Restaurant (Nonprofit)

BUSINESS PLAN

McMurphy's Grill

St. Patrick's Center
1200 6th St.
St Louis, MO 63106
(314)621-1283

April 1994

This business plan has not been disguised in any way; references to locations, people, and products are real, not fictional. McMurphy's seeks to give job skills to mentally ill homeless people in order to help them. The contributor has asked that those interested in forming a business of this type contact St. Patrick's Center with their questions during regular business hours prior to instituting any of the suggestions in the plan. Note : A number of Appendices to which the plan refers were deliberately excluded due to privacy considerations. This plan has been re-printed from the first volume for the purpose of comparison with its revision. (See next plan.)

• executive summary
• the company and the concept
• the industry and market analysis
• strategic plan
• operations and management
• major competitors: lunch business
• employee training cost analysis
• menu
• target customer analysis
• marketing strategy
• advertising and promotional recommendations
• mcmurphy's grill income statement
• cash flow calculations
• financial assumptions and analysis

EXECUTIVE SUMMARY

Opening its doors on December 3rd, 1990, McMurphy's Grill has brought a little bit of earth-quaking to the St. Louis community. While operating as a competitive restaurant, McMurphy's has set about the task of making people without homes, but with diagnostic psychiatric labels, into food servers and cooks. This business plan primarily focuses on the operational aspects of McMurphy's Grill, defining McMurphy's as two distinct, but interrelated functional organizational units: one being the restaurant business and the other being the employment training component. A strategic plan is presented for each component and the strategic direction which this operation as a whole should take to achieve growth will be outlined.

With an appealing product, both in terms of its mission and its fare, McMurphy's Grill certainly has an added advantage over its competitors. Located at Eleventh Street and Lucas in downtown St. Louis, McMurphy's, as a restaurant, has been favorably noted by restaurant critics and customers alike. Its mission, of training mentally ill homeless men and women, certainly sets it apart from any other competitive restaurant in the St. Louis area.

The success of this operation depends a great deal on the cohesiveness of the two functional organizational units as well as an aggressive marketing strategy. With this in place and a little "luck of the Irish", McMurphy's will likely reach its optimistic sales goals. If the Celebrity Hosts promotion, a newly initiated program, which will be described in more detail in the Strategic Plan, is any indication, a 30 percent increase in sales over fiscal year 1994 is not unrealistic.

Most of us can only imagine the obstacles people who are homeless and mentally ill must overcome to hold down a job, much less one in the restaurant business. Yet, this innovative employment training program has helped to ease the transition for many. From life on the streets to independence, McMurphy's goals are enthusiastic to say the least.

Perhaps the most compelling concern of this type of endeavor lies with the ability to balance both sides of the coin — the mission and the business. An organization's focus on its prime business. The delicate balance of maintaining the effectiveness and success of each component requires extra care and effort. However, with a well defined strategic plan, the community support afforded St. Patrick Center, a myriad of volunteers, and a staff with a vision — this tightrope can be successfully maneuvered.

THE COMPANY AND THE CONCEPT

While operating as a competitive establishment, McMurphy's prime focus is on teaching homeless individuals, many suffering from mental illness, skills in food preparation as well as the restaurant service.

McMurphy's has enjoyed favorable reviews for both its food and its mission. The 80-seat restaurant provides its customers with wholesome, hearty meals and a comfortable, pleasant atmosphere, while its trainees learn on-the-job skills in self-sufficiency. Primarily drawing customers from the downtown lunch business crowd, McMurphy's has a unique advantage in that it also draws people from other areas because of its mission. To support its favorable status, in both categories, McMurphy's Grill is proud to have been the 1992 Winner of the Midwest Living Magazine Hometown Pride Award and Hospitality Awards finalist for the Restaurant of the Year — Casual category sponsored by the Convention and Visitors Commission. In addition, McMurphy's Grill has been awarded grants from the Share Our Strength Foundation for its efforts in training for self-sufficiency.

Owned and operated by St. Patrick Center, a multi-service nonprofit agency providing a variety of services for homeless and low-income people in St. Louis, this innovation transitional employment program has provided an opportunity for sixty-seven men and women, thus far, to learn valuable employment skills. St. Patrick Center is located at 1200 North Sixth Street, on the near north side of downtown St. Louis. Dedicated in 1983, the Center provides opportunities for homeless and low-income persons to attain self-sufficiency and dignity through programs which effect permanent solutions, including education, counseling, job training, employment, housing assistance, and substance abuse rehabilitation. Special emphasis is placed on those who experience mental illness or chemical dependency.

The concept of a restaurant operation stemmed from a restaurant in Rock Island, Illinois which is run by mentally ill employees. By owning their own business, which serves as a transitional training program, St. Patrick Center is able to provide the flexibility required to allow the clients to move at their own pace.

With a generous grant from McDonnell Douglas Employees Community Fund and the McDonnell Douglas foundation as well as contributions from other private and corporate sources, McMurphy's Grill became a reality. The Pasta House Company provided the management expertise and restaurant operations knowledge in addition to numerous donations of restaurant fixtures and supplies. Through the Neighborhood Assistance Program of the State Department of Economic Development, McMurphy's was able to receive free rent for much of its existence. In 1993, Paric Corporation, the owners of Lucas Place, the building which houses McMurphy's Grill, donated the entire 3-floor building to St. Patrick Center. The top two floors are constructed for office space. This innovative project is truly a community endeavor.

The operation of McMurphy's Grill has provided a challenge to St. Patrick Center, whose primary expertise has been in the social service arena. In addition, McMurphy's is only one of thirteen programs operated by St. Patrick Center and thus does not have the concentrated effort that many small restaurant operators employ. Changes in administration at St. Patrick Center, especially at the Executive Director's level, along with changes in the management at McMurphy's has significantly affected the operations of the restaurant.

Under the direction of St. Patrick Center's new Executive Director and the Center's Board of Directors, efforts are underway to develop a long-range strategic plan for the entire agency along with establishing better methods to measure program effectiveness. This business plan will provide the long-range strategic direction for this particular operation, providing target measurements and goals for the business component as well as the employment training component. In addition, this operational plan will help to define management responsibilities, controls and reporting expectations of each component. The strategic plan will also help ensure consistency of operation, despite personnel changes, within each component as well as for the entire McMurphy's Grill operation.

THE INDUSTRY AND MARKET ANALYSIS

McMurphy's Grill falls into two industry classifications. As a competitive restaurant, McMurphy's Grill falls into the foodservice industry. As a facility which provides employment and training for mentally ill homeless persons and those recovering from substance addictions, McMurphy's can also be classified among other vocational rehabilitation programs.

The Foodservice Industry

Description of Product Category

Restaurants are the largest part of the U.S. foodservice industry and according to the National Restaurant Association. They "had an estimated sales of $255 billion in 1992." Fuller-service stand alone restaurants, the category which would include McMurphy's, accounted for "32 percent of all foodservice sales in 1992."

The characteristics of most limited menu tableservice restaurants, of which McMurphy's is a part of, include:

• 62.7 percent of limited-menu tableservice restaurants are single units (independent).
• 46.3 percent of these restaurants have a sales volume under $500,000.
• Over 65 percent serve both food and beverage.
• The average check per person is usually under $10.00.
• The average daily seat turnover was 1.8.

The Size of the Market

The foodservice industry is highly fragmented, thus making it an extremely competitive industry. This industry continues to be dominated by small businesses as is evidenced by "average unit sales of $429,000 reported by tableservice restaurants…" McMurphy's Grill has experienced, thus far, a much lower unit sales volume than the average. This is in part due to the limited time McMurphy's is open on a daily basis. Lack of a comprehensive marketing strategy has also had an impact upon sales.

The foodservice industry continues to experience healthy growth patterns. The National Restaurant Association forecasts an increase of 5.6 percent. Sales for Eating and Drinking places for the City of St. Louis are much higher than for the state as a whole. Total retail sales for the City of St. Louis, of which 18.7 percent are from Eating and Drinking establishments, is expected to increase 45.3 percent over 1992 sales by 1997. With this growth pattern, along with an aggressive marketing strategy, McMurphy's has the potential for significant increases in sales over the next three years.

McMurphy's is located in the extreme northwest section of the downtown core district. Thus, this geographic area represents a huge potential market for McMurphy's lunch business, box lunches, and business functions.

Consumer Attitudes and Demographics

Because McMurphy's is located in the core downtown business district, comprised mainly of white-collar professional persons, its ability to attract a lunch crowd is greater than for many other locations not in the downtown area. Thus, there is a significant potential market for McMurphy's services. It is also important to note that, "Consumers are spending 52 cents out of every dollar at restaurants and bars. This shift reflects the fact that there are more women in the work force and that convenience has become a major decision factor."

McMurphy's Grill has the added attribute in that dining at McMurphy's brings the satisfaction of helping people become self-sufficient. While fast-food operations are marketed as "value" deals, restaurants that are moderately priced, like McMurphy's, are more likely to be considered an overall value by the consumer.

The Competition

In terms of the business aspect, McMurphy's Grill certainly has a competitive edge that no other restaurant in the St. Louis community has. In addition to providing a quality meal and friendly service, this operation also offers its customer the satisfaction of knowing that they have contributed to helping someone achieve self-sufficiency. While other restaurant operations can compete more effectively by offering lower prices or boasting of quick service or providing a more elaborate atmosphere, none can compete directly with McMurphy's Grill's unique attribute — its mission.

McMurphy's large bright dining area, appealing decor, warm atmosphere, friendly service and homey meals set it apart from many of its competitors. It is also the only restaurant with outside seating, an important consideration among office workers on warm days. After being cooped up in an office all morning, people look for ways to get outside and enjoy the fresh air. The management is making plans to develop the small plot of land in front of the restaurant into a garden, which will add to the attractiveness of eating outside. It is also the only one with celebrity hosts (to be described in the Marketing Plan).

In regard to the private function market, competition is also extremely tight. Eleven facilities, located in the downtown area, advertise under Banquets/Catering in the Yellow pages. Seven are hotels, three are restaurants and one is a non-traditional facility which has a facility rental of $750.00. This nontraditional facility will be eliminated in the analysis because it competes in an entirely different arena. McMurphy's can compete very effectively in terms of price as it has one of the lowest priced facilities for both a sit down meal and open bar event. Free parking and the privacy of being the only ones in the establishment are other advantages afforded customers of McMurphy's evening functions. Its major limitation is in its capacity limits. It certainly cannot compete with the hotels in that regard. McMurphy's will need to highlight these attributes in its advertising and promotional programs.

McMurphy's is in the position to gain the support of many of its suppliers when promoting a special event or day. This is in large part because of McMurphy's overriding goal of employment and training for people working toward self-sufficiency. Unlike any of its competitors, McMurphy's Grill is a member of the following organizations which gives it credibility as a restaurant and networking capability:

• Downtown St. Louis,
• Inc. Missouri Restaurant Association
• St. Louis Convention & Visitors Commission

Only members of the St. Louis Convention and Visitors Commission will have direct access to scheduled conventions and can directly market to them. Thus McMurphy's can directly target any potentially large conventions through direct mail as well as publicly via material at the Convention Center.

Transitional Training/Employment Industry

Description and Size of Industry

McMurphy's Grill does not focus on individuals only with mental illness, which alone complicates a person's ability to function independently within the community, but those who are also homeless. It is difficult to assess the number of people who are homeless and mentally-ill. According to the National Resource Center on Homelessness and Mental Illness, "an estimated one-third of single, homeless adults have severe and disabling mental illness, and that as many as half of homeless persons with mental illnesses also have alcohol and/or drug problems." Many are unemployed and have few or no employment skills that will enable them to earn a living wage. Vocational Rehabilitation Programs and other related agencies tend to inhibit the participation of this population due to their many regulations and lack of models which meet the specific needs of this population.

The continuum of services provided by St. Patrick Center for individuals with mental illness and substance addictions, of which McMurphy's Grill is a key component, is consistent with the psychiatric rehabilitation model. Current research points to the success rate of psychiatric rehabilitation as an effective and cost-efficient treatment for persons with serious and persistent mental illness. The psychiatric rehabilitation model emphasizes activities which are integrated into the normal life of the individual and the community.

Competition

In St. Louis, two other agencies are recognized for their efforts, at the community level, with people suffering from mental illness, Independence Center and Places For People also utilize this general psychiatric rehabilitation model. The need for psychiatric rehabilitation programs is far greater than what the existing programs in St. Louis can address. McMurphy's Grill has provided training and employment skills, along with the other supportive services offered by St. Patrick Center, for sixty-seven individuals since the inception of this program in December of 1990. Thirty percent have been employed in the community in a variety of positions. A total of 36 percent, which includes the 20 individuals employed, have moved into more stabilizing situations. Places for People reports that "21 percent of all clients surveyed worked at sometime during the year examined (July 1, 1992 through June 30, 1993)." Independence Center was not able to track clients beyond the initial supported work environment and so statistics are not available. Thus, from the available data, McMurphy's Grill appears to be the most effective in terms of permanent solutions.

In comparing the efficiency of McMurphy's Grill Employment Training component with other similar programs, in terms of the cost of the training program, McMurphy's is certainly competitive. The Fountain House program, of which Independence Center is a branch, reports that their cost of training is $30.00 per day, per client. McMurphy's Grill projections for 1995 indicate that the cost of training will be $21.00 per day, per client. By 1997, this number will be significantly reduced as a result of the operating profit from the restaurant business which will be used to offset the training portion of these costs. Appendix B presents this analysis.

There is very little competition among providers of programs for the mentally ill homeless. All providers agree that there is no competition for clients/members. In fact, most would agree that there are more clients than can be served by the existing programs. The two other providers work cooperatively with St. Patrick Center in an effort to deal more effectively with this population. Information and ideas are shared, and collaborative efforts are organized.

The only source of competition is in terms of funding. However, even here the competition is minimal. Independence Center and Places For People rely heavily on the State Department of Mental Health for some of their other programs, McMurphy's Grill is strictly funded through corporate grants and private contributions. Except for Neighborhood Assistance Tax Credits through the State Department of Economic Development which has been used to offset rental costs at the outset and to help facilitate the contribution of the building which houses McMurphy's Grill, no government funds are used in the operation.

STRATEGIC PLAN

McMurphy's Grill houses two functional organizational units. Each is viewed as distinct, but interrelated. The Restaurant Business component operates to employ persons from the second functional unit, the Employment Training component.

Because of the distinct nature of each component, separate strategic plans have been developed. The close integration of these two units requires a third step which links the two and provides operational guidelines which assist in the efficient and effective management of McMurphy's Grill.

McMurphy's Grill: The Business Unit

Mission: To maintain a viable business operation in order to employ participants of the Employment Training Program.

Description of Product Services

Lunch Business

McMurphy's offers three primary services. First, McMurphy's Grill is a full-service limited menu restaurant located in downtown St. Louis. It is open from 11:00 a.m. to 3:00 p.m. and serves a hearty lunch of traditional American cuisine, with an Irish flair, at a modest price (prices on the menu range from $3.00 to $7.00). The menu, while limited, offers a wide range of soups, sandwiches, salads, entrees, plus daily specials. By offering moderate prices and reasonably quick service (a customer can be in and out within 60 minutes), McMurphy's is attractive to those individuals who like a home-cooked meal, but who are limited somewhat by time. In order to attract more of the business community and improve on McMurphy's "value" image, the menu has been revised. The changes reflect both a surface change in terms of design, but also adds side dishes to some of the entrees. This makes the meals more appealing to the value-oriented consumer.

The same homey, tasty meals are available for carry-out as well, which can be phoned in or faxed prior to being picked up. Takeout remains the driving force behind industry growth and continues to offer expansion opportunities for foodservice operators. Thus, it is extremely important that the carry-outs continue to be emphasized in the marketing efforts since the trend in lunch traffic is away from long lunch hours.

Its appeal as a restaurant have been favorably noted by restaurant critics and customers alike. The large bright dining area, appealing decor, warm atmosphere and homey menu make McMurphy's a far superior dining experience than most of its nearest competition. Because McMurphy's Grill falls into the "moderate" price range, it is considered more of a value by the customer than fast-food operations or those establishments whose price per person is over $10.00.

Box Lunches

Box lunches are another service available from McMurphy's Grill. For a reasonable price of $6.50, McMurphy's box lunch menu offers a variety of sandwiches, salads and combo's for business and organizational meetings. The current box lunch menu has previously only included sandwiches. In order to be more attractive to the business community, McMurphy's box lunches now include more options. Recommendations for these changes came from people in the business community whose firms are potential customers. Delivery of both the box lunches and the carry outs is a must in this industry. McMurphy's currently delivers box lunch orders of 10 or more. In the near future, McMurphy's will need to establish a full delivery service for carryouts as well as box lunches.

Lunch sales, including box lunches, have represented approximately 80 percent of total sales. Box lunches have represented less than one percent of the total sales until in March of 1994 when sales for box lunches skyrocketed because of one very large order. For the first quarter of 1994, box lunch sales represented 5 percent of the total sales and lunch business represented 78 percent.

Private Functions

The restaurant is also available for private functions every evening and on weekends. Cocktail parties, hors d'oeuvres and full-service dinners are offered. Prices for a cocktail party range from $7.95 per person (for up to 3 hours of open bar) to $8.95 per person (for 4 hours or more). Hors d'oeuvres prices range from $4.95 per person to $8.95 per person, depending upon the selection of options. Full course meals range from $11.50 per person to $16.50 per person. Functions with personalized menu items are also welcomed, but prices will vary with items requested. For the first quarter of 1994, sales in this area represented approximately 17 percent of total sales.

Target Customer

The characteristics of McMurphy's customers differ whether we are discussing the lunch business, the boxed lunch business or the party business. Each has its own unique characteristics. However, they all encompass supporters of St. Patrick Center as well as individuals and groups who are unfamiliar with the restaurant's primary mission.

Marketing Plan

The overall goal of McMurphy's Grill marketing strategy is to increase the number of employment training opportunities in order to expand the number of clients participating in and moving through the program. In order to accomplish this goal, however, the restaurant component must be a viable operation so as to employ persons from the employment training component. The following objectives have been identified by management as targets:

• Begin realizing an operating profit by the end of 1997 by:
• Increasing lunch time customer traffic by 40 percent over a three year period.
• Increasing the number of private functions and catering events by 21/2 times the current level over the next three years.
• Increase dollar sales by:
  • 30 percent in Year 1 (1995)
  • 20 percent in Year 2 (1996)
  • 20 percent in Year 3 (1997)
• Institute a motivational compensation program for the restaurant manager and the kitchen manager.
• Increase public awareness of McMurphy's Grill and its mission.

The management of McMurphy's Grill has been busily making plans for marketing the various services offered by the restaurant (i.e. lunch, boxed lunches, and parties). At the same time, they have already begun making some changes in the environment to enhance the decor by changing the curtains and adding new tablecloths. In addition, the bar has been reorganized which has improved its appearance and helped the efficiency of the operation. Table groupings have been rearranged so as to increase the number of tables for two. In the past, most of the tables had been set up in groups of four. Since more customers arrive in groups of two, rearranging the tables helps to eliminate wasted space.

Future plans include both short term and long term efforts to assist the Restaurant in achieving its goals of increased sales.

Financial Plan

McMurphy's previous financial history can certainly leave one wondering about its future. Sales have decreased while costs have increased. However, there is much information gleamed from these results that can be channeled into a brighter future.

As one glances at the history and then at the future based on new sales results, it is obvious that much depends upon the level of sales an operation is able to achieve. Most of McMurphy's expenses are fixed, therefore the higher the sales level the better the bottom line.

To achieve the objectives outlined in the marketing plan, it is important to understand some of the financial data and assumptions which led to the arrival of these target levels. A 40 percent increase by the end of year three would increase the average number of customers to 97 per day. This is not unrealistic, considering that the management has made plans to reduce the size of the bar which would increase its capacity of 28 seats. The seating capacity would then be 108 instead of 80.

The current breakdown between lunch sales and sales from private functions is approximately 80 percent lunch and 20 percent parties. This certainly demonstrates the significance of the lunch business. However, growth in the lunch business is not as great as in the private function business, due in part to capacity limits as well as the time frame for lunch. Thus, the future sales breakdown is more likely to resemble: 70 percent lunch and 30 percent parties.

The increase in the number of parties and catering events is expected to more than double. This assumption is based on the fact that sales per party is averaging $750. At a sales level of $150,000, the sales from private functions is approximately $30,000 (maintaining our 80/20 breakdown as explained above). With the average sales per party at $750, the number of parties would be 40 per year. Transferring this analysis to the 1997 estimated sales level, but assuming a 70/30 breakdown, the sales from private functions would be $75,000. Assuming the average sales per party remains the same at $750, the number of parties would increase to 100. This is more than double the current level. Given the potential market of area firms, future convention traffic, and supporters of St. Patrick Center, management feels this is a feasible target. They also realize that a significant marketing effort must take place to achieve this goal.

The financial reports in the future will also reflect more detail. The current accounting procedure for St. Patrick Center will need to be adjusted in order to segregate out more detail, especially in terms of sales, various types of wages, and some operational expenses. The process should be in place for the start of the new fiscal year in July.

McMurphy's Grill: The Employment Training Unit

Mission; To select and assist appropriate clients in the process of attaining on-the-job skills that will assist them in becoming self-sufficient.

Description of Service

Along with other St. Patrick Center programs, McMurphy's Grill provides a continuum of services which moves the client from the street, receiving no services, to competitive employment and independence. The pre-training portion of this program begins with the selection of appropriate mentally ill homeless clients by counselors at Shamrock Club (one of St. Patrick Center's programs). These clients will complete a series of pre-training classes before placement at McMurphy's. Training includes, but is not limited to communication, self-esteem, personal hygiene, accepting criticism, coping with past problems, time management, and problem solving. Usually the first four classes (Self-image; Behavior (Old and New); Making Choices; and Communication) are required before being placed at the restaurant. During the period in which the client is involved in the On-The-Job-Training portion of the program, the remaining four classes (Problem Solving: Saving Money/Goal Setting: Leisure Time Management/Personal Growth; and Budgeting Priorities) are offered once a week.

After the client has completed the first series of Pre-Employment Classes and before being placed into a position at the restaurant, an orientation is conducted by the Client Case Manager and individualized treatment plans are developed.

Clients are then assigned to an appropriate position at the restaurant and receive proper on-site training. This phase of training includes basic skills such as cleaning and mopping and can lead into more complex positions such as waiting. The client is encouraged to move on to competitive employment only when fully emotionally, psychologically, and socially ready to do so. The initial placement in the community will include careful monitoring by the Case Manager. Hopefully, independent employment is the end result.

Target Market

For the Employment Training component, the customer (or client trainee) is most often homeless and has symptoms of mental illness. Many also are recovering alcoholics or dealing with drug addictions. While most of our trainees are men, which is indicative of this population as a whole, there have been a few women in the program. They suffer from a variety of psychiatric illnesses and have been a part of The Shamrock Club, a day program for mentally ill homeless men and women, operated by St. Patrick Center.

While the prime target for this training program are persons who are homeless and mentally ill, if space is available clients from other programs offered by St. Patrick Center may also participate in this training program. Most are homeless, but without disabling psychiatric illnesses.

The following goals have been set in terms of the number of participants and the number who successfully become self-sufficient:

• 25 participants in 1995 with 10 successes
• 28 participants in 1996 with 12 successes
• 30 participants in 1997 with 14 successes

Financial Plan

The cost of the Employment Training component will be funded in part by the remaining corporate contributions as well as additional solicited funding. By 1997, profits from the restaurant business will help to defer a portion of these costs. Continued profits from the restaurant business segment will reduce these training costs, so that future expansion of this endeavor is likely.

Continued interest in this program from McDonnell Douglas Corporation has been received and the potential for further funding has been expressed. With this possible source of funding, coupled with St. Patrick Center's ability to raise funds, the employment training portion will be covered.

OPERATIONS AND MANAGEMENT

Perhaps the most important aspect of this strategic plan is in the operations and management of the endeavor. The management indirectly involved in the operating of the restaurant business component or the employment training component. It is vital that there be clear reporting relationships and expectations. It is also essential that both components work closely together to ensure the success of the client trainees.

As one of St. Patrick Center's programs, McMurphy's falls under the governance of the St. Patrick Center Board of Directors. The full board meets bimonthly and the executive committee of the board meets on the odd months when the full board does not meet.

Six task groups have been organized, made up of board and staff members, to look at important issues facing the center in the future:

• Mission and Vision: What should be our continuing mission and vision be for the next five years?
• Programs: What programs will best meet the client needs?
• Organization and Staffing: What are the ideal organization and staffing necessary to effectively serve our clients?
• Facilities: What facilities will be needed to house these services?
• Revenue: How will the revenue needs for the future be met?
• Board: What should be our board composition?

Chosen by the board of directors, the executive director of St. Patrick's Center reports directly to the board and is responsible for the budget of over $ 1.8 million, a full-time/part-time staff of over 50 people and the effective management of thirteen programs.

The Director of Programs (Mental Health) and the Client Case Manager are responsible for the selection of appropriate clients, conducting the pre-employment classes and the orientation session, preparing individual treatment plans with the client/trainee, and providing support services (budgeting, help with locating housing, clothing, transportation, etc.).

The Client Case Manager directly monitors client progress through the training program, assessing the clients ability to move on. This position reports directly to the Director of Programs (Mental Health).

The Director of Programs (Mental Health) reports directly to the executive director and is involved with selection of appropriate clients. The Director also supervises the Client Case Manager. A monthly report indicating client progress will be prepared for the executive director by the Director of Programs (Mental Health).

The Business Director is responsible for overseeing the operation of the restaurant business component of McMurphy's Grill. It is essential that this person have a significant background and experience in business. This person works very closely with the restaurant manager in the operation of the restaurant. This position, which reports directly to the executive director, also supervises the Marketing Consultant. Because the foodservice industry is so competitive, it is essential that the marketing effort by carefully monitored and progress noted.

The Restaurant Manager is responsible for the effective and efficient operation of the restaurant business component. This includes the training of client employees in their assigned restaurant positions, hiring other professional staff, as well as all that is involved in the daily operation of this facility. This position will report directly to the business director, who will work closely with the Restaurant Manager and his staff to ensure the viability of the operation.

Assisting the Restaurant Manager the Kitchen Manager. The Kitchen Manager is responsible for the efficient and effective operation of the kitchen facilities. Responsibilities include: ordering food and supplies, training client trainees at the various stations within the kitchen area, quality food preparation, suggesting new menu items, costing out menu items, and monitoring food waste. This position reports directly to the restaurant manager.

The Management Consultant coordinates activities with the restaurant manager and the business manager. The Management Consultant is directly responsible to the business director. Responsibilities include: preparation of a marketing plan along with an annual calendar of events; the organization, coordination and implementation of the marketing activities; establishing measurements to evaluate the effectiveness of various marketing efforts; and networking with various community organizations.

Operations

Weekly and Monthly management reports will be prepared and discussed at weekly and monthly staff meetings of those involved in this program. Problems will be identified and potential solutions discussed. Progress will be highlighted and noted for future plans. Currently, the staff meetings consist of the Restaurant Manager, the Kitchen Manager, the Director of Programs (Mental Health) and the Client Case Manager. In the future these meetings will also include the Business Director and the Marketing Consultant. This will assist in shoring up the fragmentation that exists and improving the communication process, which will help in assessing particular marketing efforts and keep everyone informed of future plans. All involved will have a better understanding of the performance of the entire operation, including the training process and the operations of the business. This will certainly improve the effectiveness and efficiency of the marketing efforts.

In addition, the following procedures need to be incorporated into the operations.

Inventory

Responsibility of the Restaurant Manager. Inventory should be taken on a weekly basis and maintained via computer so that prices can be updated regularly and will require less time each week. At this time there is not a computer at McMurphy's, but the Executive Director and Director of Development at St. Patrick Center will seek donations of computer equipment.

Meal Costing

Responsibility of the Kitchen Manager. A listing of each menu item and the ingredients needed for each, along with their costs needs to maintained and updated regularly. This will assist the management in determining prices as well as evaluating cost of sales margin.

Daily Receipts Report

Responsibility of the Restaurant Manager. To be completed on a daily basis and turned into the finance office at St. Patrick Center within two days. The receipts should be deposited daily as well.

Invoices

Responsibility of the Restaurant Manager and St. Patrick Center's Finance Office. To be checked against ordered items and then sent over to St. Patrick Center to be paid. Price changes should be noted on the inventory list and entered with the next weeks inventory.

Daily Report

Responsibility of the Restaurant Manager. In addition to the sales report, a report should be prepared summarizing the prime costs. A food statistic summary should also be maintained along with a summary of the daily productivity.

Management Reports and Variance Report

Responsibility of the Director of Finance/Administration. They include:

• Customer Count Comparisons with previous years and periods
• Inventory Valuations and the determination of Gross Profit
• Income Statement To include a breakdown of the various products offered (lunch business, box lunches, carry-out, and parties). It should also include comparisons with previous years and prior periods.
• Annual Budget To be compiled with the input of the restaurant manager, the kitchen manager, the Business Manager, and the Marketing Consultant.
• Labor Costs With this item being such a large percentage of the operating costs, this expense needs to be carefully monitored by the restaurant management on daily, weekly, and monthly reports which are to be prepared for the Restaurant Manager and Business Director by the Finance Office.

Calendar of Events

Responsibility of the Marketing Consultant and (indirectly) the Business Director. A plan that includes specific promotional events and advertising efforts by month. An estimated cost of each event and ad should be identified. The plan should be evaluated monthly by the project team along with the Marketing Consultant and revised as necessary. This will help reduce the fragmentation that has existed and served to assist management in the preparation of the annual budget.

McMurphy's Grill Operations Report

Responsibility of the Business Director; to be prepared for the Executive Director. A periodic written report (monthly or quarterly) of progress, problems, and potential solutions for the review and updating of the executive director. Problems that need immediate attention will be dealt with separately and in a timely manner. Variances in budget projections, marketing program expectations, client progress, and specific measurable results of advertising efforts should be included.

MAJOR COMPETITORS: LUNCH BUSINESS

Le Dejeuner Deli & Bakery

Located next door to McMurphy's Grill, this newly opened deli is open Monday through Friday from 7:00 a.m. to 2:30 p.m. This small operation provides a variety of menu items at a somewhat lower price. Services include dining in, carry-out, boxed lunches and catering. However, the dining environment is definitely lacking in appeal and does not seem to draw the professional business person. Its carry-out and boxed lunch business may detract from McMurphy's Grill. The atmosphere prevents a significant competitive threat. It is only the nearness of its location that identifies it as a competitor.

The Shell Cafe

Located at 1221 Locust on the Main Floor of the Shell Building, The Shell Cafe is within four blocks of McMurphy's Grill. Open primarily during the lunch period, the prices are similar. However, the menu items do not have the "homemade" appeal that is characteristic of McMurphy's Irish stew, meatloaf platter, or chicken and noodles. Menu items include dinners (steak, fish, pasta, ham, beef and gyros) and a variety of sandwiches and salads.

The Missouri Bar & Grill

Located on north Tucker (701N. Tucker), a couple of blocks from McMurphy's Grill, has a menu selection and prices comparable to McMurphy's. It also has a full bar (open until 2 a.m.). The outside of the restaurant has an attractive big, bright red awning, which is visible from far away. While similar in some ways to McMurphy's, The Missouri Bar and Grill primarily attracts people interested in the bar. It has the largest sales volume of any of the competition.

The St. Louis Fish Company

Located 2 blocks from McMurphy's Grill on Locust, the St. Louis Fish Company (a new addition to the downtown area) offers a unique menu listing. Open from 10:30 a.m. until 10:00 p.m. (Monday through Friday), this establishment offers: a lunch buffet for $2.99 per pound, and "All You Can Eat" Special for $5.99, and a Lunch Box Special for $2.50 which includes choice offish plus one side order. This is in addition to the regular menu. Service is similar to the St. Louis Bread Company and thus does not include the full-service provided at McMurphy's.

The St. Louis Bread Company

The Saint Louis Bread Co. is considered a bakery/cafe that offers authentic breads, as well as croissants, muffins and pastries. Their advertisements usually focus on their "fresh" bread and pastries. However, their menu also includes cold sandwiches, salads and soups. Prices for their sandwiches range from $4.00 to $6.00 and each restaurant has a fax number for ordering. Since their service is similar to that of a fast-food restaurant, they capitalize on the "alternative" to burgers and fries by focusing on a quick and healthy meal.

DEE DEE's Deli

DEE DEE's Deli is an interesting establishment. Located at the corner of 10th Street and Washington Ave, three blocks from McMurphy's, it appears to be a "hole in the wall" from its very unattractive exterior and the interior is very drab and dark. However, it is usually full every working day. What makes it successful is a reputation based on good food, friendly service and a great price. They differ from the Saint Louis Bread Company in that they offer items that come from the grill. Burgers and charbroiled chicken are listed among the hot and cold deli sandwiches. The service makeup is practically identical to the St. Louis Bread Company. An average customer orders from a display menu and pays the cashier. They are then given a number to take back to their table. When the order is ready, an employee will bring it to the table. Everything else, from condiments to utensils, are self-service.

All of these operations are fairly small and (except for The Missouri Bar & Grill), are only open for lunch. They all offer boxed lunches. While specific data is unavailable on these competitor's sales levels and market share, it is reasonable to assume that each possesses less than one percent of the market share and that their annual sales level is well under the industry average of $429,000 for a tableservice operation. It would be safe to assume that most of them realize between $100,000 and $300,000 in sales annually. The Missouri Bar and Grill might be higher because of its longer hours, yet it would be safe to estimate that it recognizes less than the industry average because it is not a high traffic area.

Lastly, but certainly not least among the competitive issues, are those firms which provide an inside cafeteria for their employees. The Post-Dispatch and Mercantile Bank both have international cafeterias available for their employees. This certainly detracts from business as both are large employers within walking distance of McMurphy's Grill. Management will need to reduce the impact by appealing to the employees desire for a home cooked meal and the satisfaction that they are helping someone at the same time.

EMPLOYMENT TRAINING COST ANALYSIS

Financial data for this analysis is taken from the Pro Forma Income Statement found in Appendix P. Using the bottom line figures, which include both the operational profit/loss as well as the training costs involved, a picture of the true training costs can begin to materialize.

1995: Loss of $49,118 divided by 260 days of operation divided by the number of clients per day (which for this analysis we will assume to be 10) would derive a cost per client day of: $18.89

Utilizing a similar analysis, by taking the loss of $49,118 and dividing it by the expected success rate of 10 (success rate = clients/trainees who have completed the program and have gone on to attain self-sufficiency through employment) would derive a cost for each success of: $4,912

Utilizing this same analysis, by taking the loss of $49,118 and dividing it by the number of participants expected for 1995, of 25 would derive a cost per trainee of: $1,965

1996: Loss of $32,595 divided by 260 days of operation divided by 10 clients would derive a cost per client day of: $ 12.54

• Cost per success: $2,716 (based on 12 successes)
• Cost per trainee: $1,087 (based on 30 participants)

1997: Loss of $12,890 divided by 260 days of operation divided by 10 clients would derive a cost per client day of: $4.96

• Cost per success: $ 921 (based on 14 successes)
• Cost per trainee: $ 430 (based on 30 participants)

MENU

McMurphy's Grill is owned and operated by St. Patrick Center, a multi-service agency which addresses the needs of poor and homeless people in our community.

Through a generous grant from the McDonnell Douglas Foundation and the McDonnell Douglas Employees* Community Fund, along with the assistance and expertise of The Pasta House Company, McMurphy's Grill opened on Dec. 3, 1990. It serves as a training facility for homeless mentally ill individuals who wish to make positive changes in their lives.

Open Monday through Friday from 11 a.m. to 3 p.m., McMurphy's offers carry out service, box lunches, and private parties any evening or weekend. We invite you to become a part of this endeavor by visiting McMurphy's often and by telling others about us.

Thank you for your patronage.

Soups (Cup/Bowl)

Appetizers

Salads (Your Choice of Dressing)

Sandwiches

Specialties

Soup and Salad

Daily Specials

Ask about our Daily Specials and Light Entrees!

Desserts

Ask about our Daily Dessert Specials!

TARGET CUSTOMER ANALYSIS

Lunch Business

The lunch customer tends to be a professional person, approximately equal distribution between men and women, who work within walking distance of McMurphy's Grill. Observation by the management points to the speculation that most are in mid-level management positions. Three factors support this observation. First, most are wearing business suits or dresses that reflect a professional position. Secondly, they have the leeway to enjoy a more leisurely lunch and are not bound by a time clock. Thirdly, their incomes or expense accounts seem to equate with mid-level positions since McMurphy's Grill is a medium-priced establishment. Numerous other nearby options, which are much lower priced, are available. While not in the direct vicinity, higher priced establishments that are equated with a higher status are also easily accessible from anywhere in the downtown arena and usually have better parking facilities.

A much smaller portion of the lunch business are customers who come to support St. Patrick Center and the Mission of McMurphy's Grill. This group includes professional people working in the area, employees of other nonprofit or religious organizations, and other individuals who are either downtown shopping or in the area for a business appointment.

McMurphy's carry-out service tends to draw mostly business workers in the local area. Usually, the order is for more than one person. It is a growing business segment and certainly consistent with the lunch time trend of shorter lunch periods. By offering free delivery and soliciting orders through a series of discount coupons, McMurphy's expects to significantly increase this portion of the lunch business. Previously, McMurphy's has not tracked this aspect of the lunch business, but will do so in the future.

Other groups and individuals that McMurphy's Grill hopes to target more effectively in the future include:

• Tour guides and their groups.
• People attending special events (i.e. St. Patrick Day parade, Olympic Festival and Cardinal Baseball games).
• Convention and Tourist Traffic. With the Cervantes Convention Center only two blocks away, this market seems to be a perfect opportunity to increase business. However, to be able to do this, McMurphy's Grill needs to be open when it is compatible with the particular convention's schedule. This may not be feasible or profitable for every convention.

Boxed Lunches

The boxed lunch business usually attracts the following groups:

• Nonprofit and other charitable organizations. Groups that have consistently ordered from McMurphy's Grill are United Way, Cardinal Glennon Hospital and the Girl Scouts of America.
• Religious organizations, including churches, religious congregations and schools.
• Business Meetings. An area that McMurphy's would like to increase.

The boxed lunch business needs to be more aggressively marketed to all of the above target markets, especially to the business community. Appendix F depicts a possible advertisement for the box lunches along with the revised menu which has been recommended. These revisions reflect additional options which make it more appealing to those in the business community as well as other organizational groups.

Private Parties

This particular segment of the operation has the most diverse customer base and realizes the largest contribution margin. McMurphy's Grill has been the site of wedding rehearsal parties, birthday parties, anniversaries, holiday parties (especially during the Christmas season), business meetings, art shows, fund raisers, and a variety of other gatherings. Customers learn about McMurphy's Grill from a variety of sources, most however are familiar with the restaurant's mission and desire to support its efforts. There have been other groups who were looking for space to have a party and have been steered to McMurphy's Grill by supporters or other people familiar with McMurphy's quality, service and lower cost. Management intends to focus more on this segment of its operation, recognizing that the private party business is the aspect of the business which will most help the operation research, or at least come much closer, to its break-even point.

MARKETING STRATEGY

Remodeling

In order to increase capacity, so as not to discourage those coming for lunch on days that the restaurant is full and to improve McMurphy's ability to attract lunch business meetings, McMurphy's Grill is planning to reduce the size of its bar. The bar business at McMurphy's is negligible during the lunch hour. By cutting the bar in half, which leaves sufficient space in which to service small group meetings, a new room could be created which would increase capacity by 28 seats. The benefits of this improvement, aside from those mentioned above, are additional party seating and/or cocktail area. Bar area will be easier to maintain and more inviting for customers to sit at. In addition, there is the potential for two groups to use McMurphy's Grill in the evening. The estimated cost for this, including reorganizing the serving area, would be $5,300. The restaurant manager has already solicited bids for some of the work.

Improvements to the kitchen area which would help to make the operation more efficient and the service better, include the addition of a six burner stove, a 48-inch grill, shelving, a salad window, and improvements to the dishwashing area. The cost of these changes would be approximately $1,850.

Note: The benefits are hard to estimate for items 1 & 2 above, however, in terms of the lunch business alone this increase in capacity could potentially realize a gross profit of $33,124 (based on an average check of $7.00 and full capacity every day). The assumption of full capacity is probably unreasonable considering that currently the restaurant is only filling, on the average, 69 seats per day or 86 percent of its current capacity. However, if other marketing efforts continue to improve the customer traffic, as has the Celebrity Hosts Program (sales are up 20 percent over 1993), then this assumption is not totally unrealistic.

Advertising

A large sign or printed awning that would better identify the location of McMurphy's Grill from Eleventh Street. Currently, the name is not visible until you have already passed the location. This issue is currently under consideration.

Marketing

Parking, which has been a headache from the beginning, has a significant impact upon sales. The Executive Director, the Board of Directors and the staff of this program have been working on this problem. Thus far, McMurphy's Grill has succeeded in getting the City of St. Louis to add additional parking meters along Eleventh and Lucas Streets. Management is in the process of talking with lot owners in the vicinity (of which there are several) and negotiating an arrangement whereby customers from McMurphy's can park at a reduced rate and that we can be guaranteed a particular number of parking spaces.

Develop a customer evaluation/survey for all of various services offered by McMurphy's. A recommended customer evaluation/survey for McMurphy's lunch business has been included in Appendix H. Request suggestions for improvements from customers or potential customers. Periodically invite members of the Board of Directors or other interested supporters to have lunch at McMurphy's to evaluate the quality of the food and service.

ADVERTISING AND PROMOTION RECOMMENDATIONS

McMurphy's Grill has had an added advantage in this area as the operation receives a lot of free coverage, which has been beneficial. From articles on the restaurant by the Post-Dispatch to being featured on local radio and television McMurphy's has received a lot of free publicity. The most recent coverage in the February 1994 edition of St. Louis Commerce, continues to keep St. Patrick Center and McMurphy's Grill in the mind of the St. Louis community. These efforts certainly help to increase the scope of McMurphy's Market potential by educating people as to its mission and location.

McMurphy's has recently implemented a Celebrity Hosts Promotion strategy, which has been extremely successful. Various local and state celebrities are featured each Wednesday at McMurphy's where they become the Celebrity Host for the day. Each is asked to provide names of guests to whom we can send a special invitation. This has the added advantage of increasing the restaurants mailing list for all major promotional events.

It is important that McMurphy's continue to keep its name in the forefront, both in terms of getting the message of what its mission is all about and to dispel some of the myths that may surface when discussing a project that involves the homeless mentally ill. It also doesn't hurt the bottom line by encouraging people to participate in this endeavor.

However, McMurphy's Grill long ago realized that it would never survive based solely on this type of exposure and so has aggressively advertised from the beginning. Except for a period of time after the founding Executive Director left and until the arrival of the newest Executive Director, advertising and promotion of the restaurant business has been on the forefront.

McMurphy's advertises regularly in Downtown Dollars, which is a flyer with a distribution of over 20,000 published on a monthly basis. In addition, McMurphy's occasionally advertises in the St. Louis Business Journal and St. Louis Commerce. Sometimes these are complementary adds. As a member of the St. Louis Convention & Visitors Commission, McMurphy's Grill can promote the restaurant business directly to convention traffic and tourists. McMurphy's is also listed in the National Restaurant Association Membership directory as well as among the members of Downtown St. Louis., Inc. Occasionally, an ad is run in the St. Louis Review, the Catholic newspaper of the Archdiocese of St. Louis. Finally, but certainly not least, is that McMurphy's Grill is usually cited in the St. Patrick Center Chronicles, a publication of St. Patrick Center published three times a year.

Direct mail is often used to notify supporters or other people on our mailing list about various promotional events at McMurphy's Grill. The mailings often focus on businesses downtown, supporters of St. Patrick Center, nonprofit organizations and other patrons of McMurphy's Grill. Postcards were sent out, for instance, promoting the Celebrity Hosts program. Appendix I provides a sample of what was sent out.

Continue the Celebrity Hosts Program

This effort has increased sales by 20 percent over last year during the same period. The list of willing celebrities continues to grow with the addition of a nationally known St. Louis artist. Recently, we have begun to get phone calls from leaders in the community interested in becoming a celebrity host. And this is only after two months of operation.

Add to the list of Celebrity Hosts, CEOs of major firms located in downtown St. Louis. This can have a significant impact sales from the business community. By inviting the top executives, who are likely to invite other significant people within their organization as well as other employees, McMurphy's reputation as a quality restaurant will spread. The business community will become better informed as to what McMurphy's Grill is all about.

Reinstitute Lunch of the Month Club

Set up a calendar of events and identify advertising and promotional efforts needed. Appendix K is a sample of some recommendations for the next year.

Make personal contacts with key personnel at local firms that are within walking distance to invite them to McMurphy's Grill for lunch. Offer free menu items to motivate them. The best person to identify within these local organizations are the secretaries.

Offer Sales Promotions for Frequent Diners

Revise boxed lunch menu to offer an upscale version to groups seeking a higher quality boxed lunch and who are willing to pay for it.

Offer special promotions for Secretaries Day, Boss's Day, Birthday's, etc.

Promote the anniversary of McMurphy's Grill through specials on the menu, printed advertisement, articles in a local publication, and a featured article in the St. Patrick Center Chronicles.

Advertise the availability of McMurphy's Grill for private functions in the evening or on weekends, by focusing on various wedding supply places, churches, local publications, with musicians or mobile DJ's, membership organizations (such as fraternities and sororities) and business firms in the downtown area.

Continue Responding to Convention and Visitor Commission Leads

Continual evaluation and re-focusing of these efforts is a must. By regular monthly meeting with the Marketing Consultant and better communication efforts regarding the business side of the operation, these efforts should prove to be effective and more efficient than past efforts.

MCMURPHY'S GRILL INCOME STATEMENT: Fiscal Years 1992 - 1994

CASH FLOW CALCULATIONS

FINANCIAL ASSUMPTIONS AND ANALYSIS

Pricing Strategy

McMurphy's Grill has a twofold pricing strategy. First, since McMurphy's prime objectives is its training opportunities, the flow of customers through the restaurant is essential. Customer volume is also important to the bottom line. Thus, the price must remain reasonable in order to attract customers. Many restaurant patrons, according to the National Restaurant Association study, thought that medium priced restaurants provided the most value for their money. McMurphy's Grill falls into this category and thus is seen as a provider of value. It must also be competitive with other similar (limited menu tableservice) establishments.

Secondly, the prices must be at a level to cover variable operational costs as well as allow enough margin to cover fixed operational costs and help to defray the training costs involved. The training aspect incurs increases in personnel, employee benefits, food waste, and supply costs as a result of the learning curve — which is likely to be higher than in other cases because of the turnover of trainees and their disability.

For the limited-menu tableservice establishment, the cost of food sold should be about 35 percent. The cost of food and beverage (wine, beer and other liquor) is usually around 29 to 32 percent. We can assume that 30 percent is a good average cost that McMurphy's should attempt to target. Reviewing the Income Statement for Fiscal Years 1992, 1993, 1994, which can be found in Appendix L, it can be seen that McMurphy's is higher than the average. Better inventory and waste control will assist with maintaining lower margins. The cost of sales will decrease as the party volume increases and more liquor is sold.

Thus, it is the goal of McMurphy's Grill to maintain a 30-32 percent cost of sales so that at least 68-70 percent of total sales goes toward operating expenses. Operating expenses, for foodservice establishments, tend to be rather high because of the amount of fixed assets involved. McMurphy's Grill is running high in this area, but management is in the process of assessing where the problems lie.

The kitchen manager and a volunteer at St. Patrick Center are also in the process of conducting a food cost analysis. Once this has been completed, it will be maintained and evaluated periodically with the restaurant manager. To facilitate this process, the analysis will be computerized so that it can be updated as prices change.

Sales

While sales levels have fallen since FY 1992, much can be attributed to the change in management at St. Patrick Center. Initially, the original Executive Director was heavily involved in marketing McMurphy's Grill and had become rather successful. After she moved from St. Louis, her predecessor was not very active in the marketing of the restaurant business. In fact, during his stay as Executive Director, very little marketing was done. The Marketing Consultant was rarely communicated with and at that time, the Executive Director was the only one who could direct her activity.

In addition, very little financial reporting or control was taking place. With the recent change in the Executive Director position, these areas are being highlighted more intensely. It is recommended that responsibility for the marketing and business aspect of McMurphy's Grill be handed to a newly defined position of Business Director. This will be a new position and is currently not filled, but the responsibility for the Restaurant business should fall to the Finance and Administration Department in the mean time. Such an approach reflects a more effective business approach, rather than laying the responsibility for running a business to a Director of Programs. Just as it would be inappropriate to assign the responsibility of coordinating the training program to the Director of Finance/Administration, so the current approach does not reflect a strategic orientation toward growth. This is a key consideration for implementing an effective strategic plan which will realize growth in the business component.

Since the start of the Celebrity Hosts promotion, sales for the past two months are higher, by 20 percent, than for the same two months of 1993. The increase in sales from January and February, as is depicted in Appendix M (Calendar Year 1994 Sales Breakdown), is also significant. It is obvious from this picture that liquor is not a priority item during the lunch period, but is a significant portion of the total sales of private parties.

The customer count is also a significant factor as is illustrated in both Appendix M and Appendix N (Calendar Year 1994 Customer Count). Appendix N is a little more detailed and shows that the average number of customers per day is under the 80-seat capacity that currently exists. For a restaurant like McMurphy's, the average daily seat turnover was 1.8 (this includes operations that are open for both lunch and dinner) and the median check was $6.48. McMurphy's daily seat turnover, using the data from the last two months, is .86 and the average check amount is $7.11. The large jump in the number of customers per day from January to February reflect growth as well. This picture also shows that Wednesday is by far the biggest day. This is not surprising as this is the day the celebrity hosts are with us. Thursdays and Fridays seem to also be good days. This is helpful information when considering other promotional activity.

Information such as in Appendix M and N are not available for the prior years so as to better make comparisons. In the future, however, this type of information will be maintained and reviewed on a regular basis. The usefulness of this information is beyond saying in making day-to-day decisions in any business environment.

Pro Forma projections of sales are based on the marketing goals of a 30 percent increase in the first year; a 20 percent increase in the second year; and a 20 percent increase in the third year. Also taken into consideration has been the breakeven point. For the 1995, 1996 and 1997 sales projections, the following breakeven points exist:

• 1995: $198,197
• 1996: $203,298
• 1997: $208,058

The variable costs used in calculating these breakeven points includes cost of sales, supplies and advertising. All other items are assumed to be fixed. The costs involved in the training component have not been included in this analysis. It is anticipated that McMurphy's Grill will breakeven after year two (1996). It is well on its way to success. Refer to Appendix S for the complete Breakeven Analysis.

Cost of Sales

The Historical Income Statement reflects that McMurphy's Grill is achieving a 39 percent Cost of Sales, which is higher than the industry's average of about 35 percent. It must be noted that these numbers do not reflect inventory changes. For the past year and a half no inventory records have been kept and until very recently inventories had not been taken for some time. For many food operations this is a major issue. In the future, management will ensure that inventories are taken on a regular basis. Thus, in the future, it is reasonable to assume that McMurphy's Grill will be able to maintain the industry average of 35 percent cost of food and an overall cost of sales in the range of 30 percent.

Operating Expenses

It is rather obvious, when looking at Appendix L (Historical Income Statement), that the Operating Expenses are where much of the problem is. The high level of operating expenses can in part be attributed to the high salaries/wages. The number of employees working is far more than a regular operation would utilize. In fact, an operation the size of McMurphy's might have four people working in addition to the Manager and the Kitchen Manager. For McMurphy's, the number is usually around ten people. Thus, in the Pro Forma Income Statements (Appendix O and P) the cost of training has been deducted from the Operating Expenses and noted separately to give a better reflection of the restaurant operation's performance.

In reviewing some of the operating expenses for 1993 and 1994 it was obvious that expenses for the entire building had been charged to McMurphy's Grill. The building, which had been donated in 1993, has two other floors (one of which had been occupied for a part of 1993) which can be rented out for office space. This practice, of charging the entire building's expenses to McMurphy's, had been at the direction of the Executive Director. This practice has been reversed with the arrival of a new Executive Director and so for FY 1994 an attempt was made to deduct expenses, or a portion of them, that did not directly relate to the operation of the restaurant.

An attempt has also been made to better organize these categories for the sake of industry comparisons in the Pro Forma statements. In the preparation of the Pro Forma Income Statements, an attempt was also made to review expense items with industry averages and as a result reduce some line items. In the past, budgets have been prepared based solely on historical data without consideration for what might be reasonable for a restaurant operation the size of McMurphy's Grill. Appendix P depicts line items as a percentage of sales, which will be useful in making future decisions. For the most part, the Pro Forma Projections are in line with the industry averages or are at least heading that direction. Appendix P (Pro Forma Income Statements — 3 year summary) highlights this point when looking at the Operating Expenses as a whole. As a percentage of sales, these expenses are decreasing significantly over the next three years. The industry average indicates that Operating Expenses usually average about 53.4 percent of sales. At least now, McMurphy's is heading in the right direction. It is recommended that management continue to review industry averages in the future for a better understanding of its performance and to stay ahead of its competition.

One last note, most of the fixed expense projections reflect an inflation rate of approximately 3.5 percent. Variable expenses are somewhat less that the expected changes in sales, but much higher than the 3.5 increase per year applied to most of the fixed expenses.

Income Taxes

Because McMurphy's Grill is a part of a nonprofit entity and any profit that is reaped will be channeled back into the program or into the programs at St. Patrick Center, no income taxes will need to be paid. This assumption flows throughout all the financial analyses.

Balance Sheet Cash Flow

Finally, a few notes about the Balance Sheet and a further explanation of McMurphy's Cash Flow assumptions. Appendix Q presents the Pro Forma Balance Sheet. Because McMurphy's Grill is categorized as a nonprofit operation, things are presented in a somewhat different manner. Fund Balances reflect what a for-profit organization would consider Owners Equity.

The Balance Sheet reflects very little activity because the accounting procedures for St. Patrick Center and McMurphy's Grill implement a cash-based system. While some of the parties are on a receivable basis, they are usually collected within a month. The same can be said about the payables. Invoices are paid as they are received. Cash flow is not a significant issue for St. Patrick Center or McMurphy's because of its large resource base and so the timing of receivables and payables is not a problem.

On the balance sheet, the cash reflects the balance of a grant received from McDonnell Douglas as well as other smaller contributions at the outset of this project. Further contributions will be solicited as these funds run out, primarily to cover the cost of training. The property and equipment line reflect a portion of the contribution of the Lucas Plaza building. Thus is seen as an asset for the restaurant as no rental payments must be paid out, thus it is important that it be documented. This valuation is one-third of the total value of the building, land and equipment that had been contributed. Depreciation has been deducted for the building and the equipment.

The cash flow, as seen in the cash line, takes into consideration the declining designated fund balance as a result of restaurant losses. Keep in mind that St. Patrick Center has been extremely successful at fund-raising and is confident that it can receive corporate support to cover the cost of training. However, because we have included depreciation in the expenses, which is not a cash item, it has been added back in to reflect a non-cash item. The loss which was used in this calculation was the Operating Loss and thus does not include the reduction of the loss by the amount of the training costs. Refer to Appendix R for a review of Cash Flow projections.

Restaurant (Nonprofit)

BUSINESS PLAN

McMurphy's Grill

St. Patrick's Center
1200 6th St.
St Louis, MO 63106
(314)621-1283

April 26, 1994

This business plan has not been disguised in any way. References to locations, people, and products are real, not fictional. McMurphy's seeks to give job skills to mentally ill homeless people in order to help them get off the street. The contributor has asked that those interested in forming a business of this type contact St. Patrick's Center with their questions during regular business hours prior to instituting any of the suggestions in the plan. Note: A number of Appendices to which the plan refers were deliberately excluded due to privacy considerations. Contact St. Patrick's Center with questions relating to those that were omitted.

• executive summary
• the company and the concept
• the industry and market analysis
• strategic plan
• operations and management
• major competitors: lunch business
• employee training cost analysis
• menu
• target customer analysis
• marketing strategy
• advertising and promotional recommendations
• mcmurphy's grill income statement
• cash flow calculations
• financial assumptions and analysis

EXECUTIVE SUMMARY

Opening its doors on December 3rd, 1990, McMurphy's Grill has brought a little bit of earth-quaking to the St. Louis community. While operating as a competitive restaurant, McMurphy's has set about the task of making people without homes, but with diagnostic psychiatric labels, into food servers and cooks. This business plan primarily focuses on the operational aspects of McMurphy's Grill, defining McMurphy's as two distinct, but interrelated functional organizational units: one being the restaurant business and the other being the employment training component. A strategic plan is presented for each component and the strategic direction which this operation as a whole should take to achieve growth will be outlined.

With an appealing product, both in terms of its mission and its fare, McMurphy's Grill certainly has an added advantage over its competitors. Located at Eleventh Street and Lucas in downtown St. Louis, McMurphy's, as a restaurant, has been favorably noted by restaurant critics and customers alike. Its mission, of training mentally ill homeless men and women, certainly sets it apart from any other competitive restaurant in the St. Louis area.

The success of this operation depends a great deal on the cohesiveness of the two functional organizational units as well as an aggressive marketing strategy. With this in place and a little "luck of the Irish", McMurphy's will likely reach its optimistic sales goals. If the Celebrity Hosts promotion, a newly initiated program, which will be described in more detail in the Strategic Plan, is any indication, a 30 percent increase in sales over fiscal year 1994 is not unrealistic.

Most of us can only imagine the obstacles people who are homeless and mentally ill must overcome to hold down a job, much less one in the restaurant business. Yet, this innovative employment training program has helped to ease the transition for many. From life on the streets to independence, McMurphy's goals are enthusiastic to say the least.

Perhaps the most compelling concern of this type of endeavor lies with the ability to balance both sides of the coin — the mission and the business. An organization's focus on its prime business. The delicate balance of maintaining the effectiveness and success of each component requires extra care and effort. However, with a well defined strategic plan, the community support afforded St. Patrick Center, a myriad of volunteers, and a staff with a vision — this tightrope can be successfully maneuvered.

THE COMPANY AND THE CONCEPT

While operating as a competitive establishment, McMurphy's prime focus is on teaching homeless individuals, many suffering from mental illness, skills in food preparation as well as the restaurant service.

McMurphy's has enjoyed favorable reviews for both its food and its mission. The 80-seat restaurant provides its customers with wholesome, hearty meals and a comfortable, pleasant atmosphere, while its trainees learn on-the-job skills in self-sufficiency. Primarily drawing customers from the downtown lunch business crowd, McMurphy's has a unique advantage in that it also draws people from other areas because of its mission. To support its favorable status, in both categories, McMurphy's Grill is proud to have been the 1992 Winner of the Midwest Living Magazine Hometown Pride Award and Hospitality Awards finalist for the Restaurant of the Year — Casual category sponsored by the Convention and Visitors Commission. In addition, McMurphy's Grill has been awarded grants from the Share Our Strength Foundation for its efforts in training for self-sufficiency.

Owned and operated by St. Patrick Center, a multi-service nonprofit agency providing a variety of services for homeless and low-income people in St. Louis, this innovation transitional employment program has provided an opportunity for sixty-seven men and women, thus far, to learn valuable employment skills. St. Patrick Center is located at 1200 North Sixth Street, on the near north side of downtown St. Louis. Dedicated in 1983, the Center provides opportunities for homeless and low-income persons to attain self-sufficiency and dignity through programs which effect permanent solutions, including education, counseling, job training, employment, housing assistance, and substance abuse rehabilitation. Special emphasis is placed on those who experience mental illness or chemical dependency.

The concept of a restaurant operation stemmed from a restaurant in Rock Island, Illinois which is run by mentally ill employees. By owning their own business, which serves as a transitional training program, St. Patrick Center is able to provide the flexibility required to allow the clients to move at their own pace.

With a generous grant from McDonnell Douglas Employees Community Fund and the McDonnell Douglas foundation as well as contributions from other private and corporate sources, McMurphy's Grill became a reality. The Pasta House Company provided the management expertise and restaurant operations knowledge in addition to numerous donations of restaurant fixtures and supplies. Through the Neighborhood Assistance Program of the State Department of Economic Development, McMurphy's was able to receive free rent for much of its existence. In 1993, Paric Corporation, the owners of Lucas Place, the building which houses McMurphy's Grill, donated the entire 3-floor building to St. Patrick Center. The top two floors are constructed for office space. This innovative project is truly a community endeavor.

The operation of McMurphy's Grill has provided a challenge to St. Patrick Center, whose primary expertise has been in the social service arena. In addition, McMurphy's is only one of thirteen programs operated by St. Patrick Center and thus does not have the concentrated effort that many small restaurant operators employ. Changes in administration at St. Patrick Center, especially at the Executive Director's level, along with changes in the management at McMurphy's has significantly affected the operations of the restaurant.

Under the direction of St. Patrick Center's new Executive Director and the Center's Board of Directors, efforts are underway to develop a long-range strategic plan for the entire agency along with establishing better methods to measure program effectiveness. This business plan will provide the long-range strategic direction for this particular operation, providing target measurements and goals for the business component as well as the employment training component. In addition, this operational plan will help to define management responsibilities, controls and reporting expectations of each component. The strategic plan will also help ensure consistency of operation, despite personnel changes, within each component as well as for the entire McMurphy's Grill operation.

THE INDUSTRY AND MARKET ANALYSIS

McMurphy's Grill falls into two industry classifications. As a competitive restaurant, McMurphy's Grill falls into the foodservice industry. As a facility which provides employment and training for mentally ill homeless persons and those recovering from substance addictions, McMurphy's can also be classified among other vocational rehabilitation programs.

The Foodservice Industry

Description of Product Category

Restaurants are the largest part of the U.S. foodservice industry and according to the National Restaurant Association. They "had an estimated sales of $255 billion in 1992." Fuller-service stand alone restaurants, the category which would include McMurphy's, accounted for "32 percent of all foodservice sales in 1992."

The characteristics of most limited menu table service restaurants, of which McMurphy's is a part of, include:

• 62.7 percent of limited-menu tableservice restaurants are single units (independent).
• 46.3 percent of these restaurants have a sales volume under $500,000.
• Over 65 percent serve both food and beverage.
• The average check per person is usually under $10.00.
• The average daily seat turnover was 1.8.

The Size of the Market

The foodservice industry is highly fragmented, thus making it an extremely competitive industry. This industry continues to be dominated by small businesses as is evidenced by "average unit sales of $429,000 reported by tableservice restaurants…" McMurphy's Grill has experienced, thus far, a much lower unit sales volume than the average. This is in part due to the limited time McMurphy's is open on a daily basis. Lack of a comprehensive marketing strategy has also had an impact upon sales.

The foodservice industry continues to experience healthy growth patterns. The National Restaurant Association forecasts an increase of 5.6 percent. Sales for Eating and Drinking places for the City of St. Louis are much higher than for the state as a whole. Total retail sales for the City of St. Louis, of which 18.7 percent are from Eating and Drinking establishments, is expected to increase 45.3 percent over 1992 sales by 1997. With this growth pattern, along with an aggressive marketing strategy, McMurphy's has the potential for significant increases in sales over the next three years.

McMurphy's is located in the extreme northwest section of the downtown core district. Thus, this geographic area represents a huge potential market for McMurphy's lunch business, box lunches, and business functions.

Consumer Attitudes and Demographics

Because McMurphy's is located in the core downtown business district, comprised mainly of white-collar professional persons, its ability to attract a lunch crowd is greater than for many other locations not in the downtown area. Thus, there is a significant potential market for McMurphy's services. It is also important to note that, "Consumers are spending 52 cents out of every dollar at restaurants and bars. This shift reflects the fact that there are more women in the work force and that convenience has become a major decision factor."

McMurphy's Grill has the added attribute in that dining at McMurphy's brings the satisfaction of helping people become self-sufficient. While fast-food operations are marketed as "value" deals, restaurants that are moderately priced, like McMurphy's, are more likely to be considered an overall value by the consumer.

The Competition

In terms of the business aspect, McMurphy's Grill certainly has a competitive edge that no other restaurant in the St. Louis community has. In addition to providing a quality meal and friendly service, this operation also offers its customer the satisfaction of knowing that they have contributed to helping someone achieve self-sufficiency. While other restaurant operations can compete more effectively by offering lower prices or boasting of quick service or providing a more elaborate atmosphere, none can compete directly with McMurphy's Grill's unique attribute—its mission.

McMurphy's large bright dining area, appealing decor, warm atmosphere, friendly service and homey meals set it apart from many of its competitors. It is also the only restaurant with outside seating, an important consideration among office workers on warm days. After being cooped up in an office all morning, people look for ways to get outside and enjoy the fresh air. The management is making plans to develop the small plot of land in front of the restaurant into a garden, which will add to the attractiveness of eating outside. It is also the only one with celebrity hosts (to be described in the Marketing Plan).

In regard to the private function market, competition is also extremely tight. Eleven facilities, located in the downtown area, advertise under Banquets/Catering in the Yellow pages. Seven are hotels, three are restaurants and one is a non-traditional facility which has a facility rental of $750.00. This nontraditional facility will be eliminated in the analysis because it competes in an entirely different arena. McMurphy's can compete very effectively in terms of price as it has one of the lowest priced facilities for both a sit down meal and open bar event. Free parking and the privacy of being the only ones in the establishment are other advantages afforded customers of McMurphy's evening functions. Its major limitation is in its capacity limits. It certainly cannot compete with the hotels in that regard. McMurphy's will need to highlight these attributes in its advertising and promotional programs.

McMurphy's is in the position to gain the support of many of its suppliers when promoting a special event or day. This is in large part because of McMurphy's overriding goal of employment and training for people working toward self-sufficiency. Unlike any of its competitors, McMurphy's Grill is a member of the following organizations which gives it credibility as a restaurant and networking capability:

• Downtown St. Louis, Inc.
• Missouri Restaurant Association
• St. Louis Convention & Visitors Commission

Only members of the St. Louis Convention and Visitors Commission will have direct access to scheduled conventions and can directly market to them. Thus McMurphy's can directly target any potentially large conventions through direct mail as well as publicly via material at the Convention Center.

Transitional Training/Employment Industry

Description and Size of Industry

McMurphy's Grill does not focus on individuals only with mental illness, which alone complicates a person's ability to function independently within the community, but those who are also homeless. It is difficult to assess the number of people who are homeless and mentally-ill. According to the National Resource Center on Homelessness and Mental Illness, "an estimated one-third of single, homeless adults have severe and disabling mental illness, and that as many as half of homeless persons with mental illnesses also have alcohol and/or drug problems." Many are unemployed and have few or no employment skills that will enable them to earn a living wage. Vocational Rehabilitation Programs and other related agencies tend to inhibit the participation of this population due to their many regulations and lack of models which meet the specific needs of this population.

The continuum of services provided by St. Patrick Center for individuals with mental illness and substance addictions, of which McMurphy's Grill is a key component, is consistent with the psychiatric rehabilitation model. Current research points to the success rate of psychiatric rehabilitation as an effective and cost-efficient treatment for persons with serious and persistent mental illness. The psychiatric rehabilitation model emphasizes activities which are integrated into the normal life of the individual and the community.

Competition

In St. Louis, two other agencies are recognized for their efforts, at the community level, with people suffering from mental illness, Independence Center and Places For People also utilize this general psychiatric rehabilitation model. The need for psychiatric rehabilitation programs is far greater than what the existing programs in St. Louis can address. McMurphy's Grill has provided training and employment skills, along with the other supportive services offered by St. Patrick Center, for sixty-seven individuals since the inception of this program in December of 1990. Thirty percent have been employed in the community in a variety of positions. A total of 36 percent, which includes the 20 individuals employed, have moved into more stabilizing situations. Places for People reports that "21 percent of all clients surveyed worked at sometime during the year examined (July 1, 1992 through June 30, 1993)." Independence Center was not able to track clients beyond the initial supported work environment and so statistics are not available. Thus, from the available data, McMurphy's Grill appears to be the most effective in terms of permanent solutions.

In comparing the efficiency of McMurphy's Grill Employment Training component with other similar programs, in terms of the cost of the training program, McMurphy's is certainly competitive. The Fountain House program, of which Independence Center is a branch, reports that their cost of training is $30.00 per day, per client. McMurphy's Grill projections for 1995 indicate that the cost of training will be $21.00 per day, per client. By 1997, this number will be significantly reduced as a result of the operating profit from the restaurant business which will be used to offset the training portion of these costs. Appendix B presents this analysis.

There is very little competition among providers of programs for the mentally ill homeless. All providers agree that there is no competition for clients/members. In fact, most would agree that there are more clients than can be served by the existing programs. The two other providers work cooperatively with St. Patrick Center in an effort to deal more effectively with this population. Information and ideas are shared, and collaborative efforts are organized.

The only source of competition is in terms of funding. However, even here the competition is minimal. Independence Center and Places For People rely heavily on the State Department of Mental Health for some of their other programs, McMurphy's Grill is strictly funded through corporate grants and private contributions. Except for Neighborhood Assistance Tax Credits through the State Department of Economic Development which has been used to offset rental costs at the outset and to help facilitate the contribution of the building which houses McMurphy's Grill, no government funds are used in the operation.

STRATEGIC PLAN

McMurphy's Grill houses two functional organizational units. Each is viewed as distinct, but interrelated. The Restaurant Business component operates to employ persons from the second functional unit, the Employment Training component.

Because of the distinct nature of each component, separate strategic plans have been developed. The close integration of these two units requires a third step which links the two and provides operational guidelines which assist in the efficient and effective management of McMurphy's Grill.

McMurphy's Grill: The Business Unit

Mission: To maintain a viable business operation in order to employ participants of the Employment Training Program.

Description of Product Services

Lunch Business

McMurphy's offers three primary services. First, McMurphy's Grill is a full-service limited menu restaurant located in downtown St. Louis. It is open from 11:00 a.m. to 3:00 p.m. and serves a hearty lunch of traditional American cuisine, with an Irish flair, at a modest price (prices on the menu range from $3.00 to $7.00). The menu, while limited, offers a wide range of soups, sandwiches, salads, entrees, plus daily specials. By offering moderate prices and reasonably quick service (a customer can be in and out within 60 minutes), McMurphy's is attractive to those individuals who like a home-cooked meal, but who are limited somewhat by time. In order to attract more of the business community and improve on McMurphy's "value" image, the menu has been revised. The changes reflect both a surface change in terms of design, but also adds side dishes to some of the entrees. This makes the meals more appealing to the value-oriented consumer.

The same homey, tasty meals are available for carry-out as well, which can be phoned in or faxed prior to being picked up. Takeout remains the driving force behind industry growth and continues to offer expansion opportunities for foodservice operators. Thus, it is extremely important that the carry-outs continue to be emphasized in the marketing efforts since the trend in lunch traffic is away from long lunch hours.

Its appeals as a restaurant have been favorably noted by restaurant critics and customers alike. The large bright dining area, appealing decor, warm atmosphere and homey menu make McMurphy's a far superior dining experience than most of its nearest competition. Because McMurphy's Grill falls into the "moderate" price range, it is considered more of a value by the customer than fast-food operations or those establishments whose price per person is over $10.00.

Box Lunches

Box lunches are another service available from McMurphy's Grill. For a reasonable price of $6.50, McMurphy's box lunch menu offers a variety of sandwiches, salads and combo's for business and organizational meetings. The current box lunch menu has previously only included sandwiches. In order to be more attractive to the business community, McMurphy's box lunches now include more options. Recommendations for these changes came from people in the business community whose firms are potential customers. Delivery of both the box lunches and the carryouts is a must in this industry. McMurphy's currently delivers box lunch orders of 10 or more. In the near future, McMurphy's will need to establish a full delivery service for carryouts as well as box lunches.

Lunch sales, including box lunches, have represented approximately 80 percent of total sales. Box lunches have represented less than one percent of the total sales until in March of 1994 when sales for box lunches skyrocketed because of one very large order. For the first quarter of 1994, box lunch sales represented 5 percent of the total sales and lunch business represented 78 percent.

Private Functions

The restaurant is also available for private functions every evening and on weekends. Cocktail parties, hors d'oeuvres and full-service dinners are offered. Prices for a cocktail party range from $7.95 per person (for up to 3 hours of open bar) to $8.95 per person (for 4 hours or more). Hors d'oeuvres prices range from $4.95 per person to $8.95 per person, depending upon the selection of options. Full course meals range from $11.50 per person to $16.50 per person. Functions with personalized menu items are also welcomed, but prices will vary with items requested. For the first quarter of 1994, sales in this area represented approximately 17 percent of total sales.

Target Customer

The characteristics of McMurphy's customers differ whether we are discussing the lunch business, the boxed lunch business or the party business. Each has its own unique characteristics. However, they all encompass supporters of St. Patrick Center as well as individuals and groups who are unfamiliar with the restaurant's primary mission.

Marketing Plan

The overall goal of McMurphy's Grill marketing strategy is to increase the number of employment training opportunities in order to expand the number of clients participating in and moving through the program. In order to accomplish this goal, however, the restaurant component must be a viable operation so as to employ persons from the employment training component. The following objectives have been identified by management as targets:

• Begin realizing an operating profit by the end of 1997 by:
• Increasing lunch time customer traffic by 40 percent over a three year period.
• Increasing the number of private functions and catering events by 21/2 times the current level over the next three years.
• Increase dollar sales by:
  • 30 percent in Year 1 (1995)
  • 20 percent in Year 2 (1996)
  • 20 percent in Year 3 (1997)
• Institute a motivational compensation program for the restaurant manager and the kitchen manager.
• Increase public awareness of McMurphy's Grill and its mission.

The management of McMurphy's Grill has been busily making plans for marketing the various services offered by the restaurant (i.e. lunch, boxed lunches, and parties). At the same time, they have already begun making some changes in the environment to enhance the decor by changing the curtains and adding new tablecloths. In addition, the bar has been reorganized which has improved its appearance and helped the efficiency of the operation. Table groupings have been rearranged so as to increase the number of tables for two. In the past, most of the tables had been set up in groups of four. Since more customers arrive in groups of two, rearranging the tables helps to eliminate wasted space.

Future plans include both short term and long term efforts to assist the Restaurant in achieving its goals of increased sales.

Financial Plan

McMurphy's previous financial history can certainly leave one wondering about its future. Sales have decreased while costs have increased. However, there is much information gleamed from these results that can be channeled into a brighter future.

As one glances at the history and then at the future based on new sales results, it is obvious that much depends upon the level of sales an operation is able to achieve. Most of McMurphy's expenses are fixed, therefore the higher the sales level the better the bottom line.

To achieve the objectives outlined in the marketing plan, it is important to understand some of the financial data and assumptions which led to the arrival of these target levels. A 40 percent increase by the end of year three would increase the average number of customers to 97 per day. This is not unrealistic, considering that the management has made plans to reduce the size of the bar which would increase its capacity of 28 seats. The seating capacity would then be 108 instead of 80.

The current breakdown between lunch sales and sales from private functions is approximately 80 percent lunch and 20 percent parties. This certainly demonstrates the significance of the lunch business. However, growth in the lunch business is not as great as in the private function business, due in part to capacity limits as well as the time frame for lunch. Thus, the future sales breakdown is more likely to resemble: 70 percent lunch and 30 percent parties.

The increase in the number of parties and catering events is expected to more than double. This assumption is based on the fact that sales per party is averaging $750. At a sales level of $150,000, the sales from private functions is approximately $30,000 (maintaining our 80/20 breakdown as explained above). With the average sales per party at $750, the number of parties would be 40 per year. Transferring this analysis to the 1997 estimated sales level, but assuming a 70/30 breakdown, the sales from private functions would be $75,000. Assuming the average sales per party remains the same at $750, the number of parties would increase to 100. This is more than double the current level. Given the potential market of area firms, future convention traffic, and supporters of St. Patrick Center, management feels this is a feasible target. They also realize that a significant marketing effort must take place to achieve this goal.

The financial reports in the future will also reflect more detail. The current accounting procedure for St. Patrick Center will need to be adjusted in order to segregate out more detail, especially in terms of sales, various types of wages, and some operational expenses. The process should be in place for the start of the new fiscal year in July.

McMurphy's Grill: The Employment Training Unit

Mission: To select and assist appropriate clients in the process of attaining on-the-job skills that will assist them in becoming self-sufficient.

Description of Service

Along with other St. Patrick Center programs, McMurphy's Grill provides a continuum of services which moves the client from the street, receiving no services, to competitive employment and independence. The pre-training portion of this program begins with the selection of appropriate mentally ill homeless clients by counselors at Shamrock Club (one of St. Patrick Center's programs). These clients will complete a series of pre-training classes before placement at McMurphy's. Training includes, but is not limited to communication, self-esteem, personal hygiene, accepting criticism, coping with past problems, time management, and problem solving. Usually the first four classes (Self-image; Behavior (Old and New); Making Choices; and Communication) are required before being placed at the restaurant. During the period in which the client is involved in the On-The-Job-Training portion of the program, the remaining four classes (Problem Solving: Saving Money/Goal Setting: Leisure Time Management/Personal Growth; and Budgeting Priorities) are offered once a week.

After the client has completed the first series of Pre-Employment Classes and before being placed into a position at the restaurant, an orientation is conducted by the Client Case Manager and individualized treatment plans are developed.

Clients are then assigned to an appropriate position at the restaurant and receive proper on-site training. This phase of training includes basic skills such as cleaning and mopping and can lead into more complex positions such as waiting. The client is encouraged to move on to competitive employment only when fully emotionally, psychologically, and socially ready to do so. The initial placement in the community will include careful monitoring by the Case Manager. Hopefully, independent employment is the end result.

Target Market

For the Employment Training component, the customer (or client trainee) is most often homeless and has symptoms of mental illness. Many also are recovering alcoholics or dealing with drug addictions. While most of our trainees are men, which is indicative of this population as a whole, there have been a few women in the program. They suffer from a variety of psychiatric illnesses and have been a part of The Shamrock Club, a day program for mentally ill homeless men and women, operated by St. Patrick Center.

While the prime target for this training program are persons who are homeless and mentally ill, if space is available clients from other programs offered by St. Patrick Center may also participate in this training program. Most are homeless, but without disabling psychiatric illnesses.

The following goals have been set in terms of the number of participants and the number who successfully become self-sufficient:

• 25 participants in 1995 with 10 successes
• 28 participants in 1996 with 12 successes
• 30 participants in 1997 with 14 successes

Financial Plan

The cost of the Employment Training component will be funded in part by the remaining corporate contributions as well as additional solicited funding. By 1997, profits from the restaurant business will help to defer a portion of these costs. Continued profits from the restaurant business segment will reduce these training costs, so that future expansion of this endeavor is likely.

Continued interest in this program from McDonnell Douglas Corporation has been received and the potential for further funding has been expressed. With this possible source of funding, coupled with St. Patrick Center's ability to raise funds, the employment training portion will be covered.

OPERATIONS AND MANAGEMENT

Perhaps the most important aspect of this strategic plan is in the operations and management of the endeavor. The management indirectly involved in the operating of the restaurant business component or the employment training component. It is vital that there be clear reporting relationships and expectations. It is also essential that both components work closely together to ensure the success of the client trainees.

As one of St. Patrick Center's programs, McMurphy's falls under the governance of the St. Patrick Center Board of Directors. The full board meets bimonthly and the executive committee of the board meets on the odd months when the full board does not meet.

Six task groups have been organized, made up of board and staff members, to look at important issues facing the center in the future:

• Mission and Vision: What should be our continuing mission and vision be for the next five years?
• Programs: What programs will best meet the client needs?
• Organization and Staffing: What are the ideal organization and staffing necessary to effectively serve our clients?
• Facilities: What facilities will be needed to house these services?
• Revenue: How will the revenue needs for the future be met?
• Board: What should be our board composition?

Chosen by the board of directors, the executive director of St. Patrick's Center reports directly to the board and is responsible for the budget of over $1.8 million, a full-time/part-time staff of over 50 people and the effective management of thirteen programs.

The Director of Programs (Mental Health) and the Client Case Manager are responsible for the selection of appropriate clients, conducting the pre-employment classes and the orientation session, preparing individual treatment plans with the client/trainee, and providing support services (budgeting, help with locating housing, clothing, transportation, etc.).

The Client Case Manager directly monitors client progress through the training program, assessing the clients ability to move on. This position reports directly to the Director of Programs (Mental Health).

The Director of Programs (Mental Health) reports directly to the executive director and is involved with selection of appropriate clients. The Director also supervises the Client Case Manager. A monthly report indicating client progress will be prepared for the executive director by the Director of Programs (Mental Health).

The Business Director is responsible for overseeing the operation of the restaurant business component of McMurphy's Grill. It is essential that this person have a significant background and experience in business. This person works very closely with the restaurant manager in the operation of the restaurant. This position, which reports directly to the executive director, also supervises the Marketing Consultant. Because the foodservice industry is so competitive, it is essential that the marketing effort by carefully monitored and progress noted.

The Restaurant Manager is responsible for the effective and efficient operation of the restaurant business component. This includes the training of client employees in their assigned restaurant positions, hiring other professional staff, as well as all that is involved in the daily operation of this facility. This position will report directly to the business director, who will work closely with the Restaurant Manager and his staff to ensure the viability of the operation.

Assisting the Restaurant Manager the Kitchen Manager. The Kitchen Manager is responsible for the efficient and effective operation of the kitchen facilities. Responsibilities include: ordering food and supplies, training client trainees at the various stations within the kitchen area, quality food preparation, suggesting new menu items, costing out menu items, and monitoring food waste. This position reports directly to the restaurant manager.

The Management Consultant coordinates activities with the restaurant manager and the business manager. The Management Consultant is directly responsible to the business director. Responsibilities include: preparation of a marketing plan along with an annual calendar of events; the organization, coordination and implementation of the marketing activities; establishing measurements to evaluate the effectiveness of various marketing efforts; and networking with various community organizations.

Operations

Weekly and Monthly management reports will be prepared and discussed at weekly and monthly staff meetings of those involved in this program. Problems will be identified and potential solutions discussed. Progress will be highlighted and noted for future plans. Currently, the staff meetings consist of the Restaurant Manager, the Kitchen Manager, the Director of Programs (Mental Health) and the Client Case Manager. In the future these meetings will also include the Business Director and the Marketing Consultant. This will assist in shoring up the fragmentation that exists and improving the communication process, which will help in assessing particular marketing efforts and keep everyone informed of future plans. All involved will have a better understanding of the performance of the entire operation, including the training process and the operations of the business. This will certainly improve the effectiveness and efficiency of the marketing efforts.

In addition, the following procedures need to be incorporated into the operations.

Inventory

Responsibility of the Restaurant Manager. Inventory should be taken on a weekly basis and maintained via computer so that prices can be updated regularly and will require less time each week. At this time there is not a computer at McMurphy's, but the Executive Director and Director of Development at St. Patrick Center will seek donations of computer equipment.

Meal Costing

Responsibility of the Kitchen Manager. A listing of each menu item and the ingredients needed for each, along with their costs needs to maintained and updated regularly. This will assist the management in determining prices as well as evaluating cost of sales margin.

Daily Receipts Report

Responsibility of the Restaurant Manager. To be completed on a daily basis and turned into the finance office at St. Patrick Center within two days. The receipts should be deposited daily as well.

Invoices

Responsibility of the Restaurant Manager and St. Patrick Center's Finance Office. To be checked against ordered items and then sent over to St. Patrick Center to be paid. Price changes should be noted on the inventory list and entered with the next weeks inventory.

Daily Report

Responsibility of the Restaurant Manager. In addition to the sales report, a report should be prepared summarizing the prime costs. A food statistic summary should also be maintained along with a summary of the daily productivity.

Management Reports and Variance Report

Responsibility of the Director of Finance/Administration. They include:

• Customer Count Comparisons with previous years and periods
• Inventory Valuations and the determination of Gross Profit
• Income Statement To include a breakdown of the various products offered (lunch business, box lunches, carry-out, and parties). It should also include comparisons with previous years and prior periods.
• Annual Budget To be compiled with the input of the restaurant manager, the kitchen manager, the Business Manager, and the Marketing Consultant.
• Labor Costs With this item being such a large percentage of the operating costs, this expense needs to be carefully monitored by the restaurant management on daily, weekly, and monthly reports which are to be prepared for the Restaurant Manager and Business Director by the Finance Office.

Calendar of Events

Responsibility of the Marketing Consultant and (indirectly) the Business Director. A plan that includes specific promotional events and advertising efforts by month. An estimated cost of each event and ad should be identified. The plan should be evaluated monthly by the project team along with the Marketing Consultant and revised as necessary. This will help reduce the fragmentation that has existed and served to assist management in the preparation of the annual budget.

McMurphy's Grill Operations Report

Responsibility of the Business Director; to be prepared for the Executive Director. A periodic written report (monthly or quarterly) of progress, problems, and potential solutions for the review and updating of the executive director. Problems that need immediate attention will be dealt with separately and in a timely manner. Variances in budget projections, marketing program expectations, client progress, and specific measurable results of advertising efforts should be included.

MAJOR COMPETITORS: LUNCH BUSINESS

Le Dejeuner Deli & Bakery

Located next door to McMurphy's Grill, this newly opened deli is open Monday through Friday from 7:00 a.m. to 2:30 p.m. This small operation provides a variety of menu items at a somewhat lower price. Services include dining in, carry-out, boxed lunches and catering. However, the dining environment is definitely lacking in appeal and does not seem to draw the professional business person. Its carry-out and boxed lunch business may detract from McMurphy's Grill. The atmosphere prevents a significant competitive threat. It is only the nearness of its location that identifies it as a competitor.

The Shell Cafe

Located at 1221 Locust on the Main Floor of the Shell Building, The Shell Cafe is within four blocks of McMurphy's Grill. Open primarily during the lunch period, the prices are similar. However, the menu items do not have the "homemade" appeal that is characteristic of McMurphy's Irish stew, meatloaf platter, or chicken and noodles. Menu items include dinners (steak, fish, pasta, ham, beef and gyros) and a variety of sandwiches and salads.

The Missouri Bar & Grill

Located on north Tucker (701 N. Tucker), a couple of blocks from McMurphy's Grill, has a menu selection and prices comparable to McMurphy's. It also has a full bar (open until 2 a.m.). The outside of the restaurant has an attractive big, bright red awning, which is visible from far away. While similar in some ways to McMurphy's, The Missouri Bar and Grill primarily attracts people interested in the bar. It has the largest sales volume of any of the competition.

The St. Louis Fish Company

Located 2 blocks from McMurphy's Grill on Locust, the St. Louis Fish Company (a new addition to the downtown area) offers a unique menu listing. Open from 10:30 a.m. until 10:00 p.m. (Monday through Friday), this establishment offers: a lunch buffet for $2.99 per pound, and "All You Can Eat" Special for $5.99, and a Lunch Box Special for $2.50 which includes choice of fish plus one side order. This is in addition to the regular menu. Service is similar to the St. Louis Bread Company and thus does not include the full-service provided at McMurphy's.

The St. Louis Bread Company

The Saint Louis Bread Co. is considered a bakery/cafe that offers authentic breads, as well as croissants, muffins and pastries. Their advertisements usually focus on their "fresh" bread and pastries. However, their menu also includes cold sandwiches, salads and soups. Prices for their sandwiches range from $4.00 to $6.00 and each restaurant has a fax number for ordering. Since their service is similar to that of a fast-food restaurant, they capitalize on the "alternative" to burgers and fries by focusing on a quick and healthy meal.

DEE DEE's Deli

DEE DEE's Deli is an interesting establishment. Located at the corner of 10th Street and Washington Ave, three blocks from McMurphy's, it appears to be a "hole in the wall" from its very unattractive exterior and the interior is very drab and dark. However, it is usually full every working day. What makes it successful is a reputation based on good food, friendly service and a great price. They differ from the Saint Louis Bread Company in that they offer items that come from the grill. Burgers and charbroiled chicken are listed among the hot and cold deli sandwiches. The service makeup is practically identical to the St. Louis Bread Company. An average customer orders from a display menu and pays the cashier. They are then given a number to take back to their table. When the order is ready, an employee will bring it to the table. Everything else, from condiments to utensils, are self-service.

All of these operations are fairly small and (except for The Missouri Bar & Grill), are only open for lunch. They all offer boxed lunches. While specific data is unavailable on these competitor's sales levels and market share, it is reasonable to assume that each possesses less than one percent of the market share and that their annual sales level is well under the industry average of $429,000 for a tableservice operation. It would be safe to assume that most of them realize between $100,000 and $300,000 in sales annually. The Missouri Bar and Grill might be higher because of its longer hours, yet it would be safe to estimate that it recognizes less than the industry average because it is not a high traffic area.

Lastly, but certainly not least among the competitive issues, are those firms which provide an inside cafeteria for their employees. The Post-Dispatch and Mercantile Bank both have international cafeterias available for their employees. This certainly detracts from business as both are large employers within walking distance of McMurphy's Grill. Management will need to reduce the impact by appealing to the employees desire for a home cooked meal and the satisfaction that they are helping someone at the same time.

EMPLOYMENT TRAINING COST ANALYSIS

Financial data for this analysis is taken from the Pro Forma Income Statement found in Appendix P. Using the bottom line figures, which include both the operational profit/loss as well as the training costs involved, a picture of the true training costs can begin to materialize.

1995: Loss of $49,118 divided by 260 days of operation divided by the number of clients per day (which for this analysis we will assume to be 10) would derive a cost per client day of: $18.89

Utilizing a similar analysis, by taking the loss of $49,118 and dividing it by the expected success rate of 10 (success rate=clients/trainees who have completed the program and have gone on to attain self-sufficiency through employment) would derive a cost for each success of: $4,912

Utilizing this same analysis, by taking the loss of $49,118 and dividing it by the number of participants expected for 1995, of 25 would derive a cost per trainee of:: $1,965

1996: Loss of $32,595 divided by 260 days of operation divided by 10 clients would derive a cost per client day of: $12.54

• Cost per success: $2,716 (based on 12 successes)
• Cost per trainee: $1,087 (based on 30 participants)

1997: Loss of $12,890 divided by 260 days of operation divided by 10 clients would derive a cost per client day of: $4.96

• Cost per success: $921 (based on 14 successes)
• Cost per trainee: $430 (based on 30 participants)

MENU

McMurphy's Grill is owned and operated by St. Patrick Center, a multi-service agency which addresses the needs of poor and homeless people in our community.

Through a generous grant from the McDonnell Douglas Foundation and the McDonnell Douglas Employees' Community Fund, along with the assistance and expertise of The Pasta House Company, McMurphy's Grill opened on Dec. 3, 1990. It serves as a training facility for homeless mentally ill individuals who wish to make positive changes in their lives.

Open Monday through Friday from 11 a.m. to 3 p.m., McMurphy's offers carry out service, box lunches, and private parties any evening or weekend. We invite you to become a part of this endeavor by visiting McMurphy's often and by telling others about us.

Thank you for your patronage.

Soups (Cup/Bowl)

Appetizers

Salads (Your Choice of Dressing)

Sandwiches

Specialties

Soup and Salad

Daily Specials

Ask about our Daily Specials and Light Entrees!

Desserts

Ask about our Daily Dessert Specials!

TARGET CUSTOMER ANALYSIS

Lunch Business

The lunch customer tends to be a professional person, approximately equal distribution between men and women, who work within walking distance of McMurphy's Grill. Observation by the management points to the speculation that most are in mid-level management positions. Three factors support this observation. First, most are wearing business suits or dresses that reflect a professional position. Secondly, they have the leeway to enjoy a more leisurely lunch and are not bound by a time clock. Thirdly, their incomes or expense accounts seem to equate with mid-level positions since McMurphy's Grill is a medium-priced establishment. Numerous other nearby options, which are much lower priced, are available. While not in the direct vicinity, higher priced establishments that are equated with a higher status are also easily accessible from anywhere in the downtown arena and usually have better parking facilities.

A much smaller portion of the lunch business are customers who come to support St. Patrick Center and the Mission of McMurphy's Grill. This group includes professional people working in the area, employees of other nonprofit or religious organizations, and other individuals who are either downtown shopping or in the area for a business appointment.

McMurphy's carry-out service tends to draw mostly business workers in the local area. Usually, the order is for more than one person. It is a growing business segment and certainly consistent with the lunch time trend of shorter lunch periods. By offering free delivery and soliciting orders through a series of discount coupons, McMurphy's expects to significantly increase this portion of the lunch business. Previously, McMurphy's has not tracked this aspect of the lunch business, but will do so in the future.

Other groups and individuals that McMurphy's Grill hopes to target more effectively in the future include:

• Tour guides and their groups.
• People attending special events (i.e. St. Patrick Day parade, Olympic Festival and Cardinal Baseball games).
• Convention and Tourist Traffic. With the Cervantes Convention Center only two blocks away, this market seems to be a perfect opportunity to increase business. However, to be able to do this, McMurphy's Grill needs to be open when it is compatible with the particular convention's schedule. This may not be feasible or profitable for every convention.

Boxed Lunches

The boxed lunch business usually attracts the following groups:

• Nonprofit and other charitable organizations. Groups that have consistently ordered from McMurphy's Grill are United Way, Cardinal Glennon Hospital and the Girl Scouts of America.
• Religious organizations, including churches, religious congregations and schools.
• Business Meetings. An area that McMurphy's would like to increase.

The boxed lunch business needs to be more aggressively marketed to all of the above target markets, especially to the business community. Appendix F depicts a possible advertisement for the box lunches along with the revised menu which has been recommended. These revisions reflect additional options which make it more appealing to those in the business community as well as other organizational groups.

Private Parties

This particular segment of the operation has the most diverse customer base and realizes the largest contribution margin. McMurphy's Grill has been the site of wedding rehearsal parties, birthday parties, anniversaries, holiday parties (especially during the Christmas season), business meetings, art shows, fund raisers, and a variety of other gatherings. Customers learn about McMurphy's Grill from a variety of sources, most however are familiar with the restaurant's mission and desire to support its efforts. There have been other groups who were looking for space to have a party and have been steered to McMurphy's Grill by supporters or other people familiar with McMurphy's quality, service and lower cost. Management intends to focus more on this segment of its operation, recognizing that the private party business is the aspect of the business which will most help the operation research, or at least come much closer, to its breakeven point.

MARKETING STRATEGY

Remodeling

In order to increase capacity, so as not to discourage those coming for lunch on days that the restaurant is full and to improve McMurphy's ability to attract lunch business meetings, McMurphy's Grill is planning to reduce the size of its bar. The bar business at McMurphy's is negligible during the lunch hour. By cutting the bar in half, which leaves sufficient space in which to service small group meetings, a new room could be created which would increase capacity by 28 seats. The benefits of this improvement, aside from those mentioned above, are additional party seating and/or cocktail area. Bar area will be easier to maintain and more inviting for customers to sit at. In addition, there is the potential for two groups to use McMurphy's Grill in the evening. The estimated cost for this, including reorganizing the serving area, would be $5,300. The restaurant manager has already solicited bids for some of the work.

Improvements to the kitchen area which would help to make the operation more efficient and the service better, include the addition of a six burner stove, a 48-inch grill, shelving, a salad window, and improvements to the dishwashing area. The cost of these changes would be approximately $1,850.

Note: The benefits are hard to estimate for items 1 & 2 above, however, in terms of the lunch business alone this increase in capacity could potentially realize a gross profit of $33,124 (based on an average check of $7.00 and full capacity every day). The assumption of full capacity is probably unreasonable considering that currently the restaurant is only filling, on the average, 69 seats per day or 86 percent of its current capacity. However, if other marketing efforts continue to improve the customer traffic, as has the Celebrity Hosts Program (sales are up 20 percent over 1993), then this assumption is not totally unrealistic.

Advertising

A large sign or printed awning that would better identify the location of McMurphy's Grill from Eleventh Street. Currently, the name is not visible until you have already passed the location. This issue is currently under consideration.

Marketing

Parking, which has been a headache from the beginning, has a significant impact upon sales. The Executive Director, the Board of Directors and the staff of this program have been working on this problem. Thus far, McMurphy's Grill has succeeded in getting the City of St. Louis to add additional parking meters along Eleventh and Lucas Streets. Management is in the process of talking with lot owners in the vicinity (of which there are several) and negotiating an arrangement whereby customers from McMurphy's can park at a reduced rate and that we can be guaranteed a particular number of parking spaces.

Develop a customer evaluation/survey for all of various services offered by McMurphy's. A recommended customer evaluation/survey for McMurphy's lunch business has been included in Appendix H. Request suggestions for improvements from customers or potential customers. Periodically invite members of the Board of Directors or other interested supporters to have lunch at McMurphy's to evaluate the quality of the food and service.

ADVERTISING AND PROMOTION RECOMMENDATIONS

McMurphy's Grill has had an added advantage in this area as the operation receives a lot of free coverage, which has been beneficial. From articles on the restaurant by the Post-Dispatch to being featured on local radio and television McMurphy's has received a lot of free publicity. The most recent coverage in the February 1994 edition of St. Louis Commerce, continues to keep St. Patrick Center and McMurphy's Grill in the mind of the St. Louis community. These efforts certainly help to increase the scope of McMurphy's Market potential by educating people as to its mission and location.

McMurphy's has recently implemented a Celebrity Hosts Promotion strategy, which has been extremely successful. Various local and state celebrities are featured each Wednesday at McMurphy's where they become the Celebrity Host for the day. Each is asked to provide names of guests to whom we can send a special invitation. This has the added advantage of increasing the restaurants mailing list for all major promotional events.

It is important that McMurphy's continue to keep its name in the forefront, both in terms of getting the message of what its mission is all about and to dispel some of the myths that may surface when discussing a project that involves the homeless mentally ill. It also doesn't hurt the bottom line by encouraging people to participate in this endeavor.

However, McMurphy's Grill long ago realized that it would never survive based solely on this type of exposure and so has aggressively advertised from the beginning. Except for a period of time after the founding Executive Director left and until the arrival of the newest Executive Director, advertising and promotion of the restaurant business has been on the forefront.

McMurphy's advertises regularly in Downtown Dollars, which is a flyer with a distribution of over 20,000 published on a monthly basis. In addition, McMurphy's occasionally advertises in the St. Louis Business Journal and St. Louis Commerce. Sometimes these are complementary adds. As a member of the St. Louis Convention & Visitors Commission, McMurphy's Grill can promote the restaurant business directly to convention traffic and tourists. McMurphy's is also listed in the National Restaurant Association Membership directory as well as among the members of Downtown St. Louis., Inc. Occasionally, an ad is run in the St. Louis Review, the Catholic newspaper of the Archdiocese of St. Louis. Finally, but certainly not least, is that McMurphy's Grill is usually cited in the St. Patrick Center Chronicles, a publication of St. Patrick Center published three times a year.

Direct mail is often used to notify supporters or other people on our mailing list about various promotional events at McMurphy's Grill. The mailings often focus on businesses downtown, supporters of St. Patrick Center, nonprofit organizations and other patrons of McMurphy's Grill. Postcards were sent out, for instance, promoting the Celebrity Hosts program. Appendix I provides a sample of what was sent out.

Continue the Celebrity Hosts Program

This effort has increased sales by 20 percent over last year during the same period. The list of willing celebrities continues to grow with the addition of a nationally known St. Louis artist. Recently, we have begun to get phone calls from leaders in the community interested in becoming a celebrity host. And this is only after two months of operation.

Add to the list of Celebrity Hosts, CEOs of major firms located in downtown St. Louis. This can have a significant impact sales from the business community. By inviting the top executives, who are likely to invite other significant people within their organization as well as other employees, McMurphy's reputation as a quality restaurant will spread. The business community will become better informed as to what McMurphy's Grill is all about.

Reinstitute Lunch of the Month Club

Set up a calendar of events and identify advertising and promotional efforts needed. Appendix K is a sample of some recommendations for the next year.

Make personal contacts with key personnel at local firms that are within walking distance to invite them to McMurphy's Grill for lunch. Offer free menu items to motivate them. The best person to identify within these local organizations are the secretaries.

Offer Sales Promotions for Frequent Diners

Revise boxed lunch menu to offer an upscale version to groups seeking a higher quality boxed lunch and who are willing to pay for it.

Offer special promotions for Secretaries Day, Boss's Day, Birthday's, etc.

Promote the anniversary of McMurphy's Grill through specials on the menu, printed advertisement, articles in a local publication, and a featured article in the St. Patrick Center Chronicles.

Advertise the availability of McMurphy's Grill for private functions in the evening or on weekends, by focusing on various wedding supply places, churches, local publications, with musicians or mobile DJ's, membership organizations (such as fraternities and sororities) and business firms in the down-town area.

Continue Responding to Convention and Visitor Commission Leads

Continual evaluation and re-focusing of these efforts is a must. By regular monthly meeting with the Marketing Consultant and better communication efforts regarding the business side of the operation, these efforts should prove to be effective and more efficient than past efforts.

MCMURPHY'S GRILL INCOME STATEMENT: Fiscal Years 1992 - 1994

CASH FLOW CALCULATIONS

FINANCIAL ASSUMPTIONS AND ANALYSIS

Pricing Strategy

McMurphy's Grill has a twofold pricing strategy. First, since McMurphy's prime objectives is its training opportunities, the flow of customers through the restaurant is essential. Customer volume is also important to the bottom line. Thus, the price must remain reasonable in order to attract customers. Many restaurant patrons, according to the National Restaurant Association study, thought that medium priced restaurants provided the most value for their money. McMurphy's Grill falls into this category and thus is seen as a provider of value. It must also be competitive with other similar (limited menu tableservice) establishments.

Secondly, the prices must be at a level to cover variable operational costs as well as allow enough margin to cover fixed operational costs and help to defray the training costs involved. The training aspect incurs increases in personnel, employee benefits, food waste, and supply costs as a result of the learning curve — which is likely to be higher than in other cases because of the turnover of trainees and their disability.

For the limited-menu tableservice establishment, the cost of food sold should be about 35 percent. The cost of food and beverage (wine, beer and other liquor) is usually around 29 to 32 percent. We can assume that 30 percent is a good average cost that McMurphy's should attempt to target. Reviewing the Income Statement for Fiscal Years 1992, 1993, 1994, which can be found in Appendix L, it can be seen that McMurphy's is higher than the average. Better inventory and waste control will assist with maintaining lower margins. The cost of sales will decrease as the party volume increases and more liquor is sold.

Thus, it is the goal of McMurphy's Grill to maintain a 30-32 percent cost of sales so that at least 68-70 percent of total sales goes toward operating expenses. Operating expenses, for foodservice establishments, tend to be rather high because of the amount of fixed assets involved. McMurphy's Grill is running high in this area, but management is in the process of assessing where the problems lie.

The kitchen manager and a volunteer at St. Patrick Center are also in the process of conducting a food cost analysis. Once this has been completed, it will be maintained and evaluated periodically with the restaurant manager. To facilitate this process, the analysis will be computerized so that it can be updated as prices change.

Sales

While sales levels have fallen since FY 1992, much can be attributed to the change in management at St. Patrick Center. Initially, the original Executive Director was heavily involved in marketing McMurphy's Grill and had become rather successful. After she moved from St. Louis, her predecessor was not very active in the marketing of the restaurant business. In fact, during his stay as Executive Director, very little marketing was done. The Marketing Consultant was rarely communicated with and at that time, the Executive Director was the only one who could direct her activity.

In addition, very little financial reporting or control was taking place. With the recent change in the Executive Director position, these areas are being highlighted more intensely. It is recommended that responsibility for the marketing and business aspect of McMurphy's Grill be handed to a newly defined position of Business Director. This will be a new position and is currently not filled, but the responsibility for the Restaurant business should fall to the Finance and Administration Department in the mean time. Such an approach reflects a more effective business approach, rather than laying the responsibility for running a business to a Director of Programs. Just as it would be inappropriate to assign the responsibility of coordinating the training program to the Director of Finance/Administration, so the current approach does not reflect a strategic orientation toward growth. This is a key consideration for implementing an effective strategic plan which will realize growth in the business component.

Since the start of the Celebrity Hosts promotion, sales for the past two months are higher, by 20 percent, than for the same two months of 1993. The increase in sales from January and February, as is depicted in Appendix M (Calendar Year 1994 Sales Breakdown), is also significant. It is obvious from this picture that liquor is not a priority item during the lunch period, but is a significant portion of the total sales of private parties.

The customer count is also a significant factor as is illustrated in both Appendix M and Appendix N (Calendar Year 1994 Customer Count). Appendix N is a little more detailed and shows that the average number of customers per day is under the 80-seat capacity that currently exists. For a restaurant like McMurphy's, the average daily seat turnover was 1.8 (this includes operations that are open for both lunch and dinner) and the median check was $6.48. McMurphy's daily seat turnover, using the data from the last two months, is .86 and the average check amount is $7.11. The large jump in the number of customers per day from January to February reflect growth as well. This picture also shows that Wednesday is by far the biggest day. This is not surprising as this is the day the celebrity hosts are with us. Thursday sand Fridays seem to also be good days. This is helpful information when considering other promotional activity.

Information such as in Appendix M and N are not available for the prior years so as to better make comparisons. In the future, however, this type of information will be maintained and reviewed on a regular basis. The usefulness of this information is beyond saying in making day-to-day decisions in any business environment.

Pro Forma projections of sales are based on the marketing goals of a 30 percent increase in the first year; a 20 percent increase in the second year; and a 20 percent increase in the third year. Also taken into consideration has been the breakeven point. For the 1995, 1996 and 1997 sales projections, the following breakeven points exist:

• 1995: $198,197
• 1996: $203,298
• 1997: $208,058

The variable costs used in calculating these breakeven points includes cost of sales, supplies and advertising. All other items are assumed to be fixed. The costs involved in the training component have not been included in this analysis. It is anticipated that McMurphy's Grill will breakeven after year two (1996). It is well on its way to success. Refer to Appendix S for the complete Breakeven Analysis.

Cost of Sales

The Historical Income Statement reflects that McMurphy's Grill is achieving a 39 percent Cost of Sales, which is higher than the industry's average of about 35 percent. It must be noted that these numbers do not reflect inventory changes. For the past year and a half no inventory records have been kept and until very recently inventories had not been taken for some time. For many food operations this is a major issue. In the future, management will ensure that inventories are taken on a regular basis. Thus, in the future, it is reasonable to assume that McMurphy's Grill will be able to maintain the industry average of 35 percent cost of food and an overall cost of sales in the range of 30 percent.

Operating Expenses

It is rather obvious, when looking at Appendix L (Historical Income Statement), that the Operating Expenses are where much of the problem is. The high level of operating expenses can in part be attributed to the high salaries/wages. The number of employees working is far more than a regular operation would utilize. In fact, an operation the size of McMurphy's might have four people working in addition to the Manager and the Kitchen Manager. For McMurphy's, the number is usually around ten people. Thus, in the Pro Forma Income Statements (Appendix O and P) the cost of training has been deducted from the Operating Expenses and noted separately to give a better reflection of the restaurant operation's performance.

In reviewing some of the operating expenses for 1993 and 1994 it was obvious that expenses for the entire building had been charged to McMurphy's Grill. The building, which had been donated in 1993, has two other floors (one of which had been occupied for a part of 1993) which can be rented out for office space. This practice, of charging the entire building's expenses to McMurphy's, had been at the direction of the Executive Director. This practice has been reversed with the arrival of a new Executive Director and so for FY 1994 an attempt was made to deduct expenses, or a portion of them, that did not directly relate to the operation of the restaurant.

An attempt has also been made to better organize these categories for the sake of industry comparisons in the Pro Forma statements. In the preparation of the Pro Forma Income Statements, an attempt was also made to review expense items with industry averages and as a result reduce some line items. In the past, budgets have been prepared based solely on historical data without consideration for what might be reasonable for a restaurant operation the size of McMurphy's Grill. Appendix P depicts line items as a percentage of sales, which will be useful in making future decisions. For the most part, the Pro Forma Projections are in line with the industry averages or are at least heading that direction. Appendix P (Pro Forma Income Statements — 3 year summary) highlights this point when looking at the Operating Expenses as a whole. As a percentage of sales, these expenses are decreasing significantly over the next three years. The industry average indicates that Operating Expenses usually average about 53.4 percent of sales. At least now, McMurphy's is heading in the right direction. It is recommended that management continue to review industry averages in the future for a better understanding of its performance and to stay ahead of its competition.

One last note, most of the fixed expense projections reflect an inflation rate of approximately 3.5 percent. Variable expenses are somewhat less that the expected changes in sales, but much higher than the 3.5 increase per year applied to most of the fixed expenses.

Income Taxes

Because McMurphy's Grill is a part of a nonprofit entity and any profit that is reaped will be channeled back into the program or into the programs at St. Patrick Center, no income taxes will need to be paid. This assumption flows throughout all the financial analysis.

Balance Sheet Cash Flow

Finally, a few notes about the Balance Sheet and a further explanation of McMurphy's Cash Flow assumptions. Appendix Q presents the Pro Forma Balance Sheet. Because McMurphy's Grill is categorized as a nonprofit operation, things are presented in a somewhat different manner. Fund Balances reflect what a for-profit organization would consider Owners Equity.

The Balance Sheet reflects very little activity because the accounting procedures for St. Patrick Center and McMurphy's Grill implement a cash-based system. While some of the parties are on a receivable basis, they are usually collected within a month. The same can be said about the payables. Invoices are paid as they are received. Cash flow is not a significant issue for St. Patrick Center or McMurphy's because of its large resource base and so the timing of receivables and payables is not a problem.

On the balance sheet, the cash reflects the balance of a grant received from McDonnell Douglas as well as other smaller contributions at the outset of this project. Further contributions will be solicited as these funds run out, primarily to cover the cost of training. The property and equipment line reflect a portion of the contribution of the Lucas Plaza building. Thus is seen as an asset for the restaurant as no rental payments must be paid out, thus it is important that it be documented. This valuation is one-third of the total value of the building, land and equipment that had been contributed. Depreciation has been deducted for the building and the equipment.

The cash flow, as seen in the cash line, takes into consideration the declining designated fund balance as a result of restaurant losses. Keep in mind that St. Patrick Center has been extremely successful at fund-raising and is confident that it can receive corporate support to cover the cost of training. However, because we have included depreciation in the expenses, which is not a cash item, it has been added back in to reflect a non-cash item. The loss which was used in this calculation was the Operating Loss and thus does not include the reduction of the loss by the amount of the training costs. Refer to Appendix R for a review of Cash Flow projections.

Restaurant

BUSINESS PLAN     BUTCHER HOLLOW BAR BQ

1020 Allen Ave.
St. Louis, Missouri 63104

The proprietors of this new restaurant plan to take advantage of their market research, which indicates there is a great interest and very little competition in a specific area of St. Louis for a barbecue restaurant.

• executive summary
• the company—present situation
• objectives
• management
• product description
• market analysis—customers
• competition
• risks
• marketing strategy—advertising, promotion & public relations
• pricing & profitability
• summary & use of funding
• financial projections
• addendum

EXECUTIVE SUMMARY

Butcher Hollow Bar BQ will be an eat-in, carry-out restaurant, specializing in evening and weekend leisure dining. St. Louis is recognized as one of the prime barbecue markets in the country. The Soulard neighborhood, future home of Butcher Hollow, is known as one of our area's most popular and successful nightlife hubs.

What makes Butcher Hollow Bar BQ special as a business proposition? New restaurant openings are known to be risky. What have we done to neutralize these risks and assure success?

First, we have identified an unfulfilled market for our exceptional product. Careful research has demonstrated a 66% positive response by a representative sampling of our primary and secondary geographical markets. We have learned that people living in Soulard and Lafayette Square, or within reasonable driving distance, would patronize a good eat-in or carry-out Bar BQ restaurant in Soulard if one were available. Further research of the population demographics of this area reveals a lifestyle most conducive to eating out often, as frequently as three times per week.

Management has also identified a very viable commuting market that frequents the Soulard area, availing themselves of the many attractive restaurants, bars, and bistros. These customers travel there from downtown employment, stadium events, and other entertainment centers such as Union Station, Laclede's Landing, and Kiel Auditorium. Many look forward to a stop in historic Soulard. Butcher Hollow Bar BQ will be a welcome addition to this ambiance, offering to the area a delectable barbecue fare not currently available.

Many thousands of people also work in an near the Soulard area and often unwind after work at one of the many bistros. Butcher Hollow intends to be part and parcel of this scene, offering superb Bar BQ, frosted steins of beer, along with convenient carry-out. Relaxed patio dining is also planned for use during pleasant weather.

Tom and Helen Carter bring both experience and formal training to the food service field. Tom operated the successful Tom's Cafeteria in the garment district for some eight years. Both he and Helen have a wealth of experience in food service and hospitality management.

Butcher Hollow Bar BQ also has a sound marketing plan directed at our three identified markets. Viable market, good promotion, and an excellent product, backed up by sound and experienced management will go a long way to assuring success of the business venture.

Our anticipated capitalization consists of a budget of $45,000, including $15,000 owner's equity along with $30,000 borrowed capital. Owner's equity derives from joint savings of Mr. and Mrs. Carter.

The operating plan provides for proprietor withdrawals of $1,000 per month for the first 12 months of operation. Mrs. Carter will continue her employment as Assistant Front Desk Manager at the Crest Downtown Hotel.

Careful and conservative projections anticipate a first year net of $12,000 on sales of $113,000. It should be noted that the first year P/L reflects certain initial sales promotional activities that, while burdensome during that period, are expected to yield long-term results.

Our second year projected profit is $30,500 on sales of $146,000 yielding a 38.1% return on investment.

THE COMPANY— PRESENT SITUATION

Butcher Hollow Bar BQ, a proprietorship, will be a husband and wife operated business. Both Tom and Helen Carter will bring with them experience in food service and related hospitality fields. The concept of Butcher Hollow Bar BQ is to offer a limited but highly popular menu, aimed at a clearly defined market. It is expected that at least 50% of the business will be carryout. An outside beer garden facility is also planned for nice weather. Barbecue will, of course, be prominent, but other dishes known to have great appeal in the area will also be featured.

The business will be situated in the Soulard neighborhood. This is a high profile rehabbed community with a high concentration of residential units occupied by young professionals as well as established neighborhood blue-collar workers. The Soulard neighborhood is well known for its social scene consisting of many small bars, restaurants, and bistros. The focal point is Soulard Market, an open-air produce market some 200 years old and a national historic landmark. Many people are attracted to the area for its ambiance, and its establishments cater not only to neighborhood people but to customers commuting to suburbia from downtown employment and stadium events.

Mr. and Mrs. Carter's start-up capital consists of $15,000 derived from savings. Mrs. Carter will continue her present employment as assistant front desk manager at the Crest Downtown Hotel, and will work weekends at Butcher Hollow. Mr. Carter will be employed full-time from start-up and has resigned his job as food and beverage manager of Holiday Inn Southtown.

OBJECTIVES

Butcher Hollow Bar BQ will originally target the leisure and recreational dining market. This will heavily emphasize Friday, Saturday, and Sunday business. For the first 12-month period, it is expected that the business will remain closed on Monday, opening from 4:00 PM to 11:00 PM Tuesday through Thursday, 11:00 AM to 11:00 PM Friday and Saturday, and 11:00 AM to 9:00 PM on Sunday. In addition to the local trade, these hours allow us to capture the afterwork commuter as well as those stopping off after the ballgame for barbecue and a beer.

Fridays present a special market. In addition to the normal influx of Friday evening business, Butcher Hollow will be catering to the known habit of working people to treat themselves special for lunch on Friday. Featured dishes will be the soon-to-be-famous Butcher Hollow Bar BQ or the special Jack salmon and spaghetti platter available only on Friday. The latter is known to be very popular for lunch or dinner in South St. Louis, and along with the Butcher Hollow special sauces, can attract a great deal of business.

Saturdays and Sundays, both afternoons and evenings, present great opportunities for the leisure dining trade, and our menu and carry-out promotions will be designed to maximize these opportunities.

The Soulard area also is known as a great business lunch community. While barbecue is not a good lead item for business lunch, other speciality items can be added at a future time when the lunch trade is targeted. Initially, we do not intend to compete for lunch business except on Friday when most Soulard restaurants are hopelessly overloaded. A special luncheon menu is presently being refined for possible inclusion with an expansion of hours during our second year.

MANAGEMENT

Tom Carter will head the husband and wife team of Tom and Helen Carter, as he devotes fulltime to the planning, installation, and start-up of Butcher Hollow Bar BQ. Tom, 43, holds an Associate Degree in Food Service Management from Forest Park Junior College. Upon graduation, he entered his chosen field as assistant chef at Bevo Mill under the original management of Chef Ulrich. He stayed at Bevo for 8 years, gaining experience in all phases of experience in food preparation and kitchen management. When Bevo Mill closed in 1975, Mr. Carter, using a small inheritance coupled with an SBA loan, acquired an existing cafeteria in the St. Louis garment district. He renamed the operation Tom's Cafeteria and operated it for 8 years until 1983. Tom's Cafeteria specialized in breakfast and lunch for workers in the garment and shoe trade along Washington Avenue just west of downtown St. Louis. Mr. Carter was hands-on in all phases of the business management. This business prospered and he was able to retire the SBA loan in the allotted five-year period. However, due to a decline in the garment and shoe business in the immediate area, the building in which Tom's Cafeteria was located closed down, and Tom lost his lease. Because of the decline in the area, he did not seek to relocate but obtained employment as assistant food and beverage manager at the Holiday Inn Southtown. The close-down of Tom's Cafeteria was orderly and all debt was retired as agreed.

After eighteen months at Holiday Inn Southtown, Tom was promoted to manager of food and beverage, a position he held until he recently resigned to devote full-time to Butcher Hollow Bar BQ.

Helen Carter, 38, also has extensive experience in food service and hospitality fields. As a young person, she started working in fast-food operations, and while attending the University of Denver, School of Hotel and Restaurant Management, she worked in a variety of food and beverage service capacities, usually as waitress or hostess, and on one occasion for about a year in food preparation. Circumstances did not permit her to obtain her degree, and she returned to St. Louis. She obtained employment at the Crest Downtown Hotel and is presently assistant front desk manager.

Tom and Helen Carter have been married for 14 years. Tom is working full-time to start up Butcher Hollow Bar BQ. Helen is assisting in her off-duty hours and will work Friday, Saturday, and Sunday upon opening. This will not conflict with her present employment, and she intends to continue on at Crest Downtown until Butcher Hollow Bar BQ has reached the point of requiring and being able to support her full-time services.

PRODUCT DESCRIPTION

The Menu

Barbecue is, of course, the lead item at Butcher Hollow Bar BQ. The Butcher Hollow Bar BQ comes as the result of many years of experimenting and refining different recipes and techniques. The sauce is a special recipe that has been lovingly developed by the proprietors and tested hundreds of times on willing guests, both at home and at food establishments where the Carters have presided. The technique itself is also special, calling for extra effort, but yielding terrific results. The Butcher Hollow Bar BQ people know how to put out production volume without losing any of the delightful, delectable texture and tastes that will bring the customers back time and again.

Our plan calls for opening with a fairly limited menu, featuring barbecue ribs, barbecue pork steaks and barbecue chicken halves. Also offered will be Jack Salmon (Whiting) with spaghetti. These will be available as plates, which will include entree and two side dishes, or as sandwiches. The Jack Salmon will be offered with our delicious barbecue sauce on the side.

Another speciality of wide appeal will be our meatball and spaghetti platter, served with a knockout garlic cheese bread. All of our sauces are homemade—the spaghetti sauce a private Old World recipe, and the meat balls, our own sensational mix of meat and spices.

Another offering will be a side dish of golden parmesan potatoes, a delicious accompaniment to barbecue that has received many raves. Some people like to make a meal of them by themselves. We also have special recipes for potato salad and slaw. Our intent is to bring as much effort and expertise to our side dishes and sauces as we do our entrees. This will make the food at Butcher Hollow Bar BQ extra special and keep the customers coming back for more. Nothing mundane or ordinary will be served.

We also have a nice array of entrees that we are holding in reserve, or that we may feature as weekly specials, one at a time. These recipes come from a special private collection that have been refined over many years by the Carters.

The Setting

Butcher Hollow Bar BQ will not be served in an ostentatious setting. The Soulard neighborhood lends itself to nice, storefront cafes, and in this type of setting, barbecue can be best enjoyed. Checkered tablecloths and pitchers of beer set the scene for good times, good food, and enjoyable surroundings. A bricked patio with picnic tables and yellow lights permit a beer garden annex in pleasant weather and, of course, carry-out customers are made especially welcome in a comfortable alcove. We expect a significant part of our business to be carry-out because barbecue is traditionally eaten at home.

Soft drinks, wine coolers, and draft beer are the beverages of choice at Butcher Hollow. We anticipate eight tables for four, four tables for two, four booths accommodating four to six, and two tables for six, for total seating of eighty-four.

The name Butcher Hollow is intended to conjure up a relaxed, rustic mood, nothing fancy, and not associated with a specific theme. Our decor will generally be mixed and matched chairs and furnishings with a goodly amount of Americana thrown in. Much of this will be derived from the near-antique collectables that the Carters have been accumulating over the years in anticipation of this type of establishment.

MARKET ANALYSIS—CUSTOMERS

Butcher Hollow Bar BQ has identified four distinct target markets which will comprise our customers. They consist of:

1. Primary residential population of the Soulard and Lafayette Square neighborhoods.
2. Secondary residential population of the Near South Side and South St. Louis proper sections.
3. Commuting population that works downtown and travels through Soulard, often stopping for a refreshment on the way home. Accesses to highways 40, 44, and 55 are found in our immediate area and lend themselves for easy access. Additionally, spin-off crowds from stadium events and Kiel Auditorium also are markets that will avail themselves of post game or post concert recreational dining or carry-out. The planned new arena and downtown football stadium complex can only add to the customer mix. The near proximity of Union Station and Laclede's Landing also provide traffic through our area, which we intend to entice with our delectable Butcher Hollow Bar BQ.
4. Another market is the working population of the Near Southside, which offer great opportunities for Friday lunch and after-work gatherings. Anheuser-Busch, Monsanto Chemical, and Ralston Purina are three of many large employers having upscale workers with disposable income for leisure activities.

Market Survey

To obtain consumer feedback for our idea, a telemarketing survey was instituted in the fall of 1995 for the purpose of polling the primary and secondary residential population to learn their reaction to an eat-in and carry-out barbecue-style restaurant. Twelve hundred complete conversations were conducted by telephone in the zip codes of 63104, 63118, 63110, and 63116. Among the key questions asked were: If there were a good barbecue restaurant in the Soulard neighborhood, would you patronize it either for eat-in or carry-out? Sixty-six percent responded affirmatively, and their answers were further tabulated as follows:

22% once a month or more frequently
56% every couple of months
12% a couple times per year
10% about once a year

About 75% indicated a preference for carry-out.

Profile of Customer Base

The demographics of the four zip codes comprising the residential population of our primary geographic target market reveal characteristics very supportive of a viable customer base for Butcher Hollow Bar BQ. Our primary area consists of some 52,500 households, with a median adult age of 42 years. Approximately 22% have incomes of over $50,000, with 36% having income of $30,000 to $49,000. Statistics published in the July 1995 edition of Eating Out, a leading trade journal, reveal that families with median incomes of over $30,000 and median ages over 40 eat out two to three time per week, among the highest in any category.

With approximately 50% of our primary residential target market falling within this profile, and coupled with the response to our in-house survey revealing 66% of those surveyed indicating a predisposition to patronize a good barbecue-style eat-in or carry-out restaurant, we feel that we have identified a location that is most amenable to the product that we will be providing.

Additionally, 25% of our business is expected to come from persons commuting from downtown employment, shopping, cultural and sports activities. While en route their residences in South County and West County, many people often stop in Soulard and the adjoining neighborhood of Lafayette Square to partake of the local amenities.

Another 25% is expected to come from people employed in the immediate area but living elsewhere. Some of the larger employers are:

Many workers from these firms are known to frequent the establishments of Soulard after working hours, with Fridays being a high point in the week.

COMPETITION

St. Louis is known as one of the major barbecue consuming areas of the country. Indeed, we lead the nation in the per capita consumption of prepackaged barbecue sauce sold at the retail level. Barbecue restaurants have traditionally been very popular in St. Louis as well. Two of the most popular are situated in the Affton area, just outside of what we consider our secondary market.

One of these restaurants, Phil's Bar BQ, is a second-generation establishment, tracing its roots back to North St. Louis with some fifty years of continuous operation. Roscoe McCrary reigns supreme in North St. Louis, a distinct market in itself, with Mr. McCrary's Bar BQ being both well known and highly sought by consumers from all over the metro region. McCrary's Bar BQ is often preferred fare in the post game St. Louis Cardinals clubhouse and is widely regarded as being among the best.

Suburban St. Louis County has become home for several very popular barbecue restaurants. Charlotte's Rib attracts a large following in the Ballwin/Manchester area and Damons for Ribs, a national chain, has recently opened a second location to complement its Crestwood restaurant.

KC Masterpiece Bar BQ has expanded its sphere of influence all the way from Kansas City to our own West County suburbs. Reports are that the initial store is doing excellent business with customers waiting on Friday and Saturday evenings.

Without a doubt, barbecue is popular in St. Louis. But, until the arrival of Butcher Hollow Bar BQ, South St. Louis and the Near South Side have had no convenient purveyor.

The closest place is a church-sponsored barbecue carry-out operation of long standing in the six hundred block of South Broadway that is open 24 hours a day, Friday, Saturday, and Sunday only, and does a land-office business, although offering no amenities.

During the annual Mardi Gras Festival and the St. Patrick Day celebrations, many of the restaurants and bars of Soulard erect temporary barbecue pits to cater to the heavy foot traffic. It is easy to observe that these are among the most popular stops with the celebrants. Often people congregate 3 and 4 deep around the stands, clamoring for service, as the delectable smoke and fragrance waft into the surrounding air. Butcher Hollow Bar BQ feels there is a demonstrated need for a good barbecue eat-in or carry-out restaurant in Soulard, and we intend to fill that need.

RISKS

Opening a new food establishment is often seen as one of the more risky business ventures because of the known high rate of failure of new restaurants. The proprietors of Butcher Hollow Bar BQ feel that we have effectively minimized these risks by careful market research and by bringing considerable food service management and entrepreneurial experience to the project.

Tom and Helen Carter are well-trained both by formal education and by many years of experience in restaurant service and management. Additionally, Mr. Carter was owneroperator of a successful restaurant for eight years in St. Louis during which he retired a $25,000 SBA loan in a timely fashion.

As this Business Plan will reflect, careful planning and preparation have gone into the concept and the execution of this plan. Positive consumer reaction, favorable demographics, and strategic location combine to assure Butcher Hollow Bar BQ a viable market.

Another risk that is effectively minimized is that of surviving what is sometimes known as the starvation period for many start-up businesses; i.e., the first six months to a year while customers become aware of your establishment. While the Business Plan calls for a proprietor's draw of $1,000 per month, this is of course contingent upon conditions. With Mrs. Carter maintaining her present position of employment and both she and Mr. Carter working at Butcher Hollow, the new business can operate with a minimum of payroll load, thus minimizing a significant cost factor for all new businesses. As she continues working at the Crest Downtown Hotel, the household living expenses can be met by her salary.

Traditional casualty risks will be covered by Business Owners' insurance, ample to cover all assets and with a $500,000 public and product liability umbrella.

MARKETING STRATEGY—ADVERTISING, PROMOTION & PUBLIC RELATIONS

Butcher Hollow Bar BQ has a three-pronged marketing strategy aimed at our three identified target markets.

As we expect 50% of our business to come from the residential population of our primary and secondary areas, we will be promoting Introductory Specials through ads in two heavily circulated community newspapers, the South St. Louis Journal and the Riverfront Times. The Journal will feature primarily family carry-out oriented ads, with coupons worth $1 off or a free 24 oz. soft drink, or similar promotions. The Riverfront Times, which has saturation distribution throughout the area, primarily in food and beverage establishments, is widely read by the young, upwardly mobile professional person, a consumer category recognized for their prominent discretionary and leisure spending habits.

The commuting traffic will be targeted with a billboard advertisement strategically positioned to capture the attention of southbound vehicles leaving downtown employment, stadium, and entertainment events. The cost of this advertisement is budgeted for $9,000 for the first 6 months and is intended to prime the pump and attract first-time customers. It is an investment in the future and is not expected to be immediately cost effective, but will pay-off for the long haul as we attract and keep customers.

Our third target group is the local employee population who we intend to attract for Friday lunch and after-work eat-in or carry-out business. For the lunch trade, we intend to initiate mailings to the various firms throughout the area.

The mailings will include menus and our fax number to make use of the proliferation of office fax machines to place lunch orders. For the larger companies, we will obtain lists of departments to facilitate these mailings reaching the workers that want to order. We also will make use of occasional Comp Cards, which are complimentary lunches when used with an order exceeding a set dollar amount. With each carry-out lunch, we will include a flyer touting Butcher Hollow Bar BQ as a great stop after work for barbecue and beer or for our splendid carry-out offerings.

The Carters intend to be members and participants in the Soulard Merchants Association, which is a group of about fifty local businesses, most of whom are in food and beverage service. The area is promoted twice each year, once with a giant Mardi Gras parade and festival and then at St. Patrick's Day. Butcher Hollow Bar BQ intends to maintain a high profile during both festivities and become a well established and popular addition to the Soulard scene.

PRICE & PROFITABILITY

The price formula to be employed at Butcher Hollow Bar BQ will be based on a food cost of 30% for most food items with a 25% food cost for soft drinks and 50% for beer and wine coolers. Retail prices are across the board, carry-out or eat-in, with the paper cost of carry-out being offset by the savings in service inherent to take-out food.

The pinnacle attraction at Butcher Hollow BQ is the full slab rib platter, priced at $13.00 and including two side dishes and bread. Many people will order half slabs at $7.50 per plate or $5.50 per sandwich. Our other entrees, Half Chickens, Pork Steaks, and Jack Salmon are priced at $7.50 per platter and $5.50 per sandwich accordingly. Meatballs and spaghetti with garlic cheese bread will be $7.50.

Both our barbecue sauce and our spaghetti sauce are special recipes and are very important to the overall delectability of the finished product. Extra sauces will be available in individual portions or by the quart, priced with a 50% food cost.

We expect our aggregate food and beverage cost to average about 44% and we will monitor this figure closely. We will be utilizing modern computer data entry on all of our food purchases. Recipes are preprogrammed to extrapolate the updated finished cost per portion, thereby enabling management to keep a constant check on food cost percentages, adjusting pricing as needs dictate.

As our financial forecast will indicate, we anticipate first-year sales of $113,000 with net operating profits of $12,300. We would find this acceptable in view of the anticipated "starvation period" that accompanies all new openings and the one-time expenditures of advertising and promotion that is booked in for the first six months. Our monthly break-even point is $6,700, a very reachable $1,500 per week.

Profits for the second year are expected to reach $30,500.

[*For detailed derivation of these calculations, refer to Twelve Month Proforma, Financial Projections.]

SUMMARY & USE OF FUNDING

In order to open Butcher Hollow Bar BQ, management has determined that capitalization of $45,000 will be required. These funds will be allocated as follows:

Equipment & Fixtures are listed in the schedule on the following page. Our Business Plan anticipates that capitalization will be funded as follows:

The proprietors equity is derived from savings. It is projected that borrowed capital would be drawn over a period of 60 days preceding Grand Opening, through the first 180 days of operations. Grand opening is targeted for May 1, 2000.

FINANCIAL PROJECTIONS

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TWELVE-MONTH PROFORMA
CHART 1

TWELVE-MONTH PROFORMA
CHART II

THREE-YEAR PROJECTED INCOME STATEMENT

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CASH FLOW PROJECTION

BALANCE SHEET

Restaurant

EXECUTIVE SUMMARY

MARKETING & SALES

PRODUCTS & SERVICES

CUSTOMERS

OPERATIONS

OBJECTIVES

RISK FACTORS

CONCLUSION

APPENDIX

CAFE FRESCO

31 Culver Ave.
Windsor, ON N9B 3P4

Gerald Rekve

This business plan is for an old style Italian cafe that’s concept will be based on traditional cooking methods. Our goal is to have a high standard of food for the restaurant. We will meet this goal while trying to provide menu items incorporating our imported ingredients, and being mindful of the well being of our customers (and our staff).

EXECUTIVE SUMMARY

Business Overview

Cafe Fresco Inc. is a Windsor–based company that will operate Cafe Fresco, a single unit, medium–size restaurant serving healthy, Italian style food. The restaurant will be located at 31 Culver Ave., Windsor, Canada.

The company will operate as a corporation and will be owned and operated in Windsor by the partners.

The company was incorporated in September of 2006 and elected sub–chapter S.

The founders are Gino Scarpilli and Vincent Hanna. Gino is the President and Vincent is the Vice President. There are a total of 25,000 shares of common stock issued. Gino and Vincent each own 12,000 and the remainder are retained by the company for future distribution. In addition they have loaned the company $8,000 of their own money for research and start–up costs.

A suitable site for the first restaurant was found last month and lease negotiations are in the final stages. The location will be on Culver Ave., just outside Main and First Streets and close to a dense population of the target market. When the lease is signed there will be two months of free rent for construction and in that time, the balance of the start–up funds must be raised. With that phase completed, Cafe Fresco can then open and the operations phase of the project can begin.

The location is that of an old paint and wallpaper store, with lots of parking in the back as well free street parking after 5:00pm. The renovation of the location will be done by the partners to save money and will be built with the help of contractors that will help in the areas of electrical and plumbing.

Mission

The company’s goal is that of an old style Italian cafe based on traditional cooking methods. Our goal is to have a high standard of food for the restaurant. We will meet this goal while trying to provide menu items incorporating our imported ingredients, and being mindful of the well being of our customers (and our staff), as well as the high quality of attitude, generosity between management, customers, and vendors.

With the high turnover of help for cafes, we will rely on family to fill in where required until we are off the ground and making a profit. Awareness of all these factors will give our efforts lasting effects for our basic financial goals.

Business Strategy

If the business is meeting its projections by end of year one, we will start scouting for a second location and develop plans for the next unit. Our five year goal is to have two restaurants in the Windsor area with a combined annual profit of between $50,000 and $100,000. We will look for more locations that will meet our needs to expand in a slow and orderly fashion. The goal is to keep the business small and easy to manage.

Market Analysis

Although the restaurant industry is very competitive, the lifestyle changes created by modern living continue to fuel its steady growth. More and more people have less time, resources, and ability to cook for themselves. Trends are very important and Cafe Fresco is well positioned for the current interest in lighter, healthier foods at moderate to low prices.

Household spending on foodservice jumps 8.7%

(Jan. 16, 2006) The average Canadian household spent $1,931 on food and alcohol from restaurants and licensed establishments in 2005 – an increase of $154 or 8.7% over 2004 – according to a new report from Statistics Canada.

This increase in foodservice spending by households is the largest since 1998 and follows several years of sluggish growth. Household spending at grocery and liquor stores grew only 1.0% to $5,944 in 2005, but accounts for more than 75% of the total household food dollar.

Growth in Ontario – which accounts for nearly 40% of Canadian foodservice sales – combined with robust gains in Western Canada were largely responsible for the gains in foodservice expenditures. Household spending in Ontario bounced back in 2005 with a 9.1% increase – the result of pent-up demand following several years of sluggish growth. Similarly, rising incomes and booming economies in the western provinces fuelled spending throughout the region.

Households in British Columbia retained top spot in 2005, spending an average of $2,293 at restaurants and bars – $362 more than the national average. At 16.6%, Alberta posted the fastest growth in 2005, but ranks second with average household spending on foodservice of $2,252. A healthy provincial economy boosted household spending on foodservice in Saskatchewan 9.9%, to $1,380.

Average household spending in Quebec ranked below Manitoba and Prince Edward Island in 2005 even though Quebec boasts a higher per capita disposable income.

With the lowest disposable income, households in the Atlantic region spend less at restaurants and bars than the rest of Canada. Below-average disposable income restrained household spending on foodservice in Nova Scotia and New Brunswick to $1,504 and $1,486 in 2005. Although Newfoundland and Labrador’s average household spending at grocery and liquor stores is the fifth highest in the country, spending on foodservice fell 1.4% to $1,096 in 2005.

Overall foodservice sales growth in 2005 did not keep pace with the 8.7% gain in household spending. Commercial foodservice sales were limited to 3.5%, due to lower tourism levels. It also must be noted that Statistics Canada uses different survey methodologies to calculate household spending and foodservice revenues, and there is a margin of error around both data sets.

Consumer Spending

• The average Canadian household visits a restaurant for a meal or snack 526 times per year. Meals and snacks sourced from restaurants account for 1 in 10 meal occasions. Source: CREST/NPD Group; NPD Group Eating Patterns in Canada Report, October 2005 release.
• The average Canadian household spends 22.1 percent of its total food dollar on foodservice, compared to 41.4 percent for U.S. households Source: CRFA’s, and the Bureau of Labour Statistics
• The most popular food and beverage ordered at Canadian restaurants are French fries and regular coffee. Source: CREST/NPD Group and CRFA’s
• The average check size at a restaurant is $6.36 including taxes, but excluding tips. Source: CREST/NPD Group and CRFA’s
• The average household sources a meal or snack from a restaurant 11.4 times over a two-week period. Source: CREST/NPD Group and CRFA’s
• The percentage of restaurant meals and snacks eaten off-premise has increased from 53 percent in 1994 to 60.4 percent in 2005 due to the increased popularity of drive-through service. Source: CREST/NPD Group and CRFA’s

The food service business is the third largest industry in the country. It accounts for over $199 billion annually in sales. The independent restaurant accounts for 19 percent of that total. The average American spends 8 percent of his/her income on meals away from home. This number has been increasing for the past few years. In the past ten years the restaurant industry has out–performed the national GNP by 32 percent. There are 1100 new restaurants opening every month and over 300 more needed to keep pace with increasing demand.

Growth Strategy

The predicated growth trend is very positive both in short and long–term projections. CRFA cites again that as modern living creates more demands, people will be compelled to eat more meals away from home. The CRFA Report (2006) estimates this as high as 23 percent over the next five years.

In 1998 the CRFA released the Foodservice Industry 2005 report which forecasted how the industry might look in the year 2005. Some highlights from the panel’s findings:

• Consumers will spend a greater proportion of their food dollar away from home.
• Independent operators and entrepreneurs will be the main source of new restaurant concepts.
• Nutritional concerns will be critical at all types of foodservice operations, and food flavours will be important.
• Environmental concerns will receive increased attention.

Western Canada leads with 8.4% sales growth in June

(September 14, 2006) Revenues at restaurants, caterers and bars in Western Canada jumped 8.4% in June according to Statistics Canada, thanks to robust economic activity and explosive job growth throughout the region.

Saskatchewan and Alberta benefited from healthy demand at limited-service restaurants and bars, realizing year-over-year commercial foodservice sales growth of 10.6% and 9.9% respectively. Foodservice sales in British Columbia grew 7.5% in June, a notable improvement from modest growth in May. In Manitoba, foodservice sales rose 6.1% – a welcome change from a 6.8% decline a year earlier.

The picture for foodservice demand in the rest of Canada was less rosy, however. Despite a strong start to the year, foodservice sales in Central Canada decelerated to 3.4% growth in June. A high Canadian dollar led to significant job losses in the manufacturing sector and reduced the number of international travellers to the region. Full-service restaurant sales in Ontario slipped for the third straight month due to lacklustre demand and a decline in the number of establishments.

In Atlantic Canada, high gasoline prices and a drop in the number of tourists restrained foodservice sales growth to an anaemic 0.8% in June. While sales in Nova Scotia advanced 3.3%, this was in comparison to a 5.3% drop a year earlier. Weak demand in Newfoundland and Labrador and declines in Prince Edward Island and New Brunswick contributed to the region’s weak June sales.

Overall, foodservice sales in Canada grew 4.8% in June 2006 compared to June 2005. Caterers led all segments with year-over-year growth of 12.2% in June, followed by limited-service restaurants at 8.9%. Full-service restaurant sales grew a tepid 1.3% in June with weak demand across most of Canada, while bar sales slipped 0.8%, the segment’s tenth consecutive monthly decline in sales.

Saskatchewan’s foodservice industry at a glance

The population and demographics of First and Main Streets have remained steady for the last five years. Tourism has increased 13 percent over the last six years and is predicted to keep growing. Local businesses are increasing at a rate of 5 percent yearly.

The idea of a imported food consciousness through nutritional awareness and dietary change has been slowly building for the last two years. The extensive government studies and new Food Guide Pyramid have given everyone a new definition of a balanced, healthy diet. This is not a fad but a true dietary trend where people are going to restaurants and want the food that has been organically grown and cooked based on old traditions. Italian food is just that.

This idea is backed by the scientific and medical community, the media, and the government, and also endorsed by the big food manufacturers. As stated in the Foodservice 2000 report, this trend will be even more important by the turn of the century.

A few years back the Rolling Stones played a concert in Windsor to a sold out audience. After that event you could not find an empty restaurant seat in the city, and ever since the restaurant business has noticed that their daily client count has averaged above what it was prior to the concert. The owners of the restaurant cannot put their finger on why this is, but feel there was definitely a momentum shift for the better. Talking with the owners of the restaurants, they tell us that this trend is continuing.

Competition

There are over two dozen restaurants in the Main and First Street area that sell food at similar prices. Although this presents an obvious challenge in terms of market share, it also indicates the presence of a large, strong potential. The newest competitors have made their successful entry based on an innovative concept or novelty. Cafe Fresco will offer an innovative product in a familiar style at a competitive price. Our aggressive plans of take–out and delivery will also give us an advantage to create a good market share before the competition can adjust or similar concepts appear.

Competing with Cafe Fresco for the target market are these food providers:

Independent operators include Moxie’s, Pizza Hut, Montana’s, Iruna, and The Border Cafe. Most are ethnic based and will carry at least two similar menu items. Moxie’s and Memories are long-standing businesses while the others are fairly new. They all are doing very well.

The major chain restaurants are House of Blues, Romano’s Pizza and Pasta Restaurant and Little Caesars Pizza and Pasta Restaurant. All are relatively new but well established and profitable. They have big resources of marketing and/or a specialty product or attraction (Luigi’s Pasta House is also a live music club). Gebs Pasta Restaurant Supplies Ltd Foods and Cysco both service 24,000 Main and First Street students but their product is not appealing enough to prevent students from eating out five to seven meals a week. In addition there are two local catering companies that deliver prepared meals daily to offices.

Competitive Strategy

There are three major ways in which we will create an advantage over our competitors:

• Product identity, quality, and novelty
• High employee motivation and good sales attitude
• Innovative and aggressive service options.

Cafe Fresco will be the only restaurant among all of the competition which focuses the entire menu on healthy, low–fat cooking. Each of the competitors offers at least one “healthy” selection on their menu. Moxie’s Den even has an entire section called “On the Lighter Side” but in all cases they are always seen as alternatives to the main style being offered. The target market will perceive Cafe Fresco as the destination location for healthy, low–fat cooking.

Once they have tried the restaurant, their experience will be reinforced by friendly, efficient, knowledgeable service. Return and repeat business will be facilitated by accessible take–out and delivery options. At the time of this writing all of the competitors offered take–out but only two (Little Tony’s Pizza and Pasta Restaurant and Raymond’s Pizza and Pasta Restaurant).

MARKETING & SALES

Market Penetration

Entry into the market should not be a problem. The store has high visibility with heavy foot traffic all day long. The local residents and students always support new restaurants and the tourists do not have fixed preferences. In addition, $2,000 has been budgeted for a pre–opening advertising with a local radio station and public relations campaign. Due to the weak newspaper readership we will not budget any money for the daily newspaper. We will advertise in a weekly newspaper that will help us build our clients. The newspaper only has 20,000 circulation but has a strong readership base.

Advertising

Focusing on the unique aspect of the product theme (healthy, tasty foods) a mix of marketing vehicles will be created to convey our presence, our image, and our message.

• Print media—local weekly newspapers, magazines and student publications
• Broadcast media—local programming and special interest shows
• Radio stations—CDASH FM, CBAK FM, CADC AM
• Hotel guides, concierge relations, Chamber of Commerce brochures
• Direct mail—subscriber lists, offices for delivery
• Miscellaneous—yellow pages, charity events

A public relations firm has been retained to create special events and solicit print and broadcast coverage, especially at the start–up.

The marketing effort will be split into three phases:

1. Opening—An advanced notice (press packet) sent out by the PR firm to all media and printed announcement ads in key places. Budget–$ 29,000
2. Ongoing—A flexible campaign (using the above media), assessed regularly for effectiveness. Budget– $3,000
3. Future plans and Strategic Opportunities—Catering to offices (even outside of our local area) may become a large part of gross sales. At that point a sales agent would be hired to directly market our products for daily delivery or catered functions.

PRODUCTS & SERVICES

Products

Cafe Fresco will be offering a menu of food and beverages with a distinctive image. There will be three ways to purchase these products; table service at the restaurant, take–out from the restaurant, and delivery to home or office.

The Menu

The Cafe Fresco menu is moderate sized, and moderately–low priced offering a collection of ethnic and American items with a common theme—healthy (low–fat, low cholesterol, natural ingredients), flavorful, and familiar. Our goal is to create the image of light, satisfying, and still nutritious food. All menu items will be cooked from scratch in the kitchen, like it was 100 years ago in Italy.

Food production and assembly will take place in the kitchen of the restaurant. Fresh vegetables, meat and dairy products will be used to crate most of the dishes from scratch. The chef will exercise strict standards of sanitation, quality production, and presentation or packaging over the kitchen and service staff.

Services

There will be three ways a customer can purchase food.

• They may sit down at one of the 67 seats in the dining room and get full service from a waiter.
• A separate take–out counter will service those who wish to pick up their food. Most take–out food will be prepared to order with orders coming from either the telephone or fax.
• Delivery (an indirect form of take–out) will be available at certain times and to a limited area.

The Cafe Fresco Catering service will be offered in year two of the business once the cliental has grown to a level that is easy to manage.

Potential Services

There is a market segment that prefers to eat this type of cooking at home although they do not have the time to cook. There are already caterers and even mail order companies that provide individuals and families with up to a month’s supply of pre–prepared meals.

This opportunity will be researched and developed on a trial basis. If successful, it could become a major new source of income without creating the need for additional staff or production space. At this point the owners have no desire to franchise the concept; they want to keep it small and easy to manage. They just want to cook good food.

CUSTOMERS

The market for Cafe Fresco products covers a large area of diverse and densely populated groups. Although it will be located in a downtown urban setting, it is an area where people travel to eat out and one that is also frequented by tourists. It is also an area known for and catering to the demographic group we are targeting.

The First and Main Street area is one of the most desirable retail locations in Windsor. The Windsor Chamber of Commerce rates it as the third best retail market in the city. There are more than 400 businesses in a two square mile area with average sales of $187 per square foot.

The customer base will come from 3 major segments:

• Local population—The city of Windsor with a year–round population of 199,000 is centrally located in the Windsor area and is within 15 minutes drive of 8 major suburbs.
• Colleges and Universities—First and Main Streets alone have two different schools within walking distance of Culver Ave.
• Tourism—Between hotels, motels, bed & breakfast rooms and inns, there are over 1,500 rooms available. Last year they were at a 81 percent occupancy rate.
• Local businesses—The Windsor Chamber of Commerce lists over three hundred businesses with an average of three employees in the First and Main Street square area.

The food concept and product image of Cafe Fresco will attract three different customer profiles:

• The 23–55 age bracket—This includes anyone on a restricted or prescribed diet, or those who have committed to a healthy diet but want authentic Italian food served in a real Italian Restaurant.
• The large population of Italians in the city—Imported foods from Italy allow for the real feel restaurant experience.
• Other market segments—“if you try it, you will like it.” Through marketing, publicity, and word–of–mouth, people will seek out a new experience and learn that nutritious food can be tasty, fun, convenient, and inexpensive.

OPERATIONS

Facilities & Offices

The restaurant is at 31 Culver Ave. and is a 2,400 square foot space. The licenses and codes’ issues are all in order. New equipment and dining room furnishings will be purchased and installed by the general contractor. Offices of the corporation are presently at Gino Scarpilli’s home but will be moved to the restaurant after opening.

Hours of Operation

The restaurant will be open for lunch and dinner six days a week. Service will begin at 10:00 AM and end at 12:00 AM. The restaurant will be open Christmas and Thanksgiving.

Employee Training & Education

Employees will be trained not only in their specific operational duties but in the philosophy and applications of our concept. They will receive extensive information from the chef and be kept informed of the latest information on healthy eating.

Systems & Controls

A big emphasis is being placed on extensive research into the quality and integrity of our products. They will constantly be tested for our own high standards of freshness and purity. Food costs and inventory control will be handled by our computer system and checked daily by management.

Food Production

All of the food will be prepared on the premises. The kitchen will be designed for high standards of sanitary efficiency and cleaned daily. Food will be made mostly to order and stored in large coolers in the basement. We have hired a local well known contractor to design and build a kitchen that meet the highest in food quality standards, surpassing the requirements set by the government regulating this area.

Delivery & Catering

Food for delivery may be similar to take–out (prepared to order) or it may be prepared earlier and stocked. Catering will be treated as deliveries.

We will lease a fleet of white mini vans that will have our logo and advertising on them. The purpose for this will be to give solid exposure to the world and when people think of our restaurant they will have a good impression. The vans will be cargo vans with specially designed heated cupboards inside, keeping the food fresh and warm.

The vans will always be clean and washed. We will have a total of four vans. All of the drivers will wear chef uniforms to portray a professional image.

Management Summary

Gino Scarpilli, President. Gino Scarpilli is also the owner and manager of a local weekly newspaper. In 1995, a local weekly newspaper became so popular and profitable, he decided to buy into the newspaper concept.

Gino brings with him a track record of success in the natural foods industry. His management style is innovative and in keeping with the corporate style outlined in the mission statement.

Board of Directors

An impressive board of directors has been assembled that represents some top professionals from the area. They will be a great asset to the development of the company.

Consultants & Professional Support Resources

At the present, no outside consults have been retained, excepting the design department at Market-ingDesigners Inc. A business plan was written by www.corporatemanagementconsultants.com.

Management to be Added

We are presently searching for a General Manager and Executive Chef. These key employees will be well chosen and given incentives for performance and growth.

Management Structure & Style

Gino Scarpilli will be the President and Chief Operating Officer. The General Manager and Chef will report to him. The Assistant Manager and Sous–Chef will report to their respective managers, and all other employees will be subordinate to them.

Ownership

Gino Scarpilli and Vincent Hanna—the stockholders—will retain ownership with the possibility of offering stock to key employees if deemed appropriate.

Compensation & Incentives

Cafe Fresco will offer competitive wages and salaries to all employees with benefit packages available to key personnel only.

OBJECTIVES

Cafe Fresco is an innovative concept that targets a new, growing market. We assume that the market will respond, and grow quickly in the next five years. Our goals are to create a reputation of quality, consistency and security (safety of food) that will make us the leader of a new style of dining. Our marketing efforts will be concentrated on take–out and delivery—the areas of most promising growth. As the market changes, new products may be added to maintain sales. After the restaurant opens, we will keep a close eye on sales and profit. If we are on target at the end of Year 1, we will look to expand to a second unit.

RISK FACTORS

With any new venture, there is risk involved. The success of our project hinges on the strength and acceptance of a fairly new market. After Year 1, we expect some copycat competition in the form of other independent units. Chain competition will be much later. Meanwhile, Gino will continue to work at the local daily newspaper as an advertising sales representative.

CONCLUSION

Ideally, Cafe Fresco will become profitable, and in the long run be a place to go to.

APPENDIX

Assets

Liabilities & stockholders’ equity

Restaurant

BUSINESS PLAN

PEACH BLOSSOM DINER

1 Congaree Battery Drive
Columbia, SC 34345

January 17, 1993

The Peach Blossom Diner is an authentically restored diner featuring period paraphernalia from the 1920s through the 1950s. This plan includes details on how to create an establishment with a nostalgic atmosphere and discusses issues relevant to the genesis of any new restaurant.

• business description
• market definition
• marketing plan
• financial
• creation of jobs
• financial planning
• supporting documents

The Opening of America's Most Authentic Restored Diner on the Banks of the Congaree River at the Gervais Street Bridge

Presenting the restoration of America's largest and most authentic diner with a nostalgic overview of life from the 1930's into the future. The menu will offer contrasting health conscious foods with an international flavor. The Diner will be in a special setting on the Congaree River.

Contact: David Jones

BUSINESS DESCRIPTION

Overall Purpose

The Peach Blossom Diner, situated on the banks of the Congaree River, will become a South Carolina landmark. The Peach Blossom Diner will be the largest and most authentically restored diner in America.

Specific Purpose

To offer the authenticity of a true Diner as a backdrop to a nostalgic overview of life from the 1930s to the present.

Features

The Diner will feature paraphernalia of different time periods. There will be a collection of salt and pepper dispensers from the 1950s, miniature table "juke boxes" from the 1940s, and a private dining room from the 1920s. The contrasting menu is somewhat futuristic in that it offers a wide variety of health conscious foods with an international flavor. Jonathon Perry, co-owner of Shadows Tavern, will coordinate the international menu. This menu, combined with the ambiance of the Diner, the Congaree River, a public park, a boardwalk, and a view of Columbia's skyline will provide several advantages. The Diner will be the catalyst to the long awaited Congaree River development. It will be used to promote the revitalization of our inner Tri-Cities.

Peach Blossom Diner was the original name of the establishment. This name promotes the intrigue associated with Southern culture and hospitality. It typifies the deep south and clearly expresses authenticity and nostalgia.

Brief History

The Peach Blossom Diner was built in 1952 by the Mountain Ridge Company of Lowell, New Jersey. The style and grace of this Diner exemplifies the era of Diners. This is an authentic Mountain Ridge Streamliner. The Streamliner was an extremely popular design. It was called "America's fastest selling Diner" by the diner industry.

Diners became obsolete during the upsurge of the fast food era. Now, less than 50 of these rare diners are in existence. It is unusual to find one in the deep south due to high transportation costs. This particular diner was moved to Beacon, South Carolina in 1957 where it was operated for 26 years. Around 1983, the owners built a new restaurant on the site and the original diner was placed in a field.

The Diner was purchased by David Jones in 1989 and moved to Columbia, South Carolina. It was then fully restored and two matching sections were built at the Campton Department of Corrections on Willow Road. Photographs of the restoration process are available upon request.

Marketing Strategy

The partners, David Jones and Jonathon Perry, wanted to put the Diner in a place that would ensure a competitive advantage in the downtown market. The chosen site should make the Peach Blossom Diner an attraction that would draw both local residents and tourists. The combination of the Peach Blossom Diner and Columbia's strongest untapped amenity, the Congaree River, will be an attraction worth visiting.

The site of the Peach Blossom Diner is adjacent to the Gervais Street Bridge. It is part of a 16 acre tract between the Gervais and Blossom Street Bridge on the West Bank. David Jones has developed apian for the area and a model has been prepared to illustrate the development of this plan. A photograph of the model is available upon request.

This plan will include the owners of the land, Dr. Leslie Smith and Benjamin Taylor, deeding approximately 11/2 acres to the Bellshire County Parks and Recreation Department for a park, boardwalk, and public road along the Congaree River. This plan is in progress. West Chester City Council has passed a 100% vote of approval. The West Chester Planning Commission has approved the plan and validated the local zoning. The Metro Chamber Board has also passed a 100% vote of approval and is working with the SCDDA to assist in the JEDA financial package. Bellshire County engineers have designed the road and the administrator of Bellshire County Parks and Recreation is working on the funds for the park and boardwalk.

The new road along the river front will be given the name Congaree Battery Drive. The Peach Blossom Diner will be located at 1 Congaree Battery Drive at the Gervais Street Bridge. The many attractions being created along Congaree Battery Drive complement, and will be complemented by, the authenticity and ambiance of the diner.

This nostalgic diner, combined with a contrasting upscale international menu, will be a marketed as a VIP box seat for the enchanting view of the Columbia Skyline, the enticing park and boardwalk, and the captivating backdrop melody of cool water splashing over the rocks of the Congaree River.

Food Preparation and Strategy

The food preparation will be based on the philosophy that has made Shadows Tavern so successful. Our kitchen motto will be "Freshness, consistency, and abundance."

The Chowder Shop will supply fresh seafood and meats for our varied menu. Fresh vegetables and produce will arrive daily from the Farmer's Market. Fresh sourdough rolls will be baked daily at the diner. Jonathon Perry's seasoned talents as a food buyer will be utilized to assure proper control of the inventory and turnover.

Management and Owners

The ownership of the Diner is presently in the form of a partnership. The President and Treasurer of the partnership, Jonathon Perry, controls 50% of the stock. The Vice-President, David Jones, and the Secretary, Janice Hanner, each own a 25% share of the business. The partnership will be incorporated prior to opening with the same percentages of stock. It will be called Peach Blossom Diner, Inc.

Jonathon Perry will operate and oversee the Diner. The manager of the Diner will be Tracy Wade. For the past two years, Ms. Wade has been working and training under Jonathon Perry as his assistant at Shadows Tavern. She will share in a percentage of the profit and participate in a stock earning plan. The stock plan will provide a return of up to 20% of the stock and net profits over a 5 year period. After construction is complete, it is not foreseen that Jonathon Perry or David Jones will continue to have any day to day activities involving the operation of the Diner.

Objectives

It is the owners' objective that the menu represent an exciting international flavor with a wide variety, yet it should not intimidate anyone. To ensure this, the Diner will also offer basic favorites, such as hamburgers and apple pie.

The nostalgia and ambiance of the old Diner will be an attraction that no other restaurant can offer. The original front section with the original counters will serve as both a bar and a dining area. One of the two counters has been modified with a large stainless steel ice tray where the fresh entrees of the day will be displayed. This setting will bring new people and new monetary gain to the city.

The Diner has wiring and plumbing to accommodate a bar on the large patio overlooking the river. This patio will be open on pleasant days to serve customers. Bar sales are expected to be excellent from both the inside and outside bar area, though the outside bar should produce higher sales in the Spring. Alfresco dining on the patio will allow 40 more people to be seated. The patio will be open about one-half the amount of days the Diner is opened, approximately 105 days per year.

The seasonability at Shadows Tavern illustrates that the low profit months are July and August. The best months are in the Spring and Fall.

The owners will have a viable option to test the market with an exciting breakfast menu similar to the one that has been so successful at the Seashore Cafe in Shellfish Isle. The price point will be about $1 more than a typical Columbia breakfast. However, the menu would offer some special touches, such as small slices of different fruits on the plate and beach water grits, with an optional sprinkle of New York cheddar cheese. A choice of low-fat, regular and honey butters will be available. There would also be homemade preserves (with no added fat) and a choice of three coffees. The private dining room, called the Hospitality Room, would also be available for breakfast meetings for up to 16 people.

The attendants will wear custom diner uniforms. Please contact David Jones for a photograph.

The Diner will house part of the World's largest known salt and pepper shaker collection. The parents of David Jones started the collection at their truck stop diner in Fay ville, South Carolina. It was popular for the truckers to bring his parents salt and pepper shakers from their travels around America. The collection has been in storage since 1961.

Music from the 1930s and 1940s will be selected and played through miniature "juke boxes" on the tables. The decor and setting of the middle section dining area will be modeled after the 1930s and 1940s. The private dining room will have the flair of the 1930s.

MARKET DEFINITION

Customers

The primary market for the Peach Blossom Diner during lunch and the possible breakfast is the local work force. The work force in Bellshire County is the second highest in the State with 172,000 average workers per month. West Chester County has an average daily work force of 57,000 for a total daily work force of 229,000. The metropolitan area of Bellshire and West Chester counties is approximately 500,000 people. The busiest corner in Columbia is one block up Diamond Avenue at the corner of Diamond and Howard Street with over 65,000 cars per day. Over 23,000 of those cars cross the Gervais Street Bridge where the Diner is highly visible.

There are 2.5 million visitors to the metropolitan area each year. There is no information compiled to separate the business visitor from the tourist, but it is estimated that only 15% are true tourists. The area has 1,300,000 room nights. Of the total room nights, 455,000 are within the city limits of Columbia.

The State Museum is located diagonally across the river with over 400,000 visitors per year. The location and uniqueness of the Peach Blossom Diner will be an advantage in competing for local residents, the business travelers, and the tourists.

The location is also in the overall plan of the Congaree Vista. The Congaree Vista is 900 acres of the old historic district of Columbia. Strong efforts began almost ten years ago to revitalize the Congaree Vista. Recently, progress has become visible. The Congaree Vista has become an attraction that draws people back into the City. Congaree Battery Drive will be a focal point of the Congaree Vista.

In the Spring, the 4.3 million dollar beautification of Gervais Street, from the bridge to the Capitol Building, will begin construction. Congaree Battery Drive is at the beginning of Gervais Street at the Gervais Street Bridge.

The Five Points area was the primary draw for dining and socializing for years. The Congaree Vista is quickly taking over that position. The Vista exhibits a mature image and seems to be a fresh and appealing alternative.

Competition

The general downtown and surrounding area has a number of restaurants. Discussed below are the restaurants that will offer the most competition to the Peach Blossom Diner.

The first chain to realize the future of the Vista:

Monte's Steak House is located four blocks up on Blossom Street. The restaurant has been very successful and has an excellent customer return rate. The menu is limited to basic meat and potatoes.

The second chain to move into the Vista:

The Spaghetti Shop is located one block off Blossom Street on Raymond Avenue. It is in a renovated warehouse, with a trolley theme. The seating capacity is 440. Despite the size, this restaurant offers a family oriented approach, featuring low cost pasta meals. They have been well received in the downtown area.

Established competition located downtown:

Bountiful Seafood has been downtown for years. It is located next to Monte's Steak House. Bountiful Seafood is a very casual and informal dining experience. The cement floors and paper table cloths set the tone for a restaurant. The featured fare is oyster-shooters and beer. Bountiful does not experience the volume of the other two chains, but they do a very substantial business.

The closest neighbor, only one block away, is Arnie's Upstairs. The wonderful story of Arnie's begins with a young 18 year old boy. His father leased the upstairs of a building one block from the end of The Gervais Street Bridge. Young Arnie was then put in charge of creating a dream for himself. From Arnie's Upstairs, the view of the Columbia skyline is beautifully magical from sunset to evening's end. The menu is expensive and is at the highpoint of the scale. Northern Italian cuisine is featured. Arnie's Upstairs is one of the most successful restaurants in Columbia, with the exception of Shadows Tavern.

Athens On Highway 501, five miles away, another successful restaurant called Athens is very popular. This Greek restaurant is not in a prime location, but their food keeps the parking lot full for lunch and dinner.

Competitive Strengths

The Peach Blossom Diner will be the most authentic diner in America with a setting on the river and a wide range of international foods. No other restaurant offers all these features and attractions.

The menu will have a wide variety of appetizers, entrees and deserts, plus additional culinary choices such as Thai and Indian dishes. The price point of the menu will be situated below Arnie's Upstairs and slightly higher than Athens and Monte's Steak House. A daily "Blue Plate Special" will be offered for the frugal customer. When dining at the Peach Blossom, one may choose foods from around the world in various price ranges. There is also a patio overlooking the river where drinks and a wide choice of international appetizers may be enjoyed.

MARKETING PLAN: OVERVIEW

The Peach Blossom Diner will maintain an ambiance incomparable to any other place in the Midlands. The food and menu will be upscale, capturing the contrast of the old and the new.

The menu will feature culinary foods from around the world, but will still offer the choice of an American hamburger and apple pie. Diners have enjoyed a tremendous resurgence in the last few years and are constantly in national magazines and advertised on television. David Jones has maintained a clippings file of articles and advertisements. This file is available upon request.

The City Diner in San Francisco and Simone's Diner in West Chester enjoy great success. The following quote was found in a recent edition of Southern Entertainment and Travel:

… while in West Chester you must visit Simone's Diner and enjoy gourmet food in contrast with the old Diner. When the sun goes down, not only will you see other tourists, you will also meet the locals. However, you better call for reservations about two months ahead.

The Peach Blossom Diner will also attract local residents, tourists, business travellers, and the media.

The backbone of the Peach Blossom Diner will be two basic and proven formulas of success. First, good food at reasonable prices. Second, a financial plan and sufficient equity investment to assure staying power.

Abundant research and detailed work has already gone into the building and authenticity of the Diner. People are seeking different, unique, and nostalgic things to do. Trolley Tours of Columbia provide daily evidence that people are intrigued and excited with the nostalgia of the old Trolleys. Nostalgia blended with the magnetism of the river will draw people into the city and ultimately to the site.

The Peach Blossom Diner will draw from the existing work force and bring new dollars. People will visit the Diner and Congaree Battery Drive for special events. One special attraction will be to visit as the sun settles in the sky behind you. The city skyline glows with intensity and beauty.

However, we will not sit back and strictly depend on word-of-mouth and free media. Trolleys will be used to attract customers. Trolley Tours of Columbia is operated by David Jones. Trolley Tours will expand the present historic tours with a package that will include a trip to the waterfront and lunch at the Peach Blossom Diner. In the future, a trip to the River and Diner will be added as an option for birthday parties and senior citizen outings.

The Trolleys will reach out to areas such as Wooded Acres, South Chaplin, and business parks. The Trolleys will bring people into the city for dining and visiting the river front.

There have been numerous articles in the Sun Daily Newspaper and discussions on local radio and talk shows about the development of the River. This coverage, combined with the anticipation of a revitalized river, will attract local, regional, and national attention. This will bring people into the city from outlying areas.

As done with the Trolleys, inexpensive flyers will be printed and placed in motels, the visitor's center in town, and on interstate billboards. A special emphasis will be placed on special events in the park and boardwalk area.

The Trolley business works daily with the surrounding hotels, motels, and the Columbia Visitor's Center and Convention Bureau. The Bureau advises guests on the sites and events to discover and enjoy while in Columbia. When a guest is in town and asks that age-old question: "What do you recommend I do while I am in town?", the Visitors Center is going to be suggesting a visit to the riverfront and the Peach Blossom Diner.

The Peach Blossom Diner will epitomize the sights and sounds of the 1930s and 1940s, with progressive touches of contemporary style. From the moment customers approach the premises, the glow of days gone by will entice them toward the grace, charm, and magnetism of the big band era. The Diner will emit a captivating welcome mat of hospitality which will be even more evident upon entering the oval glass doors.

The attendants, donning authentic uniforms of the era, will spark a magic touch to the already superior event. They will present appetite pleasers for any palate.

As the customers enjoy their booth seats in the front section, attention will immediately be drawn to the enchanting replica juke boxes from the 1940s filled with delightful tracks from the same decade. The music will flow as charmingly romantic and high stepping as when it was played during the Great Depression, Prohibition, and the two World Wars. No matter where the eye is turned, this decade of elegance, high life, and patriotism will abound.

FINANCIAL

JEDA LOAN AND APPRAISAL

A loan was requested for $190,000, with a monthly payment plan of $1,150. The amortization is 20 years. The interest rate requested is 4.5%. The first payment should be due 150 days from closing to allow for a construction period. It was also requested that a condition be established to allow the partners to draw on the funds in six $30,000 increments as needed. The Peach Blossom Diner will be used as collateral. It has been appraised at $700,000. A copy of the JEDA loan request, including a detailed summary of project costs and proposed financing, and the Appraisal can be obtained at the South Carolina Development Office, 123 Main St., Columbia, SC 98765.

Equity and Effort

Original note to purchase and move the Diner was $47,000.

The original note is held by G&L Bank. The note is current and the principle amount is approximately $25,000. The note is on a five-year term with monthly payments of $1,000.

The land is to be purchased from Hank Verillae and Betty Dimagio. It is 202' × 164', approximately three fourths of an acre. There is also a cabana area of 40' × 50' on the river bank.

The price of the land is $232,000. There is a $16,000 downpayment required to close and take possession of the land. The balance will be $212,000, after Mr. Verillae and Ms. Dimagio pay $4,000 in clearing costs. The partners are paying the first $6,000 of the $16,000 downpayment. The final downpayment of $10,000 is due upon receiving the JEDA funds. Mr. Verillae and Ms. Dimagio have agreed to finance the property with interest only payments.

Monthly payments for the first year will be at 6%, the second year at 7%, and the third year at 7.5%. The terms stipulate a four month period without any payments, while the construction is completed. At the end of the 3 1/2 years of interest only payments, Mr. Verillae and Ms. Dimagio will finance the balance between 8% and 10% for five more years.

Use of JEDA Funds

All prices are estimates based on buying and selling experience. Some of the pieces will be used equipment.

construction

The construction period will be four months.

All cost numbers are estimates based on the actual numbers used in building the first phases of the Diner.

CREATION OF JOBS

Current plans are to operate two shifts which will offer new jobs as follows:

FINANCIAL PLANNING

Operating Budgets

A Projected Operating Statement for the Diner's first two years of business has been prepared by Jameson's Small Business Center, 656 North West Street, Columbia, SC 96845. A brief summary of the financial figures is provided below.

Operating expenses incurred during the first year are expected to total $324,632. This figure will increase to $455,507 in the second year. During the first year, the net income, before taxes, is projected at $186,485. Net income will substantially increase in the second year to $267,295. Requests for the detailed document should be directed to Jameson's Small Business Center at the above address.

Monthly Sales and Cash Flows

These reports are also available upon request at Jameson's Small Business Center.

SUPPORTING DOCUMENTS

As mentioned throughout this proposal, photographs of the restoration process, articles concerning the resurgence of diners, and a model of the riverfront development are available upon request. Please contact David Jones, 345 Wellship Dr., Columbia, SC 96745.

Also available upon request are an Attorney's statement, the owners' resumes and personal finance statements, and a menu.