FEASIBILITY STUDY

REPORT FOR

FAST FOOD RESTAURENT

SWADISHTH

Submitted to: Submitted by:

MR.DR. Y. P SINGH SWAPNIL SRIVASTAVAFACULTY OF I.I.S.E PGDM –2nd YearLUCKNOW ENROLLMENT NO. 1085

1

EXECUTIVE SUMMARY:

The purpose of this project is to serve as an overall

summary of the project and to determine the feasibility of opening a fast

food Restaurant which is very much popular now days in the city of

Navab’s in Kapoorthala, Alliganj, Lucknow. The feasibility study is

designed to discover if a business option is "feasible" or not. It helps to

narrow the scope of the project to identify the best strategy.

It will answer questions such as "will it work or won't it?" and "will it be

profitable?"

The report summarizes the project expectations, the process of

opening up a business and the project results. Most importantly the

feasibility study of the proposed

FAST FOOD RESTAURENT will define about market, site selection,

competition and financial analysis through observational research,

surveys and literature review.

SWAPNIL SRIVASTAVA

2

ACKNOWLEDGEMENT

I am extremely grateful to all those who have shared their views,

opinions, ideas and experiences which have significantly improved this

Project Report. I would like to express my sincere thanks to, Mr.YP

SINGH International Institute for Special Education, Lucknow for his

guidance and sincere efforts towards bringing in years of his vast

industrial experience into this project. I am very thankful to all the

respondents and the employees for their cooperation in the course of

my study.

A special thanks to my friends and family for their encouragement and

help in the successful completion of the study.

SWAPNIL SRIVASTAVA

3

TABLE OF CONTENT

EXECUTIVE SUMMARY

ACKNOWLEDGEMENT

INTRODUCTION

– PROJECT BACKGROUND

– PRODUCT/SERVICE ANALYSIS

– OBJECTIVE OF THE STUDY

FEASIBILITY ANALYSIS

– CONTENTS OF FEASIBILITY ANALYSIS

WORKING ASSUMPTIONS

STATEMENT OF INITIAL INVESTMENT

COST OF PROJECT

CALCULATION OF DEPRECIATION FOR

FIVE YEARS

PROJECTED CASH FLOW FOR FIVE

YEARS

CALCULATION OF NET PRESENT

VALUE

CONCLUSION

BIBLIOGRAPHY

4

INTRODUCTION

PROJECT BACKGROUND

Name of company: SWADISTH

Owner: SWAPNIL SRIVASTAVA

Type of business: FAST FOOD RESTAURENT

Place: Kapoor Thala, Aliganj, Lucknow.

5

PRODUCT/SERVICE ANALYSIS

The businesses intend to serve three areas. The first area is Fast Food

and the second area is a Place to organize various Parties like Birthday

Party, New Year Party, Anniversaries, New Year Party, Get together,

Kitty Party, Corporate Parties etc. These two operations will involve the

core business activities of FOOD & FUN.

ADVANTAGES

In Lucknow there are very few places which provide a complete blend of

good food and party place especially in Aliganj, Lucknow. Hence very

limited

competition for FOOD & FUN. Despite of ups and down in the market

people will always move out to have Fun, Food and Party. The FOOD &

FUN believes that the business will compete very favorable in terms of

Price, Location and Selection.

6

OBJECTIVE OF THE STUDY

1. To identify the feasibility of such project in Kapporthala, Aliganj,

Lucknow.

2. Find Market segment.

3. Pricing strategy.

4. To find out the initial cost of establishment of the project

5. To calculate the Pay back period of initial investment

6. To calculate NPV & IRR.

7

FEASIBILITY STUDY

A feasibility study is a preliminary study undertaken to

determine and document a project's viability. The term is also used to

describe the preliminary analysis of an existing system to see if it is

worth upgrading all or a part. Also known as feasibility analysis. The

term feasibility study is also used to refer to the resulting document.

The results of this study are used to make a decision whether or not to

proceed with the project. If it indeed leads to a project being approved, it

will — before the real work of the proposed project starts — be used to

ascertain the likelihood of the project's success. It is an analysis of

possible alternative solutions to a problem and a recommendation on

the best alternative. It, for example, can decide whether an order

processing be carried out by a new system more efficiently than the

previous one.

A feasibility study is an important part of creating a business plan for a

new enterprise, since it has been estimated that only one idea in fifty is

commercially viable.

If a project is seen to be feasible from the results of the study, the next

logical step is to proceed with it. The research and information

8

uncovered in the feasibility study will support the detailed planning and

reduce the research time.

COMPONENETS OF FEASIBILITY

Market Analysis

Technical Analysis

Financial Analysis

Economic Analysis Ecological Analysis

9

MARKET ANALYSIS

Market Analysis Components

Industry Trends

Location and Facility

Area Characteristics

Competition

Knowing Your Customer

Projected Sales

10

The market is full of opportunities for such kind of businesses where

there is little competition and at the same time service industry is

booming at the faster pace there is not much time to cook food daily and

arrange parties at home. That is why there is huge demand for a

professional party organizer which provides a complete solution i.e. a

party place along with good food. The

FOOD & FUN will surely going to face the competition from the existing

competitors like Royal Café, Aryan’s, 0522, Narula’s, Mac Donald’s,

Pizza Hut, and other High ways Dhaba also.

Looking these factors Food & Fun can definitely go for entry in this

sector but only after identifying need of the customers, for which a study

should be conducted.

By conducting a market analysis, I will be able to answer questions such

as:

– What trends are emerging in the food service industry?

– What are the strengths and weaknesses of my competition?

– Is my location suitable?

– Does my concept fill a niche in the market?

– What is the potential number of customers I can serve per

year?

TECHNICAL ANALYSIS:

Technical Analysis seeks to determine whether the preliminary

test have been conducted & whether the prerequisites for the successful

commissioning of the project have been considered and it has been

found that the Restaurant cum Party House FOOD & FUN would be

requiring an automatic plant for the preparation of food, machinery to

11

keep the place clean, computer & printer for bill payments, vehicle to

bring raw material for the preparation of food etc.

ECONOMIC AND ECOLOGICAL ANALYSIS :

Economic Analysis is concerned with judging a project from the

social point of view. The quality of service, Gov. Priority sectors like

quality and freshness of food, tax incentives, Location i.e. commercial

place. The proposed Restaurant cum Party House will not have a great

implication on the environment but it cannot be denied that it will

somehow contribute to the

environment pollution due to release of waste and garbage and also the

noise pollution due to late night parties. Through providing regular

checks, proper method for removing waste and garbage and minimizing

the noise due to late night parties the long term impact on the

environment can be reduced and pollution can be minimized.

WORKING ASSUMPTIONS

The following assumptions are necessary for completing the project:-

– It is assumed that the minimum cash balance required

should be sufficient to meet the operating cost for the initial 2

months.

12

– It is assumed that the depreciation will be charged on WDV

(Written down Value Method).

– On the basis of market survey, it has been assumed that the

revenue in the first year will be Rs. 16, 00,000 and there

after it increase at the rate of 10% per annum and the

expenses will increase at the rate of 5%.

– The entire project is financed through owner’s capital.

– The rate of return required by the owner is 10%.

– It is assumed that the life of the project is 5 years.

– It is assumed that the salvage value will be equal to the book

value.

– Working Capital Margin will be recovered to its book value at

the end of the life of project.

STATEMENT OF INITIAL INVESTMENT

Preliminary and pre-operating expenses:

Processing and registration fee paid at municipal corporation 80000

Registration with sales tax & income tax department 18000

Total 98000

13

COST OF PROJECT

1. Building 1500000

2. A.C., Utensils, Cooking Machines 290000

3. Computer/Printer 22000

4. Generator 12000

5. Furniture & Fixture 70000

6. Refrigerator & Audio System 17000

14

7. Working Capital 45000

8. Preliminary and pre-operating

expenses

98000

TOTAL 2054000

CALCULATION OF DEPRECIATION FOR FIVE YEARS

A.C., Utensils, Cooking

Machines (15%) I II III IV V

Opening Balance 290000 246500 209525 178096.3 151381.9

Depreciation 43500 36975 31428.75 26714.45 22707.29

Balance end of the year 246500 209525 178096.3 151381.9 128674.6

Furniture & Fixture (10%) I II III IV V

Opening Balance 70000 63000 56700 51030 45927

15

Depreciation 7000 6300 5670 5103 4592.7

Balance end of the year 63000 56700 51030 45927 41334.3

Computer/Printer &

Generator (40%) I II III IV V

Opening Balance 34000 20400 12240 7344 4406.4

Depreciation 13600 8160 4896 2937.6 1762.56

Balance end of the year 20400 12240 7344 4406.4 2643.84

TV & Refrigerator (15%) I II III IV V

Opening Balance 17000 14450 12282.5 10440.13 8874.111

Depreciation 2550 2167.5 1842.375 1566.02 1331.117

Balance end of the year 14450 12282.5 10440.13 8874.111 7542.994

TOTAL DEP. Rs. 66650 53602.5 43837.13 36321.06 30393.66

Salvage Value Rs. 180195.7

PROJECTED CASH FLOW FOR FIVE YEARS

S.

No. Particulars 0 I II III IV V

1 Revenue 1600000 1760000 1936000 2129600 2342560

2 Expenses 180000 189000 198450 208372.5 218791.1

3 Depreciation 66650 53602.5 43837.13 36321.06 30393.66

16

4 EBIT 1353350 1517398 1693713 1884906 2093375

5 Interest 0 0 0 0 0

6 EBT 1353350 1517398 1693713 1884906 2093375

7 Tax @ 30% 406005 455219.3 508113.9 565471.9 628012.6

8 PAT 947345 1062178 1185599 1319435 1465363

9

Salvage

Value 180195.7

10

Recovery of

Working

Capital 45000

11

Initial

Investment 2054000

12

Operational

Cash Flow 1013995 1115781 1229436 1355756 1495756

13

Terminal

Benefit 225195.7

14

Projected

Cash Flow 1013995 1115781 1229436 1355756 1720952

17

CALCULATION OF NET PRESENT VALUE

Yrs

Cash

Flow

PV Factor @

10%

Present

Value

Cumulative Present

Value

0 -2054000 1 -2054000

1 1013995 0.909 921721.5 942510.3

2 1115781 0.826 921635.1 1864145

3 1229436 0.751 923306.4 2787452

18

4 1355756 0.682 924625.6 3712077

5 1720952 0.621 1068711 4780789

4760000

Net Present Value = Total Benefit - Initial Investment

= 2706000

Benefit cost ratio = (Present value-Initial Investment)/ Initial

investment

= 1.3174

Net Benefit cost ratio (NBCR) = BCR-1

= 0.3174

Pay Back Period = In the Third Year

IRR 49%

CONCLUSION

The Net Present Value (NPV) is positive and the Internal Rate of Return

(IRR) is greater than the cost of capital. This clearly shows that the

project is financially viable. The analysis done about the Market,

Technology, Economy and Ecological indicates that the project of FAST

FOOD RESTAURENT is feasible.

19

BIBLIOGRAPHY

1. www.google.com

2. www.wikipedia.com

3. Class notes by Dr. Y. P. Singh, Faculty, IISE, Lucknow.

20