ROCK ISLAND TAVERN
30338 East Green Ave.
Williamston, PA 11898
This business plan shows a seasoned consideration of all aspects of assuming ownership of a business already in existence. Since the business simply changed hands, information that would normally be speculative, such as traffic, average check price, and income, is more reliable. Entrepreneurs considering purchasing a business rather than starting from the ground up will find this plan very useful.
Andersen Enterprises, Inc. (AEI) was formed to own and operate the Rock Island Tavern. The tavern is located on East Green Avenue in Williamston, Oakland Township, Pellton County. Pellton County is one of the largest counties in the state and Oakland Township is one of the county's fastest growing townships.
Management will focus on maintaining the Tavern's loyal base of repeat customers and will attract new customers from surrounding communities by providing quality food and beverages at reasonable prices. In addition, AEI will feature good quality entertainment, attractive and comfortable surroundings and consistent, high quality service.
Steven Gresboro will be responsible for operational and financial management, sales, marketing and promotion. Mr. Gresboro has eight years of experience as a manager/bartender for Benedict Arnold's Pub in Jordan, PA and Junior's Joint in Kingstown, PA. His responsibilities included hiring, managing, and firing of staff personnel as well as food and beverage service, record keeping and inventory management. Mr. Gresboro has been a corporate lender for Penn Financial Corporation serving as Vice President in the middle market lending area for the past 11 years. Hehas extensive knowledge and experience in the field of banking, finance, sales and marketing. Mr. Gresboro graduated from Westminster University in 1983 with a B.S. in Business Administration Marketing. In May 1994, he received a Masters of Business Administration-Finance from St. Joseph's University.
Kevin Painter will be responsible for management of day to day operations. Mr. Painter's principal responsibilities will include staff management, purchasing, inventory management, marketing and promotions. Mr. Painter has seven years experience as a manager/bartender for Gridiron Sports Bar in Grimley, Pa. And Danny's in York River, Pa. His responsibilities included food and beverage service as well as staff management, purchasing, inventory management and recordkeeping.
The company's target market will consist primarily of local residential customers ranging in age from 21 to 45 and local businesses. Research indicates that 90% of local tavern business comes from a three mile radius. The population of Oakland Township is approximately 7539 (estimated 1992) and has grown 7% since 1990 making it one of Pellton County's largest townships. The population demographics reveal a universe of people totaling 5448 in the age group 18 to 59. The local housing area consists of a mix of single family homes, townhouses, apartment dwellings and mobile home parks. The average household income is $43,221 (estimated 1989).
The tavern will feature a wide selection of alcoholic and non-alcoholic beverages including a variety of liquors, wines, and beers. The food menu will include a wide selection of appetizers along with grilled and cold sandwiches, steaks, hoagies, burgers and fries, dinner and dinner specials. AEI will feature live entertainment, a disc jockey, music, video games and amusements. Business hours will be Monday thru Sunday, 11:00 AM-2:00 AM.
AEI's competition within a three mile radius consists primarily of several local established taverns/pubs/fire halls. The Williamston Fire Hall is located on Rt. 73 one mile east of the Rock Island Tavern, and the Victorian Rose is approximately four miles west on Rt. 73 in Watertown. The Fire Hall is popular and features a good selection of food and beverages with occasional entertainment. However, it has limited hours of operation and is closed on Sundays. The Victorian Rose is established, but has limited food, entertainment and parking and attracts a transient customer base. The tavern is also closed on Sundays. Other local competition includes the Boston Inn located three miles north on Route 206 and the Hill Street Tavern located in Foley Pass.
The Rock Island Tavern has been in business for over 40 years and is considered a landmark in Williamston. The Tavern is known for its good food, comfortable surroundings, quality entertainment and amusement/games selection. Management will actively promote the tavern as the place to meet and socialize in Williamston. This message will be delivered through local advertisements, direct mail, promotional giveaways, special events (i.e. car shows), and through word-of-mouth.
AEI Associates has offered $250M for the purchase of the assets of the Tavern excluding real estate. The assets to be purchased include equipment, machinery, fixtures, supplies, inventory and the liquor license. AEI will negotiate a ten year lease agreement with a ten year renewal option and the right of first refusal should the owner elect to sell the property.
AEI will provide an equity contribution of $125M in cash. The seller will take back a secured note for $125M over ten years at 9% fixed with no prepayment penalty. AEI will seek to obtain a $45M-$50M secured SBA guaranteed fixed rate term loan amortizing over five to seven years to finance certain initial costs and working capital requirements.
The tavern/restaurant industry is mature and established, nevertheless, food and alcoholic beverage sales continue to rise nationally. Consumers spent roughly 215 billion at restaurants and taverns in 1995. This growth has been fueled by the long term rise in the portion of food and beverage dollars consumers spend on items prepared outside the home. In addition, changing work and leisure habits and increased advertising and promotion spearheaded by the alcoholic beverage industry have contributed to the industry's growth and have enhanced profitability.
AEI will offer a wide selection of alcoholic and non-alcoholic beverages, along with a full menu and complete selection of lunch, dinner and snack items. AEI will feature live entertainment on weekends including local and regional bands and music acts. On certain weekday and weekend nights, a disc jockey will complement and/or supplement the live music. For amusement, the Tavern will provide two pool tables, darts and a wide variety of popular video games. AEI will promote drink specials, promotional prizes, giveaways and special events such as (antique car shows) in the adjacent parking lot.
The Rock Island Tavern is located along an active commercial section of East Green Avenue (Route 45) approximately ½ mile from Route 206 in Williamston, Pellton County, PA.The Tavern is approximately one-half mile east of Watertown and approximately ten miles north of Foley Pass. The surrounding businesses include several international fast food chains, retail shops, and service companies. The Tavern is located next to Gary's Farmer's Market, a very active retail established over 75 years ago.
According to Oakland Township authorities, the surrounding area is expected to continue to grow as a result of continued residential construction and commercial development. The site is locate within 1/4 mile of a new 50 lot single family housing development. The adjoining parcels have been zoned to accommodate additional townhouse development and further retail development to include a multi screen movie theater and strip center.
According to Pennsylvania Department of Transportation (PENNDOT), a 1996 traffic survey for Route 45 and Route 206 determined the average daily traffic counts to be as follows:
AEI will target the local residents and businesses of Oakland Township and surrounding townships in order to develop a loyal base of repeat customers as well as draw new customers from the surrounding communities. In addition, the company will seek to attract the areas growing commuter traffic.
AEI's target market will consist of local residential customers, local businesses and commuter traffic. Research indicates that up to 90% of business comes from within a three mile radius. Consequently, the company will focus on attracting and developing a loyal customer base from the surrounding community. AEI expects to capture commuter traffic traveling to Dentworth, Foley Pass, and Watertown
Pellton County is an urban county of 689,996 persons (estimate 1992) situated in southeastern Pennsylvania. Three major employment centers are located within the county making Pellton County one of the leading industrial and trade complexes in the nation.
Pellton County experienced rapid growth in population, housing and employment following WWII. A residential construction boom occurred during the 1950's and 1960's and has remained strong ever since. Development is likely to remain strong particularly in the western part of the county due to the extensive road network, educated and skilled labor force and availability of land.
AEI's principal competition comes from local bars, and tavern/restaurants within a ten mile radius. The Williamston Fire Hall is locate within the town of Williamston approximately one mile east on Route 45 in an active commercial are. The Fire Hall is a popular location and features a good selection of alcoholic and non-alcoholic beverages, food and occasional live entertainment.
The Victorian Rose is an established tavern located approximately three miles west on Route 45 in Watertown on a busy residential/commercial area. The tavern attracts local residents but has a limited and average food selection and limited parking.
The Rock Island Tavern will differentiate itself from its many local competitors in a variety of ways. The tavern will continue to build upon its reputation as a favorite local spot for socializing, drinking, dining and entertainment. AEI will retain loyal customers and attract new customers by improving the selection of alcoholic beverages, upgrading promotional giveaways and prizes and featuring special events. Moreover, AEI will offer quality live entertainment, theme nights and a popular selection of video games and amusements.
Management will actively promote the tavern through local advertisements, cross couponing and advertising with local merchants, direct mail promotions and through promotional giveaways and special events.
AEI's principal competitive advantages come from its ability to offer an attractive combination of beverages, food, music, and entertainment which will appeal to a large and growing target market. The principal competitors do not offer this combination and variety to their customers.
The property consists of a triangular shaped one-half acre lot situated on the east side of East Green Avenue. The building is zoned for general commercial use and consists of a two-story detached commercial dwelling of brick construction with aluminum siding and a shingle roof which is approximately 70 years old.
The first level consists of a horseshoe shaped bar with seating capacity for 22 customers along with a kitchen, adjoining dining/entertainment area and four separate rest rooms. The second floor contains a bedroom, bathroom, office area, conference room and attic. The basement area contains storage space and refrigeration and freezer units for beer and food storage.
The property will be leased to AEI Associates, Inc. under a ten-year lease agreement. However, the principals have the option to buy the property. An appraisal dated July 15, 1993 by Specht Realty, Inc. indicated a market value of $188,600. A purchase price has not yet been agreed upon. The principal equipment consists primarily of kitchen equipment such as a stove, refrigerators and freezers. Other assets include televisions, tables, chairs, air-conditioners, a cash register, desk bedroom and conference room furniture.
AEI's management team will consist of Steven Gresboro and Kevin Painter. Steven and Kevin are highly focused, hard working, energetic and broadly experienced individuals whose combined talents provide a strong and qualified management team. Steven and Kevin provide the needed "hands on" experience in the tavern/restaurants business. In addition, Mr. Gresboro brings expertise in the areas of business administration, finance, sales and marketing. His extensive business background and academic credentials compliment the strengths and talents of Kevin Painter.
AEI will employ a differentiation strategy that will create value for the customer beyond that available from existing competition. The company will focus on providing a friendly, comfortable and entertaining environment that features a wide selection of quality spirits, beverages and food.
AEI will support its differentiation strategy by effective execution of its marketing plan which contains sever integral supporting strategies, including product/service, promotional/sales and pricing.
AEI's product/service strategy will be to provide a wide selection of popular alcoholic and nonalcoholic beverages along with an extensive menu of popular snacks, lunch, and dinner selections. Management will strive to deliver the highest level of consistent, friendly, and courteous customer service to insure a pleasurable drinking and dining experience. In addition, the Tavern will feature a variety of popular live entertainment and music. AEI will also provide popular games and amusements including two pool tables, darts, and video games which will provide a strong source of additional income.
AEI will utilize multiple, constant, but limited advertising and promotional sources. These sources will be selected to maximize the return on allocated advertising/promotional dollars. The local community residents and businesses will be attracted through the yellow pages, local newspaper advertisements, flyers, coupons and periodic direct mail programs.
AEI will offer certain promotional giveaway items, such as T-shirts, key chains, calendars, coffee mugs, which will include the Rock Island Tavern's distinctive logo. In addition, the Tavern will sponsor special events such as a car show and golf outing which will include gifts and cash prizes. The company will also join certain industry associations, such as the Freestone Tavern and Restaurant Association and the local chamber of commerce. These associations provide valuable business tips, allow the business owner to develop industry contacts and build communityrelations.
AEI will utilize a combination of competitor based and prestige pricing. This will insure pricing is in line and local competitors for products and services where little value can be added such as in the case of games and amusements. However, prestige pricing will be employed such as premium micro-brews and liquors or dinner specials where AEI can offer higher quality. The company's strategy will be to position itself among the leading competitors and compete on quality, convenience and customer service, and lastly on price. By developing a high quality image and reputation AEI can maintain premium pricing and maintain its position as the preferred local tavern in the area.
The average customer is expected to spend between $5.00 and $20.00 per visit.
AEI will be owned and operated by Steven Gresboro who will own 100% of the company's capital stock.
AEI will seek to obtain a $45M-$50M secured SBA guaranteed term loan at a fixed rate amortizing over five to seven years to finance initial costs and working capital needs. The remaining balance of the required funding will be provided through a secured $125M seller note to be repaid over 10 years bearing interest at 9% fixed per annum. AEI's cash contribution will be $125M which will consist of an equity contribution and shareholder note.
AEI expects to realize strong consistent, sales and earnings growth in year one that will increase steadily by year five. This growth will be principally attributable to the increase in local population as a result of continued expansion of residential housing developments and from the establishments of new local businesses within immediate area. A new 50 lot single family home development is under construction within one-quarter mile of the Tavern. AEI expects the other surrounding land parcels will be sold for commercial development to include a large townhouse development, multi-screen movie theater and a retail strip center. The company expects to develop additional loyal customers through execution of this advertising/promotional programs, and will focus on attracting the areas growing commuter traffic. Through the five year period, management will effectively control purchases and overhead to maximize operating efficiency and profitability. In addition, operating expenditures will be carefully managed to insure incremental revenue growth results in increased bottom-line profitability.
For the purposes of this projection it is assumed AEI took over operations on January 1, 1997. A brief analysis of the 1995 financial statements is as follows:
Sales increased by 6.9% in 1995 and have increased by an average (16.2% over the past four years). Management attributes this growth to increased advertising and promotion efforts in conjunction with an upgraded food, beverage, games/amusement selection.
Management has demonstrated effective control of expenses over the past four years in relation to sales growth. Operating expenses increased by $5M in 1995 but declined in a percentage of sales by 1% to 30.8%. Major expense items include officer salaries, utilities, taxes, rent and insurance costs.
Inventory levels have been very stable year after year and are comprised primarily of liquor, food and beer. Minimum inventory levels are maintained due to the perishable nature of the aforementioned items. Management purchases liquor and food on a weekly basis. Beer is purchased twice a week.
Equipment includes principally kitchen appliances and accessories, refrigerators, beer coolers, compressors, freezers, furniture and fixtures.
This represents the remaining balance of a bank term loan to finance equipment purchases and building improvements. In addition, the principal has provided periodic loans to the company to support working capital requirements and for renovations and improvements.
|Desired Minimum Cash Balance||$20,000|
|Advertising and Promotion||2,000|
|Legal and Accounting||2,000|
|Total Initial Expenditures||$47,300|
|Total Assets Purchased||250,000|
|Total Initial Costs||297,300|
|Total Financing Requirements $297,300|
These Financial Projections are based on estimates and assumptions set forth therein, and have been delivered for the information and convenience of persons who wish to evaluate the feasibility of the company's strategy and goals. Each such person who has received them realizes that financial projections are inherently speculative. The Financial Projections are based upon the company's Assumptions reflecting conditions it expects to exist or the course of action it expects to take. Because events and circumstance do not occur as anticipated, there will be difference between the Financial Projections and actual results, and those differences may be material. The Financial Projections are based upon detailed underlying assumptions.
Sales are projected to reach $499,000 in 1997 and increase by 7% in 1998, 9% in 1999, 12% in 2000 and 15% in 2001. Sales through the projection period will be fueled by the increase in local population as a result of continued expansion of residential housing developments and from the establishment of new local businesses within the immediate area. AEI will attract and develop new customers through execution of its advertising/promotional programs.
AEI's principal sources of revenue will be generated through the sale of beer and liquor. Beer sales are expected to represent approximately 50% of total revenue. Draft and bottle beer sales will comprise the bulk of total beer revenue. Liquor sales are projected to represent approximately 15% of total revenue which is in line with historical percentage. This percentage is projected to remain relatively stable year to year as beer continues to be the dominant beverage. Food sales will comprise the remaining 35% of sales. Sales of food are expected to grow moderately year to year due to management's focus on beverage sales. The gross margin is expected to remain relatively stable at 40% of sales through the projection period. This assumption is based onhistorical figures and industry averages.
Due to significant sales growth through the projection period, expenses are forecasted to increase although decline as percentage of sales, but remaining within industry averages. Operating expenses are projected to decline as a percentage of sales from 34.0% in 1997 to 29.5% by 2001 as a result of effective management and control of expenses.
The effective tax rate is projected to be 40%.
Fixed assets are stated at cost. Depreciation is provided over the estimated useful lines of the assets under the straight-line method for financial reporting purpose and accelerated methods for income tax purposes. Fixed assets include principally machinery and equipment to be depreciated over seven years.
The excess of the purchase price over the fair market value of the assets acquired is being amortized using the straight-line method over a 15 year period.
The liquor license will be amortized using the straight line method over a 15 year period.
The majority of suppliers are expected to extend 30-day terms and AEI will pay within those terms.
Long term debt will consist of the remaining principal balance of a bank term loan amortizing over five to seven years. Also included, will be the remaining principal balance of the seller note amortizing over ten years at a fixed rate of 9% per annum. In addition, a shareholder note will pay the minimum interest allowable with no specific repayment schedule.
AEI expects to achieve profitability in 1997 and thereafter. The company plans to financegrowth through cash flow from operations. No additional equity will be required after 1997. Net worth is expected to improve from 1997 and thereafter comprising a greater percentage of total capitalization.
|Cash flow from operating activities:|
|Net income (loss)||$5,164||$10,238||$16,266||$24,252||39183|
|Depreciation & amortization||28,120||25,260||25,260||25,260||25,260|
|(Increase) decrease in inventory||(9000)||(500)||(500)|
|Incr. (decr.) in payables & accruals||12,500||3,500||3,500||1,500||4,000|
|(Increase) decrease in intagibles||(100000)|
|(Increase) decrease in other/deposits||(3000)|
|Net case from operating activities||$(66,216)||$38,498||$44,526||$51,012||$68,443|
|Cash flows from investment activities:|
|(Purchase) Sale of equipment/RE||$(150,000)||$20,000|
|Net cash from investment activities||$(150,000)||$20,000|
|Cash flow from financing activities:|
|Increase (decrease) in CPLTD||$22,500|
|Increase (decrease) in long term debt||257,500||(22,500)||(22,500)||(22,500)||(22,500)|
|Increase in additional paid in capital||20,000|
|Net cash from financing activities||$300,000||$(22,500)||$(22,500)||$(22,500)||$(22,500)|
|Net change in cash:|
|Increase (decrease) in cash||83,784||35,998||22,026||28,512||45,943|
|Cash-Beginning of year||83,784||119,782||141,808||170,321|
|Cash-End of year||$83,784||$119,782||$141,808||$170,321||$216,263|
|Core cash required||$19,192||$20,536||$22,384||$25,070||$28,831|
|Cumulative excess cash flow||$64,592||$99,246||$119,424||$145,250||$187,433|
|Cash & equivalents||$1,034||1.8%||$401||0.7%|
|Total current assets||$11,333||19.5%||$10,274||17.1%|
|Gross fixed assets||$25,506||44.0%||$32,056||53.2%|
|Less: accumulated depreciation||1,612||2.8%||5,171||8.6%|
|Net fixed assets||$23,894||41.2%||$26,885||44.7%|
|Other assets-Liquor license||20,000||34.5%||20,000||33.2%|
|Loan origination fees||0.0%||0.0%||10,036||15.9%|
|Current long term debt-bank||812||1.4%||3,462||5.7%|
|Current long term debt-seller||5,975||10.3%||3,922||6.5%|
|Total current liabilities||$10,455||18.0%||$12,397||20.6%|
|Long term debt-bank||$24,792||42.8%||$21,330||35.4%|
|Long term debt-shareholder||0.0%||0.0%||6,355||10.1%|
|Additional paid in capital||12,999||22.4%||12,999||21.6%|
|Retained earnings (deficit)||9,634||16.6%||13,386||22.2%|
|Total net worth||$22,733||39.2%||$26,485||44.0%|
|TOTAL LIABILITIES & NET WORTH||$57,980||100.0%||$60,212||100.0%|
|Cash & equivalents||$83,784||26.4%||$119,782||38.8%|
|Total Current assets||$92,784||29.2%||$129,282||41.9%|
|Gross fixed assets||$150,000||47.2%||$130,000||42.1%|
|Less: accumulated depreciation||21,450||6.8%||40,040||13.0%|
|Net fixed assets||$128,550||40.5%||$89,960||29.1%|
|Other assets-Liquor license||46,665||14.7%||43,330||14.0%|
|Current long term debt-bank||10,000||3.1%||10,000||3.2%|
|Current long term debt-seller||12,500||3.9%||12,500||4.0%|
|Total current liabilities||$35,000||11.0%||$38,500||12.5%|
|Long term debt-bank@9%||$40,000||12.6%||$30,000||9.7%|
|Long term debt-seller@9%||112,500||35.4%||100,000||32.4%|
|Long term debt-shareholder||105,000||33.1%||105,000||34.0%|
|Additional paid in capital||19,900||6.3%||19,900||6.4%|
|Retained earnings (deficit)||5,164||1.6%||15,402||5.0%|
|Total net worth||$25,164||7.9%||$35,402||11.5%|
|TOTAL LIABILITIES & NET WORTH||$317,664||100.0%||$308,902||100.0%|
|Cost of sales||199,205||72.3%||269,589||64.5%|
|License & permits||3,284||1.2%||2,930||0.7%|
|Accounting & legal||1,759||0.6%||5,010||1.2%|
|Repairs & maintenance||4,630||1.7%||8,988||2.1%|
|Depreciation & amortization||1,613||0.6%||3,558||0.9%|
|Advertising & promotion||1,750||0.6%||6.333||1.5%|
|Cleaning & exterminating||517||0.2%||983||0.2%|
|Coil cleaning & water testing||68||0.0%||149||0.0%|
|Dues & subscriptions||173||0.1%||182||0.0%|
|Linen & laundry||587||0.2%||1,642||0.4%|
|Theft & loss||0.0%||0.0%||0.0%||0.0%|
|Total operating expenses:||$65,325||23.7%||$115,429||27.6%|
|Operating profit (loss)||$11,127||4.0%||$33,117||7.9%|
|Other income (expense)||355||0.1%||102||0.0%|
|Pretax income (loss)||$9,670||3.5%||$30,569||7.3%|
|Net income (loss)||$9,670||3.5%||$30,569||7.3%|
|Cost of sales||299,400||60.0%||320,358||60.0%|
|License & permits||1,500||0.3%||1,500||0.3%|
|Accounting & legal||2,000||0.4%||1,500||0.3%|
|Repairs & maintenance||3,000||0.6%||3,500||0.7%|
|Advertising & promotion||5,000||1.0%||7,000||1.3%|
|Cleaning & exterminating||500||0.1%||500||0.1%|
|Coil cleaning & water testing||1,000||0.2%||1,100||0.2%|
|Dues & subscriptions||200||0.0%||200||0.0%|
|Linen & laundry||3,000||0.6%||3,200||0.6%|
|Theft & loss||2,000||0.4%||4,000||0.7%|
|Total operating expenses:||$169,685||34.0%||$177,225||33.2%|
|Operating profit (loss)||$29,915||6.0%||$36,347||6.8%|
|Other income (expense)||0.0%||0.0%||0.0%||0.0%|
|Pretax income (loss)||$14,165||2.8%||$22,622||4.2%|
|Net income (loss)||$5,164||1.0%||$10,238||1.9%|