Management Summary

Our managers are also owners. We want our managers to take a personal stake in the
success of the company, and for that reason we have given them a share of any profits
they generate.
Specific information about each manager is available in the following plan topics.

6.1 Personnel Plan

Most of our employees will come from the University of Southern Oregon in Ashland.
They will be part-time students and will not need healthcare benefits or 401K benefits.
This will hold our payroll burden to less than 8% of total payroll.
The store will hold an annual rafting trip and picnic on the Illinois River each summer.
This "team building" exercise will come out of the marketing budget. Please see the
Profit and Loss table for details.
Our employees will be respected, and will wear a company polo or sweatshirt, not a tightfitting, artificial fiber, company-mandated jumpsuit. Our employees will be paid more (in
salary & benefits) than employees at most other fast food restaurants will be given tuition
reimbursements, thereby making them more empowered, and more content workers. In
this way, we will meet the needs of our market, and differentiate our company from the
myriad of fast food behemoths, who's primary goal is to churn out worthless, tasteless
food in a degraded facility and by degraded employees.

PERSONNEL PLAN

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Assistant Manager

$32,400

$34,344

$36,405

$38,589

$40,904

Store Manager

$44,400

$47,064

$49,888

$52,881

$56,054

Student Help (PT)

$16,320

$17,299

$18,337

$19,437

$20,604

Student Help (PT)

$16,320

$17,299

$18,337

$19,437

$20,604

Student Help (PT)

$16,320

$17,299

$18,337

$19,437

$20,604

Student Help (PT)

$16,320

$17,299

$18,337

$19,437

$20,604

Student Help (PT)

$16,320

$17,229

$18,337

$19,437

$20,604

10

12

12

$158,400

$167,834

$177,978

$188,657

$199,977

TOTAL PEOPLE

Total Payroll

Need real financials?

We recommend using LivePlan as the easiest way to create automatic financials for your
own business plan.

Create your own business plan

6.2 Organizational Structure

The organizational structure is very flat. While it's important that our manager on duty is
clearly in charge, we will not belittle our employees through rankism that disempowers
them from taking initiative. Our manage on duty will have the final say regarding all
decisions, yet we have trained her to teach the employees how to react to customer issues
on their own and respond based on their knowledge of company policy, and when that
fails them, their common sense. Fortunately all of the people we have lined up for our
open positions appear to have an abundant supply of common sense.

6.3 Management Team

The management team has a combined 30 years of experience in the food service
industry, with 15 years of delicatessen experience.
Luke Walsh, the owner, owned and managed a deli in downtown Portland, OR for 15
years. During this period, he turned the deli into a full-service convenience mart, added a
dining area, and increase the menu from 10 items when launched, to over 100 items prior
to his exit from the company. Luke sold the company to a husband/wife entrepreneur
team in 1994 for $2 million, and has been living off personal investments and other
ventures for the last seven years. Luke received his MBA from Portland State University
in 1998, and earned his BA in finance from the University of Oregon in 1989.
Lisa McKewan, Store Manager, has a BA in Psychology, and worked for over 15 years as
manager of the The Greentree Restaurant in Ashland. This restaurant is known for its
friendly waitstaff, diverse and award-winning menu, outdoor seating, and excellent
service. Lisa turned The Greentree Restaurant from a small, 600 sq. ft deli, to a fullservice restaurant. She helped the owners find investors, and helped write the marketing
and business expansion plan. She managed the day-to-day operations of the business,
trained and hired all waitstaff, set the menu, and managed all advertising spending. Lisa
will assume the Store Manager position in title, a step down for her, but in exchange for

being flexible in this regard, she will receive 4% ownership in the company. Once the
owner has moved out of day-to-day operations, presumably around year three of
operations, Lisa will receive another 2% of the company as stipulated by her employment
contract.

6.4 Management Team Gaps

The only gap we face is the fact that none of us have run a franchise business. Since both
Lisa and Luke have experience running a sole proprietorship, and non-franchised
restaurant, our experience will more than compensate for the increased "hand-holding"
that comes with owning a franchise.
Due to the limited number of people managing the restaurant, our goals may not be met if
we were to lose a manager or owner. We have drawn up a legal contingency plan with a
$1 million policy on the owner to prevent this from disrupting the business. We have also
allowed for a cash balance that would allow for a recruitment bonus to another Store
Manager if Lisa were to leave for any reason.

Financial Plan
Our financial plan is available in the following chapters. Our numbers are based on past
experience, knowledge of the industry, growth expectations for the fast food sector
nationwide, and common sense.

7.1 Long-term Plan

Our long-term plan includes expansion into the Medford market in year two, followed by
healthy dividend payouts in years three through five. Our goal is to build a business out
of two franchises, and run each franchise as a profit center for the purpose of building
wealth for employees, the community, and the Walsh family.

7.2 Important Assumptions

The SBA 504 loan program stipulates that loans for the purpose of purchasing and
improving small business real estate will not exceed 7.5%. The loan is pegged to the 10
year treasury note +1.7%. The current rate for the US Treasury Note is 5.13%, so our
estimated long-term loan rate will be about 7%.
The tax rate includes the Oregon State Revenue Tax, currently at 6.6% of NET revenue.
We have prorated the assumptive state tax rate to 4.6% due to the fact that this tax is
levied on NET revenue, not GROSS. The Federal tax rate average for our net revenue is
expected to average 31%. Thus, or assumed total tax rate for this table is 37.6%.

GENERAL ASSUMPTIONS

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Current Interest Rate

8.40%

8.40%

8.40%

8.40%

8.40%

Long-term Interest
Rate

7.00%

7.00%

7.00%

7.00%

7.00%

36.97%

37.60%

36.97%

37.60%

36.97%

Plan Month

Tax Rate

Other

Need real financials?

We recommend using LivePlan as the easiest way to create automatic financials for your
own business plan.

Create your own business plan

7.3 Key Financial Indicators

The following chart shows the projected benchmarks.

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own
business plan.

Create your own business plan

7.4 Break-even Analysis

Our break-even analysis is based on a rough estimate of fixed costs. We predict average
fixed costs to include the cost to lease the building, equipment leases, and various other
equipment costs and fees. Our variable costs include the cost of labor, food inventory, and
other product-related costs. Our variable cost estimate is $1.14 per unit, although that
number may be revised as we review our actuals in the coming months.
Our monthly break-even unit sales are 12,754. This includes units other than sandwiches,
such as cookies, soda, chips and other add-ons. The basis for this break-even point is an
average of entrees (sandwiches) and add-ons. The average per unit revenue is $3.26.

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own
business plan.

Create your own business plan

BREAK-EVEN ANALYSIS

Monthly Units Break-even

Monthly Revenue Break-even

12,754

$41,538

Assumptions:

Average Per-Unit Revenue

$3.26

Average Per-Unit Variable Cost

$1.14

Estimated Monthly Fixed Cost

7.5 Projected Profit and Loss

The following table is the projected profit and loss for franchise Sub Shop.

$26,994

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own
business plan.

Create your own business plan

PRO FORMA PROFIT AND LOSS

Sales

Direct Cost of
Sales

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

$1,401,048

$1,541,154

$1,695,269

$1,864,796

$2,051,276

$490,544

$539,599

$593,559

$652,915

$718,206

Franchisor
Royalty (7%)

$98,073

$107,881

$118,669

$130,536

$143,589

TOTAL COST
OF SALES

$588,618

$647,480

$712,228

$783,451

$861,796

Gross Margin

$812,430

$893,674

$983,041

$1,081,346

$1,189,480

57.99%

57.99%

57.99%

57.99%

57.99%

$158,400

$167,834

$177,978

$188,657

$199,977

$69,714

$75,960

$82,634

$89,791

$97,479

Depreciation

$4,548

$4,548

$4,548

$4,548

$4,548

Depreciation

$60,000

$63,000

$66,000

$69,000

$72,000

Depreciation

$7,200

$7,920

$8,712

$9,583

$10,542

Insurance

$1,200

$1,320

$1,452

$1,597

$1,757

Cleaning Service

$3,600

$3,960

$4,356

$4,792

$5,271

Gross Margin %

Expenses

Payroll

Sales and
Marketing and
Other Expenses

Cell Phone
Service

$4,200

$4,620

$5,082

$5,590

$6,149

Legal

$2,400

$2,400

$2,400

$2,400

$2,400

$12,672

$13,427

$14,238

$15,093

$15,998

$0

$0

$0

$0

$0

Total Operating
Expenses

$323,934

$344,989

$367,400

$391,050

$416,120

Profit Before
Interest and
Taxes

$488,496

$548,685

$615,641

$690,295

$773,360

EBITDA

$493,044

$553,233

$620,189

$694,843

$777,908

$18,156

$15,848

$13,439

$11,031

$8,623

Taxes Incurred

$174,138

$200,347

$222,614

$255,403

$282,698

Net Profit

$296,203

$332,491

$379,588

$423,861

$482,039

21.14%

21.57%

22.39%

22.73%

23.50%

Payroll Taxes

Other

Interest Expense

Net Profit/Sales

7.6 Projected Cash Flow

The following chart and table shows the projected cash flow.

Need actual charts?

We recommend using LivePlan as the easiest way to create graphs for your own
business plan.

Create your own business plan

PRO FORMA CASH FLOW

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Cash Sales

$1,401,048

$1,541,154

$1,695,269

$1,864,796

$2,051,276

SUBTOTAL
CASH FROM
OPERATION
S

$1,401,04
8

$1,541,15
4

$1,695,26
9

$1,864,79
6

$2,051,27
6

Sales Tax,
VAT, HST/GST
Received

$0

$0

$0

$0

$0

New Current
Borrowing

$0

$0

$0

$0

$0

New Other
Liabilities
(interestfree)

$0

$0

$0

$0

$0

Cash
Received

Cash from
Operations

Additional
Cash
Received

New Longterm
Liabilities

$0

$0

$0

$0

$0

Sales of
Other Current
Assets

$0

$0

$0

$0

$0

Sales of
Long-term
Assets

$0

$0

$0

$0

$0

New
Investment
Received

$0

$0

$0

$0

$0

SUBTOTAL
CASH
RECEIVED

$1,401,04
8

$1,541,15
4

$1,695,26
9

$1,864,79
6

$2,051,27
6

Year 1

Year 2

Year 3

Year 4

Year 5

Cash
Spending

$158,400

$167,834

$177,978

$188,657

$199,977

Bill Payments

$922,938

$1,036,091

$1,130,375

$1,244,014

$1,361,367

Expenditures

Expenditures
from
Operations

SUBTOTAL
SPENT ON
OPERATION
S

$1,081,33
8

$1,203,92
5

$1,308,35
3

$1,432,67
1

$1,561,34
4

Sales Tax,
VAT, HST/GST
Paid Out

$0

$0

$0

$0

$0

Principal
Repayment of
Current
Borrowing

$12,000

$12,000

$12,000

$12,000

$12,000

Other
Liabilities
Principal
Repayment

$15,980

$0

$0

$0

$0

Long-term
Liabilities
Principal
Repayment

$20,004

$20,004

$20,004

$20,004

$20,004

$0

$75,000

$0

$0

$0

Additional
Cash Spent

Purchase
Other Current
Assets

Purchase
Long-term
Assets

$35,000

$250,000

$0

$0

$0

$202,000

$0

$300,000

$400,000

$500,000

$1,366,32
2

$1,560,92
9

$1,640,35
7

$1,864,67
5

$2,093,34
8

Net Cash
Flow

$34,726

($19,775)

$54,911

$121

($42,072)

Cash Balance

$54,426

$34,651

$89,562

$89,683

$47,611

Dividends

SUBTOTAL
CASH SPENT

7.7 Projected Balance Sheet

The following table is the projected balance sheet for the franchise Sub Shop.

PRO FORMA BALANCE SHEET

YEAR 1

Assets

Current Assets

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Cash

$54,426

$34,651

$89,562

$89,683

$47,611

Inventory

$47,468

$52,215

$57,437

$63,180

$69,498

$4,000

$79,000

$79,000

$79,000

$79,000

$105,894

$165,866

$225,999

$231,864

$196,109

$240,000

$490,000

$490,000

$490,000

$490,000

$4,548

$9,096

$13,644

$18,192

$22,740

TOTAL LONG-TERM
ASSETS

$235,452

$480,904

$476,356

$471,808

$467,260

TOTAL ASSETS

$341,346

$646,770

$702,355

$703,672

$663,369

Year 1

Year 2

Year 3

Year 4

Year 5

$80,627

$85,564

$93,565

$103,025

$112,687

Other Current Assets

TOTAL CURRENT
ASSETS

Long-term Assets

Long-term Assets

Accumulated
Depreciation

Liabilities and Capital

Current Liabilities

Accounts Payable

Current Borrowing

$53,000

$41,000

$29,000

$17,000

$5,000

Other Current
Liabilities

$0

$0

$0

$0

$0

SUBTOTAL
CURRENT
LIABILITIES

$133,627

$126,564

$122,565

$120,025

$117,687

$179,996

$159,992

$139,988

$119,984

$99,980

TOTAL
LIABILITIES

$313,623

$286,556

$262,553

$240,009

$217,667

Paid-in Capital

$30,000

$30,000

$30,000

$30,000

$30,000

($298,480)

($2,277)

$30,214

$9,801

($66,338)

Earnings

$296,203

$332,491

$379,588

$423,861

$482,039

TOTAL CAPITAL

$27,723

$360,214

$439,801

$463,662

$445,702

$341,346

$646,770

$702,355

$703,672

$663,369

Long-term Liabilities

Retained Earnings

TOTAL
LIABILITIES AND
CAPITAL

Net Worth

$27,723

$360,214

$439,801

$463,662

$445,702

Need real financials?

We recommend using LivePlan as the easiest way to create automatic financials for your
own business plan.

Create your own business plan

7.8 Business Ratios

Our ratios table shows industry numbers for SIC 5812, Eating Places. The SIC industry
averages are generic and do not reflect our precise numbers.

RATIO ANALYSIS

Sales Growth

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

INDUSTR
Y
PROFILE

0.00%

10.00%

10.00%

10.00%

10.00%

7.60%

13.91%

8.07%

8.18%

8.98%

10.48%

3.60%

Percent of
Total Assets

Inventory

Other
Current
Assets

1.17%

12.21%

11.25%

11.23%

11.91%

35.60%

Total Current
Assets

31.02%

25.65%

32.18%

32.95%

29.56%

43.70%

Long-term
Assets

68.98%

74.35%

67.82%

67.05%

70.44%

56.30%

TOTAL
ASSETS

100.00
%

100.00
%

100.00
%

100.00
%

100.00
%

100.00%

Current
Liabilities

39.15%

19.57%

17.45%

17.06%

17.74%

32.70%

Long-term
Liabilities

52.73%

24.74%

19.93%

17.05%

15.07%

28.50%

Total
Liabilities

91.88%

44.31%

37.38%

34.11%

32.81%

61.20%

NET
WORTH

8.12%

55.69%

62.62%

65.89%

67.19%

38.80%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

Percent of
Sales

Sales

Gross Margin

57.99%

57.99%

57.99%

57.99%

57.99%

60.50%

Selling,
General &
Administrativ
e Expenses

36.83%

36.24%

35.69%

35.17%

34.67%

39.80%

2.20%

2.20%

2.20%

2.20%

2.20%

3.20%

34.87%

35.60%

36.32%

37.02%

37.70%

0.70%

Current

0.79

1.31

1.84

1.93

1.67

0.98

Quick

0.44

0.90

1.38

1.41

1.08

0.65

Total Debt to
Total Assets

91.88%

44.31%

37.38%

34.11%

32.81%

61.20%

Pre-tax
Return on
Net Worth

1696.57
%

147.92%

136.93%

146.50%

171.58%

1.70%

Advertising
Expenses

Profit Before
Interest and
Taxes

Main Ratios

Pre-tax
Return on
Assets

137.79%

82.38%

85.74%

96.53%

115.28%

4.30%

Additional
Ratios

Year 1

Year 2

Year 3

Year 4

Year 5

Net Profit
Margin

21.14%

21.57%

22.39%

22.73%

23.50%

n.a

Return on
Equity

1068.43
%

92.30%

86.31%

91.42%

108.15%

n.a

Inventory
Turnover

10.91

10.83

10.83

10.83

10.83

n.a

Accounts
Payable
Turnover

12.07

12.17

12.17

12.17

12.17

n.a

Payment
Days

28

29

29

29

29

n.a

4.10

2.38

2.41

2.65

3.09

n.a

Activity
Ratios

Total Asset
Turnover

Debt Ratios

Debt to Net
Worth

11.31

0.80

0.60

0.52

0.49

n.a

0.43

0.44

0.47

0.50

0.54

n.a

($27,733
)

$39,302

$103,43
3

$111,83
8

$78,422

n.a

26.91

34.62

45.81

62.58

89.69

n.a

Assets to
Sales

0.24

0.42

0.41

0.38

0.32

n.a

Current
Debt/Total
Assets

39%

20%

17%

17%

18%

n.a

Acid Test

0.44

0.90

1.38

1.41

1.08

n.a

Current Liab.
to Liab.

Liquidity
Ratios

Net Working
Capital

Interest
Coverage

Additional
Ratios

Sales/Net
Worth

Dividend
Payout

50.54

4.28

3.85

4.02

4.60

n.a

0.68

0.00

0.79

0.94

1.04

n.a