Pasta Centre Business Plan

Pasta centre business plan
Executive Summary
Sigmund's Gourmet Pasta will be the leading gourmet pasta restaurant in Eugene, OR with a rapidly developing
consumer brand and growing customer base. The signature line of innovative, premium, pasta dishes include pesto
with smoked salmon, pancetta and peas linguini in an alfredo sauce, and fresh mussels and clams in a marinara
sauce. Sigmund's Gourmet Pasta also serves distinctive salads, desserts, and beverages.
Sigmund's Gourmet Pasta will reinvent the pasta experience for individuals, families, and take-away customers with
discretionary income by selling high quality, innovative products at a reasonable price, designing tasteful, convenient
locations, and providing industry benchmark customer service.
Sigmund's first restaurant will be financed through a combination of direct owner investment and long-term loans,
guaranteed by the owner's collateral.
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1.1 Objectives
Sigmund's objectives are to build brand awareness and customer service, while growing sales by opening new
stores. Sigmund's intends to utilize the following strategies to achieve these objectives:
 Offer high quality, innovative menu items, utilizing premium vegetables, meats and cheeses.
 Provide an excellent dining value. Sigmund's provides large portions of fresh, high-quality food for an
average guest check of $10 per person.
 Build brand awareness through inexpensive, guerrilla marketing tactics.
 Pursue disciplined restaurant growth.
 Provide superior customer service.
 Leverage the experience, intelligence, and skills of our sophisticated advisory board.
1.2 Mission
Sigmund's Gourmet Pasta's mission is to provide the customer the finest pasta meal and dining experience. We exist
to attract and maintain customers. When we adhere to this maxim, everything else will fall into place. Our services will
exceed the expectations of our customers.
1.3 Keys to Success
Location, Location, Location.
Sigmund's site selection criteria are critical to success. Arthur Johnson, former VP Real Estate, Starbucks, helped us
identify the following site selection criteria:
 Daytime and evening populations.
 Shopping patterns.
 Car counts.
 Household income levels.
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Company Summary
Sigmund's Gourmet Pasta is a gourmet pasta restaurant started in Eugene, OR. Sigmund's serves individuals,
families, and take-away customers with fresh, creative, attractive pasta dishes, salads and desserts. Sigmund's uses
homemade pasta, fresh vegetables, and premium meats and cheeses.
The Eugene store in the Valley River Shopping Center will be the concept store on which all future stores will be
based.
2.1 Company Ownership
Sigmund's is a privately held Oregon Corporation. The majority stock holder is Kevin Lewis.
2.2 Start-up Summary
Sigmund's will incur the following start-up costs:
 Pasta machines.
 Commercial stove.
 Commercial refrigerators and freezers.
 Commercial dishwasher.
 Cabinets with cutting board surfaces.
 Chairs and tables.
 Beverage dispenser.
 Dishware and flatware.
 Assorted knives, mixing bowls, and other accessories needed in the production of food.
 Point-of-Sale terminal.
 Computer with Internet connection, CD-RW, and printer.
Please note that the following items which are considered assets to be used for more than a year will labeled long-
term assets and will be depreciated using G.A.A.P. approved straight-line depreciation method.
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START-UP FUNDING
Start-up Expenses to Fund $2,100
Start-up Assets to Fund $162,900
Total Funding Required $165,000
ASSETS
Non-cash Assets from Start-up $75,000
Cash Requirements from Start-up $87,900
Additional Cash Raised $0
Cash Balance on Starting Date $87,900
Total Assets $162,900
LIABILITIES AND CAPITAL
Liabilities
Current Borrowing $0
Long-term Liabilities $80,000
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $80,000
Capital
Planned Investment
Kevin Lewis $85,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $85,000
Loss at Start-up (Start-up Expenses) ($2,100)
Total Capital $82,900
Total Capital and Liabilities $162,900
Total Funding $165,000
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START-UP
REQUIREMENTS
START-UP EXPENSES
Legal $1,000
Stationery etc. $100
Menus $1,000
Insurance $0
Rent $0
Research and Development $0
Expensed Equipment $0
Other $0
Total Start-up Expenses $2,100
START-UP ASSETS
Cash Required $87,900
Other Current Assets $0
Long-term Assets $75,000
Total Assets $162,900
Total Requirements $165,000
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Services
Sigmund's has created gourmet pastas and salads that are differentiated and superior to competitors. Customers can
taste the quality and freshness of the product in every bite. The following are some characteristics of the product:
1. Sigmund's dough is made with Italian semolina flour.
2. Cheeses are all imported.
3. Vegetables are organic and fresh with three shipments a week.
4. Meats are all top-shelf varieties, organic when possible.
At Sigmund's, food is not the only product. Sigmund's prides themselves on providing service that is on par with fine
dining. This is accomplished through an extensive training program and only hiring experienced employees.
At A Glance--The Protype Sigmund's Store:
 Location: an upscale mall, suburban neighborhood, or urban retail district.
 Design: bright, hip, and clean.
 Size: 1,200-1,700 square feet.
 Employees: six to seven full time.
 Seating: 35-45.
 Types of transactions: 80% dine in, 20% take away.
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Market Analysis Summary

The market can be divided into three target markets, individuals, families and take-away business. Please see the
next session for an intricate analysis of the different segments.
Sigmund's expansion strategy is to further penetrate the existing markets by opening an additional store (or stores) in
Eugene in 2004. This clustering approach enables Sigmund's Gourmet Pasta to increase brand awareness and
improve operating and marketing efficiencies. For example:
 Clustering allows Sigmund's to negotiate a fixed percentage contract with the food wholesalers.
 Marketing expenditures can be spread over multiple revenue centers. This strategy reduces risks involved
with opening new restaurants given that Sigmund's better understands the competitive conditions, consumer tastes,
and spending patterns in the market. When the Eugene market is saturated with one or two additional stores, then
Sigmund's intends to look at new markets.
4.1 Market Segmentation
The market can be segmented into three target populations:
 Individuals: people that dine in by themselves.
 Families: a group of people, either friends or a group of non-nuclear relatives dining together.
 Take away: people that prefer to eat Sigmund's food at another location.
Sigmund's customers are hungry individuals between the ages of 25 and 50, making up 53% of Eugene (Eugene
Chamber of Commerce). Age is not the most defined demographic of this customer base; all age groups enjoy pasta.
The most defined characteristic of the target market is income. Gourmet pasta stores have been very successful in
high rent, mixed-use urban areas, such as Northwest 23rd in Portland. These areas have a large day and night
population consisting of business people and families who have household disposable incomes over $40,000.
Combining several key demographic factors, Sigmund's arrives at a profile of the primary customer as follows:
 Sophisticated families who live nearby.
 Young professionals who work close to the location.
 Shoppers who patronize the high rent stores.
Service Business Analysis
In 1999, global pasta sales reached $8 billion. Pasta sales are estimated to grow by at least 10% for the next five
years. The big four, Pastabilities, PastaFresh, Pasta Works, and Pasta Perfect contribute $2 billion in combined 2000
revenues. The rest of the market is primarily made up of independent restaurants. Though the barrier to entry into the
pasta market is low, due to insufficient capitalization, most entrants fail within their first six months.
4.2.1 Competition and Buying Patterns
National Competition
 Pastabilities. This restaurant offers consumers their choice of noodles, sauces, and ingredients, allowing
the customer to assemble their dish as they wish. Food quality is average.
 PastaFresh. This company has a limited selection but the dishes are assembled with high-quality
ingredients. The price point is high, but the food is quite good.
 Pasta Works. This company offers pasta that is reasonably fresh, reasonably innovative and at a lower
price point. The company was sold a few years ago, and consequently the direction of management has been
stagnant lately and has resulted in excessive employee turnover.
 Perfect Pasta. This company had medium-priced pasta dishes that use average ingredients, no creativity,
and less than average store atmosphere. Sigmund's is not sure how this company has been able to grow in size as
their whole product is mediocre at best.
Local Competition
 (name omitted)- This is an upscale Italian restaurant that has a limited selection of pasta dishes. Although
the selection is limited and pricey, the dishes are quite good.
 (name omitted)- An Italian restaurant with a decent pasta selection, however quality is inconsistent.
 (name omitted)- An upscale restaurant with a large wine selection and good salads. Everything else is
mediocre at best and over-priced. Service can often be poor.
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Strategy and Implementation Summary

Sigmund's will leverage their two competitive advantages, superior product and industry benchmarked customer
service to build a loyal customer base.
5.1 Competitive Edge
Sigmund's competitive edge is quite simple - superior product and superior service.
 Product: the product will have the freshest ingredients including homemade pasta, imported cheeses,
organic vegetables and top-shelf meats. The product will also be developed to enhance presentation, everything will
be aesthetically pleasing.
 Service: customer service will be the priority. All employees will ensure that the customers are having the
most pleasant dining experience. All employees will go through an extensive training program and only experienced
people will be hired.
5.2 Milestones
Sigmund's will have several milestones:
1. Business plan completion. This will be done as a roadmap for the organization. This will be an indispensable
tool for the ongoing performance and improvement of the company. The business plan will be also used for raising
capital.
2. Set up of the restaurant.
3. Opening of the second store.
4. Profitability.
MILESTONES
START
MILESTONE DATE END DATE BUDGET MANAGER DEPARTMENT
Business plan completion 1/1/2001 2/1/2001 $0 Kevin Marketing
Set up of the restaurant 1/1/2001 3/1/2001 $162,900 All Department
Profitability 11/1/2001 11/31/2001 $0 Kevin Department
Opening of the second Kevin and
store 6/1/2004 6/30/2004 $100,000 Erika Department
Totals $262,900
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5.3 Marketing Strategy
Sigmund's Gourmet Pasta's advertising budget is very limited, so the advertising program is simple. Sigmund's will do
direct mail, banner ads, and inserts, with inserts in the Register-Guard likely to be the most successful of the
campaigns.
Lastly, Sigmund's will leverage personal relationships to get an article about the opening of Sigmund's in the
Register-Guard business section. Previously, friends who have had their restaurant featured in the Register-Guard
have seen a dramatic increase of sales immediately after the article was published.
5.4 Sales Strategy
The sales strategy will be to allow people to try the superior product and service for themselves. In essence, the
product will speak for itself. The marketing campaign will attract people into Sigmund's and the sales strategy will be
to let people experience Sigmund's, this will be sufficient to turn the person into a long-term customer.
5.4.1 Sales Forecast
The first two months will be used to get the restaurant up and running. By month three things will get a bit busier.
Sales will gradually increase, and by the end of the first year we will be running at 2/3 capacity. We will approach full
capacity in year two (full capacity for a restaurant being 90% full), and the introduction of new, higher price-point
items in the third year accounts for that year's increase.
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SALES FORECAST
YEAR 1 YEAR 2 YEAR 3
SALES
Individuals $103,710 $262,527 $286,024
Families $150,304 $380,474 $414,528
Take away $25,401 $64,300 $70,055
Total Sales $279,415 $707,301 $770,608
DIRECT COST OF SALES YEAR 1 YEAR 2 YEAR 3
Individuals $46,669 $118,137 $128,711
Families $67,637 $171,213 $186,538
Take away $11,431 $28,935 $31,525
Subtotal Direct Cost of Sales $125,737 $318,286 $346,773
Management Summary
Kevin Lewis, President, CPA
 Duties: strategic development, back-office administration, financial analysis, internal control, server, and line
cook.
 Education: BS general science and BS accounting, University of Oregon.
 Restaurant experience: two years as a server and busser.
 Business experience: staff accountant (Arthur Andersen) and controller (Hollywood Video).
Chef Darryl Darci, Executive Chef
 Duties: manages the back of the house, product development, kitchen hiring, kitchen training, and inventory
management.
 Education: Western Culinary Institute.
 Restaurant Experience: fifteen years of restaurant experience at Harrah's & JQ Hammonds. At JQ
Hammonds ran an opening crew for new properties, also the executive sous chef managing 20 and plated 800 meals
a day.
Erika Lewis, General Manager
 Duties: manages the front of the house, human resources, server hiring, server training, and quality control.
 Education: BS sociology, University of Oregon.
 Business experience: office and facilities manager, nCube Inc., managed a staff of five, managed system
implementation and construction projects and negotiated satellite office lease.
Advisory Board
 John Stevens, VP Food Starbucks Coffee Co., Inc.
 Arthur Johnson, Former VP Real Estate Starbucks Coffee Co., Inc.
 Donald Davis, franchise owner of Sheraton Hotel and Tony Roma's.
 Jerry Slippery, CPA, Partner, Arthur Anderson.
6.1 Personnel Plan
Kevin, Darryl, and Erika will all be working full time. In addition to this management team, there will be four other full-
time employees brought on board during the end of the third month for the first store. The second store will see the
hiring of five additional employees.
PERSONNEL PLAN
Kevin $30,000 $37,800 $39,690
Erika $30,000 $37,800 $39,690
Darryl $62,000 $75,600 $79,380
Full time employee $11,480 $13,440 $13,440
Full time employee $0 $13,440 $13,440
Total People 7 12 12
Total Payroll $166,912 $272,160 $279,720
7.1 Important Assumptions

The following table details important financial assumptions.
GENERAL ASSUMPTIONS
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0
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7.2 Break-even Analysis
The following topic and table shows our Break-even Analysis.
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BREAK-EVEN ANALYSIS
Monthly Revenue Break-even $31,017
ASSUMPTIONS:
Average Percent Variable Cost 45%
Estimated Monthly Fixed Cost $17,059
7.3 Projected Profit and Loss
The following table will indicate projected profit and loss.
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PRO FORMA PROFIT AND LOSS

SALES $279,415 $707,301 $770,608
Direct Cost of Sales $125,737 $318,286 $346,773
Other Production Expenses $0 $0 $0
Total Cost of Sales $125,737 $318,286 $346,773
Gross Margin $153,678 $389,016 $423,834
Gross Margin % 55.00% 55.00% 55.00%
EXPENSES
Payroll $166,912 $272,160 $279,720
Sales and Marketing and Other Expenses $2,400 $2,400 $2,400
Depreciation $15,000 $15,000 $15,000
Leased Equipment $0 $0 $0
Utilities $0 $0 $0
Insurance $2,400 $3,600 $3,600
Rent $18,000 $36,000 $36,000
Payroll Taxes $0 $0 $0
Other $0 $0 $0
TOTAL OPERATING EXPENSES $204,712 $329,160 $336,720
Profit Before Interest and Taxes ($51,034) $59,856 $87,114
EBITDA ($36,034) $74,856 $102,114
Interest Expense $8,000 $8,000 $8,000
Taxes Incurred $0 $15,557 $23,734
NET PROFIT ($59,034) $36,299 $55,380
Net Profit/Sales -21.13% 5.13% 7.19%
7.4 Projected Cash Flow
The following chart and table will indicate projected cash flow.
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PRO FORMA CASH FLOW

CASH RECEIVED
Cash from Operations
Cash Sales $279,415 $707,301 $770,608
Subtotal Cash from Operations $279,415 $707,301 $770,608
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $279,415 $707,301 $770,608
EXPENDITURES YEAR 1 YEAR 2 YEAR 3
Expenditures from Operations
Cash Spending $166,912 $272,160 $279,720
Bill Payments $136,690 $372,140 $417,494
Subtotal Spent on Operations $303,602 $644,300 $697,214
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $303,602 $644,300 $697,214
NET CASH FLOW ($24,187) $63,001 $73,394
Cash Balance $63,713 $126,714 $200,107
7.5 Projected Balance Sheet
The following table will indicate the projected balance sheet.
PRO FORMA BALANCE SHEET

ASSETS
Current Assets
Cash $63,713 $126,714 $200,107
Other Current Assets $0 $0 $0
Total Current Assets $63,713 $126,714 $200,107
Long-term Assets
Long-term Assets $75,000 $75,000 $75,000
Accumulated Depreciation $15,000 $30,000 $45,000
Total Long-term Assets $60,000 $45,000 $30,000
Total Assets $123,713 $171,714 $230,107
LIABILITIES AND CAPITAL YEAR 1 YEAR 2 YEAR 3
Current Liabilities
Accounts Payable $19,846 $31,549 $34,562
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $19,846 $31,549 $34,562
Long-term Liabilities $80,000 $80,000 $80,000
Total Liabilities $99,846 $111,549 $114,562
Paid-in Capital $85,000 $85,000 $85,000
Retained Earnings ($2,100) ($61,134) ($24,835)
Earnings ($59,034) $36,299 $55,380
Total Capital $23,866 $60,165 $115,545
Total Liabilities and Capital $123,713 $171,714 $230,107
Net Worth $23,866 $60,165 $115,545
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7.6 Business Ratios
The following table outlines some of the more important ratios from the restaurant industry. The final column, Industry
Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC)
code, 5812, Eating Places.
RATIO ANALYSIS
INDUSTRY
YEAR 1 YEAR 2 YEAR 3 PROFILE
Sales Growth 0.00% 153.14% 8.95% 7.60%
PERCENT OF TOTAL ASSETS
Other Current Assets 0.00% 0.00% 0.00% 35.60%
Total Current Assets 51.50% 73.79% 86.96% 43.70%
Long-term Assets 48.50% 26.21% 13.04% 56.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 16.04% 18.37% 15.02% 32.70%
Long-term Liabilities 64.67% 46.59% 34.77% 28.50%
Total Liabilities 80.71% 64.96% 49.79% 61.20%
Net Worth 19.29% 35.04% 50.21% 38.80%
PERCENT OF SALES
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 55.00% 55.00% 55.00% 60.50%
Selling, General & Administrative Expenses 91.28% 55.14% 51.74% 39.80%
Advertising Expenses 0.43% 0.17% 0.16% 3.20%
Profit Before Interest and Taxes -18.26% 8.46% 11.30% 0.70%
MAIN RATIOS
Current 3.21 4.02 5.79 0.98
Quick 3.21 4.02 5.79 0.65
Total Debt to Total Assets 80.71% 64.96% 49.79% 61.20%
Pre-tax Return on Net Worth -247.35% 86.19% 68.47% 1.70%
Pre-tax Return on Assets -47.72% 30.20% 34.38% 4.30%
ADDITIONAL RATIOS YEAR 1 YEAR 2 YEAR 3
Net Profit Margin -21.13% 5.13% 7.19% n.a
Return on Equity -247.35% 60.33% 47.93% n.a
ACTIVITY RATIOS
Accounts Payable Turnover 7.89 12.17 12.17 n.a
Payment Days 27 24 29 n.a
Total Asset Turnover 2.26 4.12 3.35 n.a
DEBT RATIOS
Debt to Net Worth 4.18 1.85 0.99 n.a
Current Liab. to Liab. 0.20 0.28 0.30 n.a
LIQUIDITY RATIOS
Net Working Capital $43,866 $95,165 $165,545 n.a
Interest Coverage -6.38 7.48 10.89 n.a
ADDITIONAL RATIOS
Assets to Sales 0.44 0.24 0.30 n.a
Current Debt/Total Assets 16% 18% 15% n.a
Acid Test 3.21 4.02 5.79 n.a
Sales/Net Worth 11.71 11.76 6.67 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Market Analysis Summary

Strategy and Implementation Summary

7.1 Important Assumptions

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PRO FORMA PROFIT AND LOSS

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PRO FORMA CASH FLOW

PRO FORMA BALANCE SHEET

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