JAMES SMITH FRENCH BAKERY, LLC
For E-2 Visa Purpose
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This venture was initiated by James Smith, long established Cook Chef in the South of France.
4
French Bakery, LLC
EXECUTIVE SUMMARY venture was initiated by James Smith, a T his long established Cook Chef in the south of
France. Mr. Smith brings together strong business acumen, operational managerial skills, as well as outstanding cooking skills to build French Bakery, LLC. This new venture is a profitable Kosher bakery-centric concept store mixing the coffee lounge experience of Starbucks with the vast array of French bakery products comparable to the ones offered by Paul, the leading French bakery chain. The concept was developed further to extensive market studies in southeast Florida. French Bakery, LLC (“The Company”) was incorporated on May 2, 2007 in the County of Palm Beach in the State of Florida. It is fully owned by James Smith, who invested $99,130 into the Company to fund the venture. On May 11, 2007, the Company signed a five-year business lease agreement with Investment Limited (the lessor) to become a permanent tenant in the 2,000-sq ft retail space located at 1956 NE 5th Avenue, Unit 3, Boca Raton, FL 33431. The total amount due at closing was $65,655.50 including one month’s rent in advance, two months’ worth of deposit, and key money.
from the former tenant, justifying a key money of $50,000. Therefore, the Company has acquired a turn-key operation with all the required permits, allowing French Bakery, LLC to be operational from day one without any further investment or construction work. The Bakery is in a prime location in an open plaza at the corner of the Federal Highway, which is the busiest street in Boca Raton. The open plaza anchors both a CVS pharmacy and a Publix supermarket. As such, it is one of the most popular open plazas in Boca Raton. The Company’s activity will be substantial. It forecasts to open a second bakery in year 3 and enhance its local exposure. French Bakery, LLC’s headcount will increase from 10 employees in year 1 to 29 employees in year 5. The Company business model is based on four sub-business models revolving around the bakery unit.
This space was formerly occupied by a bakery that closed after two years of operations due to poor quality of the products offered. In addition to the lease, the Company has acquired all the equipment, furniture, and machinery
French Bakery, LLC
5
FRENCH BAKERY CONCEPT STORE Bakery, LLC concept store is about F rench bringing Starbucks Coffee’s lounge experience together with a French bakery offer such as Paul’s (the leading French bakery chain in Europe) while observing Kosher dietary laws. French Bakery, LLC will come across as a fine French bakery where customers can enjoy a similar experience to a Starbucks. Comfortable couches, relaxing music, newspapers, and bookcases will convey a cozy atmosphere with a homey feeling. The products will appeal to all consumers regardless of their observance of dietary laws since the kosher aspect will not be prominently displayed. A discrete sign in the counter area as well as on the door will inform customers that French Bakery, LLC is a Kosher institution. As described in the chart, the initial product mix will include mainly sandwiches, bread, and pastries. Salads, soups, and quiches are forecast to represent 20% of the total sales. This sales mix will change as the offer will be adapted according to customers’ taste and suggestions.
Sandwiches 36% Bread 20% Pastries 20% Soups and salads 10% Quiches 5% Other 5%
A wide variety of breads will be offered and used to make an extensive offer of sandwiches. The offer will include low-carb dietetic bread and sandwiches to cater to health-conscious customers. Pastries will include croissant, pain au chocolat (chocolate croissant), as well as all sorts of cakes and pies. A vast array of both French and American specialties will be available.
6
French Bakery, LLC
THE MARKET OPPORTUNITY French Bakery, LLC is located in Boca Raton, a dynamic city in southwest Florida, counting a total population of 74,500 people.
This concept brings together two markets: the kosher food market and the bread-centric fast food market.
French Bakery, LLC
7
THE BREAD CENTRIC FAST FOOD MARKET The emergence of a new type of fast food bread centric concept The fast food market has come a long way since the traditional burger and fries offer. Today, Mc Donald’s or Burger King is only one of the alternatives that a consumer can choose from for a quick meal. Many factors have pushed for this change, for instance: •
Customers are more health conscious these days. They know what is and what is not good for them, and alter their eating habits in consequence.
•
Customers are more demanding in terms of quality of food and aliments. In this perspective, they like seeing the food-making process, which encourages new concepts with open kitchen and on-site cooking.
•
Customers’ taste has become more sophisticated since they have become well travelled. Thus, they expect a wider variety of dishes and specialties. For instance, a crepe, a bruschetta, a croissant, a baguette, or a fajita are commonly ordered.
•
Customers expect more and more to eat or be served in an environment that provides an experience, that has an identity and that tells a story.
These changes have pushed for a new segment in the fast food market that addresses the search for variety, for better taste, for healthier food, and for a better experience. In the past 15 years, the US market has seen the emergence of major bakery-centric fast food chains answering those criteria.
From its roots in Boston, Au Bon Pain has grown to become one of the leading bakery café chains. With more than two hundred locations operating in the United States, South Korea, Taiwan, and Thailand, Au Bon Pain is a leader in many trade channels from urban office buildings to airports, hospitals and suburbs. The company’s upscale urban cafés offer French-baked goods like croissants, baguettes, and pastries forming the core of the chain’s menu, which has expanded over the course of its 20-year history to include sandwiches, salads, soups, gourmet coffees, and other beverages.
8
French Bakery, LLC
Panera Bread is a leader in the quick-casual restaurant business with more than 1,000 bakery-cafes in almost 40 states. Its locations, which operate under the Panera and Saint Louis Bread Company banners, offer made-to-order sandwiches built using a variety of artisan breads, including Asiago cheese bread, focaccia, and its classic sourdough bread. Its menu also features soups, salads, and gourmet coffees. In addition, Panera sells its bread, bagels, and pastries to go. Almost 400 of its locations are company-operated, while the rest are run by franchisees.
It’s not just about bagels anymore. Increasingly, people are turning to their corner Einstein Bros for quick, tasty lunches—from innovative salads to hearty soups and creative sandwiches. The 2,220- to 2,500-square-foot cafés seat 40 people in an atmosphere featuring sophisticated fixtures and comfy, casual tables and waiting areas. High-quality food is the standard here, with a diverse menu ranging from gourmet, to-go coffee and specialty coffee drinks to baked goods, salads, made-to-order sandwiches and decadent desserts. There are over 300 Einstein Bros locations mostly in the southeast, and many more to come.
Atlanta Bread’s offerings include freshly baked breads, pastries, sandwchies, soups, salads, and gourmet coffees. The concept is to serve meals quickly in an atmosphere the company descibes as a “relaxed, no-rush setting that features hardwood floors, a decor highlighted with warm, inviting colors, and soft classical music playing in the background.” The bakery/ cafe that was originally established in 1993 from an Atlanta suburb of Sandy Springs, Georgia counts today close to 100 units, mostly located in the south east.
French Bakery, LLC
9
Paul, one of Europe’s most successful restaurant chains counting over 300 units in Europe, the middle-east and Asia, has entered the US market with its first locations in southeast Florida. 2007 will see another 9 opening in the sunshine state. It offers a French style of meals: savory, and sweet pastries, a selection of French pancakes, simple dishes, and a selection of salads, soups and sandwiches, all prepared on the premises. PAUL shops are designed like old-fashioned bakeries to evoke its traditional aspect. To that effect, the bread is still prepared and cooked in full view of the customers. The old-fashioned, country-style decoration of the shops makes the customers travel to the French countryside.
poll has been carried out to determine
decision criteria customers use in A which their choice of eating place and what their
It seems that if they have the other three criteria satisfied, customers are willing to pay more. Of
respective importance would be. It appeared that course the amount needs to stay within the fast the following four points were the most common food price limits. criteria mentioned in their order of importance: •
Constant Quality
•
Taste
•
Experience
•
Price
A large Jewish community The Jewish population of Boca Raton represents 40% of the total local population. It is catered by 20 kosher businesses (ranging from markets, delis, to fast food and traditional restaurants), 4 private Jewish schools, and 13 synagogues. As of today, there is no similar concept to French Bakery, LLC in the Kosher food segment in Boca Raton and its vicinities.
A strong emphasis has been put on the constancy of the food quality. It appears that if a regular customer is disappointed once by the quality of the food, he will most probably not return to that location to eat. Specialists agree that to belong to this industry, one needs to deliver constant quality on its products since catering is a ruthless An underdeveloped kosher bread centric fast market where customers hardly give a second food market chance. There is no real direct competition to French Taste is the second most important factor. CusBakery, LLC mainly because market players are tomers expect to find their beloved classic dishes using bread and baked goods in general as a while requesting exotic touches from time to cross-selling item. Either there is a problem with time. The experience that the concept offers is the offer being limited, or there is no real retail the third most important decision criteria. concept, or the quality is simply not there. HowCustomers don’t only expect a clean area. They ever, it appears that everybody is pushing into also want to relax and enjoy the time they will the baked good segment, which is a good indicaspend in a unit, even if it is only for take away. tor of what local people are looking for. Quite surprisingly, price is only the fourth decision criteria.
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French Bakery, LLC
THE BOCA RATON KOSHER BREAD CENTRIC FAST FOOD MARKET There are only two businesses offering kosher bakery products in Boca Raton: •
Albertson’s Market
•
Salomon Bakery
At Albertson’s, the biggest kosher market in the city, an in-house bakery offers a limited range of baked products:
premises are small and there is a clear hygiene problem to such an extent that regular customers stopped shopping there. In terms of bread-centric kosher fast food, again, there is no direct competitor. Boca Tov Café, which offers a menu for breakfast and lunch composed mainly of sandwiches and salads made on the premises, has a limited offer. In addition, no effort has been invested in the interior design.
This business provides baked goods not only to its end customers, but also to many kosher restaurants and competing markets in the Boca Raton area since there are only two Kosher bakers. Due to the increasing demand from its customers, Albertson’s will soon offer French baguettes. Salomon Bakery is a much smaller business, providing a wider range of baked products. Although it offers a small sitting area, more than 90% of its business is take away. This is not a direct competitor to French Bakery, LLC. The quality of the offer, especially the bread, is in constant decline. The Challah Bread
Danish
$2,99
$1,29-$1,99
Pita Bread
Cakes
$4,99 (pack of 6)
$24,99 and up
French Bakery, LLC
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FRENCH BAKERY, LLC COMPANY PRESENTATION The Corporation French Bakery, LLC (“the Company”) was incorporated as a limited-liability company on May 2, 2007 in the County of Palm Beach in the State of Florida. The CEO and 100% owner of the Company is James Smith. The capital of the Company (the sum of common stocks and paid-in surplus) is US$99,130 as at May 21, 2007. The Federal Tax ID is 20-8987049. The 5-year leasehold of the first French Bakery, LLC On the 11th of May 2007, the Company closed a business lease agreement with the Lessor Investment Limited for a total amount of $65,655.50. This amount includes one month rent in advance, two months’ deposit, and key money. This lease makes the Company a permanent tenant of the 2,000-sq ft retail space located at 1956 NE 5th Avenue, Unit 3, Boca Raton, FL 33431 for a period of five years. The former tenant of that unit was a bakery that decided to close business after two years of operations, as the management was unable to deliver sufficient quality. The Company, through its business lease agreement, has acquired all the equipment, furniture, and machinery that belonged to the former tenant. Such acquisition is part of the $50,000 key money that the Company agreed to pay upon signature of the lease. Therefore, the Company has acquired a turn-key operation with all the required permits to start the business on day 1 without any further investment or construction work. Location, location, location The Boca Raton unit is located in an open plaza at the corner of the Federal Highway and 20th
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French Bakery, LLC
Street. This intersection counts the highest level of car traffic in Boca Raton. The open plaza boasts both a CVS pharmacy and a Publix supermarket. As such, it represents one of the most popular open plazas in Boca Raton. People going to CVS or Publix will be able to go to French Bakery, LLC to have lunch or breakfast or simply buy some pastries or bread on their way. The management James Smith will manage the Company. He has already demonstrated a strong ability to execute similar projects in the past.
As shown on his résumé, James Smith has 14 years of unparalleled experience in the food industry. He graduated from the Ecole Hoteliere de Lyon, the second most prestigious French hospitality school. This school is famous for the achievements of its alumni in the food industry. He has set up and operated several restaurants and catering businesses in the south of France. Along the way, he has developed an expertise on maintaining quality while optimizing margin and building a solid operational team in order to develop and manage successful food businesses. Terrace de L’Etoile was the last business operated by James Smith for a duration of eight years. This multimillion dollar-sales restaurant in the heart of Nice, France earned a solid reputation for the quality of both its products and services. Mr. Smith doubled the sales of the business while increasing margin through the introduction of more profitable products.
In 2006, further to a trip to Florida, James Smith identified an opportunity to start a chain of kosher bakeries that would provide both a US traditional offer and a French sophisticated bakery offer. To take that project to the next level, James Smith took an intensive training on the most recent bakery techniques used by the leading French national bakery chains.
pends on this aspect. French Bakery, LLC will be open from 7 am to 7 pm from Monday to Thursday. It will close at 4 pm on Friday. It will open at 8 am and close at 6 pm on Sunday. Therefore, the bakery will be open 67 hours per week.
James Smith’s responsibilities will be purely managerial. He will hire a competent team of bakers, waiters, delivery men, and busboys. The Company plans to open a second bakery in year 3. It will hire a manager for the second bakery. As shown in the table below, the number of the Company’s employees is forecast to increase from 10 in year 1 to 29 in year 5. Each bakery will employ 15 employees after five years of operations. Employees are this business’ greatest asset. Great care would be taken in recruiting people who love working with these products and who are always ready to help. The consistency of the quality de-
COMPANY EMPLOYEES
Year 1
Year 2
Year 3
Year 4
Year 5
Managers
1
1
2
2
2
Bakers
3
5
6
11
12
Waiters
4
5
9
10
11
Busboys
1
1
2
2
2
Drivers
1
1
2
2
2
Total # of employees
10
13
24
27
29
French Bakery, LLC
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Company strategy The Company decided that the best way to enter the local market would be to acquire an existing bakery since this would represent a shortcut, given the fact that an existing bakery would already have all the permits to operate the business. Getting permits can be a stumbling block for foreign entrepreneurs who are not familiar with US regulations and don’t know how to build a bakery in accordance with those regulations. The Company forecasts a rapid market entry in the Boca Raton area through both a comprehensive business model and an aggressive marketing effort. The Company business model is based on four sub-business models revolving around the bakery unit: 1. Sales on premises with both breakfast and lunch offers; 2. Delivery of products. Boca Raton has a high concentration of offices. Therefore, the Company intends to market its products to office workers through delivery;
French Bakery, LLC will be open from 7 a.m. to 7 p.m. from Monday to Thursday. It will close at 4 pm on Friday. It will open at 8 am and close at 6 pm on Sunday. Therefore, a bakery will be opened 67 hours per week. French Bakery, LLC plans to put together marketing material such as postcards, business cards, brochure, delivery menus, as well as a website. The Company is also planning to get in touch with all the synagogues and the Jewish community centers in Boca Raton and its vicinities to advertise its products and be listed as a kosher business in their directories. On a daily basis, James Smith will contact potential clients to get supply contracts and catering contracts. The Company will send baskets with fresh products to convince potential clients of the quality of its products.
3. Supply contracts. The Company will seek to win contracts to supply its products to hospitals, schools, restaurants and hotels. This is a big market. The Company will be able to compete with a wide variety of products;
As mentioned earlier, the Company plans to open a second bakery in year 3. The location of that second bakery has not been decided yet. However, several locations are already being considered: Fort Lauderdale, Aventura, and Bal Harbour.
4. Catering services. The Company will provide products for catering events. James Smith has also a long experience in the catering service. The Company will therefore be able to offer a comprehensive catering offer from day 1.
This second bakery would reinforce the Company critical mass to achieve economies of scales.
Employees are this business’ greatest asset. Great care would be taken in recruiting people who love working with these products and who are always ready to help. The consistency of the quality de-
14
pends on it.
French Bakery, LLC
FRENCH BAKERY, LLC FINANCIAL FORECAST BOCA RATON UNIT FINANCIAL FORECAST In the financial forecast, a slow-growth economy without major recession has been taken into account. French Bakery, LLC management has prepared a five-year financial forecast for its operations in the next five years.
French Bakery, LLC sales are derived from four lines of businesses. Sales on premises Sales on the premises are sales made on site. They are forecast to reach a minimum level of $450,000 in year 1. The management forecasts that breakfast sales and lunch sales represent 15% and 85% of total sales, respectively, over the forecast period. The average checks for a breakfast and a lunch are expected to be $4.50 (for a pastry and a hot drink) and $10 (for a sandwich and a soft drink).
Sale Forecast As indicated in the table below, sales are forecast to grow from $600,000 to $1,008,000 over the next five years at a compound annual growth rate of %13.8. These sales forecast refer to the Boca Raton bakery unit only (the first bakery).
A forecast sales of $450,000 for year 1 (280 opening days) would imply 191 customers per day. More precisely, 54 breakfast customers and 137 lunch customers. This forecast can be easily achieved given the high-traffic location of the bakery. The sales are expected to grow to $700,000 by year 5 as French Bakery, LLC will reach out to more customers through a growing customer base and widespread market awareness in Boca Raton and its vicinities.
French Bakery, LLC
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Delivery As mentioned earlier, Boca Raton has a high concentration of offices. French Bakery, LLC will reach out to people working in offices at lunch time through delivery. This activity is expected to generate $70,000 in year 1 (or 25 customers), up to $100,000 in year 5.
French Bakery, LLC forecasts to grow catering sales from $30,000 in year 1 to $108,000 in year 5. The average sale for a catering event is $3,000. The management foresees to make 10 catering events in year 1 up to 36 caterings events in year 5. This segment of the business depends mainly on word of mouth and reputation, which take some time to build. Seasonality
Contracts French Bakery, LLC forecast to win bakery supply contracts with restaurants, hospitals, schools, universities, and hotels with forecast sales growing from $50,000 in year 1 to $100,000 in year 5. Those sales figures are conservative mainly because this is a large market catered by only a few players. Additionally, French Bakery, LLC will boast of a wide variety of unique bakery products and should get some attention from buyers in search of new products. Catering
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French Bakery, LLC
French Bakery, LLC is subject to seasonality. The busiest months are from November to April as the warm Florida climate attracts snow birds and tourists, as shown by the first 12 sales months of the Boca Raton unit. July and August are the slowest months.
Profit & Loss Boca Raton unit’s Earnings Before Depreciation, Amortization Interest and Taxes (EBITDA) is forecast to grow from $78,000 in year 1 to $178,000 in year 5. PROFIT & LOSS ($’000) Year 1
Year 2
Year 3
Year 4
Year 5
Sales Before Taxes
600
780
908
958
1,008
Cost of sales (COS)
150
195
227
240
252
Freight costs
17
21
25
26
28
Cost of products unsold
15
20
23
24
25
EFFECTIVE COST OF SALES (ECOS)
182
236
275
290
305
GROSS MARGIN
419
544
633
668
703
Advertising
6
8
9
10
10
Shopping bags (packaging/cutlery)
6
8
9
10
10
Theft
0
0
0
0
0
Credit Card Commissions
10
13
15
16
17
TOTAL VARIABLE COST
22
29
33
35
37
396
515
600
633
666
RENT
62.6
68
74
76
79
PAYROLL (incl. taxes & benefits)
237
315
350
360
390
Phone & internet
1.8
1.8
1.9
1.9
1.9
Utilities
5.0
5.1
5.2
5.2
5.3
Insurance
1.0
1.0
1.0
1.0
1.1
Travel
1.0
1.0
1.0
1.0
1.1
Accounting & Legal
3.0
3.0
3.1
3.1
3.2
Office expenses
1.0
1.0
1.0
1.0
1.1
Other
5.4
5.5
5.5
5.6
5.6
TOTAL FIXED COST
318
401
443
455
488
78
114
157
178
178
8.9
11.4
13.6
16.1
VARIABLE COST
MARGIN ON VARIABLE COST FIXED COST
EARNINGS BEFORE TAXES, DEPRECIATION & AMORTIZATION (EBITDA) Start-up expenses Depreciation & amortization Net interest expense (net interest income)
12.8 6.4 0
0
0
0
0
EARNINGS BEFORE TAXES
59.1
105.0
145.7
164.2
162.0
Income taxes
11.6
24.2
35.7
41.8
41.0
NET PROFIT
47.5
80.9
110.1
122.5
121.0
THE EBITDA MARGIN IS FORECAST TO INCREASE TO 18% ACROSS THE NEXT FIVE YEARS AS INCREASING SALES WILL COVER MORE FIXED COSTS. NET PROFIT IS FORECAST TO GROW FROM $53,200 IN YEAR 1 TO $121,000 IN YEAR 5.
French Bakery, LLC
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Gross Margin
However, the management accounts for the cost of products unsold. With a short product life of 1 to 2 days, those products represent a waste that would constitute 10% of the cost of products sold.
owner. Mr. Smith made a transfer in the amount of $74,580.00 from his personal bank account in France to his personal bank account in the US. He then withdrew $72,000.00 from his personal bank account in the US and deposited that amount in the Company’s bank account. In addition, he made a transfer in the amount of $27,130.00 directly from his personal bank account in the Company’s bank account. The Company‘s outstanding balance after those two deposits was $99,130.00.
The freight includes not only the delivery of raw materials, but also the delivery cost of products to remote customers.
Payroll
The bakery-centric fast food business is a highmargin business. French Bakery, LLC management forecasts to achieve reasonably a 75% margin on the products sold across the forecast period.
Taking into consideration the cost of products sold, the freight cost, and the cost of products unsold, the effective gross margin is forecast to be 66%. Start-up expenses The $12,800 start-up expenses are understated since most of the expenses have already been incurred through the corporate bank account of the
The payroll including taxes is forecast to grow from $237,000 with 10 employees working 40 hours a week in year 1 to $390,000 with 15 employees in year 5. The owner of French Bakery, LLC will earn an annual salary in the amount of $45,000 in year 1 growing to $49,000 in year 5.
THE MONTHLY EBITDA FOR THE FIRST TWELVE MONTHS OF OPERATIONS IS FORECAST TO BE POSITIVE AS SHOWN IN THE TABLE.
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French Bakery, LLC
Cash Flow Statement As shown in the table set out below, the Boca Raton bakery unit is forecast to generate a Cash Flow From Operations (CFO) in the amount of $103,000 including the start-up expenses for
$12,818.50 and rent deposit for $10,437 after 12 months of operations. The CFO is forecast to grow to $137,000 in year 5. The Cash Flow balance at the end of year 5 is forecast to reach $593,000.
CASH FLOW ($’000) Year 1 SALES BEFORE SALES TAXES
Year 2
Year 3
Year 4
Year 5
600
780
908
958
1,008
78
114
157
178
178
-12
-24
-36
-42
0
0
0
0
CASH FLOW FROM OPERATIONS (CFO) EBITDA Start-up expenses - non recurring expense Payment of income taxes
-13 0
(Incr) Decr in account receivable
0
(Incr) Decr in trade debtors
0
(Incr) Decr in prepayments & accrued income
0
0
0
0
0
-6
-2
-1
-1
-1
4
1
1
0
0
10
3
1
0
1
-10
0
0
0
0
63
105
134
142
137
CASH FLOW FROM INVESTMENTS (CFI)
-50
-10
-10
-10
-10
Increase in Fixed assets
-50
-10
-10
-10
-10
Net Interest Income (expense
0
0
0
0
0
Principal repayment of debt
0
0
0
0
0
Increase (Decrease) in Debt
0
0
0
0
0
99
0
0
0
0
112
95
124
132
127
0
112
207
331
463
112
207
331
463
591
(Incr) Decr in inventory Incr (Decr) in trade creditors Incr (Decr) in other creditors (payroll incl taxes) (Incr) Decr in other assets (rent deposits)
CASH FLOW FROM FINANCING (CFF)
99
Issue of ordinary shares
NET CASH FLOW CASH FLOW BALANCE - BEGINNING OF PERIOD CASH FLOW BALANCE - END OF PERIOD
THE COMPANY PLANS TO GENERATE A NET POSITIVE CASH FLOW FOR EACH OF THE TWELVE FIRST MONTHS OF OPERATIONS. AS SUCH, THE NET CASH FLOW FOR THE FIRST MONTH OF OPERATION IS EXPECTED TO BE $6,800.
French Bakery, LLC
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Investment As mentioned earlier, French Bakery, LLC signed a five-year business lease on a unit owned by Investment Limited for a total amount due at closing of $65,655.50 as described below. James Smith has injected $99,130 in the Company to finance this lease transaction and provide a $25,874 operational cash balance. The table below includes the breakdown of the $65,655 sum that was paid at closing:
The former tenant operated a bakery in that space. The key money includes all the equipment, furniture, and machinery left by the previous tenant, as well as business permits, allowing French Bakery, LLC to operate its business from day one. A detailed list of those assets is enclosed in the appendix. The former tenant operated a bakery in that space. The key money includes all the equipment, furniture, and machinery left by the previous tenant, as well as business permits, allowing French Bakery, LLC to operate its business from day one. A detailed list of those assets is enclosed in the appendix.
INVESTMENT SUMMARY Issue of Ordinary Shares (A): Cash amount transferred from the investor’s personal account to Company’s account
$99,130.00
Minus: First Month Rent
( $5,218.50 )
Security Deposit
( $5,218.50 )
Last month rent’s deposit
( $5,218.50 )
Key money
( $50,000.00 )
Legal fees
( $5,000.00 )
Business plan preparation fees
( $2,000.00 )
Accounting fees
( $600.00 )
Total of investment & expenses (B) Operational cash balance as of opening balance sheet date (A minus B)
( $73,255.50 )
$25,874.50
THE MANAGEMENT CONSIDERS THAT THE KEY MONEY IS SPLIT BETWEEN TANGIBLE ASSETS FOR $40,000 AND INTANGIBLE ASSETS FOR $10,000.
20
French Bakery, LLC
Balance Sheet BALANCE SHEET ($’000) Year 1
Year 2
Year 3
Year 4
Year 5
ASSETS Current Assets Cash
112
207
331
463
591
Account Receivable
0
0
0
0
0
Inventory
6
8
9
10
10
Other
10.4
10.4
10.4
10.4
10.4
Total Current Assets
128
225
351
483
611
Net Intangible Fixed assets
10
10
10
10
10
Gross Tangible Fixed assets
40
50
60
70
80
Accumulated depreciation
-6
-15
-27
-40
-56
0
0
0
0
0
44
45
43
40
34
172
270
394
523
645
Long Term Assets
Financial fixed assets Total Long Term Assets Total Assets LIABILITIES & EQUITY Current Liabilities Trade creditors
4
5
6
7
7
Other creditors
10
13
14
15
16
Taxes payable
12
24
36
42
41
0
0
0
0
0
25
42
56
63
64
0
0
0
0
0
25
42
56
63
64
99
99
99
99
99
0
60
141
251
374
Short-term notes payables Total current liabilities Long-term liabilities Total liabilities Equity Shareholders equity Retained earnings
-13
-13
-13
-13
-13
Net earnings
Start-up net earnings
60
81
110
122
121
Total Equity
147
227
338
460
581
Total Liabilities and Equity
172
270
394
523
645
THE TABLE SHOWS THE ANNUAL BALANCE SHEET RESULTS WITH TOTAL EQUITY (“NET WORTH “) INCREASING FROM $86,000 IN THE OPENING BALANCE SHEET TO $581,000 AT THE END OF YEAR 5.
French Bakery, LLC
21
FRENCH BAKERY, LLC CONSOLIDATED FINANCIAL FORECAST Income Statement
the Boca Raton unit (bakery 1).
French Bakery, LLC has enclosed a set of financial forecast on the basis of the opening of two bakeries over the next five years. The financial forecast of bakery 2 is based on the assumptions used for
The management will make the investment in year 2 to build bakery 2 for a launch of operations on the first day of year 3.
CONSOLIDATED PROFIT & LOSS ($’000) Year 1
Year 2
Year 3
Year 4
Year 5
Sales After Taxes
642
835
1,614
1,860
2,050
Sales Before Taxes
600
780
1,508
1,738
1,916
Purchases
150
195
377
435
479
17
21
41
48
53
Freight costs Customs duties & expenses
15
20
38
43
48
COST OF SALES (COS)
182
236
456
526
580
GROSS MARGIN
419
544
1,052
1,212
1,336
Advertising
6
8
15
17
19
Shopping bags
6
8
15
17
19
Theft
0
0
0
0
0
10
13
25
29
32
VARIABLE COST
Credit Card Commissions TOTAL VARIABLE COST
22
29
55
64
71
396
515
996
1,148
1,266
63
68
136
144
153
237
315
588
675
740
Phone & internet
2
2
4
4
4
Utilities
5
5
10
10
10
Insurance
1
1
2
2
2
MARGIN ON VARIABLE COST FIXED COST RENT PAYROLL (incl. taxes & benefits)
Travel
1
1
2
2
2
Accounting & Legal
3
3
6
6
6
Office expense
1
1
2
2
2
Other (incl. Headoffice cost)
5
5
11
11
11
318
401
761
857
931
EBITDA
78
114
235
292
335
Start-up expenses
13
0
0
0
0
Depreciation & amortization
6
9
29
34
39
Net interest expense (net interest income)
0
0
0
0
0
EARNINGS BEFORE TAXES
59
105
206
258
296
Income taxes
12
24
56
73
85
NET PROFIT
47
81
151
185
211
TOTAL FIXED COST
SALES ARE FORECAST TO REACH $1.9 MILLION IN YEAR 5 WITH A GROSS MARGIN OF 70% AND AN EBITDA AT $335,000.
22
French Bakery, LLC
Cash Flow Statement Cash Flow from Operations is forecast to grow to $265,000 in year 5. The Cash Flow from Invest-
ment is forecast at $90,000 in year 2, as the company will invest to build the second bakery. The Cash Flow Balance is forecast to reach $788,000 at the end of year 5.
CONSOLIDATED CASH FLOW ($’000) Year 1
SALES BEFORE SALES TAXES
Year 2
Year 3
Year 4
Year 5
600
780
1,508
1,738
1,916
78
114
235
292
335
-13
0
0
0
0
0
-12
-24
-56
-73
0
0
0
0
0
0
0
0
0
0
-6
-2
-7
-2
-2
4
1
5
2
1
10
3
11
4
3
-10
0
-12
0
0
63
105
208
239
265
Increase in Fixed assets
-50
-90
-10
-20
-20
CFI
-50
-90
-10
-20
-20
Net Interest Income (expense)
0
0
0
0
0
Principal repayment of debt
0
0
0
0
0
Increase (Decrease) in Debt
0
0
0
0
0
CASH FLOW FROM OPERATIONS (CFO) EBITDA Start-up expenses - non recurring expense
Payment of income taxes (Incr) Decr in account receivable (Incr) Decr in trade debtors (Incr) Decr in prepayments & accrued income (Incr) Decr in inventory Incr (Decr) in trade creditors Incr (Decr) in other creditors (payroll incl taxes) (Incr) Decr in other assets (rent deposits) CFO CASH FLOW FROM INVESTMENTS (CFI)
CASH FLOW FROM FINANCING (CFF)
Issue of ordinary shares
99
CFF
99
0
0
0
0
112
15
198
219
245
0
112
127
325
544
112
127
325
544
788
NET CASH FLOW CASH FLOW BALANCE - BEGINNING OF PERIOD CASH FLOW BALANCE - END OF PERIOD
THE CASH FLOW BALANCE IS FORECAST TO REACH $788,000 AT THE END OF YEAR 5.
French Bakery, LLC
23
Balance Sheet CONSOLIDATED BALANCE SHEET ($’000) Year 1 Number of bakeries
Year 2
Year 3
Year 4
Year 5
1
1
2
2
2
112
127
325
544
788
Account Receivable
0
0
0
0
0
Inventory
6
8
15
18
20
10
10
22
22
22
128
145
363
584
831
Net Intangible Fixed assets
10
10
10
10
10
Gross Tangible Fixed assets
40
130
140
160
180
Accumulated depreciation
-6
-15
-45
-79
-117
0
0
0
0
0
44
125
105
91
73
172
270
468
676
903
Trade creditors
4
5
10
12
13
Other creditors
10
13
24
28
30
Taxes payable
12
24
56
73
85
ASSETS Current Assets Cash
Other Total Current Assets Long Term Assets
Financial fixed assets (incl. Loans) Total Long Term Assets Total Assets LIABILITIES & EQUITY Current Liabilities
Short-term notes payables
0
0
0
0
0
25
42
90
112
129
0
0
0
0
0
25
42
90
112
129
99
99
99
99
99
0
60
141
292
477
-13
-13
-13
-13
-13
Net earnings
60
81
151
185
211
Total Equity
147
227
378
563
774
Total Liabilities and Equity
172
270
468
676
903
Total current liabilities Long-term liabilities Total liabilities Equity Shareholders equity Retained earnings Start-up net earnings
THE TABLE SHOWS THE ANNUAL BALANCE SHEET RESULTS WITH TOTAL EQUITY (“NET WORTH “) INCREASING FROM $86,000 IN THE OPENING BALANCE SHEET TO $774,000 IN YEAR 5.
24
French Bakery, LLC
CONCLUSION May 2, 2007, James Smith set up O nFrench Bakery, LLC, a Florida company to oper-
ate a French-themed bakery in Boca Raton, Florida. 100% owned by James Smith, French Bakery, LLC is located at 1956 NE 5th Avenue, Unit 3, Boca Raton, Florida 33431. James Smith will manage the Company. He has already demonstrated a strong ability to execute similar projects in the past.
As it is shown in his résumé, James Smith has fourteen years of unparalleled experience in the food industry. He has set up and operated several restaurant and catering businesses in the south of France. Along the way, he has developed an expertise on how to maintain quality while optimizing margin and building solid operational team in order to develop and manage successful food businesses.
The company expects sales to grow from $600,000 in year 1 to $1,916,000 in year 5 with a company head count of 10 and 29 employees respectively.
French Bakery, LLC
25
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