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REPORT ON NEW

BUSINESS
MODEL
SUBJECT- FINANCIAL
MANAGEMENT

XAVIER INSTITUTE OF SOCIAL


SERVICE

BUSINESS NAME-
FITFOOD

SUBMITTED TO- SUBMITTED BY-


PROF. TINA MURARKA MIKHIL PRANAY
ROLL-31
Introduction
• This business plan is
an initiative to provide
the fitness consultancy
through diet.
• FIT FOOD has the
expertise in solving the
Health and Fitness
issues through Natural
Diet. Our company
will serve the client
with the Daily Health
Ideas
and Fitness Meals.
•Area of Operation-
Ranchi
• Location-Harmu
Reason for choosing
location
• Harmu being the prime location.
• There are many gyms in or near Harmu
such as Health Freaks, Temple gym,
Gopes Gym, Talwakar Fitness, Red Gym,
Flex Multi gym, Capital Gym and many
more small gyms.
• To maintain diet along with exercise is
very much essential.
• Those who are serious in gym will have
healthy diet.
• There is no such store such as Food Fit in
Ranchi.
• So our store will attract decent amount of
customer’s everyday because of budget
friendly menu.
Why to choose us?
• FIT FOOD uses the best quality raw
materials available in the market in
our food preparation to become the
First and Most Effective Diet Food
Supplier in Ranchi.

• We don’t use oil and excess spices in


our food by any reason ,that’s why
our food are freshly made to build up
the taste to make a healthy Diet
Menu Plan.

• Our food is customized


according to the individual’s
goal.
• The food which are prepared in the
kitchen are planned by the dietician
and fitness expert to be able to
provide the requires nutrition
according every individual goal.

• We do not use cheap and low quality


packaging materials; we rather use
high quality packaging materials.

• Our food are not just healthy like


those who are available in the
market, but our food are goal and
fitness specific which will really help
in resolving your health and fitness
issues.
Our Team
• We have a special & dedicated team
who are involved in preparing and
delivering the diet food services.

• They are expert in their field, and these


experts will make sure that you get the
taste while maintaining your health and
achieve your fitness goal.

 • The following team members has been


divided according to their expertise, who
together can provide the client a
delicious, hygienic and nutritious meal.
 “Dietician” who decide and plan the
nutritional value of the food according to
the client’s requirement and demand.

 “Fitness specialist” who help the


dietician in deciding the nutritional
requirement according to the individual’s
goal if they are engaged in some or the
other fitness activity.

• “Cook” who make sure to cook the food


within the given instructions.. He also
takes care of the process in which the
food is being cooked.
• “Food quality controller” who makes
sure that the food is being made
hygienically, he keeps an eye on the
cooking team to see if they are washing
the food items in the right manner, are
they washing their hands time to time. Are
they preventing food from the dust/dirt etc.
• “Packaging and delivery coordinator”
who check the boxes has been sealed well
or not. He ensures the food to be delivered
to the right person at the right time. He
also checks the weight of the food
according to individual’s requirement.
(e.g. if the person is diabetic, then he
needs to maintain the calorie intake of
1300-1600 calories per day)
• “Delivery staff” who recheck the
address and name of the packed
food before delivery and then
deliver it on time
VARIOUS COST
INVOLVED
Costs will include:

• Building expenses: This is the most expensive


part of the project. Starting from scratch will
require more expenses than buying an existing
fast food. Among the benefits of both, the
immediate cash flow is possible if we buy an
existing fast food. There are other options as well
such as you can buy an already constructed space
to start your restaurant. That might involve rent
expenses.

• Licenses and Permits: For opening a new fast


food, we need to purchase a business license or
permit. We also have to obtain food safety
license, health/trade license, eating house
license, to name a few.
• Insurance expense: The property that we
will rent for opening the new fast food
needs to have insurance to prevent
property damage. So we need to buy
insurance.
• Marketing: Before opening of fast food,
we need to first launch our marketing
campaigns. These campaigns also involve
a lot of cost so we need to be careful on
choosing our channel of marketing.
• Wages for employees: One need to be
think hard on the personnel employed. It
is better to start with less staff and then
increases their number gradually as cash
flows in.
• Furniture cost: Since it’s a new fast food
we need to be ready with the expenses on
basic furniture.
• Buying Kitchen Equipment: It is
important to understand that buying all
kitchen equipments will have drastic
affect on costs. So it is better to first
decide on the menu so that we are very
clear about the equipments we require.
Once that is decided, involve a vendor or
supplier to provide us with the equipments
to start off. Choosing a vendor is much
like choosing a new employee. We should
not decide a vendor on the basis of his
price but checking their references. We
should decide vendors depending on their
delivery, work and the kind of good
working relationship with you. It is also
important that we don't employ too many
vendors as that can affect our cost.
• Working capital: When we will open
our fast food, we need to have some cash
reserved for the start-up period – a
crucial period. During this period, instead
of incoming cash flow there is only
outgoing expenses.
• Technology: We need to have at least a
personal computer with accounting
software installed for duty managers, a
phone and a LAN connection.
• Interior Decoration
• POS (Point of Sale)- There are many POS
Systems out there that will help us to
manage orders, billing, and delivery
along with many other features.
CALCULATION OF
COST INVOLVED
• Area 500 square feet
Cost per square feet = Rs 80
Total Rent per month= Rs 80*500
= Rs 40000 • Security Deposit= Rs
1,00,000
• Cost Involved in Electrical work,
Plumbing work, Painting work, Music
systems = Rs 1,00,000
• Cost involved in dine-in materials like
plates, tables, dustbins, utensils, cutleries
etc = Rs 90,000
• Local approvals, legal registrations may
cost along with bribe up to Rs 50,000.
• Cost of Store insurance –
Rs 10,000 • Planning for
delivery-
Cost of 2 delivery vehicle=
Rs50,000*2 = Rs1,00,000
Cost of 2 delivery box (5k approx.
per box).= Rs 10,000
• 3 months back up capital cost = Rs
1,50,000*3= Rs4,50,000
• Initial marketing cost (Social media
campaign) = Rs 50,000
Therefore, Approx. Total cost
involved = Rs 9,00,000.
FIXED COST
INVOLVED PER
MONTH

 Rent=Rs 40,000
 Salary of:-
Cook-10,000
Delivery Boy- 6,000
Cashier- Rs 8,000
Dietician- Rs 15,000
• Electricity and Maintenance of vehicle-
Rs 7,000
TOTAL FIXED COST PER MONTH =
Rs 86,000
MARKETING
DEPARTMENT
All Marketing
activities:-
Promotion
• Signage
• Distribution of Menus
• Distribution of Fliers/ads/coupons
• Business cards
Run Social Page
Digital Marketing
Sales Promotion
TARGET
CUSTOMERS
AREA RANCHI specially areas of Harmu, Ratu Road, Upper
Bazaar, Ashok Nagar, Main Road etc.

AGE 15-50

THOSE
TYPE OF WHO ARE INTERESTED IN GYM AND WANT HEALTHY DIET.
CUSTOMER

SOCIAL CLASS LOWER, MIDDLE, UPPER (Being budget friendly menu)

TARGET Approx. 20,000


POPULATION
SOURCES OF
FUNDS
• Total Capital Requirement- Rs
10,00,000
• Own Capital- Rs 4,00,000
• Bank Loan- Rs 4,00,000
• Unsecured Loan- Rs 2,00,000
INTEREST ON
FUNDS
Sources of fund Amount Interest

Own Capital 4,00,000 0%

Bank Loan 4,00,000 11%

Unsecured Loan 2,00,000 14%


CASH INFLOW
IN THE
BUSINESS
• As per our estimation and market research
we will be getting around 80 to 100 orders
per day.
• Let an average sale per order is Rs 100.
• Therefore, Total approx. Sale per day
assuming 100 order per day is Rs
100*100= Rs 10,000.
• Therefore, Total approx. Sale per month
assuming 30 days in a month is Rs
10,000*30
= Rs 3,00,000.
• Therefore, Total approx. Sale per year
considering 11 month (excluding few
holidays, strike etc.) = Rs 3,00,000*11 =
Rs 33,00,000.
• Assuming 40% margin in
each order • Therefore,
Profit per month is 40% of total
sale in month = 40% of Rs
33,00,000
= Rs 1,32,000
• Net Profit per month after clearing
fixed cost involved per month= Rs
1,32,000- Rs 86,000
= Rs 46,000
• Therefore, Net Profit per year equals
46,000*12= Rs 5,52,000.
CALCULATION OF
INTEREST
• Bank Loan @11% Compounded half
yearly:-
MONTH MONTHLY TOTAL BALANCE
INTEREST INTEREST

1 3767.5 3767.5 403767.50

2 3803 7570 407570

3 3838.8 11408.8 411408.8

4 3875 15283 415283


• Unsecured Loan @14%
Compounded half yearly:-

MONTHLY TOTAL
MONTH INTEREST INTEREST BALANCE

1 2415 2415 202415

2 2445 4860 204860

3 2474 7334 207334

4 2504 9838 209838


CAPITAL
BUDGETING
• Capital budgeting is a process used by
companies for evaluating and ranking potential
expenditures or investments that are significant
in amount.
• The large expenditures could include the purchase
of new equipment, rebuilding existing equipment,
purchasing delivery vehicles, constructing
additions to buildings, etc. The large amounts
spent for these types of projects are known as
capital expenditures.
• Capital budgeting usually involves the
calculation of each project's future accounting
profit by period, the cash flow by period, the
present value of the cash flows after considering
the time value of money, the number of years it
takes for a project's cash flow to pay back the
initial cash investment, an assessment of risk,
and other factors.
• Capital budgeting is a tool for maximizing a
company's future profits since most companies
are able to manage only a limited number of large
projects at any one time.
PAYBACK
PERIOD
• The Payback Period helps to determine
the length of time required to recover the
initial cash outlay in the project. Simply, it
is the method used to calculate the time
required to earn back the cost incurred in
the investments through the successive
cash inflows.
• The formula to calculate it:
• Payback Period = Initial Outlay/Cash
Inflows
• Accept-Reject Criteria: The projects
with the lesser payback are preferred.
• The number of orders may vary from
different segments every day based on
which i have anticipated an average order
of 100 of Rs 100 each and has calculated
the return accordingly.
• Initial Capital Required= Rs
10,00,000 • Estimated Capital
Inflows:-
MONTH Cash inflow (in Rs)

1 3,00,000

2 3,00,000

3 3,00,000

4 3,00,000

TOTAL CASH INFLOW IN 4


Months= Rs 12,00,000
• Total cash inflow in 3 months = Rs
3,00,000*3 = Rs 9,00,000
• Remaining Capital = Rs 10,00,000-
Rs 9,00,000 =
Rs 1,00,000
• Since there is a cash inflow of Rs 3,00,000
in 30 days i.e cash in flow of Rs 10,000
per day
• Therefore, remaining 1,00,000 will be
recovered in 10 days.

• Therefore, PAYBACK PERIOD is


3 Months 10 days
BREAK EVEN
ANALYSIS
• A break-even analysis is a financial tool
which helps you to determine at what
stage your company, or a new service or a
product, will be profitable.
• Break-even is a situation where you are
neither making money nor losing
money, but all your costs have been
covered.
• Break even quantity = Fixed costs /
(Sales price per unit – Variable cost
per unit)
BREAK EVEN
ANALYSIS
TOTAL CASH
MONTH OUTFLOW AT THE TOTAL CASH
YEAR END INFLOW

1 Rs 1006182.5 Rs 300000

2 Rs 1012430 Rs 600000

3 Rs 1018742 Rs 900000

4 Rs 1025121 Rs 1200000
Break even Analysis
1400000

1200000

1000000

800000
Total Cash outflow
600000 Total Cash Inflow

400000

200000

0
1st 2nd 3rd 4th Month
ARR
• Accounting Rate of Return (ARR) is the
average net income an asset is expected to
generate divided by its average capital
cost, expressed as an annual percentage.
• The ARR is a formula used to make
capital budgeting decisions.
• These typically include situations where
companies are deciding on whether or
not to proceed with a specific investment
(a project, an acquisition, etc.) based on
the future net earnings expected
compared to the capital cost.
• ARR formula
• The formula for ARR is:
• ARR = average annual profit / average
investment

Where,
• Average investment = (book value at
year 1+ book value at end of useful life)
/2
• Average annual profit = total profit over
investment period/number of years.
CALCULATION OF
ARR
Month Net Profit Earned (in Rs)

1 46,000

2 46,000

3 46,000

4 46,000

Average Profit 46,000

Average Investment 2,50,000

ARR (46000*100)/2,50,000
= 18.4
CONCLUSION
• Here we can see that payback period is 3
months and 10 days which is acceptable.
• Average rate of return is about
18.4% so it is acceptable to go for
this business.
• Business is meeting Break-even in around
4th month which indicates that close to 4th
month, the owner will recover its all cost
and will start earning profit.