CHAPTER 8

Projected Profit and Loss

Long Term Plan

The chapter will cover the following topics: start-up planning, personnel planning,

important assumptions, sales forecasting, break-even analysis, anticipated profit and

loss, and long-term planning. The start-up funding elaborates the projected total capital

for opening the restaurant. The personnel planning illustrates the projected number of

employees and labor cost of the restaurant. Additionally, the important assumptions

section highlights several observations-based assumptions. The sales projection shows

sales assumptions made in the first three years of the business. The break-even

analysis determines how many sales are required for the restaurant to break even.

Lastly, the profit or loss statement is a projection of future profits and losses.

Startup Funding

Aegyo King Grill is going to need about P1,200,000 as start-up funding. The owners

plan to get a P1,000,000 loan from the bank and need to have about P200,000 initial

investment. The Korean restaurant will be an independent business, and the owners will

pay back the loan, hopefully, P19,567 every month. Aegyo King Grill plans to pay back

the loan within five years with a 6.5% interest rate of bank loan. The following are main

financial indicators of the business: Building renovation, tables and chairs, kitchen

equipment, Cost of inventory, and lease fee. Working capital will cover the labor

expenses and other costs assuming the Korean restaurant cannot make a profit when it

first opens. 
Figure 1: Aegyo King Grill’s startup cost.

Start-up Cost Year 1

Renovation of Building 800,000.00
Tables and Chairs 80,000.00
Lease of Space 160,000.00
Kitchen tools and Equipment 120,000.00
Cost of inventory 40,000.00
Working Capital 80,000.00
Others 40,000.00
Total 1,200,000.00

Personnel Plan

Aegyo King Grill will recruit experienced employees to handle the restaurant for the first

year. Manager/s must ensure that servers get adequate training and maintain a

professional demeanor. The owner must also ensure that the cooks are familiar with

traditional Korean side dishes and dinners. The owner will recruit one manager, and one

of the owners will oversee the shifts that the managers are off. The staff is split into two

shifts. Additionally, the chefs will receive a monthly salary, while the rest of the

employees will get hourly wages.

Figure 2: Aegyo King Grill’s Personnel Plan

Personnel Plan

Year 1 Year 2 Year 3

 Chef (2) 480,000.00 494,400.00 509,232.00

Manager (1) 180,000.00 185,400.00 190,962.00

Servers and Cashiers (5) 580,000.00 597,400.00 615,322.00

Dishwashers and 437,500.00 450,625.00 464,143.75

Busboys (5)

Total 1,677,500.00 1,727,825.00 1,779,659.75

Important assumptions

 The close competitors of Aegyo King Grill are Ssamjang, Buffet 22, and Premier

the Samgyupsal. The results of empirical observations include the following.

Ssamjang has an affordable menu. However, it doesn’t have proper ventilation.

Also, the floor is always greasy, which most customers find hazardous. Buffet 22

has great menus and is always crowded, but it doesn’t have enough crew.

Premier the Samgyupsal, on the other hand, is the priciest Korean restaurant in

the location, and the price is not affordable to the masses. With all that said, it is

a preferable time to open another Korean restaurant with proper ventilation, an

affordable menu, and enough employees for fast service.

  Aegyo King Grill is in Torres Street Davao City. It has a 115 total square meter

space, enough to cater to 48 customers. 70% of the space is set aside for the

dining area while 30% for the kitchen space.

 The Restaurant will hire 13 employees.

 The annual increase in inflation is 3%, and for revenues is 5%.

 The daily sales forecast is computed using the following formula: Table count x

Seat allotment x Average ticket size x Table turns or (12 x 4 x 499 x 2 = 47,904).

 The target Annual Revenue is around P2,000,000.

 The Aegyo King Grill will use the average variable cost of 31% since the average

variable expense for a full-service restaurant is 31.8% (ResturantOwner Website,

2013).

 The Cost of sales is 80% of sales.

 The operating Expense is 60% of the Gross Profit

 The Income-tax is 30% of Net Income Before Tax.

 The Gross Margin Ratio is 60% of Total Sales.

Projected Sales

Figure 3: Projected Sales in the First Five Years

 SALES PROJECTED

18,000,000.00

16,000,000.00

14,000,000.00

12,000,000.00

10,000,000.00
15,971,001.98 16,769,552.08
14,486,169.60 15,210,478.08
8,000,000.00 13,796,352.00

6,000,000.00

4,000,000.00

2,000,000.00

-
Year 1 Year 2 Year 3 Year 4 Year 5

Break-Even Analysis

Fixed Cost: Amount

Lease of Space 160,000.00
Loan 16,000.00
Labor 139,792.00
Others 50,000.00
Total Fixed Cost 365,792.00
Assumptions:
Average Variable Cost Rate 31%
Estimated Monthly Fixed Cost 365,792.00
Monthly Revenue Break-even 530,133.00

Figure 4: Projected Statement of Financial Position for the First Three Years

Category Year 1 Year 2 Year 3

Sales
Unlimited 1 5,069, 5,322,75
4,827,900.00 295.00 9.75
Unlimited 2 5,070, 5,323,96
 4,828,995.00 444.75 6.99
Ala Carte 4,346, 4,563,75
4,139,457.00 429.85 1.34
Total Sales 14,486, 15,210,478
13,796,352.00 169.60 .08
Cost of Sales
Unlimited 1 1,571, 1,650,05
1,496,649.00 481.45 5.52
Unlimited 2 1,571, 1,650,42
1,496,988.45 837.87 9.77
Ala Carte 1,347, 1,414,76
1,283,231.67 393.25 2.92
Direct Cost 4,200, 4,411,03
4,000,942.08 989.18 8.64
Gross Profit 8,691, 9,126,28
8,277,811.20 701.76 6.85
Operating Expenses
Payroll 1,727, 1,779,65
1,677,500.00 825.00 9.75
Rent 1,977, 2,036,92
1,920,000.00 600.00 8.00
Others 1,509, 1,659,18
1,369,186.72 596.06 4.36
Total Operating 5,215, 5,475,77
Expenses 4,966,686.72 021.06 2.11
Net Income Before 3,476, 3,650,51
Interest and Tax 3,311,124.48 680.70 4.74
Interest Expense 6.5% 48 35,63
59,928.68 ,132.70 1.67
Net Income Before Tax 3,428, 3,614,88
3,251,195.80 548.00 3.07
Tax Expense 1,028, 1,084,46
975,358.74 564.40 4.92
Net Income After Tax 2,448, 2,566,04
2,335,765.74 116.30 9.82