3. Pre-Feasibility Study
Catering & Decoration Service.
1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general
idea and information on the said matter. Although, the material included in this
document is based on data/information gathered from various reliable sources;
however, it is based upon certain assumptions which may differ from case to case. The
information has been provided on as is where is basis without any warranties or
assertions as to the correctness or soundness thereof. Although, due care and diligence
has been taken to compile this document, the contained information may vary due to
any change in any of the concerned factors, and the actual results may differ
substantially from the presented information. SMEDA, its employees or agents do not
assume any liability for any financial or other loss resulting from this memorandum in
consequence of undertaking this activity. The contained information does not preclude
any further professional advice. The prospective user of this memorandum is
encouraged to carry out additional diligence and gather any information which is
necessary for making an informed decision, including taking professional advice from a
qualified consultant/technical expert before taking any decision to act upon the
information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
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4. Pre-Feasibility Study
Catering & Decoration Service.
2. PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the
document/study covers various aspects of project concept development, start-up, and
production, marketing, finance and business management.
The purpose of this document is to facilitate potential investors in Catering and
Decorating Services by providing them with a general understanding of the business
with the intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error, and certain industrial norms that become a guiding source regarding
various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which form basis of any Investment Decision.
3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs" , SMEDA has carried out ‘sectoral research’ to identify
policy, access to finance, business development services, strategic initiatives and
institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment has
been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types in addition to business guidance through help desk services.
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5. Pre-Feasibility Study
Catering & Decoration Service.
4. INTRODUCTION TO SCHEME
Prime Minister’s ‘Small Business Loans Scheme’, for young entrepreneurs, with an
allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide
subsidised financing at 8% mark-up per annum for one hundred thousand (100,000)
beneficiaries, through designated financial institutions, initially through National Bank of
Pakistan (NBP) and First Women Bank Ltd. (FWBL).
Small business loans with tenure upto 7 years, and a debt : equity of 90 : 10 will be
disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber
Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally
Administered Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
Catering and Decoration Services Business is proposed to be located in a medium
income area in cities like Karachi, Lahore, Rawalpindi, Hyderabad, Faisalabad, Multan
etc.
Product(s) include Catering of Food & Services to events such as Weddings, Mehndi
& Mayun, Corporate Events etc and Decoration of Event Site (this service is to be
outsourced).
Capacity: Maximum 150 events per year and initial utilization upto 67 %
Total Cost Estimates is Rs.2,104,000 with fixed investment of Rs. 1,369,000 and
working capital of Rs. 735,000.
Given the cost assumptions IRR and payback are 39 % and 3 years respectively
The most critical considerations or factors for success of the project are:
1. Procurement of Raw material
2. Location- proximity to marriage halls, business hubs etc
3. Quality Food
6. BRIEF DESCRIPTION OF PROJECT
Location: The recommended area for the proposed catering and decorating
service business is the medium income locality in cities like Karachi, Lahore,
Rawalpindi, Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc. This
business can also be undertaken in all small 2nd tier towns in addition to
suburban towns of large cities.
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6. Pre-Feasibility Study
Catering & Decoration Service.
Product:
The proposed project will offer high quality food & catering services
to events such as weddings, anniversaries and corporate events etc.
Target Market:
Target customer for catering business would be event
management companies, corporate and individual clients, marriage hall & lawns
etc.
Employment Generation: The proposed project will provide direct employment
to 08 people. Financial analysis shows the business shall be profitable from the
very first year of operation
7. CRITICAL FACTORS
Procurement of Raw material
Location- proximity to marriage halls, business hubs etc
Quality Food
In depth Management
Professionalism and Courteous Customer Service
Skilled Staff / Cooks
Planning & Organizing
Time Management
Contract with Suppliers for Decoration
8. INSTALLED AND OPERATIONAL CAPACITIES
For the proposed project, it is assumed that on an average 100 events will be catered
during a year with an average of 400 guests per event. The proposed business can also
serve up to 1000 or more guests per event. Marquee and other decorative arrangement
for big events can be outsourced to multiple Decorators.
Events
Weddings
Mehndi & Mayun
Anniversaries
Corporate
Others
Total
No. of Events in a Year
30
30
10
07
23
100
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September 2013
%
30
30
10
07
23
100
7. Pre-Feasibility Study
Catering & Decoration Service.
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The Pakistani economy is becoming increasingly service-oriented and over the past
several decades the food service industry is growing substantially. There has been a
mushroom growth of marriage halls, event management complexes in the past decade
across all major cities and towns therefore there is a potential for proposed catering and
decorative service business to be established in cities like Karachi, Lahore, Rawalpindi,
Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc.
10.
POTENTIAL TARGET MARKETS
The recommended areas for the proposed business will be cities like Karachi, Lahore,
Rawalpindi, Hyderabad, Faisalabad, Multan etc. This business can also be done in all
small 2nd tier towns in addition to suburban towns of large cities. Target customers for
the said business would be Corporate and Individual clients, Event Management
Companies, Marriage Halls & Lawns etc.
11.
PROCESS FLOW
For a regular event, following process is to be followed:
12.
Hiring and scheduling of staff
Ordering and serving arrangements for menu items
Ordering equipment as needed from event rental companies
Obtaining licenses and permits, if needed, for use of the site etc.
Coordinating all accessory services with the client and the vendors
PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability of
Catering & Decoration Service Business under the Prime Minister’s Small Business
Loan Scheme. Various cost and revenue related assumptions along with results of the
analysis are outlined in this section.
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8. Pre-Feasibility Study
Catering & Decoration Service.
The projected Income Statement, Cash Flow Statement and Balance Sheet are
attached as appendix
12.1 Project Economics
All the figures in this financial model have been calculated for catering of 100 events in
a year, whereas decoration service for such events will be outsourced in order to control
the capital expenditure at initial stage. Revenue generated through such events are
based on given assumptions are calculated to be Rs. 19.2 million.
The following table shows Internal Rate of Return, Net Present Value and Payback
Period.
Table 1 - Project Economics
Description
Internal Rate of Return (IRR)
Payback Period (yrs)
Net Present Value (NPV)
Details
39%
3.0
3,843,234
Returns on the scheme and its profitability are highly dependent on regular occurrence
of such events, good marketing practices, quality of services and more importantly good
quality and taste of food served.
12.2 Project Financing
Following table provides details of the equity required and variables related to bank
loan;
Description
Total Equity (10%)
Bank Loan (90%.)
Markup to the Borrower (%age/annum)
Tenure of the Loan (Years)
Details
Rs.210,400
Rs.1,893,600
8%
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12.3 Project Cost
Following requirements have been identified for operations of the proposed business.
Table 1: Capital Investment for the Project
Capital Investment
Construction & Renovation
Amount (Rs.)
105,000
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9. Pre-Feasibility Study
Catering & Decoration Service.
Machinery & Equipment
Office Equipment & Furniture
Advance Rent
Vehicles
Preliminary Expenses
Total Capital Costs
Initial Working Capital
Total Project Cost
165,000
174,000
150,000
675,000
100,000
1,369,000
735,000
2,104,000
12.4 Space Requirement
Space required for Catering & Decoration Service Business is 750 Sq. Ft. Management
Office will require 150 Sq. Ft. and 600 Sq. Ft. will be used for storage and cooking. It is
also assumed that preparation of Bar-B-Que items will be prepared on site as and when
required.
Table 2: Space Requirement
Area Required
For Office & Storage
Total Rent
No.
Monthly Rent
Charges (Rs.)
750
25,000
25,000
Yearly
Rent(Rs.)
300,000
300,000
12.5 Machinery and Equipment
Following table provides list of machinery and equipment required for Catering Services.
Table 3: List of Machinery and Equipment
Cost
Rs/unit
40,000
20,000
15,000
60,000
30,000
Description
Burners / fittings / Others
Daigs / Kadhai / Others
Storage Racks
Deep Freezers
Other Kitchen Utensils
Total
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Total
Rs.
40,000
20,000
15,000
60,000
30,000
165,000
10. Pre-Feasibility Study
Catering & Decoration Service.
Table 4: Office Equipment & Furniture Costs
Quantity
Computer & UPS
Printer
Tables
Chairs
Sofa Set
Split AC
Others
Total
Cost
1
1
2
6
1
1
1
Amount
50,000
15,000
8,000
3,000
20,000
45,000
10,000
50,000
15,000
16,000
18,000
20,000
45,000
10,000
174,000
12.6 Human Resource Requirement
Table 5: Human Resource Requirement
Description
Owner
Head Cook
Cooks / Karigars
Helpers
Driver
Total Staff
Nos.
1
1
2
4
1
9
Salary per month
25,000
20,000
15,000
10,000
10,000
Total
25,000
20,000
30,000
40,000
10,000
125,000
The table above provides details of human resource required to run a Catering and
Decoration Services Business. Salaries of all employees are estimated to increase at
10% annually.
12.7 Revenue Generation
The revenues are based on assumption that 100 events/year with an average of 400
guests will be organized. The Standard Menu will be of two items only.
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11. Pre-Feasibility Study
Catering & Decoration Service.
Events
Nos.
Banquet Arrangement (Per Head)
Shamiana / Kanats (Per Head)
Marquee Set up (Per Head)
Stage
Water (Per Head)
Food – Standard Menu (Per Head)
Total Sales Revenue
Total Sales Revenue in a Year
400
400
400
1
16
400
Sales
Price (Rs.)
90
15
90
20,000
250
225
Revenue (Rs.)
36,000
6,000
36,000
20,000
4,000
90,000
192,000
19,200,000
12.8 Other Costs
An essential cost to be borne by the business is the promotional expense to attract
more clients. Average monthly expenditure in this head is assumed to be Rs. 20,000.
13.
CONTACTS - SUPPLIERS
KITCHEN 'N' RESTAURANT SYSTEMS
102-A, Allama Iqbal Road Butt Lane, Garhi Shahu, Lahore, Punjab, Pakistan
Phone: 9242-36366590 / 36305989
Fax: 9242-36305989
KITCHEN CARE
# 103, Golden Plaza F-7, Blue Area, Islamabad, Capital, Pakistan
Phone: 9251-32875226
Fax: 9251-32277176
PRESTIGE KITCHENS
Kehkashan Shopping Arcade Block-7, Clifton, Karachi 75600, Sindh, Pakistan
Phone: 9221-35862978 / 35862839
Fax: 9221-5871814
KITCHEN EQUIPMENTS
Syed Qaiser Imam
554 Buffer Zone, Karachi
Phone: 03333045358
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15. 14.4
Useful Project Management Tips
Technology
List of Equipment
Burners / fittings / Others
Daigs / Kadhai / Others
Storage Racks
Deep Freezers
Other Kitchen Utensils
Energy Requirement: Should not be overestimated or installed in excess and
alternate source of energy for critical operations be arranged in advance
Equipment Suppliers: Should be asked for training/orientation and after sales
services under the contract with the suppliers
Quality Assurance Equipment & Standards:
Products/service
quality
standards need to be defined and a monitoring system for compliance to be
instituted. This improves credibility.
Marketing
Product Development & Packaging:
Expert's help may be engaged for
product/service and packaging design & development
Ads & P.O.S. Promotion:
Business promotion and dissemination through
banners and launch events is highly recommended. Brochures from good quality
Decoration Service Providers need to be obtained and kept for further use.
Sales & Distribution Network: Expert's advise and distribution agreements are
required.
Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never
be allowed to compromise quality. Price during introductory phase may be lower and
used as a promotional tool. Product cost estimates should be carefully documented
before price setting. Government controlled prices shall be displayed.
Human Resources
Owner
Head Cook
Cooks / Karigars
Helpers
Driver
16. Pre-Feasibility Study
Catering & Decoration Service.
Adequacy & Competencies:
Skilled and experienced staff should be
considered an investment even to the extent of offering share in business profit.
Performance Based Remuneration:
Attempt to manage human resource
cost should be focused through performance measurement and performance based
compensation.
Training & Skill Development:
Encouraging training and skill of self &
employees through experts and exposure of best practices is route to success.
Least cost options for Training and Skill Development (T&SD) may be linked with
compensation benefits and awards.
14.5
Useful Links
Prime Minister’s Office
www.pmo.gov.pk
Small & Medium Enterprises Development Authority (SMEDA)
www.smeda.org.pk
National Bank of Pakistan (SBP)
www.nbp.com.pk
First Women Bank Limited (FWBL)
www.fwbl.com.pk
Government of Pakistan
www.pakistan.gov.pk
Ministry of Industries & Production
www.moip.gov.pk
Ministry of Education, Training & Standards in Higher Education
http://moptt.gov.pk
Government of Punjab
www.punjab.gov.pk
Government of Sindh
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17. Pre-Feasibility Study
Catering & Decoration Service.
www.sindh.gov.pk
Government of Khyber Pakhtoonkhwa
www.khyberpakhtunkhwa.gov.pk
Government of Balochistan
www.balochistan.gov.pk
Government of Gilgit Baltistan
www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir
www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP)
www.tdap.gov.pk
Security Commission of Pakistan (SECP)
www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
www.fpcci.com.pk
State Bank of Pakistan (SBP)
www.sbp.org.pk
Pakistan Institute of Fashion Design(PIFD)
www.pifd.edu.pk
Pakistan Fashion Design Council (PFDC)
www.pfdc.org
15. KEY ASSUMPTIONS
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18. Pre-Feasibility Study
Catering & Decoration Service.
Description
Debt Equity Ratio
Interest Rate
Loan Tenure
Sales Price Growth Rate
Depreciation Rate
Weighted Average Cost of Capital
Prepaid Rent Period
Increase in Staff Salaries
Increase in Office expense
90:10
8%
7 Years
10%
10%
9.2%
6 Months
10%
10%
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