Falafel Effect Business Plan The new falafel organic fast food & restaurant start-up. Mr. Dan Studinski

2012

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The undersigned reader acknowledges that the information provided by Dan Studinski in this business plan is confidential; therefore, the reader agrees not to disclose it without the express written permission of Dan Studinski.

It is acknowledged by the reader that information to be furnished in this business plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by the reader may cause serious harm or damage to Dan Studinski.

Upon request, this document is to be immediately returned to Dan Studinski.

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This is a business plan. It does not imply an offering of securities.

Table of Contents

Page 1

Table of Contents 1.0 Executive Summary ................................................................................................................................... 1

1.1 Objective .............................................................................................................................................. 1 1.2 Mission .............................................................................................................................................. 1 1.3 Keys to Success ................................................................................................................................. 1 1.4 Products and Services ............................................................................................................................ 2 1.5 Facilities and Equipment ....................................................................................................................... 2 1.6 Food Safety ........................................................................................................................................... 3 1.7 Organisation ............................................................................................................................................ 3 1.8 Sales ................................................................................................... Error! Bookmark not defined.

2.0 Company Summary .................................................................................................................................... 4 2.1 Company Ownership .............................................................................................................................. 4

3.0 Products ....................................................................................................................................................... 6 4.0 Market Analysis Summary ........................................................................................................................ 7

4.1 Geographical Area and Demography of Target Customers ............................................................... 7 4.2 Assumptions ........................................................................................................................................... 7 4.3 Marketing Process .................................................................................................................................. 8

4.3.1 Market Segmentation ..................................................................................................................... 8 4.3.2 Target Market Segment Strategy ................................................................................................... 9

4.4 Industry Analysis .................................................................................................................................. 10 5.0 Strategy and Implementation Summary .................................................................................................. 10

5.1 Strategic Assumption: .......................................................................................................................... 10 5.2 SWOT Analysis .................................................................................................................................... 11

5.1.1 Strengths ........................................................................................................................................ 11 5.1.2 Weaknesses ................................................................................................................................... 12 5.1.3 Opportunities ................................................................................................................................. 12 5.1.4 Threats ........................................................................................................................................... 12

5.2 Competitive Analysis ........................................................................................................................... 12 5.2.1 Analytical Factors ......................................................................................................................... 12 5.3 Competitive Edge ............................................................................................................................. 13

5.3.1 Competition and Buying Patterns......................................................................................................... 14 5.4 Marketing Strategy ............................................................................................................................... 15 5.5 Sales Strategy ....................................................................................................................................... 15

5.4.1 Sales Forecast ................................................................................................................................ 16 5.5 Milestones ............................................................................................................................................. 18 5.6 Strategic Planning and Management ................................................................................................... 19

6.0 Management Summary ............................................................................................................................ 20 6.1 Personnel Plan ...................................................................................................................................... 20 6.2 Development Plans ............................................................................................................................... 20

6.2.1 Schedule for goals ......................................................................................................................... 21 6.3 Risk Analysis ........................................................................................................................................ 21

6.3.1 Evaluation Methods ...................................................................................................................... 21 7.0 Financial Plan ........................................................................................................................................... 22

7.1 Start-up Funding ................................................................................................................................... 22 7.2 Important Assumptions ........................................................................................................................ 23 7.3 Break-Even Analysis ............................................................................................................................ 23

Table of Contents

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Table 7.2: Break-Even Analysis ............................................................................................................ 23 Chart 7.1: Break-Even Analysis ............................................................................................................ 23

7.4 Projected Profit and Loss ..................................................................................................................... 24 Table 7.3: Profit and Loss ...................................................................................................................... 24 Chart 7.2: Profit Monthly ....................................................................................................................... 25 Chart 7.3: Profit Yearly .......................................................................................................................... 25 Chart 7.4: Gross Margin Monthly ......................................................................................................... 26 Chart 7.5: Gross Margin Yearly ............................................................................................................ 26

7.5 Projected Cash Flow ............................................................................................................................ 27 Table 7.4: Cash Flow ............................................................................................................................. 27 Chart 7.5: Cash Flow.............................................................................................................................. 28

7.6 Projected Balance Sheet ....................................................................................................................... 28 Table 7.6: Balance Sheet........................................................................................................................ 28 7.7 Business Plan Ratios. ....................................................................................................................... 29

8.0 Exit Strategy ............................................................................................................................................. 30 8.1 The Exit Process ................................................................................................................................... 30

Table 1: Sales Forecast ..................................................................................................................................... 1 Table 2: Personnel ............................................................................................................................................ 2 Table 3: Profit and Loss ................................................................................................................................... 3 Table 4: Cash Flow ........................................................................................................................................... 1 Table 6: Balance Sheet ..................................................................................................................................... 1

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EXECUTIVE SUMMARY

1.0 Executive Summary

Falafel Effect will specialise in quality organic falafel made using Dan Studinski's traditional family recipes from Israel. Falafel Effect would meet the needs of people on the go who still want healthy products at reasonable prices. Our Falafel will be freshly made every day and sold hot directly to the customers at our store. Our product is healthier, low in fat and free from genetically modified ingredients.

It will be complemented by an assortment of premium salads with pitta bread, potato wedges, chips, desserts and cold beverages.

1.1 Objective To capture a large proposition of the restaurant and takeaway business in Bethnal Green, London. To offer customers a superior product, at a competitive price, and provide customer service that is second to none.

1.2 Mission Customer satisfaction and education are paramount. We will endeavour to meet the high standards of excellence through superb customer services and consistent product delivery in a friendly and comforting environment.

We seek fair and responsible profit; enough to keep the company financially healthy and ensure continued growth and development. Responsible profit will fairly compensate everyone invested for their risk and hard work, loyalty and commitment.

1.3 Keys to Success We have identified four main keys to our success:

The first is the industry experience and knowledge of Dan Studinski, owner operating manager. The second will be our unique value for money product and a healthier option. The third is a focus on superior customer services and education about the products, and the fourth key will be the retention of our customers.

Ways to achieve success for Falafel Effect is by having:

A superior product that will promote customer loyalty.

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A business location & marketing strategies that will ensure that the business will gain a large share market of customers in area.

Great customer service skills that will win the customers every time.

The market demand has never been greater for food that is healthy, economical, and great tasting. The basic focus is to provide the consumer with a healthy, quality meal which is economically priced. This is a concept that will never grow old.

By buying our ingredients directly from a private organic supplier, we would try to avoid high labour cost, expensive investment in manufacturing and production equipment, and additional warehousing and production facility cost. Our major costs will be limited to product purchasing shipping and cold storage.

1.4 Products and Services The service will be exceptional because the main goal of the business will be customer satisfaction. The focus in all forms of marketing would emphasise the healthier options instead of the high-calorie poor quality items by competitors. Our sales be focused on the passion of the owner operating manager Dan Studinski for this new product and understands the continuity on assessing all aspects of evaluating food choices and keeping favourites on the menu as they rote weekly and seasonal. We believe that "the customer

is always right” and we will structure our business to provide the best service possible in a

friendly, helpful atmosphere. There are many competing, well-established fast food outlets in the area, however, none of them are currently providing a similar product.

1.5 Facilities and Equipment

The layout, design, construction, site and size of the premises would comply with all of the Food Safety Agency (FSA) regulations1, some of which include:

- Allowing adequate maintenance, cleaning and disinfection of facility and equipment. - Avoiding or minimising air-borne contamination. - Providing enough working space to carry out all tasks hygienically.

The equipment necessary for the operation of Falafel Effect will be purchased from any of the several restaurant supply companies located in the area.

1 Source: http://www.food.gov.uk/multimedia/pdfs/hygienebusinessguide.pdf

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1.6 Food Safety The four Cs of good food hygiene would be strictly adhered to. These include: Cross-contamination, Cleaning, Chilling, and Cooking.

1.7 Organisation The facility will be divided into two functional areas; Operations and Administration. Both divisions will be headed by Dan Studinski.

1.8 Sales

We anticipate our gross profit to be £71,108 for the first year, £94,092 for the second year and

£91,659 for the third year. The reduced profitability projections in the third year is due the forecast of 10% change that we have taken into consideration according to the industry standards.

Chart 1.8.1: Highlights of Sales

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2.0 Company Summary

Falafel Effect is a new start-up restaurant and take-away business soon to be opened in the Bethnal Green area of London England. Dan Studinski, owner of Falafel Effect, has several years of experience in the restaurant business industry. His focus is to satisfy the customers' demand for quality falafel with organic ingredient, served with a smile. Falafel Effect will serve up to 10 miles

radius area with over 500,000 residents, offices, schools, local stores and much more. Overheads will be kept low so that Falafel Effect's prices will beat the competition.

2.1 Company Ownership Falafel Effect is an idea initiated by Dan Studinski to offer customers a good quality organic falafel in the Bethnal Green area. Dan has worked tirelessly in getting his idea to reach its implementation stage. Dan will be the operating owner of the business, however, he has sought investment from Adam Gottesman, a silent partner with an initial shared ownership of 40%.

Falafel Effect will require an initial financial commitment of £22,000. This cost includes set-up costs, licencing and wages. All membership shares will be initially portioned into a 60% to 40% split between Dan Studinski and Adam Gottesman, Dan's co-investor and partner. The initial

percentage share will change when Adam Gottesman’s shares have reached his initial investment in

the business of £22000, this will then change to Dan having 75% shares and Adam having 25% shares for five years. After the five-year period, the business will be 100% owned by Dan Studinski. Falafel Effect aims to become a limited company before starting to trade.

2.2 Start-up Summary

The start-up cost of Falafel Effect will consist primarily of kitchen equipment, and other features and fittings like furniture and decoration for the store. Dan Studinski has an agreement with Adam

Gottesman, his silent investor, to invest £22,000 in the business. Of which in return, the investor will receive 40% share of profit until his initial investment has been paid off, then his interest in the company will reduce to 0% after five years.

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Table 2.2.1: Start-up

Start-up Requirements Start-up Expenses Shop Fixtures & Fittings £3,150 Stationery etc. £150 Insurance £300 Rent £8,400 Business Signs/Display £300 License £500 Company Formation £83 Business Plan £778 Ganeral Business Expense £1,500 Miscellaneous £3,000 Total Start-up Expenses £18,161

Start-up Assets Cash Required £3,039 Start-up Inventory £800 Other Current Assets £0 Long-term Assets £0 Total Assets £3,839

Total Requirements £22,000

Chart 2.2.2: Start-up

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3.0 Products

Falafel Effect will specialise in quality falafel platters with its entire ingredients being organic. The premium taste, presentation and quality of the falafel will not only be unique in Bethnal Green and the London area, but in the entire country.

Falafel Effect is low in fat, free of genetically modified ingredients and made with premium ingredients. After preparation, the foods are kept under steady temperature to ensure freshness, food safety standards and high customer satisfaction.

Our falafel experience will be complemented by an assortment of premium salads and potato wedges as well as cold beverages.

What is Falafel?

Falafel is one of the most widely consumed and recognised foods of the Middle East. Fried balls or patties of chickpeas with spices make falafel both tasty and easy to prepare.

Falafel is found all over the Middle East; however it is more common in countries like Israel, Egypt and Syria. It is regarded as a "fast food" and sold like hot dogs by street vendors. Falafel is also the national dish of Israel.

Other pronunciations of falafel include: felafel, falafeel, falafil, and falefel.

Falafel Ingredients:

• 1 cup dried chickpeas or 16 oz. can of chickpeas or garbanzo beans. • 1 large onion, chopped • 2 cloves of garlic, chopped • 3 tablespoons of fresh parsley, chopped • 1 teaspoon coriander • 1 teaspoon cumin • 2 tablespoons flour • Salt • Pepper

Typical Ingredients for Falafel Effect Platter:

•Pitta Bread •Homemade humus •Falafel •Tattini •Parsley •Fresh Vegetable

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•Burgul Tabule •Grilled Aubergine •Salad •Homemade Pickled Cucumbers •Garlic •Lemon •Chilli Sauce

4.0 Market Analysis Summary

Bethnal Green is a growing middle class area with over 26,000 residents and 5000 small businesses. A majority of Bethnal Green residents are families of four or more. The average income for the area is £25,000. The boom in the area is the primary response to new employment opportunities, cheap property rentals and the easy access to the city of London via underground (central line). Similar traditional businesses that do well with this population have demonstrated a good potential for Falafel Effect.

With continued growth in the area, opportunities to serve the Bethnal Green area will increase. The business will sell predominately to individuals, but also accept some catering jobs to individual parties and company functions in the London area.

4.1 Geographical Area and Demography of Target Customers The proposed location for the business is 226, Bethnal Green Road, London E2 0AA. This is located in East London and is very close to the Bethnal Green Centre where events are frequently held.

Our largest market are children and young adults between 15-24 years old, which account for about

40% of Bethnal Green’s population (according to the 2001 census2) and business people within the area. The other focus of the business are families with children, employees of surrounding businesses and other customers acquired personally through in-store or outdoor publicity.

4.2 Assumptions The strategic goals and plans for Falafel Effect are based on the following assumptions: The national and local trends toward consumption of healthy food will continue. All indications from other businesses and national food organisations agree with the notion that healthy food which is reasonably priced will continue its popularity well into the next century.

2 Source: http://ukpollingreport.co.uk/guide/seat-profiles/bethnalgreenandbow/

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4.3 Marketing Process Falafel Effect will market the food and service of its restaurant using a custom designed campaign. These advertising campaigns will include local newspaper, radio, and direct mail marketing. The business would also market its services through leaflets and e-blast emails to local businesses.

4.3.1 Market Segmentation Falafel Effect intends to market to a wide customer base with time; however, we have defined the following groups as target segments that contribute to our growth projections:

•15-24 year olds •Young adults and business people •Families with children

The largest target market is the young adults and business people group. The other two with similar target market are 15-24 year olds and families with children.

Table 4.3.2: Market Analysis

Market Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Potential Customers Growth CAGR 15-24 Year Olds 2% 7,005 7,145 7,288 7,434 7,583 2.00% Young Adults & Business People

3% 9,340 9,620 9,909 10,206 10,512 3.00%

Families with Children 3% 7,005 7,215 7,431 7,654 7,884 3.00% Total 2.70% 23,350 23,980 24,628 25,294 25,979 2.70%

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Chart 4.3.3: Market Analysis (Pie)

4.3.4 Target Market Segment Strategy 15-24 year olds:

These go out for fast food more than any other age group. They have disposable income which they tend to spend on immediate gratification items, especially food products that they perceive to be unique, cosmopolitan or have an individuality value. Because these individuals are the most open to trying new foods, they are vitally important in building an effective word of mouth marketing strategy.

Young adults and business people:

They have the potential of providing large volume sales to the company during the peak hours of 11am to 2 pm. The lunch business is mainly driven by individuals because many people go out to lunch to get out of the office setting or have business meetings at lunch either in or out of the office. The business would accommodate surrounding businesses placing phone orders in for business meetings and catering. Service to this group will provide a vital long-term revenue stream.

Families with children:

These are a growing population - numerically and with their choice for convenient foods. Parents of two-income families usually have less time to prepare meals so they are an easy group to market Falafel Effect to. This is because their lifestyle is very specific. The business will aggressively target single working mothers who tend to turn to fast and convenient food choices to accommodate

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family demands. By targeting this group, the business would not only generate a large volume of immediate business, but also create long-term customers in their children.

4.4 Industry Analysis The UK has around 3 million fast food outlets, that is, one for every 50,000 people. Consumption of fast food from home accounted for 47% of total food expenditure in the 2010, up from 45% in 1990 and 26% in 1960. It is estimated that by 2020, the total sales in the fast food industry will exceed

£385 billion. At that time, consumers will spend 53% of every pound on meals, snacks and beverages away from home.

It is expected that the strong demand for fast food and take away prepared and packaged food for busy customers to eat at home should continue to grow solidly over the next few years despite the economy - especially with the syndicate decline in the cost difference between dinning out and cooking at home. Food on the run has now become the food of choice for everyone from executives to blue collar workers.

Increased income in the area, especially when coupled with exposure to new and different foods, will stimulate the quest for increased verity in their diets. It is suggested that most successful food companies in 2020 are likely to be those that tap most effectively into the UK appreciation for diversity in their lives, especially the insatiable desire for a new different food choice.

5.0 Strategy and Implementation Summary

Falafel Effect will penetrate the commuter and captivate the consumer markets in the area because the store is located in a highly visible and accessible location. With the proliferation of kebab and chicken shops in the area, customers expect product consistency. Although our unique healthier products will initially captivate a curious market and compete on a consistency level, it will be our fast and cheerful customer service that will differentiate us from competitors and keep our customers returning as savory samples will also be offered to first time visitors.

This market desires exciting, new tasting products with familiar ingredients for lunch, while commuting to or from work or school.

5.1 Strategic Assumption: •Every resident or business in the Bethnal Green Road area is a potential customer. •We will increase customer awareness of this business and its products. •Marketing to our target segments will expose us to additional new customers.

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5.2 SWOT Analysis The SWOT analysis provides us with an opportunity to examine the internal strengths and weaknesses that Falafel Effect must address. It also allows us to examine the opportunities presented to Falafel Effect as well as potential threats.

Falafel Effect has a valuable inventory of strengths that will help it succeed. These strengths include:

Knowledgeable and friendly staff

Location of the Business

Healthier food

Clear vision of the market need.

Strengths are valuable, but it is also important to realise the weaknesses that Falafel Effect must address.

The weakness is that of the owner manager being the only initial operator of the business.

Falafel Effect strengths will help it capitalise on emerging opportunities. These opportunities will be, but are not limited to a daily growing population in the area.

Threats that Falafel Effect should be aware of includes the emergence of local competitors in the area.

5.2.1 Strengths

-Knowledgeable and friendly staff - Dan Studinski has a strong passion about the product and

wants to share his food experiences with his customers. Dan is both knowledgeable in the business and eager to please his customers.

-Location of the Business: The store will be located at Bethnal Green road, which is a very busy road. The area is also a very barbate, cosmopolitan and heavily travelled traditional retail area.

-Healthier food: Providing a healthier food option for the people in the area.

-Clear vision of the market need: Dan Studinski knows what it takes to build an upscale

falafel restaurant. He knows the customers, he knows the area, and he knows how to build the service that will bring the two together.

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5.2.2 Weaknesses

The only weakness that the business might have is the work load of the owner manager. Dan Studinski has decided that due to lack of funds, he will be responsible for manning the business in all aspects, until the business begins to show profit. With that in mind, the concern will be inconsistency and availability. What if Dan is not well or needs a day off?

5.2.3 Opportunities

Growing population in the area: Bethnal Green Road is a new vibrant town in London and it

continues to grow in population due to cheap housing and easy access to the City of London. This of course means that the council is investing in development projects in the area in terms of

new residential developments and schools. As the population in the area increases, so will the

need for Falafel Effect, their choice fast food shop.

5.2.4 Threats

Emerging local competitors: Falafel Effect will enjoy a first-mover advantage in the local organic healthier food option in area. However, it is inevitable as the population in the area

grows additional competitors will be on the horizon, and we need to be prepared for their entry

into the market. Many of our products and services will be designed to build customer loyalty, and it is our hope that our quality service and up-scale ambiance will not be easily duplicated.

5.3 Competitive Analysis Falafel Effect will have no direct competition in the Bethnal Green market. Within 2 miles of Bethnal Green Centre, there are a total of 19 businesses and within 5 miles, about 528 businesses that are listed3 in the broad category of fast food and take away. Of these, about 40% feature some form of pitta bread, salad and meat sandwich menu items. None of the local restaurants specialise in quality falafel at affordable prices in a fast food setting.

5.3.1 Analytical Factors Name recognition: As a fast food outlet, Falafel Effect does not have the name recognition of other fast food chains.

3 Fast food and take away - http://www.yelp.co.uk

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Healthy food: The current fast food market does not provide much healthy fast food. Falafel Effect fills that void by allowing customers to obtain fast food which is healthy for them and their children. New food concept: It is a Middle Eastern food in general, and more specifically, falafel is a new concept in fast food in the UK. Rental costs: Prime rental locations are extremely costly, but we have secured a prime location in a cheap but developing area. Price: Falafel Effect offers Israeli food at lower prices than typical sit-down restaurants. Service: Falafel Effect will operate with the motto "the customer is always right." In today's busy world, the customer service aspect of the restaurant business is often overlooked. Untapped market: Falafel Effect will offer an alternative not currently available in the Bethnal Green area.

5.4 Competitive Edge

Falafel Effect’s unique healthier products and focus on the customers experience will give it a significant market edge and differentiate the company from its competitors.

The business will have several distinct advantages over its leading competitors; its authentic organic healthier products, modern presentation of the food and the quality of the own manager's customer services skills.

A fast and unique food alternative: We offer our customers a completely new experience through our falafel options which includes the salad and the pitta bread, potato wedges and of course, our dessert options. The feel and taste of our products when compared to competition will initially establish a sense of curiosity, followed by value for money, hence, reputation and eventually, a loyal following of falafel lovers and connoisseurs.

Our organic products are made from the finest quality ingredients, low fat and free of genetically modified foods.

Our products will be served fast and ready for the consumer and will be an alternative to the usual fast food option available in the market.

The importance of the experience: With so many fast food restaurants and prepared foods being offered at grocery markets, the customer experience becomes extremely important as an effective

way of distinguishing offerings. It is this experience that remains in the customers’ mind well after they have consumed their food. This memory is what is communicated to their friends and colleagues.

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We realise that our business is a lot more than just falafel, it’s our falafel, and that matters to our people and the experience the customers have in our store. The store's environment will play a major role in the positive customer experience. The cleanliness, smoke-free environment, colour scheme and nostalgic urban images will create a completely new experience.

5.4.1 Competition and Buying Patterns

Within the restaurant and fast food industry there are several different segments:

1. Fast food: McDonald’s, Burger King, KFC, Local Fish & Chip & Local Kebab 2. Pizza: delivery, takeaway or dining 3. Buffet: all you can eat for a fixed price 4. Lounges: combining food & alcohol 5. Fine Dining: typically restaurants at the highest price possible 6. Fast-casual: combination of fast service and sit-down dining

The Bethnal Green Road area is saturated with low quality fast food such as cheap Curry or Tandoori restaurants and cheap Chicken and Chip or Kebab shops. Falafel Effect will be an ideal business opportunity in the area as the competition will not match the product in terms of quality and price.

Buying Patterns of Target Market: The most difficult function in predicting customer buying patterns is following the fine line of cooking too much food or not having enough products left to serve customers late in the day. Despite customer unpredictability, buying patterns typically revolve around several different factors: Quality - The menu items must meet higher level of quality for people to be willing to spend money on the food, particularly when there are so many different options available, as is the case. Location - Proximity to home or work is very important; so is convenient parking for the customers at the end of a working day or to divert from traffic to stop to pick up hot food-to-go.

Convenience - People tend to eat out because it’s quicker than preparing a meal themselves. Uniqueness - As consumers seek variety and new experience, the challenge is to stand out for competitors, not only as an alternative fast food option, but as on the offers consistently high-quality food and a distinctive atmosphere

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5.5 Marketing Strategy The focus of our marketing strategy will be to attract new customers, educate those customers and create a loyal base. Our goal is to be known as a unique organic food experience with superior customer service.

The following marketing strategies will be employed in the first year of business:

Signage: Highly visible, eye catching and recognisable signs and logos will be placed at the front of the store.

Print media advertising: Weekly and monthly food and dining out guides will be used for print advertising.

Flyers: Distribution to local businesses to create customer awareness, accompanied with ‘two

for the price of one’ coupons during our grand opening.

Word of mouth: Unsurpassed customer service and our unique products will help develop strong word of mouth advertising and in turn help extend the business brand.

Alliances: Although the business is primarily in the fast food industry, its unique product and cultural origins could be used to start a delivery and distribution of wholesale option for some restaurants that might want to include our product in their menu.

5.6 Sales Strategy Falafel Effect intends to succeed by giving customers a combination of delicious food in an appealing environment with an outstanding customer service. Once a customer enters the store, it is our job to make sure their experience with Falafel Effect is enjoyable; to establish a loyal customer base, it is important that we develop repeat business.

Our falafels will be cooked throughout the day, ensuring that they can be served with confidence while guaranteeing our customers supreme freshness and taste. We will also offer some samples of our falafel free of charge to those who enter the store for the first time.

We will offer meal deals and weekly menu specials whilst keeping accurate track of what type of falafel and associated foods sell well through a customer feedback programme. With this information, we will be able to streamline our food to match local tastes and encourage more people to eat at the store.

We need to sell the business as well as the product. The business owner manager Dan Studinski will go through a comprehensive training process on how to offer customers the finest experience. Dan will be empowered to resolve issues as and when they arise.

Part of our mission is to educate our customers about falafels. However, this must be done in a respectful fashion. Our knowledge is a resource, and must never be used to make customers feel uncomfortable or ignorant.

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Our sales strategy requires consistently high quality food and fast services in a relaxed atmosphere. We can accomplish this by:

•Having an owner manager who appreciates the unique products. •Continually assessing the quality of all aspects of the business and immediately addressing any

issues. •Interacting with our customers personally, so they know that their feedback is appreciated and

will be taken on board. •Evaluating food choices and keeping favourites on the menu as we rotate weekly and seasonal

specials.

5.7 Sales Forecast

Our sales forecast shows modest estimates for the first year of operations beginning of April 2012. Cost control is a critical force for Falafel Effect. Because we would be buying our product materials from quality organic suppliers, we will negotiate a flat purchase price for the first three years of the business. We have projected a selling price per unit for our falafel in the first six month to be £3.75. We anticipate that this will help the introduction of our business in the area. The price will increase to £4 at the end of the first six months. We anticipate keeping this price for the next 3 years.

Because this is a start-up business, we have projected that we will sell 1300 platters of falafel, 1000 cold beverages and 600 potato wedges for the first 3 months. This should increase to 1950 platters of falafel, 1200 cold beverages and 650 potato wedges for the next 3 months. We anticipate reaching our projected unit sales of 2600 platters of falafel, 1600 cold beverages and 800 potato wedges in the 6th month of the business.

We anticipate our gross profit to be £71,108 for the first period, £94,092 for the second period

and £91,659 for the third period. The reduced profitability projections in the third period is due the forecast of 10% change that we have taken into consideration according to the industry standards.

We understand that product sales will vary according to the season. Dessert and cold beverages sales in the summer months are expected to be slightly higher.

Table 5.7.1: Sales Forecast

Sales Forecast Year 1 Year 2 Year 3 Unit Sales Falafel Platter 1 5,070 7,176 8,252 Falafel Platter 2 5,070 7,176 8,252 Falafel Platter 3 7,605 10,764 10,764

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Falafel Platter 4 7,605 10,764 10,764 Cold Beverages 16,200 15,600 15,600 Potato Wedges / Chips 8,850 10,200 10,200 Total Unit Sales 50,400 61,680 63,833

Unit Prices Year 1 Year 2 Year 3 Falafel Platter 1 £3.90 £4.00 £4.00 Falafel Platter 2 £3.90 £4.00 £4.00 Falafel Platter 3 £3.90 £4.00 £4.00 Falafel Platter 4 £3.90 £4.00 £4.00 Cold Beverages £0.50 £0.50 £0.50 Potato Wedges / Chips £1.25 £0.39 £0.43

Sales Falafel Platter 1 £19,792.50 £28,704.00 £33,009.60 Falafel Platter 2 £19,792.50 £28,704.00 £33,009.60 Falafel Platter 3 £29,688.75 £43,056.00 £43,056.00 Falafel Platter 4 £29,688.75 £43,056.00 £43,056.00 Cold Beverages £8,100.00 £7,800.00 £7,800.00 Potato Wedges / Chips £11,062.50 £3,978.00 £4,386.00 Total Sales £118,125.00 £155,298.00 £164,317.20

Direct Unit Costs Year 1 Year 2 Year 3 Falafel Platter 1 £1.50 £1.65 £1.82 Falafel Platter 2 £1.50 £1.65 £1.82 Falafel Platter 3 £1.50 £1.65 £1.82 Falafel Platter 4 £1.50 £1.65 £1.82 Cold Beverages £0.20 £0.22 £0.24 Potato Wedges / Chips £0.35 £0.72 £0.79

Direct Cost of Sales Falafel Platter 1 £7,605.00 £11,840.40 £15,019.37 Falafel Platter 2 £7,605.00 £11,840.40 £15,019.37 Falafel Platter 3 £11,407.50 £17,760.60 £19,590.48 Falafel Platter 4 £11,407.50 £17,760.60 £19,590.48 Cold Beverages £3,240.00 £3,432.00 £3,744.00 Potato Wedges / Chips £3,097.50 £7,344.00 £8,058.00 Subtotal Direct Cost of Sales £44,362.50 £69,978.00 £81,021.70

Chart 5.7.2: Monthly Sales

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Chart 5.8: Sales by Year

5.9 Milestones The accompanying table shows specific milestones, with responsibilities assigned, dates, and budgets. The milestones represented in this plan are those which we have determined to be the most important.

Table 5.9.1: Milestones

Milestones Milestone Start Date End Date Budget Manager Status Shop Fixtures & Fittings 01/03/2012 01/04/2012 £3,150 Dan Studinski In Progress Stationery etc. 01/03/2012 01/04/2012 £150 Dan Studinski In Progress Insurance 01/03/2012 01/04/2012 £300 Dan Studinski In Progress Rent 01/03/2012 01/04/2012 £8,400 Dan Studinski In Progress Business Signs/Display 01/03/2012 01/04/2012 £300 Dan Studinski In Progress License 01/03/2012 01/04/2012 £500 Dan Studinski In Progress Company Formation 01/03/2012 01/04/2012 £83 Dan Studinski In Progress Business Plan 01/03/2012 01/04/2012 £778 Dan Studinski In Progress General Expenses 01/03/2012 01/04/2012 £1,500 Dan Studinski In Progress Miscellaneous 01/03/2012 01/04/2012 £3,000 Dan Studinski In Progress Totals £18,161

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Chart 5.9.2: Milestones

5.9.3 Strategic Planning and Management Proposals Reduce staff overheads:

Outsource tasks such as book-keeping. Use a contract packing service for cheaper mail shots and stock dispatch. Choose freelance workers for specific projects, to gain the expertise you need without

recruiting expensive permanent staff. Travel cost-effectively. On essential business trips, economise with advance booking for rail travel and last-minute

booking for hotel rooms. Form a business cluster:

Get together with nearby firms and gain the bulk-ordering advantages that bigger companies enjoy. Your cluster may be able to share facilities or equipment. Could your product carry a promotion for a business partner if they share your production costs?

Rent rather than buy equipment. Renting reduces capital investment and lets you speedily upgrade equipment, while saving on maintenance and repair. Check the energy rating of new electrical devices to make further savings.

Hire out under-used resources. Rent out equipment or vehicles you do not use constantly to other firms. Perhaps you have storage or desk space you need only at certain times and on which you could gain a rental income. Check your lease to make sure sub-letting is permitted.

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Ask for ideas. Challenge employees to find ways of saving a specific sum. Give a bonus or

time off to those who deliver. Ask your accountant’s advice on cost-cutting and on paying the correct rate of VAT for goods and services.

6.0 Management Summary

Falafel Effect is a new business owned and operated by Dan Studinski. Dan is the developer and designer of the products, and manages the business.

The management style reflects the participation of the owner. Dan embraces different discipline with expertise in all areas of the business through his past experience in the industry.

In addition to the day to day operations, Dan will undertake and oversea product development, purchases, positioning, pricing, inventory control, approval for all financial obligations of the business, as well as plan, develop and establish customers services policies and objectives.

6.1 Personnel Plan As the personnel plan in Table 6.1 shows, Dan Studinski, the owner operating manager, is the only employee in the business. However, Dan also has a silent investor, Adam Gottesman, that

will inject £22,000 into the business, in return he will receive 40% of all profits of the business

until the he has accumulated the initial £22,000 invest, then his share profit return will be reduced to 25% for five years.

Table 6.1.1: Personnel

Personnel Plan Year 2 Year 3 Dan Studinski - Owner Operating Manager £19,200 £19,200 Other £0 £0 Total People 1 1

Total Payroll £19,200 £19,200

6.2 Development Plans Goal 1 Opening of Falafel Effect in April 2012. Goal 2

Achieve £71,108 in gross sales in the first year of operation.

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6.2.1 Schedule for goals Schedule for Goal 1 - Opening of Falafel Effect.

Obtaining of funds. Deadline is April 1. Develop a business plan for presentation to bank/investors by March 14, 2012. Complete all preliminary administrative work, such as registering with Companies House

and opening bank account by March 15. Obtain bids for supply of inventory and equipment (including signage) from various local

restaurant supply companies. Select best company and set delivery date by March 20, 2012. Printing of all menus, forms, and promotional items by March 24, 2012. Arrange local advertising for grand opening celebration by March 24, 2012. Remodelling of site location to specification by March 27, 2012. Receive delivery of equipment by March 27, 2012. Grand opening on Monday, April 2, 2012.

Schedule for Goal 2 - Achieve £71, 108 Gross Sales in First Year.

Evaluate monthly sales to provide for increases on a monthly basis, allow for seasonal adjustments and Review entire operation and make recommendations for improving sales. Deadline August 1, 2012.

Review items which are popular and unpopular, make adjustments accordingly in the marketing plan. Deadline February 1, 2013.

Implement new marketing plan by end of February, 2013.

6.3 Risk Analysis The following risks are inherent in the pursuit of the stated goals: • The lack of name recognition in our area will impede sales potential. • Attracting potential franchise owners will be difficult. • Opening of our first store will be dependent on receiving financial assistance through loans.

6.3.1 Evaluation Methods Falafel Effect will evaluate the achievement of its stated goals by measuring financial factors. Falafel Effect will monitor monthly sales volume as compared to monthly operating costs.

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7.0 Financial Plan

7.1 Start-up Funding Total start-up funding amounts are shown in Table 7.1 below. This includes initial start-up expenses, liquid cash for operating expense, unforeseen expenses, to help cover additional

inventory cost. There is an amount budgeted for cash in the bank. The £3,039, for unforeseen cost and to cushion the business for the first six months.

The business' longer term assets will be if fixtures, fitting and kitchen equipment.

It is anticipated that Adam Gottesman will invest £22,000 in cash to the start up by the first week of April 2012.

Table 7.1.1: Start-up Funding

Start-up Funding Start-up Expenses to Fund £18,161 Start-up Assets to Fund £3,839 Total Funding Required £22,000

Assets Non-cash Assets from Start-up £800 Cash Requirements from Start-up £3,039 Additional Cash Raised £0 Cash Balance on Starting Date £3,039 Total Assets £3,839

Liabilities and Capital Liabilities Current Borrowing £0 Long-term Liabilities £0 Accounts Payable (Outstanding Bills) £0 Other Current Liabilities (interest-free) £0 Total Liabilities £0

Capital Planned Investment Owner £0 Investor £0 Additional Investment Requirement £22,000 Total Planned Investment £22,000

Loss at Start-up (Start-up Expenses) (£18,161) Total Capital £3,839

Total Capital and Liabilities £3,839

Total Funding £22,000

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7.2 Important Assumptions Important assumptions for this plan are found in Table 7.2. These assumptions largely determine the financial plan and require that we secure additional financing.

7.3 Break-Even Analysis The break-even analysis shows that Falafel Effect has sufficient sales strength to remain viable.

Our break-even point is close to 2,729 units per month and our monthly revenue break-even is

£6396.

Table 7.3.1: Break-Even Analysis

Break-even Analysis Monthly Units Break-even 2511 Monthly Revenue Break-even £5,885

Assumptions: Average Per-Unit Revenue £2.34 Average Per-Unit Variable Cost £0.88 Estimated Monthly Fixed Cost £3,675

Chart 7.3.2: Break-Even Analysis

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7.4 Projected Profit and Loss

As the profit and loss table (Table 7.3) shows, Falafel Effect expects to continue its steady

growth in profitability over the next three years of operations.

Table 7.4.1: Profit and Loss

Pro Forma Profit and Loss Year 2 Year 3 Sales £155,298 £164,317 Direct Cost of Sales £69,978 £81,022 Other Costs of Sales £0 £0 Total Cost of Sales £69,978 £81,022

Gross Margin £85,320 £83,296 Gross Margin % 55% 50.69%

Expenses Payroll £19,200 £19,200 Marketing/Promotion £300 £300 Depreciation £468 £468 Rent £25,200 £25,200 Utilities £3,000 £3,000 Insurance £600 £600 Bookkeeping £300 £300 Business Rates £4,800 £4,800 Miscellaneous £2,400 £2,400

Total Operating Expenses £56,268 £56,268

Profit Before Interest and Taxes £29,052 £27,028 EBITDA £29,520 £27,496 Interest Expense £0 £0 Taxes Incurred £8,716 £5,406

Net Profit £20,336 £21,622 Net Profit/Sales 13.10% 13.16%

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Chart 7.4.2: Profit Monthly

Chart 7.4.3: Profit Yearly

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Chart 7.4.4: Gross Margin Monthly

Chart 7.4.5: Gross Margin Yearly

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7.5 Projected Cash Flow The cash flow projection shows that provisions for on-going expenses are adequate to meet Falafel Effect's needs as the business generates cash flow sufficient to support operations. The second and third month increase in cash flow reflects the solid business strategy by Dan Studinski as he has budgeted sufficient amount of cash to cover any on-going concerns that will not affect the business revenue.

Table 7.5.1: Cash Flow Pro Forma Cash Flow Year 1 Year 2 Year 3 Cash Received Cash from Operations Cash Sales £118,125 £155,298 £164,317 Subtotal Cash from Operations £118,125 £155,298 £164,317

Additional Cash Received Sales Tax, VAT, HST/GST Received £0 £0 £0 New Current Borrowing £0 £0 £0 New Other Liabilities (interest-free) £0 £0 £0 New Long-term Liabilities £0 £0 £0 Sales of Other Current Assets £0 £0 £0 Sales of Long-term Assets £0 £0 £0 New Investment Received £0 £0 £0 Subtotal Cash Received £118,125 £155,298 £164,317

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations Cash Spending £9,600 £19,200 £19,200 Bill Payments £80,599 £115,234 £123,048 Subtotal Spent on Operations £90,199 £134,434 £142,248

Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out £0 £0 £0 Principal Repayment of Current Borrowing £0 £0 £0 Other Liabilities Principal Repayment £0 £0 £0 Long-term Liabilities Principal Repayment £0 £0 £0 Purchase Other Current Assets £0 £0 £0 Purchase Long-term Assets £0 £0 £0 Dividends £0 £0 £0 Subtotal Cash Spent £90,199 £134,434 £142,248

Net Cash Flow £27,926 £20,864 £22,070 Cash Balance £30,965 £51,829 £73,899

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Chart 7.5.2: Cash Flow

7.6 Projected Balance Sheet As shown in the balance sheet in the following table, our net will grow from approximately

£25,865 to more than £52,342 by the end of 2014 and to £80,655 by the end of the plan period. The monthly projections are in the appendix.

Table 7.6.1: Balance Sheet Pro Forma Balance Sheet Year 1 Year 2 Year 3 Assets Current Assets Cash £30,965 £51,829 £73,899 Inventory £4,518 £5,832 £6,752 Other Current Assets £0 £0 £0 Total Current Assets £35,483 £57,661 £80,651

Long-term Assets Long-term Assets £0 £0 £0 Accumulated Depreciation £0 £468 £936 Total Long-term Assets £0 (£468) (£936) Total Assets £35,483 £57,193 £79,715

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities Accounts Payable £7,914 £9,288 £10,187 Current Borrowing £0 £0 £0 Other Current Liabilities £0 £0 £0 Subtotal Current Liabilities £7,914 £9,288 £10,187

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Long-term Liabilities £0 £0 £0 Total Liabilities £7,914 £9,288 £10,187

Paid-in Capital £22,000 £22,000 £22,000 Retained Earnings (£18,161) £5,569 £25,905 Earnings £23,730 £20,336 £21,622 Total Capital £27,569 £47,905 £69,527 Total Liabilities and Capital £35,483 £57,193 £79,715

Net Worth £27,569 £47,905 £69,527

7.7 Business Plan Ratios. Ratio Analysis Year 1 Year 2 Year 3 Industry Profile Sales Growth 0.00% 31.47% 5.81% 0.00%

Percent of Total Assets Inventory 12.73% 10.20% 8.47% 0.00% Other Current Assets 0.00% 0.00% 0.00% 100.00% Total Current Assets 100.00% 100.82% 101.17% 100.00% Long-term Assets 0.00% -0.82% -1.17% 0.00% Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 22.30% 16.24% 12.78% 0.00% Long-term Liabilities 0.00% 0.00% 0.00% 0.00% Total Liabilities 22.30% 16.24% 12.78% 0.00% Net Worth 77.70% 83.76% 87.22% 100.00%

Percent of Sales Sales 100.00% 100.00% 100.00% 100.00% Gross Margin 62.44% 54.94% 50.69% 0.00% Selling, General & Administrative Expenses 42.36% 41.84% 37.53% 0.00% Advertising Expenses 0.25% 0.19% 0.18% 0.00% Profit Before Interest and Taxes 25.11% 18.71% 16.45% 0.00%

Main Ratios Current 4.48 6.21 7.92 0.00 Quick 3.91 5.58 7.25 0.00 Total Debt to Total Assets 22.30% 16.24% 12.78% 0.00% Pre-tax Return on Net Worth 107.59% 60.64% 38.87% 0.00% Pre-tax Return on Assets 83.60% 50.80% 33.91% 0.00%

Additional Ratios Year 1 Year 2 Year 3 Net Profit Margin 20.09% 13.10% 13.16% n.a Return on Equity 86.07% 42.45% 31.10% n.a

Activity Ratios Inventory Turnover 12.00 13.52 12.88 n.a Accounts Payable Turnover 11.18 12.56 12.17 n.a Payment Days 27 27 29 n.a Total Asset Turnover 3.33 2.72 2.06 n.a

Debt Ratios Debt to Net Worth 0.29 0.19 0.15 n.a Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios Net Working Capital £27,569 £48,373 £70,463 n.a Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios Assets to Sales 0.30 0.37 0.49 n.a Current Debt/Total Assets 22% 16% 13% n.a Acid Test 3.91 5.58 7.25 n.a Sales/Net Worth 4.28 3.24 2.36 n.a Dividend Payout 0.00 0.00 0.00 n.a

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8.0 Exit Strategy

Even though the business has not yet started, it is wise to include a strategy to exit the business without any loss. Instead, profit should be made when exiting the business since it has been properly planned ahead of time.

The business may choose long term or short term planning depending on the first major review of the business after a year. The directors may choose to:

Merge: Sometimes, two businesses can create more value as one company. This may be an opportunity to exit. To retain some involvement, the directors may consider staying on in an advisory role.

Be acquired: Other companies might want to acquire the business and keep its value for themselves. We would ensure that the offered sale price matches our business valuation. We may seek to cultivate potential acquirers by meeting companies that would benefit from such a deal. Hopefully, the value of the business would exceed what could be earned in a sale.

Sell: Selling outright can also allow for an easy exit. We can take the money from the sale and stay away from the company. We may also negotiate for equity in the buying company, allowing the owner to earn dividends afterwards it is in our interest to ensure that the firm is a good fit for the buyer and therefore more likely to prosper.

8.1 The Exit Process This process of exiting depends on how we choose to exit the business.

8.1.1. Selling the business: If we are selling the business there are several stages to go through:

•Grooming the business for sale •Valuing the business •Identifying and marketing the business to potential buyers •Negotiating with potential buyers •Completing legal due diligence •Finalising the sale and transferring ownership

Prior to the sale, the business will be put into shape by reducing unnecessary overheads, debts and excess stock and getting finances into good order. A detailed financial information, including audited accounts and forecasts would be prepared in advance.

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8.1.2 Closing the Business If we are simply closing the business, the process would be much simpler. We would contact the relevant authorities to advise them that we are closing down and calculate and pay off any outstanding liabilities (such as VAT) and debts. If we have employed any workers we will also need to give them the proper notice and any outstanding pay and benefits.

8.1.3 Family Succession Passing or selling the business to a son, daughter or other family member can be an attractive option. It allows us to maintain an involvement in the business and pass the assets to our heirs. We would involve them in the business as soon as possible to allow them to gain an in-depth understanding of how things work and assess their interest. Allowing them to gain experience working in other businesses can be equally important, as this will give them new strategic insight into our activities.

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Table 1: Sales Forecast Sales Forecast Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Unit Sales Falafel Platter 1 260 260 260 390 390 390 520 520 520 520 520 520 Falafel Platter 2 260 260 260 390 390 390 520 520 520 520 520 520 Falafel Platter 3 390 390 390 585 585 585 780 780 780 780 780 780 Falafel Platter 4 390 390 390 585 585 585 780 780 780 780 780 780 Cold Beverages 1000 1000 1000 1200 1200 1200 1600 1600 1600 1600 1600 1600 Potato Wedges / Chips 600 600 600 650 650 650 850 850 850 850 850 850 Total Unit Sales 2900 2900 2900 3800 3800 3800 5050 5,050 5,050 5,050 5,050 5,050

Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Falafel Platter 1 £3.75 £3.75 £3.75 £3.75 £3.75 £3.75 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 Falafel Platter 2 £3.75 £3.75 £3.75 £3.75 £3.75 £3.75 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 Falafel Platter 3 £3.75 £3.75 £3.75 £3.75 £3.75 £3.75 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 Falafel Platter 4 £3.75 £3.75 £3.75 £3.75 £3.75 £3.75 £4.00 £4.00 £4.00 £4.00 £4.00 £4.00 Cold Beverages £0.50 £0.50 £0.50 £0.50 £0.50 £0.50 £0.50 £0.50 £0.50 £0.50 £0.50 £0.50 Potato Wedges / Chips £1.25 £1.25 £1.25 £1.25 £1.25 £1.25 £1.25 £1.25 £1.25 £1.25 £1.25 £1.25

Sales Falafel Platter 1 £975.00 £975.00 £975.00 £1,462.50 £1,463 £1,463 £2,080 £2,080 £2,080 £2,080 £2,080 £2,080.00 Falafel Platter 2 £975.00 £975.00 £975.00 £1,462.50 £1,463 £1,463 £2,080 £2,080 £2,080 £2,080 £2,080 £2,080.00 Falafel Platter 3 £1,462.50 £1,462.50 £1,462.50 £2,193.75 £2,194 £2,194 £3,120 £3,120 £3,120 £3,120 £3,120 £3,120.00 Falafel Platter 4 £1,462.50 £1,462.50 £1,462.50 £2,193.75 £2,194 £2,194 £3,120 £3,120 £3,120 £3,120 £3,120 £3,120.00 Cold Beverages £500.00 £500.00 £500.00 £600.00 £600 £600 £800 £800 £800 £800 £800 £800.00 Potato Wedges / Chips £750.00 £750.00 £750.00 £812.50 £813 £813 £1,063 £1,063 £1,063 £1,063 £1,063 £1,062.50 Total Sales £6,125.00 £6,125.00 £6,125.00 £8,725.00 £8,725 £8,725 £12,263 £12,263 £12,263 £12,263 £12,263 £12,262.50

Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Falafel Platter 1 £0 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 Falafel Platter 2 £0 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 Falafel Platter 3 £0 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 Falafel Platter 4 £0 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 £1.50 Cold Beverages £0 £0.20 £0.20 £0.20 £0.20 £0.20 £0.20 £0.20 £0.20 £0.20 £0.20 £0.20 £0.20 Potato Wedges / Chips £0 £0.35 £0.35 £0.35 £0.35 £0.35 £0.35 £0.35 £0.35 £0.35 £0.35 £0.35 £0.35

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Direct Cost of Sales Falafel Platter 1 £390.00 £390.00 £390.00 £585.00 £585.00 £585.00 £780.00 £780.00 £780.00 £780.00 £780.00 £780.00 Falafel Platter 2 £390.00 £390.00 £390.00 £585.00 £585.00 £585.00 £780.00 £780.00 £780.00 £780.00 £780.00 £780.00 Falafel Platter 3 £585.00 £585.00 £585.00 £877.50 £877.50 £877.50 £1,170.00 £1,170.00 £1,170.00 £1,170.00 £1,170.00 £1,170.00 Falafel Platter 4 £585.00 £585.00 £585.00 £877.50 £877.50 £877.50 £1,170.00 £1,170.00 £1,170.00 £1,170.00 £1,170.00 £1,170.00 Cold Beverages £200.00 £200.00 £200.00 £240.00 £240.00 £240.00 £320.00 £320.00 £320.00 £320.00 £320.00 £320.00 Potato Wedges / Chips £210.00 £210.00 £210.00 £227.50 £227.50 £227.50 £297.50 £297.50 £297.50 £297.50 £297.50 £297.50 Subtotal Direct Cost of Sales £2,360.00 £2,360.00 £2,360.00 £3,392.50 £3,392.50 £3,392.50 £4,517.50 £4,517.50 £4,517.50 £4,517.50 £4,517.50 £4,517.50

Table 2: Personnel

Personnel Plan Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Dan Studinski - Owner Operating Manager £0 £0 £0 £0 £0 £0 £1,600 £1,600 £1,600 £1,600 £1,600 £1,600 Other £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Total People £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Payroll £0 £0 £0 £0 £0 £0 £1,600 £1,600 £1,600 £1,600 £1,600 £1,600

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Table 3: Profit and Loss

Pro Forma Profit and Loss Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Sales £6,125 £6,125 £6,125 £8,725 £8,725 £8,725 £12,263 £12,263 £12,263 £12,263 £12,263 £12,263 Direct Cost of Sales £2,360 £2,360 £2,360 £3,393 £3,393 £3,393 £4,518 £4,518 £4,518 £4,518 £4,518 £4,518 Other Costs of Sales £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Total Cost of Sales £2,360 £2,360 £2,360 £3,393 £3,393 £3,393 £4,518 £4,518 £4,518 £4,518 £4,518 £4,518

Gross Margin £3,765 £3,765 £3,765 £5,333 £5,333 £5,333 £7,745 £7,745 £7,745 £7,745 £7,745 £7,745 Gross Margin % 61.47% 61.47% 61.47% 61.12% 61.12% 61.12% 63.16% 63.16% 63.16% 63.16% 63.16% 63.16%

Expenses Payroll £0 £0 £0 £0 £0 £0 £1,600 £1,600 £1,600 £1,600 £1,600 £1,600 Marketing/Promotion £25 £25 £25 £25 £25 £25 £25 £25 £25 £25 £25 £25 Depreciation £0 £0 £0 Rent £0 £2,100 £2,100 £2,100 £2,100 £2,100 £2,100 £2,100 £2,100 £2,100 £2,100 £2,100 Utilities £250 £250 £250 £250 £250 £250 £250 £250 £250 £250 £250 £250 Insurance £50 £50 £50 £50 £50 £50 £50 £50 £50 £50 £50 £50 Bookkeeping £25 £25 £25 £25 £25 £25 £25 £25 £25 £25 £25 £25 Business Rates £400 £400 £400 £400 £400 £400 £400 £400 £400 £400 £400 £400 Mislellaneous £200 £200 £200 £200 £200 £200 £200 £200 £200 £200 £200 £200

Total Operating Expenses £950 £3,050 £3,050 £3,050 £3,050 £3,050 £4,650 £4,650 £4,650 £4,650 £4,650 £4,650

Profit Before Interest and Taxes £2,815 £715 £715 £2,283 £2,283 £2,283 £3,095 £3,095 £3,095 £3,095 £3,095 £3,095 EBITDA £2,815 £715 £715 £2,283 £2,283 £2,283 £3,095 £3,095 £3,095 £3,095 £3,095 £3,095 Interest Expense £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Taxes Incurred £563 £143 £143 £457 £457 £457 £619 £619 £619 £619 £619 £619

Net Profit £2,252 £572 £572 £1,826 £1,826 £1,826 £2,476 £2,476 £2,476 £2,476 £2,476 £2,476 Net Profit/Sales 36.77% 9.34% 9.34% 20.93% 20.93% 20.93% 20.19% 20.19% 20.19% 20.19% 20.19% 20.19%

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Table 4: Cash Flow

Pro Forma Cash Flow Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Cash Received Cash from Operations Cash Sales £6,125 £6,125 £6,125 £8,725 £8,725 £8,725 £12,263 £12,263 £12,263 £12,263 £12,263 £12,263 Subtotal Cash from Operations £6,125 £6,125 £6,125 £8,725 £8,725 £8,725 £12,263 £12,263 £12,263 £12,263 £12,263 £12,263

Additional Cash Received Sales Tax, VAT, HST/GST Received 0.00% £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 New Current Borrowing £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 New Other Liabilities (interest-free) £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 New Long-term Liabilities £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Sales of Other Current Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Sales of Long-term Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 New Investment Received £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Subtotal Cash Received £6,125 £6,125 £6,125 £8,725 £8,725 £8,725 £12,263 £12,263 £12,263 £12,263 £12,263 £12,263

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Expenditures from Operations Cash Spending £0 £0 £0 £0 £0 £0 £1,600 £1,600 £1,600 £1,600 £1,600 £1,600 Bill Payments £181 £5,437 £5,553 £5,632 £7,897 £6,899 £6,979 £9,274 £8,187 £8,187 £8,187 £8,187 Subtotal Spent on Operations £181 £5,437 £5,553 £5,632 £7,897 £6,899 £8,579 £10,874 £9,787 £9,787 £9,787 £9,787

Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Principal Repayment of Current Borrowing £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Other Liabilities Principal Repayment £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Long-term Liabilities Principal Repayment £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Purchase Other Current Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Purchase Long-term Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Dividends £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Subtotal Cash Spent £181 £5,437 £5,553 £5,632 £7,897 £6,899 £8,579 £10,874 £9,787 £9,787 £9,787 £9,787

Falafel Effect

Page 2

Net Cash Flow £5,944 £688 £572 £3,093 £828 £1,826 £3,683 £1,389 £2,476 £2,476 £2,476 £2,476 Cash Balance £11,083 £11,771 £12,343 £15,436 £16,264 £18,090 £21,773 £23,161 £25,637 £28,113 £30,589 £33,065

Falafel Effect

Page 1

Table 6: Balance Sheet

Pro Forma Balance Sheet

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10

Month 11

Month 12

Assets Starting Balances

Current Assets Cash £5,139 £11,083 £11,771 £12,343 £15,436 £16,264 £18,090 £21,773 £23,161 £25,637 £28,113 £30,589 £33,065 Inventory £800 £2,360 £2,360 £2,360 £3,393 £3,393 £3,393 £4,518 £4,518 £4,518 £4,518 £4,518 £4,518 Other Current Assets

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Current Assets

£5,939 £13,443 £14,131 £14,703 £18,828 £19,656 £21,482 £26,290 £27,679 £30,155 £32,631 £35,107 £37,583

Long-term Assets Long-term Assets £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 Accumulated Depreciation

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Long-term Assets

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Assets £5,939 £13,443 £14,131 £14,703 £18,828 £19,656 £21,482 £26,290 £27,679 £30,155 £32,631 £35,107 £37,583 Liabilities and Capital

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10

Month 11

Month 12

Current Liabilities Accounts Payable £0 £5,252 £5,368 £5,368 £7,667 £6,669 £6,669 £9,001 £7,914 £7,914 £7,914 £7,914 £7,914 Current Borrowing

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Other Current Liabilities

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Subtotal Current Liabilities

£0 £5,252 £5,368 £5,368 £7,667 £6,669 £6,669 £9,001 £7,914 £7,914 £7,914 £7,914 £7,914

Falafel Effect

Page 2

Long-term Liabilities

£0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0 £0

Total Liabilities £0 £5,252 £5,368 £5,368 £7,667 £6,669 £6,669 £9,001 £7,914 £7,914 £7,914 £7,914 £7,914 Paid-in Capital £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 £22,000 Retained Earnings (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) (£16,061) Earnings £0 £2,252 £2,824 £3,396 £5,222 £7,048 £8,874 £11,350 £13,826 £16,302 £18,778 £21,254 £23,730 Total Capital £5,939 £8,191 £8,763 £9,335 £11,161 £12,987 £14,813 £17,289 £19,765 £22,241 £24,717 £27,193 £29,669 Total Liabilities and Capital

£5,939 £13,443 £14,131 £14,703 £18,828 £19,656 £21,482 £26,290 £27,679 £30,155 £32,631 £35,107 £37,583

Net Worth £5,939 £8,191 £8,763 £9,335 £11,161 £12,987 £14,813 £17,289 £19,765 £22,241 £24,717 £27,193 £29,669