3.5.c. Model Cash-flow

I.

INDUSTRY OVERVIEW

I.1. GENERAL FACTS REGARDING THE MARKET Despite the strong growth in the Romanian economy that peaked in 2007, Fast food sector is seen as a beneficiary of the negative effects of the recession compared to other consumer foodservice categories. In fact, one of the most important effects of the recession in 2010 was the loss of purchasing power. On the same time, the establishment of shopping malls and hypermarkets led to a major change of Romanian purchasing habits and lifestyles. I.2. DEMAND AND SUPPLY A report published by Visionwise Consulting in February 2010 shows that out of 100 people, 36 went to a restaurant in the last four weeks while the number of those that went to a fast-food is reported to be 30. The detailed results of the interview run by the before mentioned company are available in the nearby graph. According to the same report, children and young people are a more likely client for a fast food than adults and elderly people. Moreover, according to the Out of Home Consumption Habits Report published by Unilever Food Solutions in 2011, men are a more likely client for a fast food, as statistics show that 66% of them eat at a fast food at least 2-3 times per week, while the percentage of women reporting the same thing is just 34 percent.

I.3. PROSPECTS As we mentioned, the presence of large chains led to important changes in lifestyle and are forecast to have the strongest impact on fast food. Taking into account the busy life in Bucharest and other large cities with strong economic activity we are expected to sustain the good growth of fast food over the forecast period. Concerning the impact of the independent outlets, which are predicted to comprise the majority, there will be affected by the slow economic recovery but given the fact that they generally target lower-income consumers the impact will be reduced, although it will not encourage a significant opening of new outlets. Moreover, according to the same report published by the Euromonitor International, the winners of the crisis will be the Chains because they rely on strong brand recognition and Romanians with lower incomes will increase the frequency of patronising the chains at the expense of full-service restaurants due to the perception of fast food as providing cheaper leisure and entertainment after shopping or during weekends.

Consilium Advisors | 63 Polona St., 1st Floor, ap. 2, Bucharest Romania, www.consiliumadvisors.ro

II.

FINANCIAL FORECAST – GROWTH PLAN

The financials below are based on a set of conservative assumptions. 

Sales will start from 200 sandwiches / day in the first month and stabilize at 1,000 sandwiches / day in the eleventh month of operation. We assumed a split 75/25 of simple versus double sandwiches.

Sales (pcs / day) Simple

Mo 1

Mo 2

Mo 3

Mo 4

Mo 5

Mo 6

Mo 7

Mo 8

Mo 9

Mo 10

Mo 11

Mo 12

150

188

263

338

413

488

563

638

675

713

750

Double

50

63

88

113

138

163

188

213

225

238

250

TOTAL

200

250

350

450

550

650

750

850

900

950

1,000

 Prices for simple and double sandwiches are 7, respectively 15 Ron (VAT included).  On the workmanship side we took a conservative approach as well. A Sandwich Artist and a Shift Manager are supposed to prepare between 100 and 250 sandwiches / hour and we based our calculations on the lowest figure. We considered an average workload / shift of 25% in the morning shift, 35% in the mid-day shift and 10% for the night shift. Workload is calculated as follows: number of sandwiches prepared / ((100 sandwiches / hour) * (8 hours)). Under these workload assumptions the personnel budgeted should be able to deliver 80% and more than the number of sandwiches bought.  The personnel will evolve as follows:

Sanwich Artists / Shift 1 Sanwich Artists / Shift 2 Sanwich Artists / Shift 3 Shift Manager / Shift 1 Shift Manager / Shift 2 Shift Manager / Shift 3 Restaurant Manager

Mo 1

Mo 2

Mo 3

Mo 4

Mo 5

Mo 6

Mo 7

Mo 8

Mo 9

Mo 10

Mo 11

Mo 12

2 2 0 1 1 0 0

2 2 0 1 1 0 1

2 3 0 1 1 0 1

2 3 2 1 1 1 1

Salaries will remain constant, equivalent of 250 Euro net for a Sandwich Artist, 300 Euro for a Shift Manager, and 375 Euro for the Restaurant Manager. Social security expenses are estimated at 28% of net salaries. Advertising and royalty expenses are 4.5% and 8% respectively of net sales. The rent for the 120 sqm restaurant is 6,000 Euro (VAT included). The restaurant is situated at a premium location in Bucharest, with a rent of 50E / sqm (VAT included). Total monthly rent is 6,000 Euro / month. A guarantee of 6,000 Euro is required as well. Utilities – gas, electricity, water, garbage collection - are estimated at 700 Euro / month (VAT included). GLA includes accounting and legal services estimated at 700 Euro / month (VAT included). 

    

 The initial outlay is detailed in the financial section, consisting of: Pre-operational CAPEX and expenses (VAT included) of 151,000 Euros Another 6,870 Euros for the first 3 months of operational losses The Net income turns positive in the 5th operational month and the investment is fully recuperated in the 8th month of the second year of operations.

Consilium Advisors | 63 Polona St., 1st Floor, ap. 2, Bucharest Romania, www.consiliumadvisors.ro 2|P a g e

Profit and Loss Forecast (RON)

Mo 1

Mo 2

Mo 3

Mo 4

Mo 5

Mo 6

Mo 7

Mo 8

Mo 9

Mo 10

Mo 11

Mo 12

Y1

Y2

Y3

Net sales Other operating revenues

24,597

34,435

44,274

56,573

68,871

81,169

91,008

98,387

108,226

118,065

127,903

135,282

988,790

1,623,387

0

Operating revenues Raw materials and consumables

24,597

34,435

44,274

56,573

68,871

81,169

91,008

98,387

108,226

118,065

127,903

135,282

988,790

1,623,387

10,331

14,463

18,595

23,760

28,926

34,091

38,223

41,323

45,455

49,587

53,719

56,819

415,292

681,823

Transportation

1,230

1,722

2,214

2,829

3,444

4,058

4,550

4,919

5,411

5,903

6,395

6,764

49,440

81,169

Employees' salaries

6,880

8,493

11,933

107,608

143,190

Social Security Expenses

1,926

2,378

3,341

30,130

40,093

Advertising Expenses

1,107

1,550

1,992

2,546

3,099

3,653

4,095

4,427

4,870

5,313

5,756

6,088

44,496

73,052

Royalty

1,968

2,755

3,542

4,526

5,510

6,494

7,281

7,871

8,658

9,445

10,232

10,823

79,103

129,871

16,645

199,742

2,081

24,968

1,734

20,806

-19,304

-15,320

-11,335

-6,354

-1,373

1,544

5,528

8,517

8,098

12,083

16,068

19,056

17,206

228,672

5,144

61,726

EBT

-24,448

-20,464

-16,479

-11,498

-6,517

-3,600

384

3,373

2,954

6,939

10,924

13,912

-44,519

166,947

Tax

0

19,588

26,711

-24,448

-20,464

-16,479

-11,498

-6,517

-3,600

384

3,373

2,954

6,939

10,924

13,912

-44,519

147,358

140,235

Rent Utilities (Gas, Water, Electricity, Garbage Collection) GLA (Accounting, Insurance) EBITDA Depreciation

Net Income

Consilium Advisors | 63 Polona St., 1st Floor, ap. 2, Bucharest Romania, www.consiliumadvisors.ro

Cash Flow (RON)

Ante

Cash Flow from Operations Cash Flow from Investments

-32,777 334,637

Contingency

-43,000

VAT Net Cash Flow

-83,226 493,640

Cummulative Cash Flow

Initial Outlay

Mo 1

Mo 2

Mo 3

-19,304

-15,320

-11,335

Mo 4

Mo 5

Mo 6

-6,354

-1,373

1,544

5,528

Mo 8

8,517

Mo 9

8,098

Mo 10

Mo 11

Mo 12

Y1

12,083

16,068

19,056

17,206 334,637

Y2

Y3

209,084

201,961

27,054

0

-184,124

17,837

-43,000 -2,047 514,992

-902 531,213

243 542,305

1,675 546,985

3,106 545,252

4,538 539,170

RON

Intangible Assets (w/o VAT) Initial Franchise Tangible Assets (w/o VAT) Building Improvement

138,710

Equipment Security System

156,048 3,468

26,008

Outside Signs Inventories (w/o VAT) Supplies Other Assets

10,403

Lease Guarantee

20,640

Consilium Advisors | 63 Polona St., 1st Floor, ap. 2, Bucharest Romania, www.consiliumadvisors.ro 4|P a g e

Mo 7

12,137

5,683 527,959

6,542 512,901

7,687 497,115

8,832 476,200

9,978 450,155

10,837 420,262

27,054 420,262

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