BUSINESS SET UP COSTS DETAIL:

Delicacies start-up costs will comprise of non-recurring charges that are basically associated with setting up the business. Similarly, registration charges, accountant’s fees, promotional and advertising charges, legal charges, employee training costs, insurance covers, license costs also form part of these costs. In order to get the business established, these variety of different costs will be incurred. Furthermore, start-up costs will consist of paying for the place where the business will be conducted, legal fees etc. Food Truck Start-up Costs

Equipment Estimated Cost Notes

Food Truck + Equipment $35,000 – $200,000 Depends upon mode on investment on food truck.

Initial Product Inventory $1,000 – $2,000

Licenses $200 – $700 Depends upon location of business operations.

Websites set-up costs Free – $6,000 Varies a lot depending on what you want.

Facebook / Twitter Free of cost

Point of sales transactions $100 – $1,000  An iPad and an app for credit transactions.

Uniforms $0 – $2,000

Misc. Expenses $600 – $1500 Plan for some unexpected expenses                       

Smallwares $200 – $3000

Fire Extinguisher $200 – $300

Phone / Internet $200 – $400

Fuel $400 It depends.

Labor $250 $5 – $10 per hour is average rate.

Repairs & Maintenance $1500 approx.

FUNDING – DISCUSSION OF APPROPRIATE FUNDING METHODS:

There are numerous options that are generally available to any start-up business in order to finance its business and operating activities. Self-finance or bootstrapping is one of the appropriate methods to start a restaurant business (How To Fund a Restaurant Startup, 2020). At Delicacies, the main focus will be to put self-funding as main contribution. But it can be seen that sometimes start-ups can cost more money than expected. Several other options will also be considered if financing cannot be met with the help of self-funding or personal capital.

Angel investment or venture capital are another option to continue business growing. Angel investors are normally interested in investing in start-ups with the additional capital they kept with themselves (10 Funding Options To Raise Startup Capital For Your Business, 2020). They basically see the potential that a new start-up has and as a result invest in them. But in order to obtain this funding option, Delicacies has to prove its growing potential in terms of gaining more customer-base and implementing effective business policies.

Delicacies has an option to apply for venture capital investment as well. Venture capitalists are those who invest in newly established start-ups with very huge potential from financial perspective and as well as from non-financial perspective. Delicacies is keen to provide divine customer experience in order to get the attention of number of venture capitals in New Zealand.

DEBTORS AND CREDITORS:

As most businesses do, Delicacies is very well aware of debtors and creditors that it will continue business with i.e. how to approach its debtors and how to satisfy creditors by paying liabilities and hence reducing its financial obligations.

There will be those regular local customers who wants to get the food on regular basis or might be in huge quantity and as a result invoice needs to be prepared for them or those customers who don’t pay with cash i.e. debit or credit payments, then in that case an invoice will be required. That will be its debtors. Similarly, at the time of any uncertain or unplanned event, when it will transfer or sale its business to any new business venture, and that business entrepreneur didn’t pay all of the amount at the time of acquiring the business, then automatically that entrepreneur will be its debtor.

From creditors point of view, these are the individuals or companies who expect Delicacies to further expand in the future. They may involve venture capitalists, angle investors, banks (from whom Delicacies may need to ask for loan in order to start the business or during the business operations). They want to believe that Delicacies financial plan to succeed in future is really meeting their demands and either they are competing well in the market such that existing rival feel threat to themselves.

There is a chance that creditors won’t give any further loan or capital in order to run the business until and unless Delicacies continue to prove that its products and items are worth accepted by its loyal customers.

BREAK-EVEN POINT IDENTIFIED:

Generally every start-up business is keen to find out as to how much the amount of sales that they need over a certain period of time in order to not lose any money (Insler, 2020). Similarly knowing its break-even, Delicacies will surely assess the risk of opening the food truck. There will be numerous fixed costs that cannot be ignored in this business.

Generally, investing in food truck is itself a huge cost because a new truck can cost more than $100,000. But if the same food truck is been rented out in case if an entrepreneur think that it has not enough capital to purchase a new one, then in that case renting of a food truck is a great option. Similar is the case with Delicacies who has numerous options to tackle with financing issues, but in order to deal with purchasing option, it will opt renting of food truck such that purchase of a new food truck will be risky and expensive option. Rental payments associated with this will automatically form part of fixed costs, because they will be usually paid on monthly

basis. Similarly, fixed salaries associated with permanent employees do also form part of fixed costs.

After determining fixed costs, sales price per unit and variable costs per unit will be determined. Sales price include the price that Delicacies will charge its consumers for just a single product. Similarly, variable costs per product are the costs that are incurred in order to produce the food items for e.g. raw material used, labor hired on hourly basis, overhead costs etc.  

Let assume the fixed costs will be around $45000 along with sales price and variable cost per unit/product/item which will be $3.5 per product and $2.3 per product respectively. The expected break-even point will be calculated as follows;

= Fixed Costs / (Sales Price per product – variable costs per product)

= $45,000 / ($3.5 – $2.3)

= 37,500 unites or food items

This means that we need to sell approx. 38,000 food items such as pastries and beverages in order to reach the break-even point.

PROJECTED BALANCE SHEET:

Projected Balance Sheet

Assets	As at 30 June	As at 30 June
Current assets:	2021	2022
Cash	652000	436300
Investments	–	–
Inventories	15000	–
Accounts receivable	56000	–
Pre-paid expenses	10000	–
Total current assets	733000	436300
Fixed assets:	2021	2022
Property and equipment	10000	20000
Leasehold improvements	2000	1000
Furniture and Fixtures	1000	1200
Vehicles	–	–
Total fixed assets	13000	23200
Other assets:
Goodwill	–	–
Total other assets	–	–
Total assets	733000	436300
Liabilities and owner’s equity
Current liabilities:	2021	2022
Accounts payable	10000	200000
Accrued wages	–	–
Accrued compensation	–	–
Income taxes payable	500	1000
Unearned revenue	–	–
Other	–	–
Total current liabilities	10500	21000
Long-term liabilities:	2010	2011
Mortgage payable	–	–
Total long-term liabilities	–	–
Owner’s equity:	2010	2011
Investment capital	501000	381000
Total owner’s equity	501000	381000
Total liabilities and owner’s equity	511,500	402000
Balance	–	–

It is newly start-up business which means that Delicacies is always in need of financial support by third party venture capitals or angel investors or by community in which it will operate. There is no capital investment in any non-current asset. The only non-current asset is the food truck itself which will be rented for the first 2 years approximately. There is a decrease of 40% in cash in hand which means that customers may find any alternate shop or restaurant more suitable in terms of food quality or price. Similarly accounts payable involve repayment of any loan or amount back to venture capitalist which shows an increase of 50%.

Income Statements

Revenue                                                       All amount in $
		2021	2022
	Gross Sales of food items	151000	255300
	Less: Sales Returns and Allowances
	Net Sales	151000	255300
Cost of Goods Sold
	Beginning Inventory	10000	43300
	Add: Purchases	18300	27800
	Freight-in
	Direct Labor	12000	24000
	Indirect Expenses
	Inventory Available	3000	2000
	Less: Ending Inventory
	Cost of Goods Sold	(43300)	(97100)
	Gross Profit (Loss)	107700	158200
Expenses
	Advertising	1800	3600
	Amortization	200	200
	Bad Debts	100	100
	Bank Charges	40	40
	Commissions
	Contract Labor	10000	20000
	Depreciation
	Insurance	4800	9100
	Interest	550	1200
	Legal and Professional Fees	3000	2000
	Licenses and Fees	4000	4500
	Miscellaneous	5000	7000
	Rent	1200	2400
	Repairs and Maintenance	1200	2400
	Telephone	2670	3350
	Travel	2800	5540
	Utilities	4060	7700
	Vehicle Expenses	2000	3000
	Total Expenses	(54220)	93730
	Net Operating Income	53480	64470
Other Income
	Gain (Loss) on Sale of Assets	5000	4000
	Interest Income
	Total Other Income	5000	4000
	Net Income (Loss)	57480	68470

• As compared to 2021, there is a net loss of $ 131530 which is approximately double than the amount of net profit in the year 2021. This will be mostly because of uncertain threats in the form of new rivals, increase of raw material prices, increased labor charges and most importantly rental charges. Uncertain situations can prevail mainly because of pandemics such as Covid-19, any type of business loss due to bad weather conditions or earthquakes, tsunami etc.

Cash Flow Statement

year begins:1/7/2021	JAN	FEB	MAR	APR	MAY	JUN	JUL	AUG	SEP	OCT	NOV	DEC
Cash on Hand (beginning of month)	25094	49,927	74,821	99,794	124,928	150,042	175,025	200,264	225,403	250,306	275217	255884
Cash Receipts
Cash Sales	5000	6000	7000	7000	8000	9000	9000	10000	8000	9000	9000	8000
Collections from CR accounts	2000	3000	4000	4000	4000	5000	5000	5000	6000	6000	6000	6000
Total	7000	9000	11000	11000	12000	14000	14000	15000	14000	15000	15000	14000
Total Cash Available (before cash out)	32,094	58,927	85,821	110,794	136,928	164,042	189,025	215,264	239,403	265,306	290,217	269,884
Cash Paid Out
Purchases (merchandise)	400	200	250	100	250	200	400	300	250	200	250	200
Purchases (raw materials)	1000	1500	1100	1200	1300	1500	1700	1300	1400	1000	1100	1200
Payroll expenditures	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000
Repairs & maintenance	100	100	100	100	100	100	100	100	100	100	100	100
Advertising	150	150	150	150	150	150	150	150	150	150	150	150
Delivery & travel charges	300	300	200	250	200	200	250	200	200	250	250	200
Accounting & legal	100	100	100	100	100	150	150	150	150	150	150	150
Rent	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000
Telephone	220	220	230	210	230	200	220	220	230	210	240	240
Utilities	300	300	350	310	400	350	300	350	400	350	300	350
Insurance	400	400	400	400	400	400	400	400	400	400	400	400
Interest on any loan	50	50	50	50	50	50	50	50	50	50	50	50`
Miscellaneous	150	150	200	150	150	180	140	150	200	210	210	210
Total	5170	5470	5130	5020	5330	5480	5860	5370	5530	5070	5200	5200
Cash Paid Out (Non P&L)
Capital purchase	0	0	0	0	0	0	0	0	0	0	0	0
Other startup costs	4000	0	0	0	0	0	0	0	0	0	0	0
Owners’ withdrawal	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000
Total	6000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000
Total Cash Paid Out	11170	9470	9130	9020	9330	9480	9860	9370	9530	9070	9200	9200
Cash Position (end of month)	20,924	49,457	76,691	101,774	127,598	154,562	179,165	205,894	229,873	256,236	281,017	260,684

Cash Flow Statement

year begins: 1/7/2022	JAN	FEB	MAR	APR	MAY	JUN	JUL	AUG	SEP	OCT	NOV	DEC
Cash on Hand (beginning of month)	20,924	49,457	76,691	101,774	127,598	154,562	179,165	205,894	229,873	256,236	281,017	260,684
Cash Receipts
Cash Sales	3000	2000	3000	3000	2500	3000	4000	2000	3000	2000	3000	3500
Collections from CR accounts	1000	1500	1000	2000	2500	2000	2000	2100	2000	2200	1000	2000
Total	4000	3500	4000	5000	5000	5000	6000	4100	5000	4200	4000	5500
Total Cash Available (before cash out)	16,924	45,957	72,691	96,774	122,598	149,562	173,165	201,794	224,873	252,036	277,017	255,184
Cash Paid Out
Purchases (merchandise)	800	800	600	600	700	600	800	600	700	800	800	500
Purchases (raw materials)	2000	2000	1000	2000	1000	2000	2000	2000	1000	1500	1500	1500
Payroll expenses (taxes, etc.)	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000
Repairs & maintenance	200	200	200	200	200	200	200	200	200	200	200	200
Advertising	300	300	300	300	300	300	300	300	300	300	300	300
Delivery & travel charges	400	400	500	400	460	460	450	520	500	500	500	450
Accounting & legal	300	300	300	400	400	400	500	500	500	500	500	500
Rent	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000
Telephone	200	250	300	300	300	400	300	250	300	200	250	300
Utilities	500	500	600	600	700	700	700	750	600	600	650	800
Insurance	600	700	800	800	800	700	800	600	800	800	900	800
Interest	100	100	100	100	100	100	100	100	100	100	100	100
Miscellaneous	200	200	200	250	250	250	300	250	300	250	300	250
Total	9600	9750	8900	9950	9210	10110	10110	10070	9300	9750	10000	9700
Cash Paid Out (Non P&L)
Capital purchase (specify)	0	0	0	0	0	0	0	0	0	0	0	0
Other startup costs	4000	0	0	0	0	0	0	0	0	0	0	0
Owners’ withdrawal	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000
Total	5000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000	1000
Total Cash Paid Out	14600	10750	9900	10950	10210	11110	11110	11070	10300	10750	11OOO	1O7OO
Cash Position (end of month)	2,324	35,207	62,791	85,824	112,388	138,452	162,055	190,724	214,573	241,286	265,017	244,484

Here the cash flow projections are based on investments, business expenses as according to the upcoming on-going operational activities. Similarly, the cash inflows and outflows essentially determine the business solvency i.e. either Delicacies will continue in foreseeable future or liquidate itself. From above cashflow projections, it can be seen that initially Delicacies has more cash in hand as per projections. This includes cash in the form of capital investments, start-up support from venture capitalist firms. By every month end, it will seem to possess sufficient cash in hand after paying out different expenditures. This can be because of the cost-competitive strategies with the help of which, market competitiveness can be gained by Delicacies. Subsequently in later years, Delicacies is forecasted to face new market challenges where rivals can introduce substitute products where it can face damage in the form of cash position at every month end.  Similarly, inflation and economic conditions may fall down due to the current Covid-19 situation, hence that can be the major reason behind shortfall of cash. It will surely look forward to move to another place where it may face less barriers to entry and different macro-economic factors. As a result, it will bear different start-up costs as well. Because of uncertain conditions and changing of location, owner will reduce its drawings limit in order to spend the earned profits on different expenditures.

From capital purchases perspective, food truck is itself a capital asset, hence Delicacies has rented out a truck in order to avoid getting stuck into cash shortage in advance.

Overall the feasibility of the business seems to be in favor of Delicacies until and unless it alerts itself in advance regarding any business or financial threat coming over its way. There are number of restaurants or food trucks that are operating all over Wellington or New Zealand, but getting market lead position is completely based on application of such business strategic decisions with the help of which competitive position can be gained. Delicacies has an option to completely customized its manual work into technology. Which means that it can deliver to homes as well with the help of developing point of sale inside its food trucking operation. Delicacies should research more and more in order to learn the market norms more in-depth such that getting a good business idea can give Delicacies a competitive-edge while taking into account different market risks. With the help of e-marketing, customer base can be increased. A website should be built so that customers can select and order menu by visiting their website as well. Delivery boys will be required to deliver food at home. Research and development are one of the main aspects of any business to grow further Customers will always visit those places where they are offered good quality food with lower prices. Delicacies will offer such items that customers will surely like by taste and quality. In order to tackle any uncertain threat, a contingency plan should always be in place with the help of which, the business should remain continued without having its processes ineffective and inconsistent.   

References

10 Funding Options To Raise Startup Capital For Your Business. (2020, 6 13). Retrieved from Profibooks: https://www.profitbooks.net/funding-options-to-raise-startup-capital-for-your-business/

How To Fund a Restaurant Startup. (2020, 6 13). Retrieved from rezku: https://rezku.com/blog/how-to-fund-a-restaurant-startup

Insler, S. (2020, 6 13). How to Calculate the Break-Even for a Restaurant. Retrieved from Chron: https://smallbusiness.chron.com/calculate-breakeven-restaurant-59242.html#:~:text=A%20key%20figure%20to%20know,1%20minus%20variable%20cost%20percentage.