Catering & Decorating Services (Rs. 1.22 Million)

8/10/2019 Catering & Decorating Services (Rs. 1.22 Million)

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Pre-Feasibility Study

(Catering and Decorating)

Small and Medium Enterprises Development Authority

Ministry of Industries & ProductionGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,Lahore

Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7

[email protected]

REGIONAL OFFICE

PunjabREGIONAL OFFICE

SindhREGIONAL OFFICE

Khyber PakhtunkhwaREGIONAL OFFICE

Balochistan3rdFloor, Building No. 3,Aiwan-e-Iqbal Complex,

Egerton Road Lahore,

Tel: (042) 111-111-456Fax: (042) 36304926-7

[email protected]

5thFloor, BahriaComplex II, M.T. Khan Road,

Karachi.

Tel: (021) 111-111-456Fax: (021) 35610572

[email protected]

Ground FloorState Life Building

The Mall, Peshawar.

Tel: (091) 111-111-456Fax: (091) 5286908

[email protected]

Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.

Tel: (081) 2831623, 2831702Fax: (081) 2831922

[email protected]

Note: All SMEDA Services / information related to PM's Youth Business Loan areFree of Cost

May, 2014
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Pre-Feasibility Study Catering and Decorating Services (Rs.1.22 Millions)

Table of Contents

1. DISCLAIMER ......................................................................................................................... 2

2.

PURPOSE OF THE DOCUMENT ......................................................................................... 3

3. INTRODUCTION TO SMEDA ............................................................................................. 3

4. INTRODUCTION TO SCHEME ........................................................................................... 4

5. EXECUTIVE SUMMARY ..................................................................................................... 4

6. BRIEF DESCRIPTION OF PROJECT ................................................................................... 47. CRITICAL FACTORS ............................................................................................................ 5

8. INSTALLED AND OPERATIONAL CAPACITIES ............................................................ 5

9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ........................................................ 610. POTENTIAL TARGET MARKETS ...................................................................................... 6

11. PROCESS FLOW ................................................................................................................... 6

12. PROJECT COST SUMMARY ............................................................................................... 6

12.1

Project Economics......................................................................................................712.2 Project Financing........................................................................................................7

12.3 Project Cost .................................................................................................................712.4 Space Requirement....................................................................................................812.5 Machinery and Equipment.........................................................................................812.6 Human Resource Requirement................................................................................912.7 Revenue Generation..................................................................................................912.8 Other Costs..................................................................................................................9

13. CONTACTS - SUPPLIERS .................................................................................................. 1014. ANNEXURES ....................................................................................................................... 11

14.1 Annexure 1 Income Statement............................................................................11

14.2

Annexure 2 Balance Sheet..................................................................................1214.3 Annexure 3 Cash Flow Statement......................................................................13

14.4 Useful Project Management Tips..........................................................................1414.5 Useful Links ..............................................................................................................15

15. KEY ASSUMPTIONS .......................................................................................................... 16


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1. DISCLAIMER

This information memorandum is to introduce the subject matter and provide a general

idea and information on the subject. Although, the material included in this document isbased on data / information gathered from various reliable sources; however, it is based

upon certain assumptions which may differ from case to case. The information has been

provided on as is where is basis without any warranties or assertions as to the

correctness or soundness thereof. Although, due care and diligence has been exercised

to compile this document, the contained information may vary due to any change in any

of the concerned factors, and the actual results may differ substantially from the

presented information. SMEDA, its employees or agents do not assume any liability for

any financial or other loss resulting from this memorandum in consequence of

undertaking this activity. The contained information does not preclude any further

professional advice. The prospective user of this memorandum is encouraged to carryout additional diligence and gather any information which is necessary for making an

informed decision, including taking professional advice from a qualified consultant /

technical expert before taking any decision to act upon the information.

For more information on services offered by SMEDA, please contact our website:

www.smeda.org.pk

SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST - 2
http://www.smeda.org.pk/http://www.smeda.org.pk/http://www.smeda.org.pk/


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2. PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneursin project identification for investment. The project pre-feasibility may form the basis of

an important investment decision and in order to serve this objective, the document /

study covers various aspects of project concept development, start-up, production,

marketing, finance and business management.

The purpose of this document is to facilitate potential investors in Catering and

Decorating Servicesby providing them with a general understanding of the business

with the intention of supporting potential investors in crucial investment decisions.

The need to come up with pre-feasibility reports for undocumented or minimally

documented sectors attains greater imminence as the research that precedes suchreports reveal certain thumb rules; best practices developed by existing enterprises by

trial and error, and certain industrial norms that become a guiding source regarding

various aspects of business set-up and its successful management.

Apart from carefully studying the whole document one must consider critical aspects

provided later on, which shall form the basis of any investment decision.

3. INTRODUCTION TO SMEDA

The Small and Medium Enterprises Development Authority (SMEDA) was established in

October 1998 with an objective to provide fresh impetus to the economy through

development of Small and Medium Enterprises (SMEs).

With a mission "to assist in employment generation and value addition to the national

income, through development of the SME sector, by helping increase the number, scale

and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify

policy, access to finance, business development services, strategic initiatives, and

institutional collaboration and networking initiatives.

Preparation and dissemination of prefeasibility studies in key areas of investment hasbeen a hallmark of SME facilitation by SMEDA.

Concurrent to the prefeasibility studies, a broad spectrum of business development

services is also offered to the SMEs by SMEDA. These services include identification of

experts and consultants and delivery of need based capacity building programs of

different types in addition to business guidance through help desk services.



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4. INTRODUCTION TO SCHEME

Prime Ministers Youth Business Loan program, for young entrepreneurs, with an

allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide

subsidised financing at 8% mark-up per annum for one hundred thousand (100,000)

beneficiaries, through designated financial institutions, initially by the National Bank of

Pakistan(NBP) and the First Women Bank Ltd. (FWBL).

Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 01

year grace period and a debt: equity of 90:10 will be disbursed to SME beneficiaries

across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit

Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

5. EXECUTIVE SUMMARY

Catering and Decoration Services Business is proposed to be located in a middle

income area in cities like Karachi, Lahore, Rawalpindi, Hyderabad, Faisalabad, Multan

etc.

Services include catering of food & services to events such as weddings, mehndi &

mayun, corporate Events etc and decoration of event site (this service is to be

outsourced).

Capacity: Maximum 100 events per year and initial utilization upto 50%

Total Cost Estimates is Rs. 1.22 million with fixed investment of Rs. 0.92 million and

working capital of Rs. 0.304 million

Given the cost assumptions IRR and payback are 27 % and 3.8 years respectively

The most critical considerations or factors for success of the project are:

1. Procurement of Raw material

2. Location- proximity to marriage halls, business hubs etc

3. Quality Food

6. BRIEF DESCRIPTION OF PROJECT

Location: The recommended area for the proposed catering and decorating

service business is the middle income locality in cities like Karachi, Lahore,

Rawalpindi, Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc. This

business can also be undertaken in all small 2nd tier towns in addition to

suburban towns of large cities.



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Product: The proposed project will offer high quality food & catering services to

events such as weddings, anniversaries and corporate events etc.

Target Market: Target customer for catering business would be event

management companies, corporate and individual clients, marriage hall & lawns

etc.

Employment Generation:The proposed project will provide direct employment

to 06 people. Financial analysis shows that the business shall be profitable from

the very first year of operation

7. CRITICAL FACTORS

Procurement of raw material

Location - proximity to marriage halls, business hubs etc

Quality of food, with precautionary measures of salient hygienic features

Strict management control

Professionalism and courteous customer service

Skilled Staff / Cooks

Planning & Organizing

Time Management

Contract with suppliers for decoration

8. INSTALLED AND OPERATIONAL CAPACITIES

For the proposed project, it is assumed that on an average 50 events will be catered

during a year with an average of 400 guests per event. The proposed business can also

serve up to 1,000 or more guests per event. Marquee and other decorative arrangement

for big events can be outsourced to multiple decorators.

Table 1: Project Economics

Events No. of Events in a Year %

Weddings 15 30

Mehndi & Mayun 15 30

Anniversaries 5 10Corporate Events 3 07

Others 12 23Total 50 100



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9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The Pakistani economy is becoming increasingly service-oriented and over the past

several decades the food service industry is growing substantially. There has been a

mushroom growth of marriage halls, event management complexes in the past decade

across all major cities and towns therefore there is a potential for proposed catering and

decorative service business to be established in cities like Karachi, Lahore, Rawalpindi,

Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc.

10. POTENTIAL TARGET MARKETS

The recommended areas for the proposed business will be cities like Karachi, Lahore,

Rawalpindi, Hyderabad, Faisalabad, Multan, Peshawar and Quetta etc. This business

can also be done in all small 2nd

tier towns in addition to suburban towns of large cities.

Target customers for the said business would be Corporate and Individual clients, Event

Management Companies, Marriage Halls & Lawns etc.

11. PROCESS FLOW

For a regular event, following process is to be followed:

Hiring and scheduling of Staff

Ordering and serving arrangements for menu items

Ordering equipment as needed from event rental companies

Obtaining licenses and permits, if needed, for use of the site etc.

Coordinating all ancillary services with the client and the vendors

12. PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of

Catering & Decoration Service Business under the Prime Ministers Youth Business

Loan program. Various cost and revenue related assumptions along with results of the

analysis are outlined in this section.

The projected Income Statement, Cash Flow Statement and Balance Sheet are

attached as appendix



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12.1 Project Economics

All the figures in this financial model have been calculated for catering of 50 events in a

year, whereas decoration service for such events will be outsourced in order to control

the capital expenditure at initial stage. Revenue generated in year 1 through such

events is based on given assumptions and calculated to be Rs. 9.6 million.

The following table shows Internal Rate of Return, Net Present Value and Payback

Period.

Table 2: Project Economics

Description Details

Internal Rate of Return (IRR) 27%

Payback Period (years) 3.8

Net Present Value (NPV) Rs. 3,026,629

Returns and profitability are highly dependent on regular occurrence of events, goodmarketing practices, quality of services and more importantly good quality and taste of

food.

12.2 Project Financing

Following table provides details of the equity required and variables related to bank

loan;

Table 3: Project Financing

Description Details

Total Equity (10%) Rs.122,200

Bank Loan (90%.) Rs.1,099,800

Markup to the Borrower (%age/annum) 8%

Tenure of the Loan including Grace Period (Years) 08

Grace Period (Years) 01

12.3 Project Cost

Following requirements have been identified for operations of the proposed business.

Table 4: Capital Investment for the Project

Capital Investment Amount (Rs.)

Construction & Renovation 135,000

Machinery & Equipment 150,000

Office Equipment & Furniture 83,000

Advance Rent (Deposit) 150,000Vehicles 350,000

Preliminary Expenses 50,000



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Total Capital Cost 918,000

Initial Working Capital 304,000

Total Project Cost 1,222,000

12.4 Space Requirement

Space required for Catering & Decoration Services Business is 750 sq. ft. Management

office will require 150 sq. ft. and 600 sq. ft. will be used for storage and cooking. It is

also assumed that preparation of Bar-B-Que items will be prepared on site as and when

required.

Table 5: Space Requirement

Area Requi red Area(Sq. ft.)

Monthly RentCharges (Rs.)

YearlyRent(Rs.)

For Office & Storage 750 25,000 300,000

Total Rent 25,000 300,000

12.5 Machinery and Equipment

Following table provides list of machinery and equipment required for the proposedCatering & Decoration Services Business.

Table 6: Machinery and Equipment

DescriptionTotalRs.

Burners / Fittings / Others 25,000Daigs / Kadhai / Others 20,000

Storage Racks 15,000

Deep Freezers 60,000

Other Kitchen Utensils 30,000Total 150,000

Table 7: Office Equipment & Furniture Costs

Quantity Cost Amount

Computer & UPS 1 25,000 25,000

Printer 1 10,000 10,000

Tables 2 8,000 16,000

Chairs 6 2,000 12,000Sofa Set 1 10,000 10,000

Others 1 10,000 10,000

Total 83,000



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12.6 Human Resource Requirement

Table 8: Human Resource Requirement

Description Nos. Salary peremployee permonth (Rs.)

Total monthlySalary (Rs.)

Owner 01 20,000 20,000

Head Cook 01 18,000 18,000

Cook / Karigar 02 12,000 24,000

Helper 01 10,000 10,000

Driver 01 10,000 10,000

Total Staff 06 82,000

The table above provides detail of human resources required to run a Catering and

Decoration Services Business. Salaries of all employees are estimated to increase at

10% annually.

12.7 Revenue Generation

The revenues are based on assumption that 50 events/year with an average of 400

guests will be organized. The standard menu will be of two items only.

Table 9: Revenue Generation

Events Nos.Sales

Price (Rs.)Revenue (Rs.)

Banquet Arrangement (Per Head) 400 90 36,000

Shamiana / Kanats (Per Head) 400 15 6,000

Marquee Set up (Per Head) 400 90 36,000

Stage 1 20,000 20,000

Water (Per Head) 16 250 4,000

Food Standard Menu (Per Head) 400 225 90,000

Total Sales Revenue per event 192,000

Total Sales Revenue in a Year 9,600,000

12.8 Other Costs

An essential cost to be borne by the said business is the promotional expense to attract

more clients. Average monthly expenditure in this head is assumed to be 1% of Net

Sales.

Working Capital Requirements: It is estimated that an additional amount ofapproximately Rs. 304,000 will be required as cash in hand to meet the initial workingcapital requirements during operations. The requirement is based on the rent, utilitiesand salaries expenses for at least two months. The following table gives the break up.



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Table 10 Working Capital Requirement

Months Monthly Charges (Rs.)

Utilities 02 90,000

Salaries 02 164,000

Rent 02 50,000

Total 304,000

13. CONTACTS - SUPPLIERS

KITCHEN 'N' RESTAURANT SYSTEMS

102-A, Allama Iqbal Road Butt Lane, Garhi Shahu, Lahore, Punjab, Pakistan

Phone: +92-42-36366590 / 36305989

Fax: +92-42-36305989

KITCHEN CARE

# 103, Golden Plaza F-7, Blue Area, Islamabad, Capital, Pakistan

Phone: +92-51-32875226

Fax: +92-51-32277176

PRESTIGE KITCHENS

Kehkashan Shopping Arcade Block-7, Clifton, Karachi 75600, Sindh, Pakistan

Phone: +92-21-35862978 / 35862839

Fax: +92-21-5871814



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14. ANNEXURES

14.1 Annexure 1 Income Statement



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14.2 Annexure 2 Balance Sheet



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14.3 Annexure 3 Cash Flow Statement



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14.4 Useful Project Management Tips

Technology

List of Equipment

Burners / Fittings / OthersDaigs / Kadhai / Others

Storage RacksDeep Freezers

Other Kitchen Utensils

Energy Requirement:Should not be overestimated or installed in excess and

alternate source of energy for critical operations should be arranged in advance.

Equipment Suppliers:Should be asked for training/orientation and after salesservices under a contract with the suppliers.

Quality Assurance Equipment & Standards: Products/Service quality

standards need to be defined and a monitoring system for compliance to be

instituted. This will improve credibility.

Marketing

Product Development & Packaging: Expert's help may be engaged for

product/service and packaging design & development.

Ads & P.O.S. Promotion: Business promotion and dissemination throughbanners and launch events is highly recommended. Brochures from good quality

Decoration Service Providers need to be obtained and kept for further use.

Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never

be allowed to compromise on quality. Price during introductory phase may be lower

and used as a promotional tool. Product cost estimates should be carefully

documented before price setting.

Human Resources

Owner

Head Cook

Cook / Karigar

Helpers

Driver



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Adequacy & Competencies: Skilled and experienced staff should be

considered an investment even to the extent of offering share in business profit.

Performance Based Remuneration: Attempt to manage human resource

cost should be focused through performance measurement and performance based

compensation.

Training & Skill Development: Encouraging training and skill of self &

employees through experts and exposure of best practices is route to success.

Least cost options for Training and Skill Development (T&SD) may be linked with

compensation benefits and awards.

14.5 Useful Links

Prime Ministers Office

www.pmo.gov.pk

Small & Medium Enterprises Development Authori ty (SMEDA)

www.smeda.org.pk

National Bank of Pakistan (NBP)

www.nbp.com.pk

First Women Bank Limited (FWBL)

www.fwbl.com.pk

Government of Pakistan

www.pakistan.gov.pk

Ministry of Industries & Production

www.moip.gov.pk

Ministry of Education, Training & Standards in Higher Education

http://moptt.gov.pk

Government of Punjab

www.punjab.gov.pk

Government of Sindh

www.sindh.gov.pk

Government of Khyber Pakhtoonkhwa

www.khyberpakhtunkhwa.gov.pk



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Government of Balochistan

www.balochistan.gov.pk

Government of Gilgi t Baltistan

www.gilgitbaltistan.gov.pk Government of Azad Jammu Kashmir

www.ajk.gov.pk

Trade Development Authority of Pakistan (TDAP)

www.tdap.gov.pk

Securities & Exchange Commission of Pakistan (SECP)

www.secp.gov.pk

Federation of Pakistan Chambers of Commerce and Industry (FPCCI)www.fpcci.com.pk

State Bank of Pakistan (SBP)

www.sbp.org.pk

15. KEY ASSUMPTIONS

Description

Debt Equity Ratio 90:10Interest Rate 8%

Loan Tenure (With 01 year grace period) 8 Years

Sales Price Growth Rate 10%

Depreciation Rate 10%

Weighted Average Cost of Capital 9.2%

Prepaid Rent Period 6 Months

Increase in Staff Salaries 10%

Increase in Office expense 10%


Catering & Decorating Services (Rs. 1.22 Million)

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