House of Grill Restaurant Financial Evaluation Report
Table of Contents
Executive Summary…………………………………….3-4
Cash Flow Projection…………………………………..5-6
Sensitivity Analysis……………………………………..7-8
Restaurant Valuation…………………………………….9
Terms Sheet……………………………………………..10
Milestones and Deliverables…………………………….10-11
Conclusion……………………………………………….11
References………………………………………………..12-13
EXECUTIVE SUMMARY
The financial evaluation report below shows the findings and conclusions for the financial performance of House of grill restaurant. The business is the food industry it mainly deals with providing a great culinary experience for people of all age and background with their best interest in mind. The main specialization of the business is mainly providing grilled meat, chicken and bar. The company is strategically located in Central London, and it has vast tourist attraction sites around it. The company aims at providing its esteemed customers with the best experience; it focuses on providing a unique and unforgettable grill cuisine experience in London. The restaurant aims at providing world-class services that cannot be met with any other restaurant in the world.
The company has had challenges in finding high-quality food but has managed to maintain its stature over the years. High-quality food with premium ingredients and expertise are very much appealing to customers; thus, the restaurant aims at accessing high-quality food.
Customers usually want to eat good food at a price that’s within their limits.
The restaurant has a vast menu which offers a diverse selection of food in order to meet the demands of their different kinds of customers, including vegetarians and vegans at premium quality.
The business has a large number of employees due to its size; the employees’ remuneration is based on the type of qualification or skill that one possesses. Employees are given correct guidelines on their tasks, they are expected to deliver quality work, or they could face disciplinary actions.
The restaurant aims at maintaining its high status by conducting a financial report.
Cash Flow Projection
It mainly focuses on forecasting the restaurant’s cash flows in order to maintain the operations that concern business and prevent the business from running out of cash. Cash flow is considered to be the life-blood of all businesses as any businesses cannot be maintained without cash. Since we do not have the company’s cash statement of each month, we’ll use the company’s annual statement for cash projection.
Anticipated Income Year’s Cash Flow projection (£)
Annual Turnover 500,000
Total Income 500,000
Expenditures
Business Rate 15,000
Rent 35,000
Salaries 57,600
Gas, electricity and water 48,000
Accounting Fees 5,000
Taxes 20,000
Total Expenditure 180,600
Operating Income (profit) 319,400
From the figures obtained, it seems the restaurant is experiencing a cash flow surplus since the income exceeds the expenditure basing that the turnover is an estimate. Cash flow surplus can be managed properly to help the company spend its surpluses wisely. The company’s surplus can be managed by; investing in Short term ventures which may bring back more profits and can also facilitate the expansion of the business. The company may also invest its funds in liquid instruments and also purchasing supplies for the restaurant.
The cash flow projection obtained is as a result of proper budgeting by the restaurant’s finance committee, and all credit should be given to them. The results may also be influenced by the restaurant’s long-term goals that facilitated adequate planning of the company’s revenue.
Implementation of the stated factors is also considered a cause for the restaurant’s high profits, the company’s Human Resource committee seems to be doing a great job to ensure implementation of the restaurant’s goals well adheres.
Sensitivity Analysis
Case Study
Fab a previously known as “Fabulis” a gay social networking company which was considered to be a fast-growing company can be used a success scenario and a cautionary tale as it underwent significant levels of change within a very short period of time. The company was considered to have the world’s fastest-growing turn over which were valued at $ 1 billion. Fab experienced a sudden event of changes that led the company to finally be sold off to PHC at $ 15 million with all its stock and stock.
Amitay, Vagantibus Graeciae fabulis, 2005 (10)
Measures have been provided to prevent Housing home and grill from undergoing such risks.
The restaurant faces a wide scope of uncertainty that may affect its operations, from the previous funding enterprise essay, the company faces a wide risk in its funding options. I outsourced the risks associated with the funding essay.
Bootstrapping If at any moment the business fails and the investors had used their personal assets to facilitate operations of the business, then they would encounter losses alone. This causes the personal risk to the investors as they risk having no income. The investors or owners may miss out on opportunities that are associated with partnerships.
Family and friends in case the business suffers loss investors risk losing both family and income as trust may be lost.
Debt Most credit facilities require lenders to have a high credit score in order for them to access credit. This implies that starting businesses may face a challenge in acquiring debt.
Equity Financing Too much capital raised through equity causes capital risks as owner’s lose control of ownership.
Possible Outcomes
| Variables | Pessimistic Expected Optimistic |
| Turn over | £750,000 £500,000 £350,000 |
There are three estimated outcomes of the turn over one being pessimistic which is valued at £750,000 which I consider to be very high in my point of view the other is the expected or the actual turn over which is £500,000, this value is rather moderate and is considered as the most likely outcome. The third and final estimate is the optimistic estimate which is valued at £350,000; this is the value estimated in the case of if worse comes to worst than the most likely outcome would be that.
Note: I used to turn overestimates as the given cash flow could not be used to calculate NPV’s for a suitable sensitivity analysis.
Restaurant valuation today and exit
Different strategies can be used in the valuation of a company or a business; this can be easily summed up to:
Company’s value=Equity value+Debt-cash
The estimated market share of House of the grill is £800,000 this value I consider to be the value of the restaurant as there’s no other information given for correct valuation.
We do not use the income approach to value the restaurant as the figures used are only estimates, and they cannot provide accurate values.
The restaurant’s valuation during exit could simply be calculated by using the same formula used above. The value at the exit in simple terms is the Restaurants market value at the time it’s going out of business, this is the sum of all its equity including all assets and debts minus the cash at the hand of the restaurant.
In the case of loss and failure of the business, its value would be less than its value today, but in the case of surplus profits and maximum growth, the restaurant’s value would be much higher than its initial value today.
Factors that may be included in the Restaurants Terms sheet
A terms sheet contains all venture capital used to start and run a company; it outlines all the financial and other business-related terms of an investment. It serves as a form of agreement for the operation of the new or upcoming investment.
The documents required for a terms sheet is subscription agreement and a Shareholders Agreement. These documents are later on made into one file. Discussions are further continued until all parties are in agreement after which a customized constitution is prepared, which contains all the discussed issues and all the agreements and rules made.
The investment process depends on the agreements of the stakeholders; this is usually the amount of shares to be issued and also the amount of capital each party has to raise. The amount of capital raised by each party is considered to be their percentage ownership. This percentage applies in cases of sharing profits and loss. If for example party A and party B want to form House of grill restaurant and party A contributes £30,000 and party B £50,000, and they require £100,000 as initial capital they may issue the remaining amount as equity. Party A would have 30% share capital and ownership and party B 50% while the rest is considered as equity share in terms of Shares issued.
A terms sheet contains the following;
Founder Shares This is the amount that the capital investors put in the project, and it is clearly illustrated by the example of party A and B where party A has a founder share of 30% and party B 50%
Pre-emption rights on new share issues this applies if the business seeks expansion and has insufficient funds the company may issue more shares to facilitate its expansion, but this is done according to the agreements of the investors as to much equity dissolves the ownership capacity and rights of the initial shareholders.
Price protection Initial investors need an anti-dilution protection right to prevent the price of the initial investment geared in business. If for example more shares are issued at an estimate which is below what was initially invested this protection applies by providing a designed model that facilitates the calculation of the number of new shares that the new investors receive.
Redemption this is the right to demand that under certain conditions, the initial investors can buy back shares at a fixed price.
Dividend Rights Shareholders and initial investors must be paid gained profits on their shares or rather the gained profits could be re-invested in the business to increase the size of the business.
Milestones and Deliverables
The investors come up with a plan to facilitate the growth of the business. The projected plan is considered to be the milestone of the business. The Home Grill and Bar could make a number of milestones that include proper customer services to meet customer satisfaction and attract more customers.
This can also be done by brand advertising on television and radios or use of modern forms of advertising such as social media platforms such as Instagram and Twitter. This could facilitate the growth of the business as the majority of the targeted audience use social media to interact and find holiday gate away and restaurants they could go and have some nice well-prepared food.
Another milestone could be making plans on how to cope up with the different market conditions in the future; this includes the peak and low seasons. This could be of much help as the restaurant could adequately cope with the peak and low seasons.
They could also create risk measures that could prevent it from affecting the business this could be through insurance as it may help the business in case of any harm or loss the insurance company could become the risk bearer.
Conclusion
In conclusion, the House of grill restaurant being a growing company and experiencing high turnovers annually faces the great risk of facing market failure in the future. Proper management measures should be put into place to prevent the business from facing risks as provided from the fab case study. The business could experience great and enormous profits if its finances are well managed.
References
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