Feasibility Study

Identification and exploration of business scenarios

Throughout the restaurant industry there is a wide variety of service styles. Determining
which style of service best suits our talents and needs is the first process of opening a business.
Each service style caters to specific markets and in order to ensure success our service style
must please our target market.

Fast Food, also known as quick service restaurants, caters to people in fast paced
environments. This style of restaurant primarily serves food such as burgers, fries, chicken
sandwiches, etc. that are made in bulk, wrapped, and kept warm until served. This doesn’t
allow foods to be made fresh with high quality ingredients along with having the healthiest
selection of food. Fast Food restaurants have minimal seating, if any as they might have a
drive-thru option available. Our concept for Confections by Design Bakery is looking on building
relationships with our customers on a personal level. The fast food service style does not fit this
image. Our café plans to make our products fresh with healthy options, therefore fast food is
not the best choice.

Fast casual restaurants do not offer full tableside service but some places may have some
aspects of tableside service available. This is a new and upcoming concept that is a
combination between fast food and casual dining. Fast casual dining also focuses on healthier
food options as well as fresh ingredients. These restaurants cater to people who would like to
receive their food in a timely manner to get in and out of the restaurant rather than sitting around
waiting for food and service, such as in casual or fine dining. This style of service would fit
perfectly for the needs of our target market. Having a fast casual style allows customers to
come at any time of day and receive quality food without having to commit a lot of time to dining.

Casual Dining is a style of service where a restaurant serves moderately-priced food in a

casual atmosphere. Casual dining restaurants provide full table service as well as a fully
stocked bar. Our concept for Confections by Design Bakery is a smaller café instead of a full
service restaurant, having a full casual dining restaurant would not be a realistic service to
pursue.

Fine dining restaurants are full service restaurants offering only the highest quality food,
service, and experience. Even though Confections by Design Bakery will focus on providing
quality food and service, making Confections by Design Bakery into a fine dining restaurant
would be inappropriate. Especially considering the style of food we would provide and the target
market we are trying to appeal to.

Type and Quality of Products Marketed

Confections by Design Bakery will consist of two different departments; the bakery and
the sandwich bar. The bakery carries a variety of goods such as bagels, breads, muffins,
pastries, cookies, and cupcakes. There will also be select sandwiches made from the bakery’s
bagels and breads. The bakery department is generally geared toward the breakfast crowd and
for those with a sweet tooth at any time of the day. The sandwich bar will appeal more to the
lunch crowd, offering the freshest ingredients along with a healthy selection. Confections by
Design Bakery will also offer a variety of beverages featuring espressos, coffee, juice, tea, and
fountain beverages.

How will the business make money?

 Confections by Design Bakery will earn its profit by simply being the best café around.
This is determined by not only the quality of the food but also by the customer service provided.
Confections by Design Bakery plans on having a small, close, and well-trained staff that can
meet the public and the company’s needs. Having a small staff creates a family like atmosphere
with the café. By inviting the public into what we consider our home, makes the customer feel
special and we are able to create strong, loyal, relationships with them.

Technical Processes, Size, Location, Kinds of Inputs

Confections by Design Bakery plans to have a generous size café, but nothing that is too
large or overwhelming. There will be some comfortable indoor seating along with a few tables
outside for when the weather is nice. The target markets for Confections by Design Bakery will
be families and businesses. The best location for these markets would be the Kentlands. The
Kentlands is an up and coming community with many families and now businesses within a 5
mile radius.

Relationship to the surrounding geographical area

Bringing our business into the Kentlands community is going to create competition for
surrounding businesses similar to Confections by Design Bakery; however, this will bring more
revenue into the community. Confections would be located in an area which already has
buildings available instead of building a new place and requiring heavy construction in the area.
This saves the community the hassle of having to work and travel around our business and
hopefully make a good impression on the Kentlands community.

Industry Description

The restaurant industry is one of the seven service industries in the hospitality industry
(other categories include lodging, event planning, theme parks, transportation, cruise line, and
tourism industries). Food and beverage facilities are essentially retail stores that carry and
prepare food items. They are facilities that prepare food and drink to order for customers in
exchange for money. Meals can be consumed on premises, but restaurants also offer offsite
delivery or carryout services. According to the statistics provided from the National Restaurant
Association, there are approximately 970,000 food service locations nationwide with a projected
sales of $632 billion in 2012; the typical sales is $1.7 billion per day (“Facts at a Glance”).
The types of restaurants are categorized based upon menu style, preparation methods
and pricing. The four major categories in the restaurant industry are fast food, fast casual,
casual dining, and fine dining restaurants. Target markets in the restaurant industry are
versatile; consumers can be categorized by age, food preference, cultural background etc.
Some on the market segments includes young adults, seniors, tourists, vegetarians, business
people, sports fans, lunch break crowd, happy hour crowd, etc.
Our concept is fast casual, the type of restaurant that does not offer full table service but
offers a friendlier atmosphere with higher quality of food. Most fast casual establishments offer
counter service accompanied with food. The menu is usually limited and extends to over the
counter displays with various options in the way the food is prepared. This restaurant concept
was popularized in the mid 1990s; however, it did not become “trendy” until the 2010s. The
reason behind this change in trends was because consumers started to prefer food service that
offers healthier food options compared to fast food and with a relatively low cost as compared to
casual and fine dining.
The success of a restaurant is based on a variety of factors that include food quality,
customer service, location, menu price, etc. One of these factors is trend which can be defined
as the direction in which something tends to move. In the restaurant industry, it is focused more
on the kinds of food being served. The National Restaurant Association identifies the trend in
the next year or two to focus on children’s nutritional menus and sourcing ingredients from local
farms. Consumers nowadays focus more on the nutritional value of food and how ingredients
are harvested. Factors that contribute to this trend including the ingredients’ freshness, methods
which they are grown, and the distance the ingredients have traveled before they are made onto
the table.

The Restaurant Life Cycle

The restaurant life cycle of restaurants has four stages: Introduction, growth, maturity
and decline.

The introductory stage is when a new product or service enters the marketplace, in this
case our bakery cafe. The nature of hospitality products is typically intangible which can make
market testing difficult before introduction. Ideally the product should be developed on the basis
of consumer research. This stage may also be one of high costs. Typically, the introduction
often begins with a soft opening that may be a few days to a few weeks before the official
opening. Word of mouth brings some customers or small groups to “test” the products and
services offered in the restaurant.
The growth stage of the restaurant industry differs from manufacturing industry; if the
menu items in a newly opened restaurant are not successful, the managers will simply take the
items off the menu and offer new ones. In manufacturing industry, if a product is not successful
then the entire plan is terminated. The growth stage of the hospitality unit is one of excitement
and disappointment. Sales may be growing monthly or there may not be enough seats in the
restaurants. Customers who tried the facility in the introductory stage have told others who are
now trying it. Business is booming, but there are many marketing issues at hand. It is during the
growth stage that the previous relationship with marketing pays off. Consumers come back for
the food and service and they will tell others about it. The growth stage is also a time of product
refinement. Continuous customer research and feedback should assist in eliminating flaws and
fine tuning our products to the target market. An important note during this stage is that it is not
a good time to raise product prices.
The mature stage of the product life cycle can continue for a long time or it can end
quickly. If the product has successfully and correctly gone through the introductory and growth
stages, the market should now be pretty well in place. In the mature stage, the restaurant has to
run harder just to stand still. With other competitions sharing the same target market, the
concept and facility could be getting old. The best way to avoid this is to keep and increase the
loyal customers during the growth stage. The best way to stay in business is to stay close to the
customer, find new markets, seek and solve customers’ problems, and do it better than the
competition.
 If the restaurant is not maintained during the mature stage it will enter the decline stage.
For example, the menu items may lose their freshness, consumers may change, or it is time for
the restaurant to go. Decline has a tendency to progress faster than growth stage. During the
beginning of this stage, managers face declining revenue by cutting expenses. The managers
may decrease the front and back of the house employees to cut labor costs, use cheaper raw
ingredients, and decrease menu prices. However, these actions cause more revenue decline
and result in unhappy customers, which results in even more revenue decline (Shoemaker).

Industry Competitiveness

According to the National Restaurant Association 2012 Restaurant Industry Fact Sheet,
seven out of ten eating and drinking establishments are single unit operations. This means that
franchises make up almost thirty percentage of the industry. The first year success rate for
restaurants is roughly ten percent. However, since franchises have better operation systems
and are well known for their reputations, their success rate has increased to forty percent.
The 2009 average unit sales were $837,000 for full service restaurants and $738,000 for
quick service restaurants. Although the unit sales for full service are higher, the profit margin
may not be as high as compared to quick service restaurants. Quick service restaurants serve
food at lower prices and have high guest turnover ratios. Their labor costs and food and
beverage costs are also lower which means that their profit margin may also be higher.
The major competitors at the Kentlands in Gaithersburg are Panera Bread, Chipotle,
Cosi Sandwich, Liz Bakery, and Whole Foods Market. Panera Bread, Cosi Sandwich and Liz
Bakery are considered direct competitors while Chipotle and Whole Foods are indirect
competitors.
Panera Bread is a chain of franchised bakery cafes categorized as quick service
restaurants in the United States and Canada. Panera started in 1981 when the co-CEO
purchased the St. Louis Bread Company with twenty of its cafes in the area. By 1999, Panera
had expanded into a national restaurant, operating over fifteen hundred cafes over forty states.
Panera competes on many levels including fast casual dining and specialty foods. Its main
competitors include McDonald’s, Starbucks Coffee, and Subway. To stay profitable in the highly
competitive restaurant industry, Panera regularly reviews and revises their menu to sustain the
interest of regular customers, satisfying changing customer preferences and being responsive
to various seasons of the year. Panera develops a competitive advantage in changing their
menu over competitors who do not change their menu frequently and customers often lose
interest in their menu offerings.
Cosi is an American restaurant chain that primarily offers gourmet sandwiches and
salads. The concept was based on a cafe in Paris, France. Founded in 1996, they’re all over the
World with one hundred and four locations just in the United States. These restaurants also
feature a full service espresso bar and many chains may even serve alcohol. One attraction is
that all Cosi’s breads are baked in an open flame oven in full view of the customers. The menu
also serves breakfast items such as bagels, salads, soups, and desserts. The top competitors of
Cosi on a national and local basis are Panera Bread Company, Starbucks Corporation, and
ABP Corporation.
Liz Bakery is an independent bakery specialized in custom cakes such as wedding
cakes, quinceaneras, sculpted cakes and cupcakes. We consider Liz Bakery as our direct
competitor because our cake selections are similar to their offerings. One advantage Liz Bakery
has over ours is its reputation; the bakery has been in the Kentlands area longer than we will
have been and it has a loyal customer base. Our competitive advantage over them is that we
offer a variety of specialty items.
There are two other establishments, Whole Foods Market and Chipotle, which are
considered our indirect competitors. Whole Foods Market has almost everything we sell; what
distinguishes it from our bakery cafe is that Whole Foods is a market. Our bakery cafe also
offers the experience that consumers will not find in Whole Foods. And as for Chipotle, it is also
considered as a fast casual dining restaurant. One of its competitive advantages is that it has
many target markets with many loyal customers.

Bargaining Power

The suppliers of ingredients, equipment, labor, and expertise services provided have
power over the restaurant industry. The bargaining power is the price for the materials and
services provided. The restaurant industry has many suppliers that vary in different sizes and
specialties. Restaurant owners will choose the suppliers who can correspond to their needs.
One indication that suppliers have bargaining power is that the suppliers can contract with only
certain independent or franchise operations and can set the amount of ingredients the operation
must order. Small independent units may not be able to purchase from certain vendors because
they do not have the financial power to purchase in large quantities. If our bakery cafe offers
menu items that are ingredient driven (for example, fresh local produce and proteins), this will
increase supplier power as the suppliers can demand higher prices for their products and
increase our food cost.
The Bargaining power of customers plays an important role in the restaurant industry.
When the buyer power is strong, the buyers can certainly set the price they are willing to afford.
Consumers of fast casual restaurants will like to have high quality food and a better experience
offered at a reasonable price. It is dangerous for fast casual restaurants to raise prices because
of the low prices offered by competitors and the expectations of their consumers. One of the
reasons that fast casual restaurants were able to succeed during the recent recession is
because the owners were able to maintain reasonable prices to offer their consumers.
The threat of new potential entrants in fast casual restaurants is extremely high. There
are fewer barriers for entry into this market because it requires relatively low capital.
Restaurantowner.com identifies that an approximate cost to start a restaurant business is
$225,000. Another factor that can influence more potential entrants is the possibility to create a
better dining experience. Fast casual restaurants not only need to offer a better dining
experience, but they also need to serve good food. If the restaurants are able to revolutionize
their consumers’ experience, it will be extremely easy to enter into the fast casual segment.
To succeed in this extremely competitive market, a fast casual restaurant must have a
competitive advantage. A restaurant can obtain this advantage by lowering menu prices while
creating product differentiation, exploiting relationships with suppliers, and distributing products
differently. It is reasonable to assume that most fast casual restaurants offer similar menu items
in the same price range. The restaurant owner must lower their menu prices and/or improve
customer service. Competition increases in this industry because the number of restaurants is
constantly increasing and they are battling for the same group of customers. A fast casual
restaurant should always try to increase their revenue by expanding their targeting market.

Market Potential

The product we offer will be sold in both the product and service market; our menu items such
as sandwiches, baked goods, and drinks are the products and our dining experience is the
service.

The demand for fast casual restaurants in the restaurant industry has been constantly growing.
This concept meets the customers’ demand of “eating on the run” and provides healthier
options. In recent years consumers favor healthy food options. The food quality and preparation
methods at the traditional fast food restaurants have been scrutinized in recent years. The food
options provided in these establishments have been shown to have negative health
consequences.

However, consumers’ desire of healthier food options does not supersede the need of
quick service dining. Consumers prefer food that can be eaten quickly during a lunch break or
picked up on the way home. Fast casual restaurants have found a niche where the consumers’
needs of healthy food overlap with quick service. This is an opportunity for restaurateurs
because fast casual restaurants are targeting two potential markets; quick service and casual
dining. Although restaurants in this category do not offer full tableside service, their food quality
is just as high and the food takes shorter time to prepare. The price for a typical meal is
anywhere from eight to fifteen dollars. Although this price is higher than what is offered at fast
food restaurants, consumers are willing to pay more for higher quality and healthier food.

In order to become a “branded product” our restaurant concept must become a

franchise. Franchising is the practice of using a firm’s business model. The franchisee must pay
a fee to the franchisor in order to use the franchisor’s business concept, logo, menu, design,
etc. It is less risky than independent operations because a franchisor’s concept has been
proven to be successful. To be established as a successful operation, a business must
successfully operate for a few years to prove to potential clients that its concept is worth
purchasing.

According to Los Angeles Times, the market share of fast casual dining establishments
in early 2012 was at six percent. Although the market share is not as high as the other kinds of
food establishments, it is the only segment in the restaurant industry that has shown growth in
the last five years.

Access to Market Outlets

Our target markets are mainly focused on families and businesses. To promote and
advertise our products and services we are planning on using a variety of social media,
including Facebook, groupons, direct mails, etc. Our plan is to use approximately 3.5% of our
monthly income for advertising.
The Restaurant Industry Distribution System

Sources Intermediaries

(Growers, manufacturers, (Middlemen)

and processors)

Retailers

(Restaurants)

Consumers

(Guests)

The industry distribution system has the following components: sources, intermediaries,
retailers, and consumers. A source is a supplier at the beginning of a product’s channel of
distribution. For instance, a farmer is a source our restaurant can use for fresh fruits in our
baked goods. This supplier typically sells items to an intermediary that resells them to hospitality
operations. Intermediaries are also known as vendors, which retailers such as restaurants and
grocery stores order items from. Items retailers order from vendors are in larger quantities and
are offered in wholesale prices. The only way consumers can purchase these items is through
the retailers (“Product Life Cycle”).

Proposed Business Concept

Our proposed business will be a small bakery located at The Kentlands in Gaithersburg,
MD. The Kentlands are less than 5 miles from I-270 and around 25 miles from downtown
Washington DC. There is plenty of public transportation accessible from this location. Our
selected location allows us to access nearly two thousand homes in the Kentlands
neighborhood along with numerous office buildings within a 5 mile radius. The main utilities
used in these properties are gas, power, and water.
In order to obtain a food service facility license a menu, HACCP flow charts for each
menu item, insurance documentation, and a set of complete plans are ready to be submitted to
the Maryland Department of Health and Human Services.
Our bakery will be offering a variety of products that use a number of high quality
ingredients from local bakery suppliers. We have selected to use local suppliers because of
their quite competitive pricing and high quality ingredients when compared to other imported
suppliers.

Ingredients and Vendors

Major suppliers of local raw materials are:

Restaurant depot
George R. Ruhl & Son, INC (Bakery supply)
Hoffman’s Meats (Deli supply)
 Costo
Sam’s Club

Some ingredients for basic items are listed below:

Ingredients Unit price Quantity Total Cost

Flour $ 13.50 /50lb 5 $ 67.50
High Gluten Flour $ 15.00 /50lb 5 $ 75.00
Eggs $ 11.50 /90ct 6 $ 69.00
Baking Powder $ 6.00 /5lb 1 $ 6.00
Butter $ 9.00 /lb 50 $ 450.00
Sugar $ 25.00 /50lb 5 $ 125.00
Cream $ 4.00 /qt 15 $ 48.00
Yeast $ 3.00 /lb 2 $ 6.00
Baking Soda $ 13.00 /lb 2 $ 26.00
Chocolate $ 184.00 /40lb 2 $ 368.00
Milk $ 2.89 /gallon 6 $ 17.34
Lettuce $ 2.39 /2 heads 30 $ 71.70
Tomatoes $ 6.00 /3 lb 8 $ 48.00
Sprouts $ 2.24 /box 4 $ 8.96
Onions $ 5.37 /10lb 3 $ 16.11
Avocado $ 4.47 /5ct 8 $ 35.76
Bell Peppers $ 6.98 /2lb 4 $ 27.92
Ham $ 6.27 /lb 15 $ 94.05
Turkey Breasts $ 7.49 /lb 15 $ 112.35
Pepperoni $ 5.69 /lb 15 $ 85.35
Sausage $ 3.57 /lb 10 $ 35.70
Provolone Cheese $ 3.04 /lb 10 $ 30.04
Cheddar Cheese $ 4.94 /lb 10 $ 49.40
Swiss Cheese $ 4.94 /lb 10 $ 49.40
Mozzarella Cheese $ 3.38 /lb 10 $ 33.80
Pepperjack Cheese $ 4.94 /lb 10 $ 49.40
Horseradish Dijon $ 3.35 /bottle 6 $ 20.10
Honey Mustard $ 2.44 /bottle 6 $ 14.64
Mayonnaise $ 6.73 /bottle 6 $ 40.38
Thousand Island $ 6.48 /bottle 6 $ 38.88
Canned Tuna $ 8.46 /10cans 3 $ 25.38
Pickles $ 4.24 /jar 2 $ 8.48
Olives $ 3.49 /jar 2 $ 6.98
Vinegar $ 1.79 /bottle 1 $ 1.79
Bacon $ 3.13 /lb 5 $15.65
Coffee Beans $ 14.88 /bag 24 $357.12
Tea Bags $ 4.98 /box 3 $14.94
Coke Products $ 0.31 /can 192 $ 59.52
Apple Juice $ 0.50 /bottle 48 $ 24.00
Orange Juice $ 0.50 /bottle 48 $ 24.00
Lemonade $ 0.42 /bottle 48 $ 20.16
Milk $ 0.72 /bottle 48 $ 34.56
Business Ownership

A partnership between four managing owners has been formed to run our bakery. Since
the four owners have managed restaurants in the area, they are familiar with local buying
sources, suppliers, and methods. The managers also have leadership skills and have the ability
to supervise personnel while reflecting the style and character of the bakery. Two full time
bakers are needed to maintain the operation of the baked goods. They have to work early in the
morning to begin preparing our fresh baked breads, cakes, bagels, and pastries. We will need
two cake decorators, one full-time and one part-time, to manage all special ordered cakes and
cupcakes. The lead cake decorator needs to arrive early in the morning to begin preparing items
for the morning and creating a list for the afternoon. The part-time cake decorator will help with
the afternoon and weekend shifts. Five clerks are required to maintain the daily operation; order
taking, making sandwiches/soups, busing tables, and keeping dining area clean. Three Prep
workers are needed for preparation of sandwiches and soups, at the same time keep working
areas organized. Prospective employees are students from Montgomery College, University of
Maryland and residents from the local area.

Wages and Job Descriptions

The following are the wage rates and skill level requirements for all the positions:
Job Title Wage Rate Skill Level
Owners/ Managers $ 4,000.00/month At least 2 year experience in management /
supervising positions in hospitality industry.
Bakers $10.00/hour Formal culinary schools trained in baking and pastry
field
Able to work in early morning shift
Able to work alone under pressure
2 years prior experience
Cake Decorators $10.00/hour Formal culinary schools trained in baking and pastry
field
Able to work in early morning shift
Able to work alone under pressure
2 years prior experience
Clerks $7.50/hour Proficiency in Math
Proficiency in handling money transaction
Proficiency in using a calculator and automated cash
register
Must be able to speak, read, and write in English
1 year prior experience
Prep workers $7.50/hour Proficiency in Math
Proficiency in handling money transaction
Proficiency in using a calculator and automated cash
register
Must be able to speak, read, and write in English
1 year prior experience
Financial Studies

The main monthly expenses for our bakery is a rent payment at $2,720 a month in The
Kentlands on Main Street, a payment on our equipment loan, and accounts payable to our
vendors. The building was previously used as a retail store and is 960 square feet. We will need
to renovate inside and purchase or lease all equipment needed to run a bakery. This listing was
found on Showcase.com and advertised storefronts in The Kentlands and the surrounding
areas. Some of our main purchases will include, but are not limited to:

Double rack ovens $39,108 (three)

Proof box $34,589
Microwave $942 (two)
Pastry racks and sheet pans $500 (20)
Ranges $2,535
Prep tables $600 (4 maple tops) 1193 (3 stainless steel)
Walk in freezer $6,391
Walk in refrigerator $5,051
Reach in refrigerator $2,981 (two)
Ice maker $1,683
Mixers $13,831 (floor model) 1,340 (2 countertop model)
Dough sheeter $6,482
Refrigerated display cases $7,579 (two)
Three tub sink $829
Sandwich station $3,618
Espresso machine $8,100
Soda machine $4,115
Bread slicer $2,332
Scales $600 (two)
Table and chairs $337 (five)

Our estimated main equipment costs are $251,428. We will add approximately $100,000
to this estimate to cover the costs of renovation and any unforeseen extra equipment needed. If
there are any funds leftover we will roll them into the purchase of supplies and ingredients. We
will need approximately $25,000 for those purchases. Equipment prices were estimated from
various commercial kitchen websites such as galasource.com and Bakeryequipment.com.

Our menu was designed by one of the founding partners. The creative edge from comes
from her extensive restaurant background from working in various restaurants and bakeries in
the past. She spent a lot of time researching market prices and comparing competitors’ prices
from Panera Bread and Einstein Bros Bagels. Our forecasted sales for any given week within
the first year are:

Food Sales Number Cost Sales

Turkey Bistro 28 5.59 156.52
Ham and Swiss Mix 17 5.49 93.33
Avocado Club Mex 35 6.29 220.15
The Firecracker 42 5.89 247.38
The Italian Bistro 28 6.39 178.92
The Veggie Mex 18 5.29 95.22
The Tuna Avalanche 14 5.39 75.46
Cup of Soup 52 1.89 98.28
Bowl of Soup 35 2.99 104.65
Bread Bowl Soup 28 4.19 117.32
Side Salads 70 1.99 139.3
Breakfast Club 53 4.09 216.77
Sausage Lovers 35 3.89 136.15
Simply Eggs 28 3.19 89.32
Single Bagel 125 0.99 123.75
Half a dozen Bagels 62 5.59 346.58
Baker’s dozen Bagels 35 9.99 349.65
Bag of Bagels 38 13.99 531.62
Tub of Cheese 37 2.89 106.93
Assorted Breads 125 3.69 461.25
Assorted Pastries 150 1.99 298.5
Assorted Muffins 150 1.59 238.5
Cookies 175 1.39 243.25
One Cupcake 175 1.39 243.25
Half a dozen Cupcakes 70 6.59 461.3
Dozen Cupcakes 53 11.99 635.47
Catered Cakes 52.5 25 1312.5
Total Food Sales 7321.32
Beverage Sales
Reg Coffee 37 1.69 62.53
Large Coffee 49 1.99 97.51
Reg Tea 26 1.49 38.74
Large Tea 33 1.79 59.07
Reg Soda 80 1.59 127.2
Large Soda 90 1.89 170.1
Juices 31 2.69 83.39
Milk 25 1.79 44.75
Cappuccino 21 2.99 62.79
Cinnamon Latte 28 3.09 86.52
Vanilla Latte 28 3.09 86.52
Caramel Latte 31 3.19 98.89
Mocha Latte 36 3.29 118.44
White Mocha Latte 36 3.29 118.44
Chai Tea 32 2.99 95.68
Espresso Shot 28 1.25 35
Total Beverage Sales 1385.57
Total Sales 8706.89
 Collectively our forecasted sales for one week are $7,394.39 from our standing menu
and approximately $1312.50 from our catered menu of special order cakes for a total of
$8,706.89. Respectively our estimated forecasted sales per month are $37,700.83 and per year
is $452,758.28. We should budget approximately 3.5% of our monthly sales from our menu for
advertising, which is approximately $1318 a month. Each month our sales will fluctuate between
items sold. For example in the winter time we will sell more hot coffee then cold drinks, whereas
in the summer time we will sell more coffee as iced or frozen drinks. These are simply the
averages estimated for any given week or month within our first year of being open. By the end
of the third year, we hope to double our sales volume.

Estimated Start-Up Costs and Contributions

The partners will each contribute a set amount towards the investment of the company
at $15,000 each. With $60,000 in capital, we would need research possible banks for a loan
amount of approximately $295,000 for our renovation needs. All ingredients and supplies for our
bakery will be placed on accounts payable to the suppliers after a down payment of 5% of the
sales to each supplier. We plan on having a staff of approximately 12 employees, two bakers,
two cake decorators, three prep cooks, and five clerks. The bakers and lead cake decorator will
be employed full time while the other workers will be employed part time. Estimated wages for
our employees will be approximately $5,200 each biweekly pay period.
We will look into various local banks for a business loan for our equipment and
renovations. Banks based locally generally like to help out the community in which they do
business in. The Bank of America, Capital One Bank, M&T Bank, and PNC are the major local
banks in the area. We will arrange meetings with each bank to see who has the best offer the
fits our needs. We are hoping to find financing around 4.25% for a long term goal.

Break Even Analysis

Our estimated sales for one month are $37,700 with a food cost percentage of 25%
putting our cost of sales at $9,672. Our estimated fixed costs are the loan payment at $3,500,
rent payment at $2,720, estimated depreciation costs of $3,457, and insurance payment of
$167. This comes to a total of $9,844 in fixed costs. Our estimated variable costs are cost of
sales at $9,672, wages at $11,258, advertising at $1,318, utilities at $450, and payroll taxes at
$1,352 for a total of $24,050 in variable costs. Our variable cost percentage would be about
64%, giving us a contribution margin of 36%. The formula for the breakeven point is FC / (100%
- VC% or 1 - VC) = 9844 / .36 = $27,344. Our bakery would need to make $27,344 in sales in
order to break even each month.

Estimated Financial Statements

Following are the estimated financial statements for the first months to the end of our
first year in business. We will use these statements to forecast sales and obtain market
research to continue to improve our business. We have an estimated depreciation rate of 16.5%
over a course of ten years for our equipment. Our estimated interest rate on our loan from the
bank is 4.25% over the course of 15 years. The purpose of forecasting financial statements is
so the owners can make budget plans for the first few months after opening. Once the business
has been opened, the forecasted statements can be replaced with actual data. We can compare
our estimates to our data recorded from the first few months to see if we are headed in the right
direction. We will make adjustments where needed to ensure we stay as close to our target
goals as possible.
 Balance Sheet

Ending of our first month

ASSETS
Current
Cash $60,000.00
Inventory 7,297.23
Accounts Receivable 10,715.77
Total Current Assets 78,013.00
Noncurrent
Furniture 7,664.00
Equipment 243,761.00
Prepaid Insurance 2,000.00
Total Noncurrent Assets 253,425.00

Total Assets $331,438.00

LIABILITIES
Current
Accounts Payable $7,600.00
Wages 11,258.00
Utilities 450.00
Advertising 1,318.00
Current Portion LT Debt 3,500.00
Total Current Liabilities 24,126.00
Noncurrent
Loan Payable 295,000.00
Less Current Portion Due 2,500.00
Total Noncurrent Liabilities 292,500.00
Total Liabilities 316,626.00

EQUITY
Owner's Capital 14,812.00
Total Equity 14,812.00

Total Liabilities and Equity $331,438.00

 Income Statement

Ending of our First Year

REVENUE
Food Sales $380,708.64
Beverage Sales 72,049.64
Total Revenue $452,758.28
COST OF SALES
Cost of Food 95,177.16
Cost of Beverage 20,894.40
Total Cost of Sales 116,071.56

Gross Profit 336,686.72

OPERATING EXPENSES
Payroll 135,200.00
Payroll Taxes 16,224.00
Marketing 15,816.00
Utilities 5,400.00
Total Operating Expenses 172,640.00

INCOME BEFORE FIXED

EXPENSES 164,046.72

FIXED EXPENSES
Loan 42,000.00
Rent 32,640.00
Depreciation 41,485.00
Insurance 2,000.00
Total Fixed Expenses 118,125.00

NET INCOME $45,921.72

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