.5 The Future of the Industry The Pakistani economy is becoming increasingly service-oriented, and over the past several decades, the foodservice industries that offer the highest levels of convenience have been rewarded with strong sales growth. In the face of rising population, incomes and increasingly hectic work schedules, a nearly insatiable demand for convenience will continue to drive fast food sales. Fast Food Outlets will strive to find ways to make their products even more accessible. Even if incomes stagnate or attitudes change, consumers are unlikely to return to meal preparation at home on a large scale. This suggests that even if consumers choose to spend more time at home, for family or other reasons, much of the meal preparation will still occur elsewhere. Many more table service restaurants, which traditionally focus on full-service in house dining, will likely try to capture part of this market by offering take-out, and possibly experimenting with home delivery. The value of consumer time, as well as the demand for consistent, high-quality food products, will continue to shape the fast food industry. Fast food, once considered a novelty, has become an increasingly significant part of the young generation’s diet. The role of convenience in this dietary shift cannot be over-emphasized, and the future growth PREF-11/December, 2006/
  • 7. Pre-Feasibility Study Fast Food Restaurant of the rest of the foodservice industry will be driven in large part by its ability to find new ways to save consumers’ time. 1. 5 Key Success Factors / Practical Tips for Success Whether you are opening a one-of-a-kind restaurant or trying to grow your existing restaurant into a multi-unit chain, there are winning principles that can help shape your restaurant and improve its chances of succeeding. i) Conceive the “Winning” Concept A well-defined concept stands a much better chance of long term success than some vague notion. To start, it is wise to first set specific goals and decide on the ways you will measure your restaurants success. ii) Longetivity This can be described as the art of being able to maintain success over time while adjusting to meet the changing demands and buying habits of the customer. To open a restaurant successfully and become profitable is one thing, but to maintain that success over a long period of time is “winning.” iii) Consistency To not simply open a restaurant, but to truly develop a winning concept requires implementing systems and procedures to ensure consistency of your operation. iv) Market Appeal All restaurants want to be busy but winning concepts seem to have a broad appeal and well developed “points of difference” that enable them to dominate their market niche. To be the first place the customer thinks of going when choosing to dine out is the goal of the winning concept. v) Expandability Consistency of quality and service, and operating systems and management procedures established in the first unit can result in more expandable opportunities where all systems are already developed and waiting to be implemented. vi) Menu Pricing One of the most important factors in the strategic planning of a restaurant is in the development of the menu. It involves designing an appealing selection of menu PREF-11/December, 2006/
  • 8. Pre-Feasibility Study Fast Food Restaurant items that are competitively priced in the marketplace. Menu pricing is a very tricky task because you need to price items so that you can operate profitably and, just as important, offer your targeted guests a good price/value relationship. vii) Selecting Prime Location The specific location within your target area also is critical. If you are situated in an infrequently traveled area no where near complimentary businesses or at the back of a mall, you limit your earning potential. Even if you are the only outlet in town you must gauge the likelihood of outsiders visiting your restaurant. If the restaurant is right off of a major freeway heavily traveled by truckers and road trippers you may be highly successful despite a remote location. viii) Market Research This is probably the most critical factor for running a successful fast food restaurant. You need to visit fast food outlets, franchises and other chains to see how your ‘concept’ would fit into the neighborhood you are planning to target. Talk to customers to know their preferences, some detailed meetings with restaurant managers / owners over dinner would do the trick in obtaining best practices and critical information that otherwise could have been overlooked. Keep in mind that because a concept works in one area does not mean it will be well-received by customers in your location. Tastes are subject to location preference and more often target market. In high scale urban areas (like PECHS, KDA etc.) you are more likely to be successful with a niche concept than in a dense middle income areas (like Gulistan e Jauhar). Another thing to consider is competition. If your market is saturated with similar restaurants and the population may not be large enough to support more restaurants, you may want to rethink your concept. 1. 6 Proposed Business Legal Status Although the legal status of business tends to play an important role in any setup, the proposed fast food business is assumed to operate on a sole proprietorship basis which may extend to partnership in case of addition of new products that might add significant business to the existing setup. PREF-11/December, 2006/
  • 9. Pre-Feasibility Study Fast Food Restaurant 2 OPENING A SUCCESSFUL RESTAURANT From burger stands to barbeque steakhouses more and more restaurants are popping up in cities every day. Since restaurants are such a common business venture, people must enjoy running them. However, all of those advantages come at a price - building a restaurant from scratch is not an easy task. It is a hard and expensive process, and the reality is that many restaurants fail in their first year of business due to improper planning. But rest assured, there are ways to reduce the risk of becoming another statistic. Following are some of the handy tips that can help run a successful fast food establishment. 2. 1 How to Start a Restaurant? 2.1.1 Work in a Restaurant One of the best ways to reduce the risk of owning a failed restaurant is to have some restaurant experience before you start. Many successful restaurateurs have said that the best way to prepare for owning a restaurant is by working in one, hopefully in an eatery similar to one you'd like to open. You'll learn more than just how to serve food with a smile; you can learn restaurant marketing, menu development, payroll, and other significant components of the restaurant world. Working in the restaurant industry and learning the basics is an important first step to becoming an owner. 2.1.2 Know Your Target Market Who do you see eating at your restaurant? Are you targeting the family crowd, teenagers or seniors? Knowing your target market before you start planning will not only help you solidify your menu; it will help determine your location, décor and the overall atmosphere of your restaurant. A family-style restaurant, which caters to parents and their kids, may not appeal to seniors. On the other hand, an upscale, quiet restaurant offering a two-hour dining experience wouldn't be appealing to teenagers or families with small children. 2.1.3 Select a Service Style & Food Concept What type of restaurant do you see yourself owning? Typically, your service style will either be fast-food, which offers food types that range from burgers, fries, soups and sandwiches; mid-scale, which has full course meals at value prices; or upscale, offering full service meals with high-class ambiance and, in turn, higher prices. After narrowing your establishment to one of these three options, you can narrow your style of food choices. Is there a particular type of cuisine that you see yourself serving? Do you prefer pizza or soup? Sandwiches or Chinese? Choosing your food concept goes hand- in-hand with your choice in service style. 2.1.4 Develop a Business Plan Like any other type of company, a restaurant will need a concise business plan. This plan should include but is not limited to: the overall concept and goal of the restaurant; specific PREF-11/December, 2006/
  • 10. Pre-Feasibility Study Fast Food Restaurant financial information and projections; a description of the target market; the menu and pricing; equipment and employee details; advertising and marketing plan; and a potential exit strategy. 2.1.5 Create ‘the Menu” and not “a menu” The menu can make or break a restaurant, and should be in accordance with the overall concept of the restaurant. Revisit the business plan to make sure the menu is attractive to the target market, is affordable within specified budget, and complements the restaurant's design concept. For example, if the restaurant is family-friendly, you will need a kids menu. If it is supposed to be an upscale establishment, a lot of thought will have to go into the dessert list. 2.1.6 Choose a Location & Layout It is important to find a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses (especially if you're catering to the lunch crowd). It is necessary to revisit the business plan to make sure you are close to your target market. If you are opening a fast food restaurant, it may not be the best idea to open it in the vicinity of upscale homes but preferably near flats. In addition, make sure that the monthly rent is in-line with the business plan's projected profit so that you do not become building-poor. Once you find your location, the layout and design of the interior should be taken into account. You should already have a concept of your restaurant in your business plan; bring this concept into the design of the dining room. When designing your kitchen area, think about what's on your menu in order to determine what is needed for the food preparation area. 2.1.7 Getting the Appropriate Funding The business plan will help you recognize how much money you will need to start your restaurant. If you are unsure about how much money you will need upfront, talking to other restaurant owners can help you project your expected start-up costs. There are numerous ways restaurateurs raise capital to start their business, including taking advantage of government programs that cater to upstart small business owners; liquidating assets or using them as collateral for a loan; or encouraging a family or friend to become the creditor. 2.1.8 Be Familiar With Safety Regulations Restaurants are regulated and subject to inspection, and failing to be up to speed with these regulations could be detrimental to the fast food outlet. Therefore it is necessary to consult with old restaurateurs to become familiar with what one must do to meet the necessary legal requirements. 2.1.9 Hiring Employees One of the biggest challenges restaurants face is a lack of qualified labor. In order to get and retain qualified employees, make sure your pay scales relate clearly to the job's duties PREF-11/December, 2006/
  • 11. Pre-Feasibility Study Fast Food Restaurant and responsibilities. In addition, find out what other restaurants are paying their employees so that you can be competitive in the job market, without spending too much on payroll. However try linking your payroll with the bottom line and see how much money can be squeezed out for the employees. 2.1.10 Advertise & Market Every business needs a comprehensive marketing plan, and restaurants are no exception. After determining your marketing budget, price out billboard advertising, flyers in newspapers, and local cable TV advertising. Ask your customers how they found out about you, so that you can record where your advertising and marketing money are best spent. Opening up food stalls and setting up tasting booths at local neighborhood events or having an event at the restaurant benefiting a students / event, can be an inexpensive way to achieve positive word-of-mouth. 2. 2 Choosing a Location Not every food-service operation needs to be in a retail location, but for those that do depend on retail traffic like fast food outlets, here are some factors to consider when deciding on a location:  Anticipated sales volume. How will the location contribute to your sales volume?  Accessibility to potential customers. Consider how easy it will be for customers to get into your outlet. If you are relying on strong pedestrian traffic, consider whether or not nearby businesses will generate foot traffic for you.  The rent-paying capacity of your business. If you've done a sales-and-profit projection for your first year of operation, you will know approximately how much revenue you can expect to generate, and you can use that information to decide how much rent you can afford to pay.  Restrictive ordinances. You may encounter unusually restrictive ordinances that make an otherwise strong site less than ideal.  Traffic density. With careful examination of food traffic, you can determine the approximate sales potential of each pedestrian passing a given location. Two factors are especially important in this analysis: total pedestrian traffic during business hours and the percentage of it that is likely to patronize your food service business.  Visibility is a location’s ability to be seen and recognized. Good visibility can create opportunities for the impulse eating decision that is critical for fast food operators, and it allows the exposure full-service restaurants require.  Customer parking facilities. In case you allow for parking the site should provide convenient, adequate parking as well as easy access for customers.  Proximity to other businesses. Neighboring businesses may influence your store's volume, and their presence can work for you or against you. PREF-11/December, 2006/
  • 12. Pre-Feasibility Study Fast Food Restaurant  History of the site. Find out the recent history of each site under consideration before you make a final selection. Who were the previous tenants, and why are they no longer there?  Terms of the lease. Be sure you understand all the details of the lease, because it's possible that an excellent site may have unacceptable leasing terms.  Future development. Check with the local planning board to see if anything is planned for the future that could affect your business, such as additional buildings nearby or road construction. 2. 3 Deciding on the Layout Layout and design are major factors in your restaurant's success. You'll need to take into account the size and layout of the dining room, kitchen space, storage space and counter. Typically, restaurants allot 40 to 60 percent of their space to the dining area, approximately 30 percent to the kitchen and prep area, and the remainder to storage and office space.  Dining area. This is where you'll be making the bulk of your money, so don't cut corners when designing your dining room. Visit restaurants in your area and analyze the décor. Watch the diners; do they react positively to the décor? Is it comfortable or are people shifting in their seats throughout their meals? Note what works well and what doesn't. Much of your dining room design will depend on your concept. It will help you to know that 40 to 50 percent of all sit-down customers arrive in pairs; 30 percent come alone or in parties of three; and 20 percent come in groups of four or more. To accommodate the different groups of customers, use tables for four that can be pushed together in areas where there is ample floor space. This gives you flexibility in accommodating both small and large parties. Place booths for four to six people along the walls.  Production area. Too often, the production area in a restaurant is inefficiently designed--the result is a poorly organized kitchen and less than top-notch service. Keep your menu in mind as you determine each element in the production area. You'll need to include space for receiving, storage, food preparation, cooking, baking, dishwashing, production aisles, trash storage, employee facilities and an area for a small office where you can perform daily management duties. Arrange your food production area so that everything is just a few steps away from the cook. Your design should also allow for two or more cooks to be able to work side by side during your busiest hours. PREF-11/December, 2006/
  • 13. Pre-Feasibility Study Fast Food Restaurant 2. 4 Designing & Decor Since customers ultimately drive restaurant design trends, many of your restaurant design ideas will come from your clientele. Successful restaurant design ideas are bred with an understanding of the types of experiences your customers are looking for and the promise your brand has made to them. You may know what types of menu items they crave, but do you know what kinds of restaurant design ideas create an atmosphere that will welcome them time and time again?  Step One: The restaurant designer’s process begins with a thorough understanding of the eatery’s menu, location, customers, architectural preferences and lighting concerns. More than just a design powwow, the restaurant designer’s process includes budget considerations, timelines and coordination with city officials to secure necessary building permits.  Step Two: The most effective restaurant design considers the flow of waiter staff from the kitchen to the dining area or from the dining area to the restrooms. The restaurant designer’s process contemplates the overall circulation within the restaurant for maximum efficiency  Step Three: With the floor plan in hand and a concept in mind, the next stage in the restaurant designer’s process is interior design. Sketches may depict color schemes, furniture placement, window treatments, artistic lighting and other aspects of the ambiance. This is also the part of the restaurant designer’s process where we consider paints, wallpapers, foliage and artwork. 2. 5 Creating a Menu Though menu variety has increased over the years, menus themselves are growing shorter. Busy consumers don't want to read a lengthy menu before dinner; dining out is a recreational activity, so they're in the restaurant to relax. Keep your number of items in check and menu descriptions simple and straightforward, providing customers with a variety of choices in a concise format. Your menu should also indicate what dishes can be prepared to meet special dietary requirements. Items low in fat, sodium and cholesterol should also be marked as such. 2. 6 Restaurant Size That depends to some extent on how you answered the fundamental question mentioned above. For the sake of discussion, a restaurant can be understood in two parts; the front- house component and the back-house component, which we will call the engine. The back- house areas include, the cook-line, the food preparation areas, refrigerated any dry storage areas, office and the dishwashing area. The front-house functions are typically dining areas (interior and exterior), waiting area, to-go area, restroom, and private dining areas. PREF-11/December, 2006/
  • 14. Pre-Feasibility Study Fast Food Restaurant The speed of product delivery; the size of the engine, a casual or formal atmosphere, and numbers of patrons you want to accommodate will all factor in to the amount of space you need for your restaurant. The goal is trying to maximize the number of patrons one can serve, out of the smallest most efficient back-house possible. 2. 7 Hiring the Right Employees Choosing employees who will do a good job is not only important to the success of your business, but will also contribute to the image of your establishment, provided they are properly trained. There are several categories of personnel in the restaurant business: manager, cooks, servers, busboys, dishwashers and cleaners. When your restaurant is still new, some employees' duties may cross over from one category to another. For example, your servers may double as the cleaners. Be sure to hire people who are willing to be flexible in their duties.  Manager / Owner. The most important employee in most restaurants is the manager. The best candidate is you or a person who has already managed a restaurant or restaurants in the area and will be familiar with local buying sources, suppliers and methods. The manager should have leadership skills and the ability to supervise personnel while reflecting the style and character of the restaurant.  Chefs and cooks. When you start out, you'll probably need three cooks - two full time and one part time. But one lead cook may need to arrive early in the morning to begin preparing soups, bread and other items to be served that day. One full-time cook should work days, and the other evenings. The part-time cook will help during peak hours, such as weekend rushes, and can work as a line cook during slower periods, doing simple preparation. Cooking schools can usually provide you with leads to the best in the business, but look around and place newspaper ads before you hire. Customers will become regulars only if they can expect the best every time they dine at your restaurant. To provide that, you'll need top-notch cooks and chefs.  Servers. The servers will have the most interaction with customers, so they need to make a favorable impression and work well under pressure, meeting the demands of customers at several tables while maintaining a pleasant demeanor. There are two times of day for wait staff: very slow and very busy. Schedule your employees accordingly. The lunch rush, for example, starts around 11:30 a.m. and continues until 1:30 or 2 p.m. Restaurants are often slow again until the dinner crowd arrives around 6:30 to 7 p.m. PREF-11/December, 2006/
  • 15. Pre-Feasibility Study Fast Food Restaurant 2. 8 A Good Fast Food Restaurant Experience Based on some surveys conducted with fast food goers following are some of the factors that contribute to a good fast food experience:  Location  Characteristics  Welcome  Food server  Food.  Environment (parking, restrooms, lighting).  Dessert Variety  Smile factor.  Time factor.  Profit factor (beverages offered, dessert menus presented). Measuring good service is subjective, but generally what is expected from a server when reviewing restaurants.  The server should greet diners within 3 minutes of their being seated.  The server should neat and clean.  The server should not be too chatty or familiar.  The server should know the menu and be able to answer questions.  The server should bring drinks within 3 minutes of being ordered.  The appetizer (if any) should be served within 5 minutes of ordering.  Entrees should be served within 20 minutes of ordering.  Water or beverage glasses should be refilled regularly.  The server should silently survey the table and assess our needs without constantly interrupting to ask, "Do you need anything else?"  The bill should be brought promptly when requested, and change should be returned promptly.  Plates should be removed at the proper time, and the table should be cleared of bread and butter before dessert is served. 2. 9 Legal Requirements The Pakistan Hotels and Restaurant Acts Act 1976 is the law which requires the owners of all types of restaurants to register and obtain a license with the government. The restaurant owner is required to apply to the controller for registration of the restaurant. PREF-11/December, 2006/
  • 16. Pre-Feasibility Study Fast Food Restaurant Application for registration and determination of fair rates shall be made to the controller in Form “G” together with a certificate of medical fitness in Form “I” from a registered medical officer of the civil hospital in respect of the staff of the restaurant. For registration of a restaurant, the owner of the restaurant is required to conform to the standard of health, hygiene and comfort which standards have been set out in Schedule II of the act. On receipt of application, the controller will carryout inspection of the aforementioned premises and once satisfied will initiate the registration process. Once registered the owner of the restaurant will apply to the controller for license as per the Act which needs to be renewed on a yearly basis for the prescribed fee. 2. 10 Project Investment This section will provide the total cost of the project. Item Cost (Rs.) Construction Cost (all inclusive) 1,307,000 Dining & Office Furniture 542,250 Equipment & Machinery 967,000 Advance Rent 1,200,000 Preliminary Expenses 50,000 Working Capital 1,036,000 Total 5,102,250 PREF-11/December, 2006/
  • 17. Pre-Feasibility Study Fast Food Restaurant 2. 11 Proposed Product Mix The proposed project is assumed to provide customers with a variety of fast food items as outlined in the following menu: Broast Price Chinese Price Chicken Broast (Qtr.) 65 Hot & Sour Soup (2 Servings) 75 Chicken Broast (Half) 125 Hot & Sour Soup (4 Servings) 140 Chicken Broast (Full) 250 Chicken Corn Soup (2 Servings) 75 Chicken Corn Soup (4 Servings) 140 Burgers Price Plain Rice 40 Chicken Burger 50 Chicken Fried Rice 80 Chicken Cheese Burger 55 Vegetable Fried Rice 60 Beef Burger 40 Egg Fried Rice 70 Beef Cheese Burger 45 Beef Fried Rice 80 Zinger Burger 80 Beef Chilli (w/o rice) 75 Chicken Chilli (w/o rice) 85 Sandwiches Price Price Chicken Sandwich 55 French Fries (per plate) 25 Egg Sandwich 40 Cole Slaw 15 Beef Sandwich 45 Soft Drinks (Large) 50 Club Sandwich 80 Soft Drinks (Regular) 15 Based on the above the fast food restaurant can offer low cost combo meals to its customers for increased value. Following are the proposed combo deals that can be further modified to meet increasing demand: Combos Items Price Combo Deal 1 Zinger Burger / French Fries / Regular Drink 105 Combo Deal 2 Chicken Broast (Qtr.) / French Fries / Regular Drink 90 Combo Deal 3 Chicken Burger, Broast (Qtr.), French Fries, Regular Drink 135 Combo Deal 4 Club Sandwich / French Fries / Regular Drink 105 Family Deal 1 Full Broast / Zinger Burger / Club Sandwich / French Fries (4) / Large Drink 535 Family Deal 2 Zinger Burger (2) / Club Sandwich (2) / Broast (Half) / Large Drink / Fries (2) 515 Jumbo Deal 5% discount on purchase above Rs. 1,000/- It desirable to have a vast variety of food items to capture a larger target audience but initially the entrepreneur needs to be careful in choosing the right product mix that has the greatest acceptability such that the sales volume generated are able to cover the initial setup costs and desired profit margins. Once the fast food restaurant achieves a steady sales pattern further food items like Barbeque can be added and similarly for desserts ice cream would be the best potential. In case circumstances demand items other than the proposed menu the entrepreneur should make immediate changes to the menu before he starts loosing out customers. PREF-11/December, 2006/
  • 18. Pre-Feasibility Study Fast Food Restaurant One important factor to consider here is that the entrepreneur must have the requisite skills to decide on whether to introduce a new product line (like Barbeque, Pizza) or add a new item to the existing product line both of which might require the purchase of additional kitchen equipment. Hence the experience of the entrepreneur will play an important role in determining the course of action. 2. 12 Recommended Project Parameters Capacity Human Resource Equipment Location 300 Customers per Local / American / Middle Income 21 day Chinese Level Area Financial Summary Cost of Capital Project Cost IRR NPV Payback Period (WACC) Rs. 5,102,250 57% Rs. 13,076,676 2.5 Years 17.5% 2. 13 Proposed Location The recommended area for the proposed business setup will be in a densely populated middle income area (for example Gulistan-e-Jauhar, Karachi). The main reason for such a location is the presence of target market and customer traffic which are the prerequisites for the success of the restaurant. 3 MACHINERY & EQUIPMENT Understanding the customer’s individual needs and the capability to satisfy these completely is a vital part of the restaurant’s success. This is in turn dependent on the machinery and equipment used to produce good quality fast food. Fast Food Machines are easily available in the market wherein the owner has to choose between expensive brands and cheaper ones depending on how much he can afford to give quality to his customers. Secondhand equipment of world leading brands such as SPINZER, FRYMASTER, HENNY PENNY, LINCOLN, AYRKING, KEATING, MIRROR, CARPIGIANI, LINCAT, MORRETTI, ILSA, ROUND-UP, SANYO, ELETTROBAR are available while cheaper Chinese brands have gained popularity over the years. The machines can be ordered through international vendors with a minimum delivery period of 3 months while refurbished / reconditioned machines are also available. Some outlets closing their business also tend to sell their machinery at low prices but the durability and reliability factor must be taken into consideration while buying such machines. The typical fast food restaurant as outlined above would require the following machine / equipment for its operations: PREF-11/December, 2006/
  • 19. Pre-Feasibility Study Fast Food Restaurant Item Details Quantity Unit Price (Rs.) Total Price(Rs) Freezers (12 cf) 3 25,000 75,000 New Broast Machine (15 Pound 1 650,000 650,000 Capacity)* Deep Well Frier (Single Valve With 2 2 40,000 80,000 Baskets) Hot Plate for Burgers, Kebab, Sandwiches 1 33,000 33,000 (30” x 22”) Bin Marry Soup Container (2 Valve With 1 50,000 50,000 Steel Cabinet) Potato Cutter (8mm) 1 3,000 3,000 Pillar (4.5 Kg Potato Peeling Capacity) 1 6,000 6,000 Microwave 1 10,000 10,000 Working Tables 2 20,000 40,000 Keg Racks & Shelves 2 10,000 20,000 Total 15 - 967,000 * Available from Spinzer USA, Delivery Time Three Months, Reconditioned Available at Rs. 200,000 with the same specs and Delivery Time 3. 1 Machinery Maintenance All machines require routine cleaning and maintenance after every three months and an annual service which costs around 1% to 5% of the total cost depending upon the use of the machine and operator's skill. We have assumed an average of 2.5% of the depreciated cost as the annual maintenance cost. 3. 2 Dining Furniture & General Fixtures The restaurant is expected to entertain a minimum of 300 customers in a day, which requires a good seating layout to avoid any confusion and problems during rush hours. The following table gives the details of the dining tables and chairs that would serve approximately 100 customers (maximum capacity) at a time: PREF-11/December, 2006/
  • 20. Pre-Feasibility Study Fast Food Restaurant Item Details Quantity Unit Price (Rs.) Total Price(Rs) Dining Table – Square 25 6,000 150,000 (2X2) Chairs (Standard 14”) 100 1,500 150,000 Kitchen Cutlery Set 2 2,500 5,000 Dining Cutlery* (Plate, 150 150 22,500 Fork, Knife, Spoon, Glass) Air Conditioner Split Units 2 31,000 62,000 (6 Ton) Hot Water Geyser Large 1 20,000 20,000 Halogen Lights 25 250 6,250 Wall Lights (Large) 4 1,500 6,000 Portable Emergency Light 4 2,500 10,000 Generator (1.5 KVA) 1 90,000 90,000 Counter Chairs 2 1,500 3,000 Office Table & Chair Set 1 10,000 10,000 Waiting Chairs for Take 5 1,500 7,500 Away Customers Total 322 168,400 542,250 *Cutlery to be 1.5 times the maximum capacity (i.e. 100 customers) 4 LAND & BUILDING REQUIREMENT 4. 1 Land Requirement The land requirement is around 2,000 sq.ft. in densely populated area where all utilities and facilities are properly available. It is recommended that the fast food outlet be opened on the ground floor of flats or shopping mall wherein the consumer traffic will be a maximum. The more the shop is near the main road the better sales potential it will have. PREF-11/December, 2006/
  • 21. Pre-Feasibility Study Fast Food Restaurant 4. 2 Dedicated Area Requirement The floor space needs to be carefully allocated to allow for maximum dining space for customers in rush hours. The allocation of space between different sections would be as follows: Civil Works & Décor* % Size Total Construction Details (Cost in Rs / square (Sq. Feet) (Sq. Feet) Cost (Rs) feet) Dining 63 % 1,250 700 875,000 Waiting 4% 80 700 56,000 Kids Play 3% 70 800 56,000 Kitchen & 25 % 500 450 225,000 Preparation Office 1.5% 30 450 13,500 Stores 3% 70 450 31,500 Total 100 % 2,000 3,550 1,257,000 * Includes interior decoration as well as fancy fittings, lightings, hangings etc. 4. 3 Recommended Mode The proposed premises will be acquired on a rental basis with 6 month deposit and 6 months advance rent after which rent will be payable on a monthly basis. The monthly rent is approximately Rs. 50/ Sq Feet for the ground floor which would amount to Rs. 100,000 per month for the proposed fast food outlet (2,000 Sq Ft.) 4. 4 Reception & Owner Office To allow for maximum space for dining and security concerns (Cash control) it is recommended that the owner should manage the reception counter as well as all cash handling emanating from the tables. Therefore a total of Rs. 50,000 would be required to erect the reception and cash counter along with the take-away order taking booth. The Office Furniture & Equipment will be depreciated at the rate of 10% per annum according to the diminishing balance method for the projected period. 5 HUMAN RESOURCE REQUIREMENT The human resource requirement for the general and management staff are as follows: PREF-11/December, 2006/
  • 22. Pre-Feasibility Study Fast Food Restaurant Monthly Salary Total Salary Designation / Type Number (Rs.) (Rs.) Owner 1 - - Kitchen Supervisor 2 6,000 12,000 Shift Supervisor 3 8,000 24,000 (including reliever) Cook 4 4,000 16,000 Servers 6 3,000 18,000 Take Away Order Taker 1 6,000 6,000 / Cashier Dishwasher 2 2,500 5,000 Cleaner 1 2,500 2,500 Guard (12 Hour) 1 6,000 6,000 Total 21 38,000 89,500 Considering the size of the proposed establishment it is assumed that the owner would be managing the overall affairs of the fast food setup. He will be required to process and check bills, invoices, receivables management, maintain accounts, etc. for record. The owner will also ensure safe custody of store keys. The cashier will only be responsible for receiving payment and handing over change while the owner would be managing the cash drawer for control purposes. It is important to note that many food outlets tend to lose out due to inadequate cash control by the owners especially during rush hours where the counter staff can easily slip out one or two payments. 6 FINANCIAL ANALYSIS & KEY ASSUMPTIONS The project cost estimates for the proposed fast food outlet have been formulated on the basis of discussions with relevant stakeholders and experts. The cost projections cover the cost of land, building, inventory, equipment including office furniture etc. The specific assumptions relating to individual cost components are given as under: 6. 1 Revenue & Cost Projections The Sales are expected to increase by 15% every year while the cost of raw materials is assumed to increase by 10%. The 15% annual increase in revenue is expected to result from a part increase in population increase and part increase in product price. PREF-11/December, 2006/
  • 23. Pre-Feasibility Study Fast Food Restaurant The prices used to calculate the gross revenue earned are based on the billing rate at which the entrepreneur will charge the customer. The prices are also inclusive of the General Sales Tax. Furthermore it is assumed that the following sales breakup will form the revenue streams for the fast food outlet Revenue Stream % of Total Sales Dine In 60% Take Away 20% Home Delivery 20% Total Revenue 100% The minimum delivery order size is assumed to be Rs. 250/- per order with 3 delivery riders being employed at the charge out rate of Rs. 25 per delivery order wherein no transportation fuel is provided by the fast food outlet. For Take Away and Home Delivery another 1% of sales added cost due to packing is assumed. 6. 2 Rent Cost The rent for the assumed premises will be Rs. 100,000/- per month. It is assumed that Rs. 1,200,000 will be given in advance before possession of premises. This will include 6 months deposit and 6 month advance rent. The rent would be payable on a monthly basis and is expected to increase at the rate of 10% per annum for the projected period. 6. 3 Utilities Requirement The following table presents the assumed breakup of utilities on a monthly basis: Utility Monthly Charges (Rs.) Electricity 25,000 Water 2,000 Gas 15,000 Telephone 10,000 Total 52,000 PREF-11/December, 2006/
  • 24. Pre-Feasibility Study Fast Food Restaurant As depicted above the most of the fast food machines require considerable gas during the preparation process. The preheating procedure of the equipment before commencement of preparation also consumes considerable gas. It is assumed that utilities expenses will be increased by 10% every year. 6. 4 Depreciation on Building & Equipment Depreciation on Shop, Equipment, Machinery and Fixtures is assumed to be at the rate of 10% per annum based on the diminishing balance method for the projected period. 6. 5 Working Capital & Pre Operating Costs It is estimated that an additional amount of approximately Rs. 1,036,000 will be required as cash in hand to meet the working capital requirements / contingency cash for the initial stages. The requirement is based on the rent, utilities and salaries expenses for at least four months and 3 days raw material inventory. The following table gives the break up. Item 4 Months Cost (Rs.) Utilities 208,000 Salaries 358,000 Raw Material Inventory 70,000 Rent 400,000 Total 1,036,000 The provision for pre operating costs is assumed to be Rs. 50,000 which will be amortized equally over a 5 year period. 6. 6 Account Receivables All sales will be made strictly on cash basis. It is not advisable to operate a fast food restaurant on credit basis. 6. 7 Miscellaneous Outlet Expenses A monthly figure of Rs. 6,000 (200 per day) is assumed to be incurred for miscellaneous expenses which are expected to increase at the rate of 10% per annum for the projected period. PREF-11/December, 2006/
  • 25. Pre-Feasibility Study Fast Food Restaurant 6. 8 Financial Charges It is assumed that long-term financing for 5 years will be obtained in order to finance the fast food setup which would mainly include construction & décor of Building, Purchase of machinery & equipment, purchase of inventory etc. This facility would be required at a rate of 15% (including 1% insurance premium) per annum with 60 monthly installments over a period of five years. The installments are assumed to be paid at the end of every month. 6. 9 Taxation The tax rate applicable to sole proprietorship is the same as that of the salaried individual. Therefore, we are assuming that the tax rate would be the same for the proposed fast food setup. 6. 10 Cost of Capital The cost of capital is explained in the following table: Particulars Rate Required return on equity 20.0 % Cost of finance 15.0 % Weighted average cost of capital 17.5 % The weighted average cost of capital is based on the debt/equity ratio of 50:50. 6. 11 Owner’s Withdrawal It is assumed that the owner with withdraw from the business once the desired profitability is reached from the start of operations. The amount would depend on business sustainability and availability of funds for future growth. PREF-11/December, 2006/
  • 26. Pre-Feasibility Study Fast Food Restaurant 6. 12 Key Assumptions Item Assumption(s) Sales Increase 15 % per year Increase in Cost of Raw Materials 10 % per year Increase in Staff Salaries 10 % per year Increase in Utilities (Electricity / Water / 10 % per year Gas) Increase in Rent 10 % per year Increase in Office Expenses 10 % per year Debt / Equity Ratio 50 : 50 Depreciation o Shop Building & Fixtures 10 % per annum (Diminishing Balance) o Kitchenware & Machinery 10 % per annum (Diminishing Balance) o Furniture 10 % per annum (Diminishing Balance) Equipment Annual Maintenance Cost 2.5% of Written Down Value Raw Food Inventory - Meat 3 Days Raw Food Inventory – Spices & Sauce 7 Days Lease Period 5 Years Lease Installments Monthly Financial Charges (Lease Rate) 15 % per annum Tax Rate Income Tax on Salaried Individuals PREF-11/December, 2006/
  • 27. Pre-Feasibility Study Fast Food Restaurant INCOME STATEMENT: FAST FOOD RESTAURANT Projected Income Statement (Rs.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Revenue 10,015,200 11,517,480 13,245,102 15,231,867 17,516,647 20,144,145 23,165,766 26,640,631 30,636,726 35,232,235 Net Sales 10,015,200 11,517,480 13,245,102 15,231,867 17,516,647 20,144,145 23,165,766 26,640,631 30,636,726 35,232,235 Raw Material Cost 4,910,141 5,401,155 5,941,270 6,535,397 7,188,937 7,907,831 8,698,614 9,568,475 10,525,323 11,577,855 Labor & Salaries 1,074,000 1,181,400 1,299,540 1,429,494 1,572,443 1,729,688 1,902,657 2,092,922 2,302,214 2,532,436 Utilities 624,000 686,400 755,040 830,544 913,598 1,004,958 1,105,454 1,215,999 1,337,599 1,471,359 Cost of Sales 6,608,141 7,268,955 7,995,850 8,795,435 9,674,979 10,642,477 11,706,725 12,877,397 14,165,137 15,581,650 Gross Profit 3,407,059 4,248,525 5,249,252 6,436,432 7,841,668 9,501,668 11,459,042 13,763,234 16,471,589 19,650,584 General Administrative & Selling Expenses Rent Expense 1,200,000 1,320,000 1,452,000 1,597,200 1,756,920 1,932,612 2,125,873 2,338,461 2,572,307 2,829,537 Office & Miscellaneous Expenses 72,000 79,200 87,120 95,832 105,415 115,957 127,552 140,308 154,338 169,772 Amortization Expenses 10,000 10,000 10,000 10,000 10,000 0 0 0 0 0 Depreciation Expense 281,625 253,463 228,116 205,305 184,774 166,297 149,667 134,700 121,230 109,107 Maintenance Expense 21,758 19,582 17,624 15,861 14,275 12,848 11,563 10,407 9,366 8,429 Subtotal 1,585,383 1,682,244 1,794,860 1,924,198 2,071,384 2,227,713 2,414,655 2,623,875 2,857,241 3,116,846 Operating Income 1,821,677 2,566,281 3,454,392 4,512,234 5,770,284 7,273,955 9,044,386 11,139,359 13,614,348 16,533,738 Financial Charges (15% Per Annum) 357,889 298,344 229,228 149,001 55,878 0 0 0 0 0 Earnings Before Taxes 1,463,788 2,267,936 3,225,164 4,363,233 5,714,406 7,273,955 9,044,386 11,139,359 13,614,348 16,533,738 Tax 365,947 566,984 806,291 1,090,808 1,428,602 1,818,489 2,261,097 2,784,840 3,403,587 4,133,435 Net Profit 1,097,841 1,700,952 2,418,873 3,272,425 4,285,805 5,455,466 6,783,290 8,354,519 10,210,761 12,400,304 Monthly Profit After Tax 91,487 141,746 201,573 272,702 357,150 454,622 565,274 696,210 850,897 1,033,359 PREF-11/December, 2006/
  • 28. Pre-Feasibility Study Fast Food Restaurant BALANCE SHEET: FAST FOOD RESTAURANT Projected Balance Sheet (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Assets Current Assets Cash & Bank Balance 1,036,000 2,055,062 3,589,528 5,747,452 8,655,889 12,464,053 18,085,816 25,018,772 33,507,992 43,839,983 56,349,394 Prepaid Rent 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 Total Current Assets 2,236,000 3,255,062 4,789,528 6,947,452 9,855,889 13,664,053 19,285,816 26,218,772 34,707,992 45,039,983 57,549,394 Fixed Assets Fast Food Machinery 967,000 870,300 783,270 704,943 634,449 571,004 513,903 462,513 416,262 374,636 337,172 Shop 1,307,000 1,176,300 1,058,670 952,803 857,523 771,770 694,593 625,134 562,621 506,359 455,723 Office Fixtures 542,250 488,025 439,223 395,300 355,770 320,193 288,174 259,356 233,421 210,079 189,071 Total Fixed Assets 2,816,250 2,534,625 2,281,163 2,053,046 1,847,742 1,662,967 1,496,671 1,347,004 1,212,303 1,091,073 981,966 Preliminary Expenses 50,000 40,000 30,000 20,000 10,000 - - - - - - Total Assets 5,102,250 5,829,687 7,100,690 9,020,498 11,713,631 15,327,020 20,782,486 27,565,776 35,920,295 46,131,056 58,531,360 Owner's Equity 2,551,125 3,648,966 5,349,918 7,768,791 11,041,216 15,327,020 20,782,486 27,565,776 35,920,295 46,131,056 58,531,360 Long Term Liability 2,551,125 2,180,721 1,750,772 1,251,707 672,415 0 0 0 0 0 0 Total Equity & Liabilities 5,102,250 5,829,687 7,100,690 9,020,498 11,713,631 15,327,020 20,782,486 27,565,776 35,920,295 46,131,056 58,531,360 PREF-11/December, 2006/
  • 29. Pre-Feasibility Study Fast Food Restaurant CASH FLOW STATEMENT: FAST FOOD RESTAURANT Projected Statement of Cash Flows (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Cash Flow From Operating Activities Net Profit 0 1,097,841 1,700,952 2,418,873 3,272,425 4,285,805 5,455,466 6,783,290 8,354,519 10,210,761 12,400,304 Add: Depreciation Expense 0 281,625 253,463 228,116 205,305 184,774 166,297 149,667 134,700 121,230 109,107 Amortization Expense 0 10,000 10,000 10,000 10,000 10,000 0 0 0 0 0 Net Cash Flow From Operations 0 1,389,466 1,964,415 2,656,989 3,487,729 4,480,579 5,621,763 6,932,957 8,489,220 10,331,991 12,509,411 Cash Flow From Financing Activities Receipt of Long Term Debt 2,551,125 Repayment of Long Term Debt (370,404) (429,949) (499,065) (579,292) (672,415) 0 0 0 0 0 Owner's Equity 2,551,125 Net Cash Flow From Financing Activities 5,102,250 (370,404) (429,949) (499,065) (579,292) (672,415) 0 0 0 0 0 Cash Flow From Investing Activities Construction Cost (1,307,000) Office Furniture (967,000) Equip & M/C (542,250) Advance Rent (1,200,000) Preliminary Expenses (50,000) Net Cash Flow From Investing Activities (4,066,250) 0 0 0 0 0 0 0 0 0 0 NET CASH FLOW 1,036,000 1,019,062 1,534,466 2,157,924 2,908,437 3,808,164 5,621,763 6,932,957 8,489,220 10,331,991 12,509,411 Cash at the Beginning of the Period 0 1,036,000 2,055,062 3,589,528 5,747,452 8,655,889 12,464,053 18,085,816 25,018,772 33,507,992 43,839,983 PREF-11/December, 2006/
  • 30. Pre-Feasibility Study Fast Food Restaurant FAST FOOD RESTAURANT Cost & Revenue Sheet 300 Broast Cost Price Unit Sales Total Cost Total Sales Chinese Cost Price Unit Sales Total Cost Total Sales Chicken Broast (Qtr.) 35 65 36 0.12 1260 2340 Hot & Sour Soup (2 Servings) 25 75 6 0.02 150 450 Chicken Broast (Half) 70 125 18 0.06 1260 2250 Hot & Sour Soup (4 Servings) 50 140 3 0.01 150 420 Chicken Broast (Full) 140 250 6 0.02 840 1500 Chicken Corn Soup (2 Servings) 25 75 6 0.02 150 450 Chicken Corn Soup (4 Servings) 50 140 3 0.01 150 420 Burgers Cost Price Unit Sales Total Cost Total Sales Plain Rice 12 40 3 0.01 36 120 Chicken Burger 20 50 24 0.08 480 1200 Chicken Fried Rice 20 80 12 0.04 240 960 Chicken Cheese Burger 25 55 36 0.12 900 1980 Vegetable Fried Rice 18 60 6 0.02 108 360 Beef Burger 18 40 18 0.06 324 720 Egg Fried Rice 18 70 3 0.01 54 210 Beef Cheese Burger 23 45 18 0.06 414 810 Beef Fried Rice 20 80 3 0.01 60 240 Zinger Burger 40 80 24 0.08 960 1920 Beef Chilli (w/o rice) 30 75 6 0.02 180 450 Chicken Chilli (w/o rice) 35 85 9 0.03 315 765 Sandwiches Cost Price Unit Sales Total Cost Total Sales Cost Price Unit Sales Total Cost Total Sales Chicken Sandwich 20 55 21 0.07 420 1155 French Fries (per plate) 8 25 5 40 125 Egg Sandwich 12 40 6 0.02 72 240 Cole Slaw 6 15 5 30 75 Beef Sandwich 20 45 3 0.01 60 135 Soft Drinks (Large) 40 50 10 400 500 Club Sandwich 35 80 30 0.1 1050 2400 Soft Drinks (Regular 250ml) 9 15 375 3375 5625 TOTAL 8040 16650 TOTAL 5438 11170 Daily Monthly Additional Final Total Sales (Rs) 27,820 834,600 - 834,600 Total RM Cost (Rs.) 13,478 404,340 4,838 409,178 Gross Profit (Rs.) 14,342 430,260 425,422 0.509731129 Sales Break Down Orders Value (Rs) Packing Cost Delivery Cost Add Cost Daily Basis 1% of Sales 25 / Order Dine In (60%) 180 500,760 - - Take Away (20%) 60 166,920 1,669 - 1,669 Delivery (20%) 60 166,920 1,669 1,500 3,169 Total 300 834,600 3,338 1,500 4,838 PREF-11/December, 2006/