AFC Consultants International

AMUSEMENT PARK
TABLE OF CONTENTS
1 2 2.1 2.2 2.3 2.4 3 4 4.1 4.2 5 6 6.1 6.2 6.3 6.4 6.5 6.6 6.7 7 8 EXECUTIVE SUMMARY ..................................................................................................2 PROJECT DESCRIPTION ...............................................................................................2 MAIN GOALS.................................................................................................................2 SPACE PROGRAM .........................................................................................................3 INVESTMENT REQUIREMENTS .........................................................................................3 STAFFING STRUCTURE ..................................................................................................4 SERVICE STRATEGY .....................................................................................................4 MARKET ANALYSIS .......................................................................................................5 TARGET MARKET ..........................................................................................................5 SWOT ANALYSIS .........................................................................................................5 MARKETING PLAN .........................................................................................................6 FINANCIAL PLAN ...........................................................................................................6 MAJOR ASSUMPTIONS ...................................................................................................6 PROJECTED INCOME STATEMENT ...................................................................................8 PROJECTED BALANCE SHEET ........................................................................................9 PROJECTED CASH FLOWS ...........................................................................................10 RATIO ANALYSIS .........................................................................................................11 BREAK-EVEN ANALYSIS ...............................................................................................11 SENSITIVITY ANALYSIS .................................................................................................12 RECOMMENDATIONS AND KEY SUCCESS FACTORS ..............................................12 ECONOMIC IMPACT EVALUATION..............................................................................12

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Executive Summary

The proposed project consists in establishing an amusement park in Marjeyoun town. The project will offer attractive games and rides in a secure environment. It will target Marjeyoun caza inhabitants as well as neighboring regions of Hasbaya and Bint Jbeil, as it will be a unique park in this area. The initial investment is estimated at $243,085, which include the equipment, fixtures, furniture and working capital. The park will have a total area of 4,000 square meters and will include an outdoor playground, a coffee shop, a hall for birthdays and a parking lot. The annual rent of the park is assumed at $6,000 The projections are taken over a period of 5 years. The Luna Park is expected to provide average annual net profits of $61,922. The amusement park provides an internal rate of return (IRR) of 29% and a payback period of 4 years 6 months. These results show that the project is feasible. A worst case scenario was developed with the assumption of a lower number of kids playing at the park gave an average net profit of $48,216, an IRR of 23% and a payback period of 5 years 7 months. A best-case scenario based on higher number of kids gave an average net profit of $75,629, an IRR of 35% and a payback period of 3 years 9 months. The amusement park with its activities is expected to positively reshape the economic and social environment of Marjeyoun. It will offer 9 part time job opportunities for Marjeyoun residents and most importantly, it will provide a quality amusement park for the children where special events could also be organized.

Project description

The project consists in establishing an amusement park in Marjeyoun town, which will offer attractive games and rides in a secure environment. The park will offer entertainment for the whole family. It will be operational during the summer season, i.e. around 4 months per year and will attract families from Marjeyoun and the surrounding cazas. The park will offer the following services: 7 different rides for kids A hall for birthday parties A coffee shop offering snacks, juices, ice cream and Narguil

2.1 Main goals

To offer entertainment for the kids as well as their parents. Kids enjoy the games and activities while parents can have snacks and beverages along with Narguile at the coffee shop. To offer an attractive venue for birthdays and other events.

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2.2 Space program

The park will have a total area of 4,000 square meters divided as follows:

Space Program Item Outdoor playground Coffee shop + hall for parties Parking Total area in square meters

Total m2 2,500 500 1,000 4,000

2.3 Investment requirements

The initial investment includes the equipment, mainly small rides and games, fixtures (2 generators) and furniture for the office and the coffee shop. The total investment amounts to $243,085 as shown below:

Initital Investment Equipments Train Carousel Mini Airplane Dragon Board Mini Bumper Bungee Tramborin Inflatables Total Equipment Fixtures Generator 30 KVA Generator 60-70 KVA Total Fixtures Furniture Office furniture Coffee shop furniture Total Furniture Total Fixed Assets Working Capital Total investment

20,000 30,000 35,000 55,000 60,000 10,000 5,000 215,000 4,500 8,000 12,500 3,000 1,500 4,500 232,000 11,085 243,085

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Train

Mini bumper

2.4 Staffing structure

The amusement park will have 9 employees including a manager, one maintenance foreman, 6 rides operators and one coffee shop attendant. The rides operators are responsible for one or more rides and ensure the rides / park security. All employees will be hired on a seasonal basis, as the park will be operational only during the summer months (i.e. 4 months).
` Staff Structure Manager Maintenance foreman Rides operators Coffee Shop Attendant Total Staff N of staff 1 1 6 1 9

Service strategy

The park will include rides for children as well as a corner for parents where they can have snacks and beverages. For the sake of the study, the following rides were selected: Train Carousel Mini Airplane Dragon Board Mini Bumper Bungee Tramborin Inflatables

The amusement park will be operational only in the summer time (i.e. over 4 months). During the summer season, some expatriates and locals that reside in the Capital and other main cities come to spend the vacations in their native villages. These visitors flows create increased demand for entertainment venues. The park will offer families attractive and affordable entertainment for their kids.

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Market Analysis

Currently, there are no amusement parks in Marjeyoun Caza. In fact, there are very limited entertainment options in the caza and the neighboring areas. The closest Luna Park is in Nabatieh. The most direct competition to the Marjeyoun Luna Park would be Madinat Farah in Nabatieh. This park is well established and managed. Its owners have 3 other parks in Saida, Tyre and Beirut. Switching rides among the 3 parks has been helping to constantly attract clients and has been ensuring high turnover. The amusement parks that are available in neighboring cazas of Tyr and Nabatieh have been experiencing very high turnovers, especially that the inhabitants of these regions have very limited options for entertainment.

4.1 Target market

The Luna Park will target the following groups: Kids and teenagers Summer camps outings Summer Schools (organized outings) Adults accompanying the kids would enjoy watching them while taking a snack, Narguile, or beverages. Expatriates visiting during the summer

4.2 SWOT Analysis

STRENGTHS The amusement park will be unique in Marjeyoun casa and this will constitute an important advantage. It will be a motive for vacationing expatriates to spend more time in Marjeyoun WEAKNESSES The limited rides for kids, who will constantly require new ones, thereby increasing the necessary capital expenditures budget to upkeep the business. The seasonality of this project. The amusement park will only be operational during the summer season.

OPPORTUNITIES The park could be marketed for other activities, such as kermes, birthdays, summer camps outings, etc The lack of such projects in the South makes the amusement park a destination by itself to the Marjeyoun caza.

THREATS Generally, youngsters from the area have a tendency to go to Beirut and its suburbs, which offer larger varieties of entertainment options. The political instability at the regional level and the proximity of Marjeyoun to the border makes this caza relatively less secure than other parts of Lebanon and limits the number of returning expatriates and visitors.

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Marketing Plan

The amusement park will base its marketing strategy on the following: The Parks location will be selected to offer high visibility, convenient access and ample parking. The park will organize the launching event, where key people and potential clients are invited free of charge. A flyer displaying all rides will be distributed in schools, summer camps, and shops. Offering bundles of 10 and 20 rides at preferential discounted prices to encourage people to spend more time in the Park. Special offers could combine rides along with a snack and drink. Offering special discounts and package deals for schools in order to attract a large number of students, which in turn increases the number of parents that would accompany their kids to the Park. Offering specially priced packages for birthdays, during off peak hours, in order to maximize the revenues of the Park.

Financial Plan

This section details the calculations, assumptions and methodology used as a basis for the financial projections of the amusement park.

6.1 Major assumptions

The assumptions are based on market acceptable pricing levels. They are conservative and take into consideration the economic situation in the caza. Following are the major assumptions and the expected increase over the years:

Revenues from rides

Year 1

Year 2

Year 3

Year 4

Year 5

Kids per day Number of days Price per ride Average spending per kid
Revenues from cafeteria Year 1

175 120 $0.33 $5

Year 2

200 120 $0.33 $5

Year 3

225 120 $0.33 $5

Year 4

250 120 $0.33 $5

Year 5

275 120 $0.33 $5

Kids buying from cafeteria per day Number of days Average spending per kid
Revenues from birthdays Year 1

87.5 120 $1
Year 2

100 120 $1
Year 3

112.5 120 $1
Year 4

125 120 $1
Year 5

137.5 120 $1

Number of birthdays per season Rent of the hall

32 $50

48 $50

64 $50

64 $50

64 $50

It is assumed that in year one, 2 birthdays per week will be organized over 4 months. This number will increase to 3 birthdays per week in year 2 and to 4 birthdays per week starting year 3. Birthdays could be organized in week days as well as during weekends.

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Other assumptions
The following table shows the income statement and the balance sheet assumptions.
Income Statement Assumptions

Rent expense Increase in rent Fuel Electricity Maintenance Cleaning COGS - Cafeteria
Annual increase in general expenses Income tax rate
Balance Sheet Assumptions Inventories Expenses payable

$6,000 5% $500 $400 $600 $200 0.25 2% 15%

per year every 3 years per month per month per month per month of cafeteria revenues

1 month of cafeteria COGS 10% of general expenses

The following table shows the depreciation rates:

Depreciation Rates Equipment Fixtures Furniture

10% 10% 7.5%

It is assumed that the management will purchase new equipments for the park every year for a total cost of $50,000 per year. These equipments will either replace the old rides to maintain an image of innovation for the park and continue attracting locals and visitors.

Staff structure
The amusement park will have a seasonal staff structure. The manager will oversee the parks daily operations. He will also be responsible for marketing activities and creating new concepts and themes for events. The maintenance foreman will be responsible for the continuous maintenance of the equipment to ensure safety and uninterrupted operations. Each one or two rides need an operator in order to start and stop the games. A coffee shop attendant will handle the sales of snacks and beverages. This person will be responsible for ticket sales as well. ` Staff Structure N of staff Monthly Salary Total Salary Manager 1 800 800 Maintenance foreman 1 400 400 Rides operators 6 200 1,200 Coffee Shop Attendant 1 250 250 Total Staff 9 2,650

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6.2 Projected Income Statement

The following income statement is based on conservative assumptions of revenues as well as costs.
AMUSEMENT PARK PROJECTED INCOME STATEMENT Revenues from rides Revenues from coffee shop Revenues from birthdays Total revenues Expenses COGS - Coffee shop Supplies and printed materials (flyers) Fuel Electricity Maintenance Rent expenses Insurance Cleaning Salaries & benefits Depreciation Other expenses Total General & Administrative exp EBIT Tax Net profit (loss) Net profit margin Year 1 105,000 10,500 1,600 117,100 2,625 2,000 2,000 1,600 2,400 6,000 5,000 1,200 10,600 23,088 10,000 66,513 50,588 7,588 42,999
43.2%

Year 2 120,000 12,000 2,400 134,400 3,000 2,040 2,040 1,632 2,448 6,000 5,100 1,224 10,600 28,088 10,200 72,372 62,029 9,304 52,724
46.2%

Year 3 135,000 13,500 3,200 151,700 3,375 2,081 2,081 1,665 2,497 6,000 5,202 1,248 10,600 33,088 10,404 78,240 73,460 11,019 62,441
48.4%

Year 4 150,000 15,000 3,200 168,200 3,750 2,122 2,122 1,698 2,547 6,300 5,306 1,273 10,600 38,088 10,612 84,419 83,781 12,567 71,214
49.8%

Year 5 165,000 16,500 3,200 184,700 4,125 2,165 2,165 1,732 2,598 6,300 5,412 1,299 10,600 43,088 10,824 90,307 94,393 14,159 80,234
51.1%

The projected income statement shows attractive net profit margins all over the projected years. These levels are expected to be reached through an increase in revenues from rides, coffee shop and birthdays. The insurance fees cover the insurance on unexpected accidents that may occur on the premises. The average net profit margin is 47.7% and the average net income is around $61,922.

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6.3 Projected Balance Sheet

The balance sheet shows the projected assets and liabilities of the company.
AMUSEMENT PARK PROJECTED BALANCE SHEET Assets Cash Inventories Total current assets Equipment Fixture Furniture Establishment expenses Accumulated depreciation Net Fixed Assets Total assets Liabilities & Owners' equity Expenses payable Current liabilities Invested Capital Retained earnings Owners' equity Total liabilities & owners' equity Year 1 29,573 656 30,229 215,000 12,500 4,500 10,000 23,088 218,913 249,142 Year 2 30,373 750 31,123 265,000 12,500 4,500 10,000 51,175 240,825 271,948 Year 3 35,890 844 36,734 315,000 12,500 4,500 10,000 84,263 257,738 294,472 Year 4 55,212 938 56,149 365,000 12,500 4,500 10,000 122,350 269,650 325,799 Year 5 78,524 1,031 79,555 415,000 12,500 4,500 10,000 165,438 276,563 356,118

4,143 4,143 232,000 12,999 244,999 249,142

4,224 4,224 232,000 35,724 267,724 271,948

4,307 4,307 232,000 58,164 290,164 294,472

4,421 4,421 232,000 89,379 321,379 325,799

4,505 4,505 232,000 119,612 351,612 356,118

STATEMENT OF RETAINED EARNINGS Retained earnings at 1 January Net profit (loss) for the year Dividends distributed Retained earnings at 31 December

Year 1 0 42,999 30,000 12,999

Year 2 12,999 52,724 30,000 35,724

Year 3 35,724 62,441 40,000 58,164

Year 4 58,164 71,214 40,000 89,379

Year 5 89,379 80,234 50,000 119,612

Each year, the company is expected to acquire new equipment (rides) that replace the old ones for an average amount of $50,000 per year.

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6.4 Projected Cash Flows

The following table shows the projected cash flows of the amusement park.

STATEMENT OF CASH FLOWS Net income Adjustments to reconcile net income to cash provided by operating activities Depreciation Changes in inventories Changes in expense payables Total Adjustments Cash provided by operating activities Cash Flow from Investing Activities Capital expenditures Investment in fixed assets Net cash used in investing activities Cash Flow from Financing Activities Capital injected Dividends distribted Cash provided by financing activities Cash at beginning of year Changes in cash Cash at end of year

Year 1 42,999

Year 2 52,724

Year 3 62,441

Year 4 71,214

Year 5 80,234

23,088 (656) 4,143 26,574 69,573

28,088 (94) 82 28,076 80,800

33,088 (94) 83 33,077 95,517

38,088 (94) 114 38,107 109,322

43,088 (94) 85 43,078 123,312

(242,000) (242,000)

(50,000) (50,000)

(50,000) (50,000)

(50,000) (50,000)

(50,000) (50,000)

232,000 (30,000) 202,000 29,573 29,573

(30,000) (30,000) 29,573 800 30,373

(40,000) (40,000) 30,373 5,517 35,890

(40,000) (40,000) 35,890 19,322 55,212

(50,000) (50,000) 55,212 23,312 78,524

The statement of cash flows shows the cash provided/used in operations, investing and financing activities. The statement shows the capital of $232,000 injected the first year, which is used to finance the acquisition of fixed assets for the business. Moreover, the company expects to acquire new equipment amounting to $50,000 each year. Those equipments are financed from the retained earnings of the company; the shareholders will not inject money to finance those equipments. The main goal for acquiring those equipments is to be able to constantly attract the people in the region with new games and rides. The statement shows the dividends distributed in each year.

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6.5 Ratio analysis

The following table shows the main financial ratios for the amusement park.

Ratio Analysis
Liquidity Ratios Current Ratio Working Capital Profitability Ratios Net Profit Margin Financial Strength Total Debt to Owners' Equity Management Effectiveness Return on Assets Return on Equity = ROE Return on Investment = ROI Asset Management (Efficiency) Total Assets Turnover: Sales/tot assets Total Debt to Total Assets

Year 1 7.30 26,087 43% 0.02 20% 21% 23% 20% 2%

Year 2 7.33 26,797 46% 0.02 23% 23% 26% 23% 2%

Year 3 8.42 32,119 48% 0.01 25% 25% 28% 25% 1%

Year 4 12.60 51,363 50% 0.01 26% 26% 31% 26% 1%

Year 5 17.47 74,519 51% 0.01 26% 27% 34% 26% 1%

The current ratio, which is equal to current assets divided by current liabilities, shows very high level throughout the years. The working capital is positive in all the years showing the ability of the company to meet its short term liabilities Net profit margin is satisfactory in all the projected years. Return on assets increases with the increase in net income. It reaches 26% by year 4. Return on equity and return on investment also increase over the years with the growth in profitability. The total assets turnover, which is sales divided by total assets, is expected to improve over the years with the growth in sales.

6.6 Break-even analysis

The following table shows the annual revenue levels needed for the amusement park to breakeven. Thus, in year 1, an amount of $65,352 is needed to breakeven. The breakeven point increases with the increase in net profit.

AMUSEMENT PARK BREAKEVEN ANALYSIS

Year 1

Year 2

Year 3

Year 4

Year 5

Total Revenues Total Variable Costs Total Fixed Costs

Break-even revenues

117,100 2,625 63,888

65,352

134,400 3,000 69,372

70,955

151,700 3,375 74,865

76,569

168,200 3,750 80,669

82,508

184,700 4,125 86,182

88,151

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6.7 Sensitivity analysis

A worst-case scenario is taken by assuming a lower number of kids playing in the amusement park. In this scenario, the amusement park will have an average net profit of $48,216 and an average net profit margin of 41.3%. A best-case scenario is developed considering higher number of kids playing in the park per day. This scenario gives an average profitability of around $75,629 and an average profit margin of 52.8%

Sensitivity Analysis
Number of kids playing per day Year 1 Year 2 Year 3 Year 4 Year 5 Profitability Average net income Average net profit margin Internal Rate of Return (IRR) Payback Period

Worst Case 150 175 200 225 250

Most Likely 175 200 225 250 375

Best Case 200 225 250 275 300

48,216 41.3%

61,922 47.7%

75,629 52.8%

23% 29% 35% 5 years 7 months 4 years 6 months 3 years 9 months

Recommendations and key success factors

A key success ingredient for the amusement park is its ability to provide entertainment for kids while ensuring security through continuous maintenance for the rides. The park should capitalize on its major advantages of being unique in the region. The new equipment added each year will help to increase the step-in at the park. It is highly recommended to constantly seek new themes and rides to be able to continue attracting local clientele as well as visitors. The park should focus on increasing its marketing efforts through offering special packages to schools, summer camps, and groups. Moreover, the organization of special themes and events (kermes) will help to increase the number of visitors and ensure loyal clientele.

Economic Impact Evaluation

The amusement park with its activities is expected to positively reshape the economic and social environment of Marjeyoun. The park will offer 9 part time job opportunities for Marjeyoun residents and most importantly, it will provide a quality amusement park for the children where special events could also be organized.

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