CHAPTER I

INTRODUCTION

1.1 Introduction of the business

The fast food trend is growing in Kathmandu city and other few metros of the
country. The taste and preference of people are also shifting as they are being more
and more exposed to western culture through various forms of media. Cinema Ghars
are transforming into multiplexes and shops into big malls. The food habit of people
is also changing as people are getting more and more choices in terms of product
variety and pricing.

Burgers are not new in Nepal. It is available in the menu of almost every restaurant
and one can also grab them from the busy street vendors selling various junk foods at
different nooks and corners of the city. So, there is no doubt about the popularity of
burger as a preferable lunch item. So, my intention here is not to serve the market
with another breed of same old burger, but to provide specialized brand of quality
burger with a distinct taste and appeal through small kiosks located in busy area.
Branding a burger may seem new in Nepal, but in the western world, it is not a new
concept. There are various specific brands of burgers that are catering varying taste
and preference of consumers and furthermore these brands are spreading across
boundaries through franchising and licensing arrangement.

So, my core business will be selling different variants tasty and hygienic burgers with
a long-term vision of building a strong brand. Though new in Nepal, the business I am
trying to incept is tried and tested concept in many of the western countries. This is
one of the low cost business models where fixed cost is kept at the minimum and
resources are efficiently utilized to keep the cost down.

1.2 Business ideas (Problems based idea generation)

The basic idea for this business plan was incepted while I was having a burger myself
in one of the busy streets of Kathmandu where few of my friends told me how they
would love to have quality and hygienic burgers as shown in western TV shows and
movies. The basic seed for this idea was planted on that moment but later I preformed
an informal survey with my friends and relatives to understand their perception about

1
burgers that were available in Kathmandu. With the help of that survey, I found that
people like to have quality burger as one option for their lunch, but as per them the
burgers that are available in the streets are unhygienic as well as the taste is not up to
the par. So, with this gap in mind I seek to incept a low cost business model to serve
burgers through a specialized kiosk, which basically are small shutter or shops that
specialize in burgers. The business model is based on takeaway dining, i.e. customer
buys the products and eats it in his own place of choice; but having this said the
kiosks will be strategically placed in the location where there is ample public space
for consumption.

1.3 Mission, vision and objectives

Every organization has its own Vision, Mission and Goal that guide the
organization to sustain for very long period of time. Similarly the Fitness First
also has its Vision, Mission and Objectives. Below explains vision mission and
goal of the organization.

1.3.1 Vision

To become one of the best Burger Koisk of the Kathmandu valley by creating unique
position in the minds of customer with our quality and professional service.

1.3.2 Mission

We are committed to Quality, Service, cleanliness and value for each and
every customer, each and every time.
Customers are the most important visitor on our premises and they are not
dependent on us, we are dependent on them. We are not doing them a favour
by serving them they are doing us a favour by giving us the opportunity to
do so.

1.3.3 Objectives

Objectives

To provide high level of customer satisfaction with qualitative burger with

affordable price.
To gain market share and earn profit more than the competitors.

2
 1.4 Keys to Success
Your Burger Point is focused on serving a niche segment of burger lovers who are
trendy, fun loving, more of a happy-go-lucky nature and take life as it comes with
fewer concerns. Our long-term focus would be on building a strong brand that will be
synonymous to tasty and quality burgers that will differentiate it from the competitors
and also create barriers for new comers. The main factors that determine the success
of the Your Burger Point are:

Strategic location advantage

Effective and efficient utilization of resources.
Continuous commitment to quality and taste.

1.5 Business Model Canvas of Your Burger Point

KEY PARTNERS KEY ACTIVITIES VALUE CUSTOMER CUSTOMER

PROPOSITION RELATIONSHIP SEGMENTS
Suppliers Preparation of
Share holders Burger Quality Affordable and Urban youths
Customers Hygienic accessible Adults
Employees Affordable price Quality Quick and tasty
Customer products hygienic lunch
Satisfaction without hassle
KEY RESOURCES CHANNELS

Raw Material Suppliers

Machinery Share Holders
Members
Customers
COST STRUCTURE REVENUE STREAM

Equipment Sales of Products

Operation Cost
Other Direct & Indirect Cost
Salary & Rents
Start up Capital

Business Model of Your Burger Point

Value Proposition
We are focused to satisfy customer with the quality and hygienic different variants of
burgers with affordable price.
Key Activities

3
The key activity of our organization is to make or prepare the burger ordered by the
customer with distinct taste and hygienic manner.

Key resources

To make our organization run we need different resources like meat patty, veg patty,
bread roll, lettuce, tomato, onion, mayonnaise, ketchup, and relish.

Customer Segment

Our organization has targeted many customers mainly urban youths, adults who wants
quick and tasty hygienic lunch without hassle.

Channel

We will totally encourage all type of participants who are urban youths and adults
who want quick and tasty lunch without hassle. Whereas different suppliers of
equipment and raw material play an important role to deliver the value preposition we
promise to our customer. All employees play an important role in the service deliver.

Customer Relationship

We totally focus on providing our customers affordable and accessibility of quality

products.

Key Partner

We are associated with different partners without whom the organization is to be run.
The key partners are suppliers, shareholders, member/customers and employees.

Cost Structure

During the start up of business different start up capital is to be invested and further
equipments are to be purchased and operation cost are to be met up with different
direct and indirect cost. Salaries are to be provided to the staff working in the
organization and rents are to be paid for the premises.

Revenue structure

The revenue is generated with sales of different variant of burgers.

4
 CHAPTER II

PRODUCT AND SERVICES

2.1 Product

Your Burger Point provides the product burger that the customers want to consume.
Your Burger Point is the brand that everyone will trust for its taste and hygiene as
well as its quality. Our goal is to be a destination for mostly youths and adults who
want quick tasty, healthy and hygienic burger without hassle.

There will be three types of burger in Your Burger Point:

Hamburger Burger
Chicken Burger
Veg Burger

2.2 Marketing simulation

As any business plan begins with demand estimation and finding out the demand of
burger is not easy in Kathmandu as there is no legitimate published source that
specify its demand. So, for my business plan, I used survey method in which I
researched six of the takeaway burgers vendors that somewhat followed similar
business pattern to that of mine. I specifically asked the vendors how much burger
they sold daily and based upon those data I came up with the total yearly demand for
the burger that is shown on the table below:

Table 1: Demand estimation of Burgers

No. of Vendors Daily Demand Monthly Yearly

6 1500 45625 547500

The other data related to operational and organizational management was obtained
through market study. In this, various people from the restaurants business who have
years of experience were asked about the true nature of business and its prerequisites.
Similarly, various machineries and raw material suppliers were also consulted so that
the business plan would be accurate in terms of its fixed and variable costing.

5
2.3 Market Opportunities

The takeaway burger segment is attractive segment to enter as the number of

businesses catering this segment is particularly less as compared to other fast food
products. The main differentiating factor in this venture would be the creation of
brand that will be perceived by the people as of high quality and hygiene. The
demographics for catering this segment will be urban youths and adults who want
quick and tasty lunch without hassle. As the kiosks will be placed in busy area like
New Road, Thamel or outside departmental stores, multiplexes and shopping malls,
where there will be enough customers to achieve the target sales.

This model is stable as the focus is not only on creating a great product but also on
creating a great brand. The burger as a product is highly generic and business model
too is vulnerable to imitation. So, the main barriers to the competitors will the brand
name itself that will be based on quality and hygiene. Similarly there are numerous
opportunities in terms of product line expansion and diversification; and depending
upon the sales and demand, products can be added or discontinued. Furthermore, if
the venture is a successful in the long run, the company can earn only by franchising
the brand itself.

2.4 SWOT Analysis

It is very important for our center to know about the strengths and weaknesses of our
internal environment and use our strength for the productivity and remove weaknesses
to gain the competitive advantage. It is also very important for us to analyze the
external environment to know about the threats and turn the threats into opportunities.

Strength

1.Open seven days a week

2. Highly experienced professionals
3. Effective management
4. Competitive price
5. Convenience location
6. Quality Products

Weakness

1. Newly entered in the market

6
2. Lack of experience in the field

Opportunities

1. Increasing westernization and modernization culture

2. Consumers wants food in less time

Threats

1. Competition from already existing firm

2. Political instability
3. Competitors may imitate innovative ideas
4. A possibility of low cost of service from competitor

7
 CHAPTER III

INDUSTRY ANALYSIS

3.1 The competition

The industry is not a big one. The competition is increasing day by day. If you
maintain the quality of your service in terms of consistency and price, it is not
difficult to keep your loyal consumers. As per the market demand there are so many
Burger Kiosk established in the market to serve the consumer in the fast time and in
best way. There are many Burger house or kiosk in busy places like Newroad,
Thamel, New Baneshwor, Nepaltar, etc.

3.2 Competitors Analysis:

Some of the famous burger houses in our location i.e. Newroad are:

1. RDs Caf
2. Big Bite

The following are the competitive analysis of the RDs caf and Your Burger Point:

Table 2: Competitors Analysis

Competitors Strength Weakness

RD Cafe 1. Have lots of customers 1. High price

2. Experience in the field 2. Lack of convenience location

Your Burger Point 1.Highly experienced 1. Newly entered in the market

professionals 2. Lack of experience in the
2. Competitive price field
3. Convenience location
4. Quality Products

8
3.3 Porters five forces Analysis

Through Porters five forces analysis, we can identify the attractiveness of the
business

Intensity of Rivalry: Intensity of rivalry is very high to attract and retain every
potential customers in market either providing quality services or in low cost.

Threats of Entrants: As the procedure of establishing a Burger shop is simple

and short, the numbers of Burger shop are growing in Nepalese market day by
day. The concept of establishing such business does not impose barrier for the
new entrants, the new competitors can enter in the market at any time. It is not
sure that how many numbers of new companies will enter the market. But till
then, we will certainly gain some market share in the industry through high
customer loyalty, as we will be providing quality services at a very reasonable
price, so there is no such condition to be afraid of new entrants in the market.

Threats of Substitutes: There are many Burger shops in Kathmandu valley that
provides similar services to its clients. There are so many shops that provide
the good services with different substitute products. Thus there is a threat of
substitute in the market in terms of services provided. But in Your Burger
Point, though the services are similar but the prices and hygienic burger do
vary.

Bargaining Power of Buyers:

The bargaining power of buyers is high due to competitive market. As the

numbers of shops are in increasing number, buyers are gaining advantages of
substitute place to get service.

Bargaining Power of suppliers:

The bargaining power of suppliers is less again due to competitive market and
burger shops are compelled to offer its services at low price with high quality
services then only they can attract and retain their customers. Since there are
numerous business houses that provide the raw materials like pattymeat, bread
roll, lettuce, tomato, onion, mayonnaise, ketchup, and relish. We can choose
the most reliable, effective and reasonable supplier to meet our requirements.

9
 CHAPTER IV

MARKETING STRATEGIES

4.1 Customer Analysis:

4.1.1 Segmentation

There are so many customers in Nepal and we have segmented the customers
according to the demographic area like urban area, income level: middle class and
others.

4.1.2 Target

Though there are so many customers we can target on but due to limited resources
and time constraints we are only targeting the Newroad area that is the most busiest to
target urban youths and adults who want quick and tasty lunch without hassle so there
will be opportunities of selling more of our products and take competitive advantages.

4.2 Marketing Plan

4.2.1 Business objective

Burgers are general products that are readily available everywhere. In spite of its
general tendency there are certain elements in the product as well as service that
differentiate one burger from another.

As YOUR BURGER POINT is new entrants in the takeaway burger segment, our
initial strategy is to maximize sales in order to create a loyal customer base so as to
build a strong brand that will differentiate it from the competitors and also create
barriers for new comers. This strategy will be perused for next 3 to 5 years so as to
stabilize our market in order to fulfill our long-term objective of building a brand that
will be synonymous to tasty and quality burgers.

4.2.2 Target segment

We will be basically targeting three segments of the burgers based on burger variant
as we need to provide variety of products to the market. The three segments will be
hamburger, chicken burgers and veggie burgers.

10
 Table 3: Summary of Estimates (Sales Target, Revenue, of Each Segment)
::

Market Segments Ham Chicken Veggie Total

Total sales target in 36956 22174 9855 68985

units

Total sales revenue 2956500 1884769 739125 5580394

( Rs)

Through this survey, the total per year demand of burgers was found out to be about
547,500. Similarly, within burgers, demand for Hamburger was found out to be
273,750; Chicken-burger was found out to be 164,250 and Veggie-burger was found
out to be 109,500. With this demand on mind, I planned to serve only 15% of total
market and with 90% capacity utilization for the initial year. The total sales target for
the first year is about 68,985 burgers.

4.3 Marketing strategies

The demand sensitivity for all variants of burgers is assumed to be same considering
the little difference among the products. It is fairly assumed that Rs 1 increase in price
will decrease in demand of burger by 1000 units. Similarly, Rs 50,000 spent on
promotion per year will lead to increase in demand by about 11,000 units.

Likewise, a new addition of the store requires about Rs 500,000 of additional

investment that will increase the demand by about 90,000 burgers per year.
Appropriate mix of place, promotion and price is chosen for each burger variants so
as to maximize sales.

For hamburgers, the price will be decreased to Rs. 80 that is Rs. 5 will be reduced to
the market price. There wont be any place strategy, as it will involve extra
investment in fixed assets, as we will need to open up an exact same store in another
location. Similarly, 3.3 units of promotion will be done amounting to Rs 165,000. It is
logical to decrease the price by Rs. 5 as it will help to attract new customers. We will
be doing much promotion in newspapers and magazines as well as using social media
for creating buzz in the market.

For chicken burgers, the price will be decreased by Rs. 5 to make it Rs. 85. No
distribution channel will be added and 1.8 units of promotion will be done amounting

11
to Rs 90,000. Similarly, for veggie burgers, the price will be decreased by Rs. 5 to
make it Rs. 75. In this segment too we will not be adding any distribution channel and
using 0.5 units of promotion amounting to Rs 25,000.

Even though the promotional expenses for each of the products variants are estimated
separately. The advertisements and promotions of one-product variants will provide
synergistic effects to other product variants.

4.4 Positioning

Products may be positioned in many different ways. Generally, the way they are
differentiated and the benefits they offer.

4.5 Product Attributes

The basic goal of positioning strategy is to own a word that ranks the product in
prospects mind as a Hygienic. We would equip our workers with disposable gloves
preparing raw materials such as cooked patty of ground meat, bread roll, lettuce,
tomato, onion, mayonnaise, ketchup, and relish.

4.6 Benefits

Burger would be the tastiest and healthiest food that would reach the customers.

4.7 Marketing Mix

The marketing mix of Your Burge Point consists of the various elements in the
marketing mix that forms the core of a companys marketing system and hence helps
to achieve marketing objectives.

Product

We are providing hamburgers, chicken burgers and veg burgers to the customers with
very hygienic and great teaste. However, customers requirements change over time.
In order to meet these changes, Your Burger Point will introduce new products and
will continue to do so. Care is taken not to adversely affect the sales of one choice by
introducing a new choice, which will cannibalize sales from the existing one.

Price

The customers perception of value is an important determinant of the price charged.

Customers draw their own mental picture of what a product is worth. A product is
more than a physical item, it also has psychological connotations for the customer.

12
The danger of using low price as a marketing tool is that the customer may feel that
quality is being compromised. It is important when deciding on price to be fully
aware of the brand and its integrity.

Promotion

The promotions aspect of the marketing mix covers all types of marketing
communications One of the methods employed is advertising, Advertising is
conducted on in the press for example in newspapers and magazines.

Place

Place, as an element of the marketing mix, is not just about the physical location or
distribution points for products. It encompasses the management of a range of
processes involved in bringing products to the end consumer. The shop is located in
the busiest place of the Kathmadu i.e. Newroad.

People

The employees in Your Burger Point have a standard uniform and it specially focuses
on friendly and prompt service to its customers from their employees.

Process

The production process consists of converting various raw materials into burgers. The
basic process includes preparing raw materials such as cooked patty of ground meat,
bread roll, lettuce, tomato, onion, mayonnaise, ketchup, and relish. Then as the
customer's orders, the store manager will inform the cook and the helper. The cook
will then put the patty into the grill and bread roll into the oven. In the mean time, the
skilled staff will source all the necessary ingredients and both of them in coordination
will prepare burgers according to orders. The store manager will then prepare receipt
and hand over the burger and receipt to the customer and collect the payment.

Physical evidence

Your Burger Point focuses on clean and hygienic interiors of of the shop.

13
 CHAPTER V

OPERATION PLAN

5.1 Production (operation) process

The production process consists of converting various raw materials into burgers. The
basic process includes preparing raw materials such as cooked patty of ground meat,
bread roll, lettuce, tomato, onion, mayonnaise, ketchup, and relish. Then as the
customer's orders, the store manager will inform the cook and the helper. The cook
will then put the patty into the grill and bread roll into the oven. In the mean time, the
skilled staff will source all the necessary ingredients and both of them in coordination
will prepare burgers according to orders. The store manager will then prepare receipt
and hand over the burger and receipt to the customer and collect the payment.

Figure 1: Operation Process of Your Burger Point

Order of customer

Inform Cook and Helper

Burger is prepared

Receipt is made

Collect the payment

Suppliers decisions

In order to gain competitive advantage selecting key supplier is a must. Where and
what we buy or need to buy in the future should be thus properly analyzed. After
having done the market survey, we have decided to custom make the necessary
furniture from the Wood craft, a local furniture maker. They have ensured us effective
delivery of qualitative goods and serviced with custom made designs with certain
discounts.

14
5.2 Locations and Facility

The shop will be located at New Road, Kathmandu. We regard this location as
appropriate for our business because this area comprises of both the residential and
commercial sector. This area has potential market with presence of many restaurants,
banks, beauty parlors, clothing store, shopping complex and accessibility to
transportation facility.

5.3 Capacity utilization

The capacity utilization for year 1 is 90% and expected to increase at the rate of 10%
per annum throughout the years. Total sales target for the year 2015 is 68,985 burgers
with the monthly average of about 5,749 burgers. Total of 36,956 hamburgers, 22,174
chicken burgers and 9,855 burgers are expected to be produced in 2015. The weighted
average price of burgers was found out to be Rs. 80.89; the total promotion expense is
expected to be Rs. 280,000 per annum.

Table 4: Capacity Utilization of Your Burger Point

Sales Capacity Sales Target Monthly Daily

Forecasting Utilization (%)
Year 1 90 68985 5749 189

Year 2 100 76650 6388 210

Year 3 110 84315 7026 231

Year 4 120 91980 7665 252

Year 5 130 99645 8304 273

5.4 Fixed assets

As the store is planning to be operated in the rented space, fixed assets such as land
and buildings will not be involved. The equipment and machinery headings of the
fixed assets contain machines such as burger grill and fryer, microwave oven,
refrigeration unit with freezer and a computer for billing.

Similarly, Furniture and fixtures consists of cabinets and other items. The total
amount allocated for Machinery and Equipment and Furniture and Fixtures is Rs
400,000 and Rs 100,000 respectively. The costing of the required assets was done as

15
per the brief market survey where suppliers of equipments and owners of burger
vendors were consulted for the pricing of the assets required for setting up this
establishment.

The followings are the fixed assets.

Table 5: Fixed Assets

Particulars Amount

Machinery & Equipment 400000

Furniture 100000

Total Fixed Assets 500000

Machinery and equipment is depreciated at the rate of 10% whereas furniture and
fixtures at the rate of 20%, total amounting to Rs 60000 per annum.

5.5 Raw materials

The total raw material cost for three product lines were calculated based on
percentage of selling prices. 55% of the selling price consists of actual cost of raw
materials which amounts to about Rs 255,768.05

Table 6: Raw material Cost

Raw material per month Proportion Amount/unit Amount (cost per month)

Raw materials in prop to 55% 44.49 255768.05

sales

5.6 Labor

One cook and a support staff will be used interchangeably for operating the store
whose salary will be 12,000 each with total amounting to 24,000. The total cost for
labor is summarized below:

16
 Table 7: Labor Cost

Labor Number of labor Rate/month Amount

Skilled 2 12000 24000

Semiskilled 0 - -

Unskilled 0 - -

Total 24000

5.7 Overhead expenses

The total factory overhead will amount to 67,000 per month which includes rent of
Rs. 60,000 which is a going rate for shutter in busy streets of New Road; electricity
bill of about 2,000 and utilities of about of 5000.

Table 8: Overhead Expenses

Factory Overhead Per Month

Rent Expenses 600000
Electricity 2000
Utilities 5000
Total factory overhead expenses 2000

5.8 Per unit costs

The total factory cost will amount to about 346,768.05 and per unit factory cost will
be about Rs 60.32.

Table 9: Per Unit Cost

Particular Amount
Raw materials cost 255768.05
Labor cost 24000
Factory overhead expenses 67000
Total monthly sales target (units) 5749
Per unit factory cost per month 60.32

17
 CHAPTER VI

ORGANIZATIONAL AND MANAGEMENT PLAN

6.1 Form of organization:

The organization will be registered as a partnership firm under Partnership Act, 2020
(1964) of Nepal with two partners.

6.2 Organization structure of management team and their profiles

Since the organization set up will be relatively very small, the structure will be flat
and have very informal but professional culture. YOUR BURGER POINT will have a
simple organisational structure with two partners handling the general management
functions and decision-making. Likewise, one store manager will handle the day-to-
day operation of the stores and two other skilled support staff will be employed in
order to prepare and serve burgers. (Refer Annex 2 for organisational chart). The
profile of partners is as follows.

Sunil Shrestha: Sunil is currently pursuing his masters degree in business

administration from D.A.V. Business School with major in Marketing.

Sushma Maharjan: Sushma is currently pursuing his masters degree in business

administration from D.A.V. Business School with major in Finance.

Figure 2: Organizational Structure

Managers/
Partners

Store
Manager

Store Store
Support Staff Support Staff

18
6.3 Fixed assets

As, there wont be any formal office infrastructure so there will not be any fixed
assets involved for administrative and organizational purpose.

6.4 Administrative expenses

The two partners will act as the overall manager of the business so Rs 20,000 have
been separated to both of them as their monthly salary. This is to support the notion
that remaining accumulated profit will be reinvested in the business for expansion.

Similarly, as the store requires one manager to handle the day-to-day operation, store
manager will be employed to handle inventory as well as daily sales activities. His
monthly salary will be Rs 15,000 amounting 180,000 per annum. Similarly, his cell
phone bill will also be reimbursed up to Rs 2,000 per month that is the only
administrative expenses.

Table 10: Administrative Expenses

Administrative Expenses
Salary 55000
Overhead:
Electricity 0
Stationary 0
Others 2000
Total 57000

6.5 Pre-operating expenses

The pre-operating expenses include expenses made prior to the inception of the actual
business and contain registration fees and expenses made for research and survey. The
expenses are presented in the table below:

19
 Table 11: Pre-operating Expenses

Pre-operating expenses Amount

Registration 10000
Survey and business plan 10000
Total 20000

20
 CHAPTER VII

FINANCIAL PLAN

7.1 Total Capital

The total capital consists of fixed assets that will be used in factory, pre- operating
expenses and working capital:

Table 12: Total Capital

Fixed Assets 500000

Pre-Operating Expenses 200000
Working Capital 188384.54
Total Capital 708384.54

The total working capital is calculated for different days of inventory of materials and
credit sales:

Table 13: Working Capital

Days PUC Amount

Raw Material Inventory
Work In Progress Inventory
Finished Products Inventory
Account Receivables
Cash for One Month
Total Working Capital
2 17051.20
0 -
0 -
0 -
171333.33
188384.54

The total cash is equivalent to all monthly expenses for labor, factory expenses,
administrative expenses and marketing expenses. Majority of raw material is highly
perishable in nature. So, raw material are only stored for 2 days considering its easy
availability, transportation ease and lead-time. There is no work in progress inventory
in production process as inventory is sourced as needed. Similarly, there is no finished
products inventory as burgers are prepared as the customers' orders. Likewise, the
there is no account receivable as all the sales will be in cash.

21
Therefore, total capital = fixed assets + pre-operating expenses + working capital
which is equal to Rs 708,384.54.

7.2 Financing plan and interest rate

42% of the business is supposed to be financed by taking a long-term loan from the
bank at the rate of 12% per annum. Similarly, the owners will finance the balance that
is 58%. Thus, total of Rs. 300,000 will be taken as a long-term loan where as rest the
owners will finance Rs 408,384 itself. The company will not take any short-term loan
to finance its working capital. The financial plan is presented as follows.

Table 14: Financial Plan and Interest Rate

Particular Equity Loan Total Interest

Land - - -
Building - - -
Machinery and equipment 100000 300000 400000
Furniture and fixture 100000 - 100000
Vehicles - - -
Office equipment
Total 200000 300000 500000 12%
Percentage 40% 60% 100%
Pre-operating expenses 20000 - 20000
Working capital 188384.54 - 188384.54 10%
Total 408384.54 300000 708384.54
Percentage 58% 42% 100%

7.3 Loan Repayment Schedule

Rs 300,000 will be taken as a long-term loan from a bank. The interest rate for the
loan is 12% per annum. The loan repayment schedule for five years is presented in the
table below.

22
 Table 15: Loan Repayment Schedule

Year Outstanding loan Interest Principal Total Installment

1 300000 36000 47222.92 83222.92
2 252777.08 30333.25 52889.67 83222.92
3 199887.41 23986.49 59236.43 83222.92
4 140650.98 16878.12 66344.80 83222.92
5 74306.18 8916.74 74306.18 83222.92

7.4 Pricing strategy and final price

Various pricing strategy was considered ranging from cost plus pricing to
comparative and marketing skimming. If we follow a cost-plus pricing strategy and
add 20% mark at the per- unit cost, the final selling price is Rs. 89.78. If a Market
Skimming strategy is used and premium price is charged, the final selling price is
fixed at Rs. 100 and subtracting per unit cost calculated Rs. 74.8, the markup will be
is Rs. 25.18.

The final per unit cost is calculated to be Rs. 74.82 and as the market is highly
competitive, we will use competitive pricing where the weighted average price is
found to be Rs. 80.89 with a markup of Rs. 6.08

Table 16: Pricing Strategy

Pricing Cost plus Comparative Market skimming

PUC 60.32
Marketing Expenses 23333.33
Admin cost 57000
Interest expenses 3000
Total market, admin & 83333.33
interest
Production unit 5748.75
Per unit market, admin, 14.50
interest
Total per unit cost 74.82 74.82 74.82
Add % mark up 14.96 6.08 25.18
Price 89.78 80.89 100

23
 CHAPTER 8

FINANCIAL ANALYSIS

8.1 Projected financial statements

8.1.1 Projected Profit and Loss

As the profit and loss table shows, YOUR BURGER POINT expects to continue its
steady growth in profitability over the next five years of operations. The profit for the
first year will be Rs. 359,177.19 and will increase throughout the years to be Rs
1,374,339.20 at the end of fifth year. The complete projected profit and loss statement
of YOUR BURGER POINT is as follows.

Table 17: Projected Profit And Loss Statement

Particular Year 1 Year 3 Year 3 Year 4 Year 5

Capacity 90% 100% 110% 120% 130%
Sales unit 68985.00 76650.00 84315.00 91980.00 99645.00
Sales revenue 5580393.75 6200437.50 6820481.25 7440525 8060568.75

Raw material 3069216.56 3069217.56 3069218.56 3069219.56 3069220.56

Labor 288,000.00 320,000.00 352,000.00 384,000.00 416,000.00
Depreciation 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00
Factory 804,000.00 804,000.00 804,000.00 804,000.00 804,000.00
overhead
Total factory 4221216.56 4594240.63 4967264.69 5340288.75 5713312.81
cost
Gross profit 1359177.19 1606196.88 1853216.56 2100236.25 2347255.94
Administration 684,000 684,000 684,000 684,000 684,000
Marketing 280,000 280,000 280,000 280,000 280,000
expenses
Total admin & 964,000 964,000 964,000 964,000 964,000
marketing
EBIT 395,177.19 642,196.88 889,216.56 1,136,236.25 1,383,255.94
Interest 36,000 30,333.25 23986.49 16,,878.12 8,916.74
EBT 359,177.19 611,863.63 865,230.07 1,119,358.13 1,374,339.20

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Accumulated 359,177.19 971,040.81 1,836,270.89 2,955,629.02 4,329,968.22
Profit

8.1.2 Net Present Value

Table 18: Net Present Value

Year CFAT (Net Cum CFAT PV PV

Income) factor@10%
0 708,384.54 -708,384.54 1 -708,384.54
1 359,177.19 -349,207.35 0.909 -317,429.48
2 611,863.63 262,656.28 0.826 216,954.08
3 865,230.07 1,127,886.35 0.751 847,042.64
4 1,119,358.13 2,247,244.48 0.683 1,534,867.98
5 1,374,339.20 3,621,583.68 0.621 2,249,003.46
3,822,054.16

8.1.3 Pay Back Period (PBP)

PBP = Minimum year + Amount to be recovered / recovery year CFAT

= 1+ 349,207.35 / 611,863.63

= 1.5707 years

8.1.4 Projected Cash Flow

The cash flow statement shows the Cash Inflows and Cash Outflows of the BUGER
JOINT to project the Net Cash Flow of the business. The net cash flows from Year 1
to Year 5 is calculated to be Rs 354,903.06, Rs 618,973.96, Rs 865,993.64, Rs
1,113,013.33 and Rs 1,360,033.02 respectively.

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 Table 19: Projected Cash flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Total Cash 708384.54 5580393.7 6200437.50 6820481.25 7440525.00 8060568.75

Inflows 5

Total Cash 520000 5225490.6 5581463.54 5954487.61 6327511.67 6700535.73

Outflows 9

Net Cash 188384.54 354,903.06 618,973.96 865,993.64 1,113,013.33 1,360,033.02

Flow

Opening - 188,384.54 543,287.60 1,162,261.56 2,028,255.20 3,141,268.53

Balance

Closing 188,384.54 543,287.60 1,162,261.56 2,028,255.20 3,141,268.53 4,501,301.55

Balance

The cash flow statement illustrates that Your Burger Point expects to maintain a
steady rate of cash flow over the next five years of operations. Please refer to Annex 3
for the complete projected cash flow statement.

8.1.5 Projected Balance Sheet

YOUR BURGER POINT is to maintain a healthy balance sheet. Please Refer Annex
2 for complete projected balance sheet.

8.1.6 Breakeven analysis

Analysis shows that YOUR BURGER POINT will break-even at 83.84% of total
sales in the 1st year. It is also because the capacity utilization is 90% in initial period.
It can also be attributed to gestation period. BEP would continuously decrease in the
upcoming years with higher utilization of capacity and improvement in sales and
costs. This break-even decreases to 57.20% by the end of 5th year

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 Figure 3: Five Years BEP

8.1.7 Net Present Value (NPV)

The NPV of the YOUR BURGER POINT is Rs. 2,335,908, i.e. positive. Hence, the
business is a profitable and sustainable one because the cash inflows from the
business in future are positive.

8.1.8 Overall Feasibility

The feasibility of YOUR BURGER POINT can be indicated by is market

opportunities, growth prospects of BEP, positive NP, increasing Cash flow. The
market dynamics present the feasibility of the business in terms of opportunities to
solve the customers problem and meet their requirements. So, based on the above
detailed feasibility analysis of the project, it can be concluded that:

We can see that the BEP will been declining gradually till the 5th year, which
is a very good sign for the business.
The Net Present Value of the business is positive.
The expected future cash flows of the project are greater and increasing.

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 APPENDICES

Annex 1

Projected Cash flow Statement

Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Cash Receipts
Equity 408,384.54 - - - - -
Debt 300000 .00 - - - - -

Cash sales - 5,580,393.75 6,200,437.50 6,820,481.25 7,440,525.00 8,060,568.75

Total Receipt 708,384.54 5,580,393.75 6,200,437.50 6,820,481.25 7,440,525.00 8,060,568.75

Disbursement
Fixed Asset 500,000.00 - - - - -
Pre-operating
Expenses 20,000.00 - - - - -
Increase in
Inventory - 17,051.20 - - - -
Factory
Expenses - 4,161,216.56 4,534,240.63 4,907,264.69 5,280,288.75 5,653,312.81

Administration - 684,000.00 684,000.00 684,000.00 684,000.00 684,000.00

Marketing - 280,000.00 280,000.00 280,000.00 280,000.00 280,000.00

Interest 36000.00 30,333.25 23,986.49 16878.12 8,916.74
Principal 47,222.92 52,889.67 59,236.43 66,344.80 74,306.18
Total
Disbursement 520,000.00 5,225,490.69 5,581,463.54 5,954,487.61 6,327,511.67 6,700,535.73
Surplus or loss
(A-B) 188,384.54 354,903.06 618,973.96 865,993.64 1,113,013.33 1,360,033.02
Opening
balance - 188,384.54 543,287.60 1,162,261.56 2,028,255.20 3,141,268.53

Ending Balance 188,384.54 543,287.60 1,162,261.56 2,028,255.20 3,141,268.53 4,501,301.55

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 Annex 2

Projected Balance Sheet

PROJECTED BALANCE SHEET

YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
ASSETS
Fixed Assets 500,000.00 500,000.00 500,000.00 500,000.00 500,000.00 500,000.00
Gross
Accumulated 60,000.00 120,000.00 180,000.00 240,000.00 300,000.00
Depreciation
Net Fixed 500,000.00 440,000.00 380,000.00 320,000.00 260,000.00 200,000.00
Assets
Pre-operating 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00
Expenses
Current
Assets
Inventory 17,051.20 17,051.20 17,051.20 17,051.20 17,051.20
Account - - - - -
Receivable
Cash 188,384.54 543,287.60 1,162,261.56 2,028,255.20 3,141,268.53 4,501,301.55
Total Assets 708,384.54 1,020,388.80 1,579,312.76 2,028,255.20 3,438,319.73 4,738,352.75

LIABILITIES
Term loan 300,000.00 252,777.08 199,887.41 140,650.98 74,306.18 -
Short term - - - - - -
loan
Initial Equity 408,384.54 408,384.54 408,384.54 408,384.54 408,384.54 408,384.54
Profit - 359,177.19 971,040.81 1,836,270.89 2,955,629.02 4,329,968.21
Retained
Total Equity 408,384.54 767,561.72 1,379,425.35 2,244,655.42 3,364,013.55 4,738,352.75
Total Capital 708,384.54 1,020,338.80 1,579,312.76 2,385,306.40 3,438,319.73 4,738,352.75
& Liabilities

29
30