Dolphin Sea Food Restaurant Project Report

Course:- Financial Management
Teacher
Sir Faisal Dhedhi
Members
Salman H Latif 56830
Tariq Mehmood 56908
Qamar u din 57897
Syed Moaz Ali 55634

1. 1













22
ND
OF APRIL 2015

Submitted To




Submitted By



MEMBERS
Salman H Latif 56830
Tariq Mehmood 56908
Qamar u din 57897
Syed Moaz Ali 55634






FINANCIAL MANAGEMENT
SIR. FAISAL DHEDHI

2. 2

ACKNOWLEDGEMENT

We would like to express our special thanks of gratitude to our Instructor
Faisal Dhedhi, of subject Financial Management, who gave us the golden
opportunity to do this wonderful project on the topic which also helped us in doing a
lot of Research and we came to know about so many new things. He was always there
to show us the right track when we needed his help. With the help of his valuable
suggestions, guidance and encouragement, we were able to perform this project work.

We are really thankful to him. We are overwhelmed in all humbleness and
gratefulness to acknowledge our depth to all those who have helped us to put these
ideas, well above the level of simplicity and into something concrete.

We would like to thank our parents and friends who helped us a lot in gathering
different information, collecting data and guiding us from time to time in making this
project. Despite of our parent's busy schedules; they gave us different ideas in making
this project unique. We put a team effort to complete and make it a great project.
We would also like to thank our colleagues / members, who often helped and gave us
support at critical junctures during the making to this project.

3. 3

Table of Contents
Introduction ................................................................................................................................ 4
1. PROJECT PROFILE ............................................................................................................. 5
1.1 Project Brief ........................................................................................................................ 5
1.2Rationale for investment ...................................................................................................... 5
1.3 Legal status of the company................................................................................................. 5
1.4Project investment ............................................................................................................... 5
1.5 Construction Cost ................................................................................................................ 6
1.6 Dining and Office Furniture .................................................................................................. 6
1.7 Equipment and Machinery ................................................................................................... 7
1.8 Advance Rent ...................................................................................................................... 7
1.9 Working Capital................................................................................................................... 7
1.10 Utilities ............................................................................................................................. 8
1.11 Salaries ............................................................................................................................. 8
1.12 Land and Building Requirement.......................................................................................... 9
2. SWOT Analysis ................................................................................................................. 9
2.1 Strengths ............................................................................................................................ 9
2.2 Weaknesses ........................................................................................................................ 9
2.3 Opportunities...................................................................................................................... 9
2.4 Threats ............................................................................................................................... 9
3. Financial Feasibility ......................................................................................................... 10
3.1 Depreciation on Building & Equipment ............................................................................... 10
3.2 Account Receivables .......................................................................................................... 10
3.3 Miscellaneous Outlet Expenses .......................................................................................... 10
3.4 Financial Charges............................................................................................................... 10
3.5 Taxation............................................................................................................................ 10
3.6 Cost of Capital ................................................................................................................... 10
3.7 Forecasted Income Statement............................................................................................ 11
3.8 Forecasted Balance Sheet .................................................................................................. 12
4. Key Assumptions ........................................................................................................... 133
5. Project Parameters.......................................................................................................... 133
6. MENU ......................................................................................................................... 144

4. 4

Introduction

This project report is developed to exploit potential investment opportunity in setting up and operating
a medium sized Sea food restaurant offering a variety of sea food items to the general public. This
pre-feasibility gives an insight into various aspects of planning, setting up and operating a Sea food
restaurant for the general populace. The report is designed to provide relevant details (including
technical, financial and marketing) to facilitate in making the decision by providing various
technological as well as business alternatives. The report also allows flexibility to change various
project parameters to suit the needs of the entrepreneur.
Dolphin is the name proposed for our Sea food restaurant. It will be located into the mainstream of
Gulistan – e – Jauhar. Dolphin would provide to its customers a whole new experience of dine in and
take away. The Ownership of Dolphin Restaurant would be equally distributed among the five
partners. All the four owners are the students of PAF KIET, studying business administration. The
entrepreneurial skills, and an idea of setting up a venture firm is a driving force for all the five
students.50% of the capital requirement would be sponsored by the owners, while 50% would be debt
financed, it means debt/equity ratio will be 50:50.we get loan from Bank Al Habib at 15% interest
rate. The total project cost will be Rs.5, 102,250/= only. It includes Construction Cost, Dining and
Office Furniture, Equipment and Machinery, Advance Rent, Preliminary Expenses and Working
Capital.
Dolphin restaurant will be offer something different. We will offer different varieties and sizes of live
fish floating in tanks like Red Snapper, Pomfret, Tuna or Salmon. We will also offer jumbo prawns,
lobsters, shrimps, crabs or other sea food products. Let the customer select the piece, then prepare it
fresh and serve whether fried, grilled or baked. We will charge premium for this. We will use Market
oriented pricing strategy. Our competitors are Aqua lounge (Zam Zama), Kamameshi restaurant
(phase 5) and Blue water (ZamZama phase 5).
The NPV of our project is 11,334,969.The IRR is 24% and the Payback period is 3.97 years. The
weighted cost of capital is 17.5%.Our financial projections shows that it will be investable.

5. 5

1. PROJECT PROFILE
1.1 Project Brief

Dolphin is the name proposed for our Sea food restaurant. It will be located into the mainstream of
Gulistan – e – Jauhar. Dolphin would provide to its customers a whole new experience of dine in and
take away. The recommended area for the proposed business setup will be in a densely populated
middle income area (for example Gulistan-e-Jauhar, Karachi).
1.2Rationale for investment

The Ownership of Dolphin Restaurant would be equally distributed among the four partners. All the
five owners are the students of PAF KIET, studying business administration. The entrepreneurial
skills, and an idea of setting up a venture firm is a driving force for all the four students.50% of the
capital requirement would be sponsored by the owners, while 50% would be debt financed, it means
debt/equity ratio will be 50:50.we get loan from Bank Al Habib at 15% interest rate.
1.3 Legal status of the company

Dolphin would be a privately owned company (restaurant), owned by four partners:
1. Salman Haji Latif
2. Qamar U din
3. Tariq Mehmood
4. Syed Moaz


1.4Project investment





.

.

Item: Cost (Rs.)


Construction Cost 1,307,000


Dining and Office Furniture 542,250


Equipment and Machinery 967,000


Advance Rent 1,200,000


Preliminary Expenses 50,000


Working Capital 1,036,000


Total 5,102,250

.

6. 6


1.5 Construction Cost


Details

% (Sq.feet)

Size (Sq.feet)
Civil works &
Decor. (Cost in
Rs./Sq.feet)
Total
Construction
Cost
Dining 63% 1250 700 875,000
Waiting 4% 80 700 56,000
Kids Play 3% 70 800 56,000
Kitchen 25% 500 500 250,000
Office 1.5% 30 700 21,000
Stores 3% 70 700 49,000
Total 100% 2000 4100 1,307,000

1.6 Dining and Office Furniture

Item Details Quantity Unit Price(Rs.) Total Price(Rs.)
Dining Table – Square
(2X2)
25 6,000 150,000
Chairs (Standard 14”) 100 1,500 150,000
Kitchen Cutlery Set 2 2,500 5,000
Dining Cutlery (Plate,
Fork, Knife, Spoon,
Glass)
150 150 22,500
Air Conditioner Split
Units
(6 Ton)
2 31,000 62,000
Hot Water Geyser Large
1 20,000 20,000
Halogen Lights
25 250 6,250
Wall Lights (Large)
4 1,500 6,000
Portable Emergency
Light
4 2,500 10,000
Generator (1.5 KVA)
1 90,000 90,000
Counter Chairs
2 1,500 3,000
Office Table & Chair Set
1 10,000 10,000
Waiting Chairs for Take
Away Customers
5 1,500 7,500
Total
322 168,400 542,250

7. 7

1.7 Equipment and Machinery

Item Details Quantity Unit Price (Rs.) Total Price (Rs.)
Freezers (12 cf) 3 25,000 75,000
New Broast Machine (15
Pound Capacity)
1 650,000 650,000
Deep Well Fryer (Single
Valve With 2 Baskets)
2 40,000 80,000
Water tank for different
varieties and sizes of live
floating fishes.
1 33,000 33,000
Bin Marry Soup Container
(2 Valve With Steel Cabinet)
1 50,000 50,000
Potato Cutter (8mm)
1 3,000 3,000
Pillar (4.5 Kg Potato Peeling
Capacity)
1 6,000 6,000
Microwave
1 10,000 10,000
Working Tables
2 20,000 40,000
Keg Racks & Shelves
2 10,000 20,000
Total
15 - 967,000
1.8 Advance Rent
The rent for the assumed premises will be Rs. 100,000/- per month. It is assumed that Rs.1,
200,000/- will be given in advance before possession of premises. This will include 6 months deposit
and 6 month advance rent. The rent would be payable on a monthly basis and is expected to increase
at the rate of 10% per annum for the projected period.
1.9 Working Capital
It is estimated that an additional amount of approximately Rs. 1,036,000 will be required as cash in
hand to meet the working capital requirements / contingency cash for the initial stages. The
requirement is based on the rent, utilities and salaries expenses for at least four months and 3 days
raw material inventory. The following table gives the break up.

Item 4 months Cost (Rs.)
Utilities 208,000
Salaries 358,000
Raw Material Inventory 70,000
Rent 400,000
Total 1,036,000

8. 8

The provision for pre operating costs is assumed to be Rs. 50,000 which will be amortized equally
over a 5 year period.
1.10 Utilities
The following table presents the assumed breakup of utilities on a monthly basis:







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

Designation/Type Count Monthly Salary Total Salary
Owner 1 - -
Kitchen Supervisor 1 12,000 12,000
Shift Supervisor
(including reliever)
1 10,000 10,000
Cook
2 9,000 18,000
Servers
2 8,000 16,000
Cashier
1 9,000 9,000
Dishwasher
1 8,000 8,000
Cleaner
1 7,500 7,500
Guard
1 9,000 9,000
Total
11 72,500 89,500

Considering the size of the proposed establishment it is assumed that the any one on the owner
would be managing the overall affairs of the sea food setup initially. He will be required to process and
check bills, invoices, and receivables management, maintain accounts, etc. for record. The owner will
also ensure safe custody of store keys.
The cashier will only be responsible for receiving payment and handing over change while the owner
would be managing the cash drawer for control purposes. It is important to note that many food
Utility Monthly Charges(Rs.)
Electricity 25,000
Water 2,000
Gas 15,000
Telephone 10,000
Total 52,000

9. 9

outlets tend to lose out due to inadequate cash control by the owners especially during rush hours
where the counter staff can easily slip out one or two payments.
1.12 Land and Building Requirement
The land requirement is around 2,000 sq.ft. In Gulistan – e- Jauhar where all utilities and facilities are
properly available. It is recommended that the Dolphin outlet be opened on the ground floor of flats or
shopping mall wherein the consumer traffic will be a maximum. The more the shop is near the main
road the better sales potential it will have.

2. SWOT Analysis
2.1 Strengths
 High-quality food offerings that exceed competitor’s offerings in quality, presentation, and price.
 Strong Cash Flows.
 Innovative range of Sea foods under one roof.
2.2 Weaknesses
 A limited marketing budget to develop brand awareness.
 Lack of knowledge about our customers.
2.3 Opportunities
 Growing market with a significant percentage of the target market still not aware that Sea food
exists.
 Balanced menu.
 Customer focus.
 Increase delivery service.
2.4 Threats
 Competition from other Sea food restaurants.
 A slump in the economy reducing customer's disposable income spent on eating out.
 Increasing wage rates directly affect menu prices.
 Changing customer demands.
 Rising raw material costs.

10. 10

3. Financial Feasibility
3.1 Depreciation on Building & Equipment
Depreciation on Shop, Equipment, Machinery and Fixtures is assumed to be at the rate of 10% per
annum based on the diminishing balance method for the projected period.
3.2 Account Receivables
All sales will be made strictly on cash basis. It is not advisable to operate a Seafood restaurant on
credit basis.
3.3 Miscellaneous Outlet Expenses
A monthly figure of Rs. 6,000 (200 per day) is assumed to be incurred for miscellaneous expenses
which are expected to increase at the rate of 10% per annum for the projected period.
3.4 Financial Charges
It is assumed that long-term financing for 5 years will be obtained in order to finance the sea food
setup which would mainly include construction & décor of Building, Purchase of machinery &
equipment, purchase of inventory etc. This facility would be required at a rate of 15% per annum with
60 monthly installments over a period of five years. The installments are assumed to be paid at the
end of every month.
3.5 Taxation
The tax rate applicable to sole proprietorship is the same as that of the salaried individual. Therefore,
we are assuming that the tax rate would be the same for the proposed fast food setup.
3.6 Cost of Capital
The cost of capital is explained in the following table:

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

11. 11


3.7 Forecasted Income Statement



YEAR YEAR YEAR YEAR YEAR

2016 2017 2018 2019 2020
NET SALES
(15%increase/year)
10,015,200 11,517,480 13,245,102 15,231,867 17,516,647
RAW MATERIAL COST(10% increase/year) (4,910,141) (5,401,155) (5,941,270) (6,535,397) (7,188,937)
GROSS PROFIT 5,105,059 6,116,325 7,303,832 8,696,470 10,327,710

UTILITIES 624,000 686,400 755,040 830,544 913,598
LABOR & SALARIES(10% increase/year) 1,074,000 1,181,400 1,299,540 1,429,494 1,572,443
RENT EXPENSE 1,200,000 1,320,000 1,452,000 1,597,200 1,756,920
OFFICE AND MESCELLANEOUS EXPENSE 72,000 79,200 87,120 95,832 105,415
AMORTIZATION EXPENSE 10,000 10,000 10,000 10,000 10,000
DEPRECIATION EXPENSE 281,625 253,462 228,116 205,305 184,774
MAINTANCE EXPENSE 21,758 19,582 17,624 15,861 14,275
SUB TOTAL (3,283,383) (3,550,044) (3,849,440) (4,184,236) (4,557,425)
OPERATING INCOME / EBIT 1,821,676 2,566,281 3,454,392 4,512,234 5,770,285
FINANCIAL CHANGE (15% PER ANNUM) (273,251) (384,942) (518,159) (676,835) (865,543)
INCOME BEFORE TAX / EBT 1,548,425 2,181,339 2,936,233 3,835,399 4,904,742
TAX(17% of EBT) (263,232) (370,828) (499,160) (652,018) (833,806)
NET PROFIT 1,285,193 1,810,511 2,437,073 3,183,381 4,070,936

12. 12

3.8 Forecasted Balance Sheet

Forecasted Balance Sheet
Dolphin Sea Food Restaurant
As of 31st December 2014, 2015, 2016,2017,2018
Description Year 0
Dec 31,
2014
Dec 31,
2015
Dec 31,
2016
Dec 31,
2017
Dec 31,
2018
ASSETS

CURRENT ASSETS

CASH AND BANK
BALANCE
1,036,000 2,055,062 3,589,528 5,747,452 8,655,889 8,995,939
PREPAID RENT 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
TOTAL CURRENT
ASSETS
2,236,000 3,255,062 4,789,528 6,947,452 9,855,889 10,195,939

FIXED ASSETS
MACHINERY 967,000 870,300 783,270 704,943 634,449 571,004
SHOP 1,307,000 1,176,300 1,058,670 952,803 857,523 771,770
OFFICE FIXTURES 542,250 488,025 439,223 395,300 355,770 320,193
TOTAL FIXED ASSETS 2,816,250 2,534,625 2,281,163 2,053,046 1,847,742 1,662,967
PRELIMINARY
EXPENSES
50,000 40,000 30,000 20,000 10,000 -
TOTAL ASSETS 5,102,250 5,829,687 7,100,691 9,020,498 11,713,631 11,858,906

OWNERS EQUITY 2,551,125 3,648,965 5,349,918 7,768,790 11,041,215 11,858,906

LONG TERM LIABLITY 2,551,125 216,845,6 184,318,8 156,670,9 133,170,2 -

TOTAL EQUITY AND
LIABLITY
5,102,250 5,829,687 7,100,691 9,020,498 11,713,631 11,858,906

13. 13


4. Key Assumptions

5. Project Parameters

Item(s) Assumptions
Sales Increase 15 % per year
Increase in Cost of Raw Materials 10 % per year
Increase in Staff Salaries 10 % per year
Increase in Utilities (Electricity / Water /Gas) 10 % per year
Increase in Rent 10 % per year
Increase in Office Expenses 10 % per year
Debt / Equity Ratio 50 : 50
Depreciation:

Shop Building & Fixtures 10 % per annum (Diminishing Balance)
Kitchenware & Machinery 10 % per annum (Diminishing Balance)
Furniture 10 % per annum (Diminishing Balance)
Equipment Annual Maintenance Cost 2.5% of Written Down Value
Raw Food Inventory – Fishes 3 Days
Raw Food Inventory – Spices & Sauce 7 Days
Lease Period 5 Years
Lease Installments Monthly
Financial Charges (Lease Rate) 15 % per annum
Tax Rate 17% of EBT
Financial Summary

Project
Cost
Capacity
Human
Resource
Equipment Location
5,102,250
300 Customers per
day
21 Local / American / Chinese
Middle Income Level
Area

NPV IRR
Payback
Period
Discounted Payback
period
Profitability
Index
Cost of Capital
(WACC)
11,334,969 24% 3.97 years 3.19 years 1.2 17.50%

14. 14

6. MENU
DOLPHIN SEA FOOD RESTAURANT

SALAD Price
Salad with Smoked Salmon 120
Pasta and Shrimp Salad 175
Prawns Fettuccine 110
Seaport Appetizers
Prawn Fritters 225
Prawn Trellis 155
Coconut Shrimp 175

Soup
Crab bisque 180
Maryland Crab 200

Sea Food Favorites
Tuna Steaks 525
Seafood Rice 220
Sweet and Sour Fish 360
Sambal Prawns 475
Fish Burger 250
Seafood Pizza (regular) 550
Tuna Salad Sandwich and Chips 250
Lobster Salad Sandwich and Chips 350
Crab Cake Sandwich w/Fries 450

Steamed
Steamed Red snapper 475
Steamed Pomfret 500
Grilled Seasonal Fish 450
Grilled Salmon 450
SPECIALTIES
Select Fish from tank (Fried) 520
(Steamed) 490
(with Rice) 450
(Burger or Sandwich) 300
(Pizza) 650
BEVERAGES
Mineral Water 30
Coffee
Green Tea 40
Soft Drinks 50
Tea 30