Mjlado feasibility study

FEASIBILITY STUDY<MJLADO BAKERY CAFÉ>

MJLADO BAKERYPOBLACION, DANAO CITYCEBU, PHILIPPINES 6004

TUESDAY, 20 OCTOBER 2015

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InformationDocument Id 11010-ISMAJORDocument Owner Mark John P. LadoIssue Date Tuesday, October 20, 2015Last Saved Date Wednesday, October 21, 2015File Name MJLADO Feasibility Study.docx

Table of Contents

GUIDE 21. IDENTIFICATION AND EXPLORATION OF BUSINESS SCENARIOS 3

1.1 Type and Quality of Products Marketed 31.2 How will the business make money? 3

2. PROBLEM STATEMENT 32.1 Technical Processes, Size, Location, Kinds of Input 3

3. REQUIREMENTS STATEMENT 43.1 Relationship to the surrounding geographical area 4

4. FEASIBILITY ASSESSMENT 44.1 Industry Description 44.2 The Restaurant Life Cycle 54.3 Industry Competitiveness 64.4 Bargaining Power 64.5 Market Potential 64.6 Access to the Market Outlets 7

5. FEASIBILITY RANKING 75.1 THE RESTAURANT INDUSTRY DISTRIBUTION SYSTEM 75.2 PROPOSED BUSINESS CONCEPT 75.3 INDGREDIENTS AND VENDORS 8 - 95.4 BUSINESS OWNERSHIP 105.5 WAGES AND JOB DESCRIPTIONS 105.6 FINANCIAL STUDIES 11 - 135.6.1 ESTIMATED STRAT-UP COSTS AND CONTRIBUTIONS 13 - 145.6.2 BREAK EVEN ANALYSIS 14

6. FEASIBILITY RESULT 14 - 166.1 ESTIMATED FINANACIAL STATEMENTS 14 - 166.2 BALANCE SHEET 14 - 16

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Guide

What is a Feasibility Study?

A Feasibility Study is a document which identifies each of the solution options available and rates the likelihood of each option achieving the desired result. It includes:

A full description of the business problem (or opportunity) A list of the requirements for a solution to fix the problem (or realise the opportunity) Available options for delivering a solution An assessment of the feasibility of each option A list of the risks and/or issues associated with each option A preferred option to be approved for implementation. ©

When do I use a Feasibility Study?

The Feasibility Study is typically presented by Senior Management within the business to an identified Business Sponsor. Although it may be conducted prior to, during or after the completion of a Business Case, it is usually undertaken as part of the overall Business Case process to add more rigour to the solution options presented in the Business Case. For this reason, the topics defined in both the Business Case and Feasibility Study documents are similar.

The main purpose of the Feasibility Study is to ascertain the likelihood of each solution option identified for meeting the stated business requirements. Although the risks, issues and constraints are important, the project is less likely to be a success if the solution option chosen is unlikely to be feasibly implemented.

To determine the likely feasibility of an option, a range of ‘assessment’ methods is undertaken. As there is a myriad of potential methods available to assess feasibility, we suggest you take time to consider the most appropriate method available to your project. The outcome of the Feasibility Study is a confirmed solution option for inclusion within the Business Case. The next stage, after the solution option has been approved, is to define the project scope and structure within a project Terms of Reference document. ©

NB A Feasibility Study may address a business problem to be resolved, or a business opportunity to be realised. Although this document refers frequently to the resolution of ‘business problems’, each section equally applies to the realisation of ‘business opportunities’ as well.



1. Identification and exploration of business scenarios

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 MJLADO Bakery Café 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 MJLADO Bakery Café will focus on providing quality food and service, making MJLADO Bakery Café 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.

1.1 Type and Quality of Products Marketed

MJLADO Bakery Café will consist of two different departments; the bakery and the sandwich bar. The bakery carries a variety of goods such as bagels, breads, muffins, pas-tries, 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. MJLADO Bakery Café will also offer a variety of beverages featuring espressos, coffee, juice, tea, and fountain beverages.

1.2 How will the business make money?

MJLADO Bakery Café 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. MJLADO Bakery Café 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.

2. Problem Statement 2.1 Technical Processes, Size, Location, Kinds of Inputs

MJLADO 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 MJLADO Bakery will be families and businesses. The best location for these markets would in Philippines.



3. Requirements Statement 3.1 Relationship to the surrounding geographical area

Bringing our business into the Philippine community is going to create competition for surrounding businesses similar to MJLADO Bakery Café; however, this will bring more revenue into the community. Bakery 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 Philippine community.

4. Feasibility Study4.1 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 Php632 billion in 2015; the typical sales is Php1.7 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.



4.2 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).



4.3 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.

4.4 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.

4.5 Market PotentialThe 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.



4.6 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.com, direct mails, etc. Our plan is to use approximately 3.5% of our monthly income for advertising.

5. Feasibility Ranking5.1 The Restaurant Industry Distribution System

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”).

5.2 Proposed Business Concept

Our proposed business will be a small bakery café located at Poblacion, Danao City Cebu Philippines. The Poblacion are less than 1 mile from I-170 and around 18 miles from downtown Danao City. There is plenty of public transportation accessible from this location. Our selected location allows us to access nearly two thousand homes in the Poblacion neighbourhood 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.


Sources(Growers, manufacturers,

and processors)

Intermediaries(Middlemen)

Retailers(Restaurants)

Consumers(Guests)


5.3 Ingredients and Vendors

Major suppliers of local raw materials are: Restaurant depot Philippine General Flour, INC (Bakery supply) Aguilar Fresh Meats (Deli supply) Sap’s Club

Some ingredients for basic items are listed below:Ingredients Unit price Quantity Total Cost

Flour Php 13.50 /50lb 5 Php 67.50

High Gluten Flour Php 15.00 /50lb 5 Php 75.00

Eggs Php 11.50 /90ct 6 Php 69.00

Baking Powder Php 6.00 /5lb 1 Php 6.00

Butter Php 9.00 /lb 50 Php 450.00

Sugar Php 25.00 /50lb 5 Php 125.00

Cream Php 4.00 /qt 15 Php 48.00

Yeast Php 3.00 /lb 2 Php 6.00

Baking Soda Php 13.00 /lb 2 Php 26.00

Chocolate Php 184.00 /40lb 2 Php 368.00

Milk Php 2.89 /gallon 6 Php 17.34

Lettuce Php 2.39 /2 heads 30 Php 71.70

Tomatoes Php 6.00 /3 lb 8 Php 48.00

Sprouts Php 2.24 /box 4 Php 8.96

Onions Php 5.37 /10lb 3 Php 16.11

Avocado Php 4.47 /5ct 8 Php 35.76

Bell Peppers Php 6.98 /2lb 4 Php 27.92

Ham Php 6.27 /lb 15 Php 94.05

Turkey Breasts Php 7.49 /lb 15 Php 112.35

Pepperoni Php 5.69 /lb 15 Php 85.35

Sausage Php 3.57 /lb 10 Php 35.70

Provolone Cheese Php Php 3.04 /lb 10 Php 30.04



Cheddar Cheese Php 4.94 /lb 10 Php 49.40

Swiss Cheese Php 4.94 /lb 10 Php 49.40

Mozzarella Cheese Php 3.38 /lb 10 Php 33.80

Pepperjack Cheese Php 4.94 /lb 10 Php 49.40

Horseradish Dijon Php 3.35 /bottle 6 Php 20.10

Honey Mustard Php 2.44 /bottle 6 Php 14.64

Mayonnaise Php 6.73 /bottle 6 Php 40.38

Thousand Island Php 6.48 /bottle 6 Php 38.88

Canned Tuna Php 8.46 /10cans 3 Php 25.38

Pickles Php 4.24 /jar 2 Php 8.48

Olives Php 3.49 /jar 2 Php 6.98

Vinegar Php 1.79 /bottle 1 Php 1.79

Bacon Php 3.13 /lb 5 Php 15.65

Coffee Beans Php 14.88 /bag 24 Php 357.12

Tea Bags Php 4.98 /box 3 Php 14.94

Coke Products Php 0.31 /can 192 Php 59.52

Apple Juice Php 0.50 /bottle 48 Php 24.00

Orange Juice Php 0.50 /bottle 48 Php 24.00

Lemonade Php 0.42 /bottle 48 Php 20.16

Milk Php 0.72 /bottle 48 Php 34.56



5.4 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 or-dered 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 stu-dents from Montgomery College, University of Maryland and residents from the local area.

5.5 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 Php4,000.00/month At least 2 year experience in management / super-vising positions in hospitality industry.

Bakers Php10.00/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 Php10.00/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 Php7.50/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 Php7.50/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

5.6 Financial Studies



The main monthly expenses for our bakery is a rent payment at Php 2,720 a month in Poblacion 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 Poblacion and the surrounding areas. Some of our main purchases will include, but are not limited to:

Double rack ovens Php39,108 (three)Proof box Php34,589Microwave Php942 (two)Pastry racks and sheet pans Php500 (20)Ranges Php2,535Prep tables Php600 (4 maple tops) 1193 (3stainless steel)Walk in freezer Php6,391Walk in refrigerator Php5,051Reach in refrigerator Php2,981 (two)Ice maker Php1,683Mixers Php13,831 (floor-model) 1,340 (2model)Dough sheeter Php6,482Refrigerated display cases Php7,579 (two)Three tub sink Php829Sandwich station Php3,618Espresso machine Php8,100Soda machine Php4,115Bread slicer Php2,332Scales Php600 (two)Table and chairs Php337 (five)

Our estimated main equipment costs are Php251, 428. We will add approximately Php100, 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 Php25, 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 SalesTurkey Bistro 28 5.59 156.52Ham and Swiss Mix 17 5.49 93.33Avocado Club Mex 35 6.29 220.15The Firecracker 42 5.89 247.38The Italian Bistro 28 6.39 178.92The Veggie Mex 18 5.29 95.22The Tuna Avalanche 14 5.39 75.46Cup of Soup 52 1.89 98.28Bowl of Soup 35 2.99 104.65Bread Bowl Soup 28 4.19 117.32Side Salads 70 1.99 139.3Breakfast Club 53 4.09 216.77Sausage Lovers 35 3.89 136.15Simply Eggs 28 3.19 89.32Single Bagel 125 0.99 123.75Half a dozen Bagels 62 5.59 346.58Baker’s dozen Bagels 35 9.99 349.65Bag of Bagels 38 13.99 531.62Tub of Cheese 37 2.89 106.93Assorted Breads 125 3.69 461.25Assorted Pastries 150 1.99 298.5Assorted Muffins 150 1.59 238.5Cookies 175 1.39 243.25One Cupcake 175 1.39 243.25Half a dozen Cupcakes 70 6.59 461.3Dozen Cupcakes 53 11.99 635.47Catered Cakes 52.5 25 1312.5Total Food Sales 7321.32



Beverage SalesReg Coffee 37 1.69 62.53Large Coffee 49 1.99 97.51Reg Tea 26 1.49 38.74Large Tea 33 1.79 59.07Reg Soda 80 1.59 127.2Large Soda 90 1.89 170.1Juices 31 2.69 83.39Milk 25 1.79 44.75Cappuccino 21 2.99 62.79Cinnamon Latte 28 3.09 86.52Vanilla Latte 28 3.09 86.52Caramel Latte 31 3.19 98.89Mocha Latte 36 3.29 118.44White Mocha Latte 36 3.29 118.44Chai Tea 32 2.99 95.68Espresso Shot 28 1.25 35Total Beverage Sales 1385.57Total Sales 8706.89

Collectively our forecasted sales for one week are Php7, 394.39 from our standing menu and approximately Php1312.50 from our catered menu of special order cakes for a total of Php8, 706.89. Respectively our estimated forecasted sales per month are Php37, 700.83 and per year is Php452, 758.28. We should budget approximately 3.5% of our monthly sales from our menu for advertising, which is approximately Php1318 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.

5.6.1 Estimated Start-Up Costs and Contributions

The partners will each contribute a set amount towards the investment of the company at Php15, 000 each. With Php60, 000 in capital, we would need research possible banks for a loan amount of approximately Php295, 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 Php5, 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 Allied Bank, The Fair Bank, and The Land Bank 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.

5.6.1 Break Even Analysis

Our estimated sales for one month are Php437, 700 with a food cost percentage of 25% putting our cost of sales at Php9, 672. Our estimated fixed costs are the loan payment at Php3, 500, rent payment at $2,720, estimated depreciation costs of Php3, 457, and insurance payment of Php167. This comes to a total of Ph9, 844 in fixed costs. Our estimated variable costs are cost of sales at Php9, 672, wages at Php11, 258, advertising at Php1, 318, utilities at Php450, and payroll taxes at Php1, 352 for a total of Php24,050 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 = Php27, 344. Our bakery would need to make Php27, 344 in sales in order to break even each month.

6. Feasibility Results6.1 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.

6.2 Balance SheetEnding of our first month

ASSETS Current

Cash Php60,000.00

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 Php331,438.00



LIABILITIES Current Accounts Payable Php7,600.00 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 Php331,438.00

Income StatementEnding of our First Year

REVENUE

Food Sales Php380,708.64

Beverage Sales 72,049.64 Total Revenue Php452,758.28

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 Php45,921.72



Mjlado feasibility study

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