Use of Investment Capital
P
asta Express specializes in quick serve pasta. The originator of the fast-food pasta concept, it began franchising in 1992, and has grown from one company-owned location to 62 franchises.The fast-food pasta concept allows the customer to enjoy a high-quality, great tasting meal within minutes of placing the order. A typical consumer is a middle- to upper middle-income adult, age 25 to 55 who is tired of fried fast food and has chosen to eat a nutritious pasta meal instead.
Pasta Express has grown substantially in the past two years. In 1995, Pasta Express sold the rights for twenty franchise units in the state of Wisconsin and for thirty units in the Corpus Christ- Houston, Texas area. Several other franchises in Missouri, Florida, California, and Colorado are in various stages of the sales process.
Pasta Express has experienced a 500% increase in franchise leads over the past two years for the following reasons:
Immediate Profitability: Because of our expertise in site selection, the effective Grand Opening, and ongoing advertising, franchisees can often become profitable in the first month of operation.
Mass Appeal: The large and diverse menu gives Pasta Express the strength and flexibility to appeal to every kind of consumer. The Italian food lover, the health conscious eater, the pizza lover, the salad eater, children and adults, and families or couples can all find items to enjoy on the menu.
Ease of Replication: A good chef can help increase sales, and a good business operator can help up to six restaurants perform well, but only a food concept that can be easily replicated can become a national and international sensation. Ease of operation is what separates Pasta Express from other dynamic food concepts. One does not need any experience in the food industry to make the system work successfully. All that matters is that one follow the franchise program.
With so many advantages, the only downside is lack of capital. With or without financing, Pasta Express will continue to grow. The question is whether it can grow quickly enough to seize the opening available in the marketplace. With additional financing, Pasta Express can easily become the next dominant trend in the quick serve food market.
Pasta Express is currently looking for investment capital of $250,000. This investment will be taken in two installments—one installment of $175,000 to be paid immediately, andanother$75,000 to be paid in six months.
Phase I—Investment Capital Expenditures
Marketing Working Capital Systems Upgrade
Investment 175,000
Expense
75,000 75,000 25,000
Business Plans Handbook
FAST FOOD
Phase 2—Investment Capital 75,000Marketing Expense 75,000 Totals 250,000 250,000
Due to expansion, we are in need of additional operations employees, marketing, and office support. Funds in this category will be used to add and upgrade computer hardware and software, phone systems, and to purchase a booth for franchise shows.
1996 Projected income
Income Category Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Totals Royalties
1,750 2,550 5,200 5,200 5,300 7,700 8,200 8,700 9,200 9,700 10,200 10,700 84,400 Rochester
400 600 600 600 600 600 600 600 600 600 600 64,000 Taylor
400 400 400 400 400 500 500 600 500 500 500 500 5,500 Lansing
350 350 400 400 400 500 500 500 500 500 500 500 5,400 E. Lansing
300 300 400 400 400 500 500 500 500 500 500 500 5,300 Troy
Southgate
600 600 600 700 700 700 700 700 700 700 6,700 Ann Arbor
600 600 600 700 700 700 700 700 700 700 6,700 Farmington Hills
600 600 600 700 700 700 700 700 700 700 6,700 Milwaukee
700 700 700 700 700 800 800 800 800 800 800 800 9,100 Sterling Heights
400 300 300 400 500 500 500 500 500 500 500 4,900 Milwaukee #2
400 300 300 400 500 500 500 500 500 500 500 3,500 Texas #1
500 500 500 500 500 500 500 500 3,500 New Stores
500 1,000 1,500 2,000 2,500 3,000 3,500 14,000 Product Sales
Spice Bags
200 400 500 600 700 800 900 1,000 1,100 1,200 1,300 8,700 Franchise Sales
- 15,000 - 15,000 - 15,000 - 15,000 - 15,000 - 15,000 90,000 Territory Sales
- 100,000 - - - - 100,000 - - 90,000
Totals
1,750 17,750 5,600 120,700 5,900 23,400 9,000 24,000 10,200 125,800 11,400 27,000 383,100 -
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FAST FOOD
Phase 2—Investment Capital 75,000
Marketing Expense 75,000 Totals 250,000 250,000
Due to expansion, we are in need of additional operations employees, marketing, and office support. Funds in this category will be used to add and upgrade computer hardware and software, phone systems, and to purchase a booth for franchise shows.
1996 Projected income
Income Category Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Totals Royalties
1,750 2,550 5,200 5,200 5,300 7,700 8,200 8,700 9,200 9,700 10,200 10,700 84,400 Rochester
400 600 600 600 600 600 600 600 600 600 600 64,000 Taylor
400 400 400 400 400 500 500 600 500 500 500 500 5,500 Lansing
350 350 400 400 400 500 500 500 500 500 500 500 5,400 E. Lansing
300 300 400 400 400 500 500 500 500 500 500 500 5,300 Troy
Southgate
600 600 600 700 700 700 700 700 700 700 6,700 Ann Arbor
600 600 600 700 700 700 700 700 700 700 6,700 Farmington Hills
600 600 600 700 700 700 700 700 700 700 6,700 Milwaukee
700 700 700 700 700 800 800 800 800 800 800 800 9,100 Sterling Heights
400 300 300 400 500 500 500 500 500 500 500 4,900 Milwaukee #2
400 300 300 400 500 500 500 500 500 500 500 3,500 Texas #1
500 500 500 500 500 500 500 500 3,500 New Stores
500 1,000 1,500 2,000 2,500 3,000 3,500 14,000 Product Sales
Spice Bags
200 400 500 600 700 800 900 1,000 1,100 1,200 1,300 8,700 Franchise Sales
- 15,000 - 15,000 - 15,000 - 15,000 - 15,000 - 15,000 90,000 Territory Sales
- 100,000 - - - - 100,000 - - 90,000
Totals
1,750 17,750 5,600 120,700 5,900 23,400 9,000 24,000 10,200 125,800 11,400 27,000 383,100 -
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FAST FOOD
Business Plans Handbook Individual StoreSales Volume
1992 1993 1994 1995 1996 (Projections)
Troy 138,000 155,000 187,360 231,000 258,000 Lansing 11,000 140,000 152,000 187,000 200,000 East Lansing - - 166,900 220,000 Taylor 115,000 154,000 161,000 175,000 Milwaukee 45,000 260,000 Ann Arbor 200,000 Southgate 140,000 Southfield 150,000 Farmington Hills 150,000 Livonia 50,000 Milwaukee #2
Texas #1 200,000 Ann Arbor #2
Rochester 141,000 91,000 150,000 Sterling Heights 75,000 110,000 128,000 131,000 150,000 Totals 224,000 661,000 712,360 921,900 2,303,000
•1992 Lansing opened in mid-December Sterling Heights opened in June
•1993 Taylor opened in April Rochester opened in March
•1994 Rochester closed. A Main Street location was sought.
•1995 East Lansing opened in April Milwaukee opened in November
Main Street location was found for Rochester. It should re-open in 1996.
Food Truck Revenue
1996 1997 1998 1999 2000 Income
20 Festivals 300,000 400,000 450,000 500,000 550,000 Expenses
Cost of Sales 75,00 100,000 112,500 125,000 137,500 Cost of Labor 90,000 120,000 125,000 150,000 165,000 Insurance 3,000 3,200 3,400 3,600 3,800 Lease Payments 18,000 18,000 18,000 18,000 18,000, Maintenance 1,800 2,400 3,000 3,600 4,200 Fees for Festivals 10,000 15,000 20,000 25,000 30,000 Fuel 2,000 3,000 4,000 5,000 6,000 Small Wares 1,500 -
Total Expenses 201,300 261,600 295,900 330,200 364,500 Net Profit 98,700 138,400 154,100 169,800 185,500 Royalties 84,400 94,600 130,830 184,620 256,850 New - 107,500 112,500 225,000 375,000 Operations 8,700 9,800 11,300 13,300 15,800 Food Truck 300,000 400,000 450,000 500,000 700,000 New Stores 90,000 250,000 300,000 500,000 700,000 New Territories 200,000 300,000 450,000 600,000 750,000 Five Year
Projected Income
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Business Plans Handbook
FAST FOOD
Revenue Royalties Old Stores New Stores Operations Truck Revenue New Stores New Territories Total Revenue Expenses Advertising Labor Rent Phone Insurance Supplies Utilities
Travel Expenses Postage
Vehicle Expense Sales Expense Miscellaneous Office
- 84,400 - 8,700 300,000 90,000 200,000 683,100
8,000 85,000 4,000 20,000 1,000 1,500 1,500 4,000 2,000 5,000 120,000 700 5,000 Professional Services Accounting
Legal Marketing Truck Expenses Interest Total Expenses Profit/Loss
25,000 25,000 25,000 201,300 15,000 549,000 134,100
- 94,600 107,500 9,800 400,000 250,000 300,000 1,161,900
62,000 128,000 9,500 25,000 1,000 2,400 1,500 8,000 3,000 5,000 180,000 1,000 4,000
20,000 10,000 10,000 261,400 15,000 746,800 415,100
- 130,830 112,500 11,300 450,000 300,000 450,000 1,454,630
75,000 180,000 12,000 27,000 1,900 3,000 2,000 10,000 3,000 5,000 225,000 - 2,500
20,000 15,000 20,000 295,800 15,000 912,200 542,430
- 184,620 225,000 13,300 500,000 500,000 600,000 2,022,920
140,00 328,000 36,000 33,000 3,000 36,000 2,800 11,000 4,000 5,000 240,000 - 3,000
30,000 30,000 60,000 329,600 15,000 1,306,400 716,520
- 256,850 375,000 15,800 550,000 700,000 750,000 2,647,650
160,000 563,000 36,000 36,000 4,000 38,000 3,000 13,000 5,000 7,000 520,000 - 4,000
40,000 50,000 70,000 364,500 15,000 1,928,500 719,150
Equity and Debt Positions
In exchange for the $250,000 investment, Pasta Express is offering an equity position of $150,000 and a note for the remaining $100,000.
Terms
Pasta Express will pay 10% interest for three years on the note of $100,000. Pasta Express will give a 25% stock position in exchange for the remaining $150,000 investment. Pasta Express will buy out the 25% stock position at 2.5 times the initial investment, or the investor may choose to remain a stockholder in anticipation of a public stock offering. If a buyout is chosen, it will occur in late 1997 or 1998.
Profit and Loss Statement
Exit Strategy