Catering decorating services

Pre-Feasibility Study

Prime Minister’s Small Business Loan Scheme

CCAATTEERRIINNGG && DDEECCOORRAATTIINNGG SSEERRVVIICCEESS

Small and Medium Enterprises Development Authority

Ministry of Industries & Production

Government 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

PUNJAB REGIONAL OFFICE

SINDH REGIONAL OFFICE

KPK REGIONAL OFFICE

BALOCHISTAN

3rd Floor, Building No. 3, Aiwan-e-Iqbal Complex,

Egerton Road Lahore,

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

[email protected]

5TH Floor, Bahria

Complex II, M.T. Khan Road,

Karachi. Tel: (021) 111-111-456

Fax: (021) 5610572

[email protected]

Ground Floor

State Life Building

The Mall, Peshawar. Tel: (091) 9213046-47

Fax: (091) 286908

[email protected]

Bungalow No. 15-A

Chaman Housing Scheme

Airport Road, Quetta. Tel: (081) 831623, 831702

Fax: (081) 831922

[email protected]

September 2013

mailto:[email protected]

Pre-Feasibility Study Catering & Decoration Service.

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Contents 1. DISCLAIMER ......................................................................................................................... 3 2. PURPOSE OF THE DOCUMENT ......................................................................................... 4 3. INTRODUCTION TO SMEDA .............................................................................................. 4 4. INTRODUCTION TO SCHEME ........................................................................................... 5

5. EXECUTIVE SUMMARY ..................................................................................................... 5 6. BRIEF DESCRIPTION OF PROJECT ................................................................................... 5 7. CRITICAL FACTORS ............................................................................................................ 6 8. INSTALLED AND OPERATIONAL CAPACITIES ............................................................ 6

9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ........................................................ 7 10. POTENTIAL TARGET MARKETS ................................................................................... 7

11. PROCESS FLOW ................................................................................................................ 7 12. PROJECT COST SUMMARY ............................................................................................ 7

12.1 Project Economics ........................................................................................................ 8 12.2 Project Financing .......................................................................................................... 8 12.3 Project Cost................................................................................................................... 8

12.4 Space Requirement ....................................................................................................... 9 12.5 Machinery and Equipment............................................................................................ 9

12.6 Human Resource Requirement ................................................................................... 10 12.7 Revenue Generation ................................................................................................... 10 12.8 Other Costs ................................................................................................................. 11

13. CONTACTS - SUPPLIERS .............................................................................................. 11

14. ANNEXURES ................................................................................................................... 12

14.1 Annexure 1 – Income Statement ........................................................................... 12 14.2 Annexure 2 – Balance Sheet ................................................................................. 13

14.3 Annexure 3 – Cash Flow Statement ..................................................................... 14 14.4 Useful Project Management Tips ......................................................................... 15

14.5 Useful Links ............................................................................................................. 16 15. KEY ASSUMPTIONS....................................................................................................... 17


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1. DISCLAIMER

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

idea and information on the said matter. Although, the material included in this

document is based 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 taken 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 carry out 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

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 entrepreneurs

in 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, and

production, marketing, finance and business management.

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

Decorating Services by 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 such

reports 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 it’s successful management.

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

provided later on, which form 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 has

been a successful 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 Minister’s ‘Small Business Loans Scheme’, 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 through National Bank of

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

Small business loans with tenure upto 7 years, 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 medium

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

etc.

Product(s) 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 150 events per year and initial utilization upto 67 %

Total Cost Estimates is Rs.2,104,000 with fixed investment of Rs. 1,369,000 and

working capital of Rs. 735,000.

Given the cost assumptions IRR and payback are 39 % and 3 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 medium 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 08 people. Financial analysis shows 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 Food

In depth Management

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 100 events will be catered

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

serve up to 1000 or more guests per event. Marquee and other decorative arrangement

for big events can be outsourced to multiple Decorators.

Events No. of Events in a Year %

Weddings 30 30 Mehndi & Mayun 30 30

Anniversaries 10 10 Corporate 07 07

Others 23 23 Total 100 100


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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 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 accessory 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 Minister’s Small Business

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

analysis are outlined in this section.


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

attached as appendix

12.1 Project Economics All the figures in this financial model have been calculated for catering of 100 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 through such events are

based on given assumptions are calculated to be Rs. 19.2 million.

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

Period.

Table 1 - Project Economics

Description Details

Internal Rate of Return (IRR) 39%

Payback Period (yrs) 3.0

Net Present Value (NPV) 3,843,234

Returns on the scheme and its profitability are highly dependent on regular occurrence

of such events, good marketing practices, quality of services and more importantly good

quality and taste of food served.

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

loan;

Description Details

Total Equity (10%) Rs.210,400

Bank Loan (90%.) Rs.1,893,600

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

Tenure of the Loan (Years) 07

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

Table 1: Capital Investment for the Project

Capital Investment Amount (Rs.)

Construction & Renovation 105,000


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Machinery & Equipment 165,000

Office Equipment & Furniture 174,000

Advance Rent 150,000 Vehicles 675,000

Preliminary Expenses 100,000

Total Capital Costs 1,369,000

Initial Working Capital 735,000

Total Project Cost 2,104,000

12.4 Space Requirement Space required for Catering & Decoration Service 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 2: Space Requirement

Area Required No. Monthly Rent Charges (Rs.)

Yearly Rent(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 Catering Services.

Table 3: List of Machinery and Equipment

Description Cost

Rs/unit Total Rs.

Burners / fittings / Others 40,000 40,000 Daigs / Kadhai / Others 20,000 20,000

Storage Racks 15,000 15,000 Deep Freezers 60,000 60,000

Other Kitchen Utensils 30,000 30,000 Total 165,000


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Table 4: Office Equipment & Furniture Costs

Quantity Cost Amount

Computer & UPS 1 50,000 50,000

Printer 1 15,000 15,000

Tables 2 8,000 16,000

Chairs 6 3,000 18,000

Sofa Set 1 20,000 20,000

Split AC 1 45,000 45,000

Others 1 10,000 10,000

Total 174,000

12.6 Human Resource Requirement

Table 5: Human Resource Requirement

Description Nos. Salary per month Total

Owner 1 25,000 25,000

Head Cook 1 20,000 20,000

Cooks / Karigars 2 15,000 30,000

Helpers 4 10,000 40,000

Driver 1 10,000 10,000

Total Staff 9 125,000 The table above provides details of human resource 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 100 events/year with an average of 400

guests will be organized. The Standard Menu will be of two items only.


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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 192,000

Total Sales Revenue in a Year 19,200,000

12.8 Other Costs An essential cost to be borne by the business is the promotional expense to attract

more clients. Average monthly expenditure in this head is assumed to be Rs. 20,000.

13. CONTACTS - SUPPLIERS KITCHEN 'N' RESTAURANT SYSTEMS

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

Phone: 9242-36366590 / 36305989

Fax: 9242-36305989

KITCHEN CARE

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

Phone: 9251-32875226

Fax: 9251-32277176

PRESTIGE KITCHENS

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

Phone: 9221-35862978 / 35862839

Fax: 9221-5871814

KITCHEN EQUIPMENTS

Syed Qaiser Imam

554 Buffer Zone, Karachi

Phone: 03333045358


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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

14.4 Useful Project Management Tips

Technology

List of Equipment

Burners / fittings / Others Daigs / Kadhai / Others

Storage Racks Deep Freezers

Other Kitchen Utensils

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

alternate source of energy for critical operations be arranged in advance

Equipment Suppliers: Should be asked for training/orientation and after sales

services under the 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 improves 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 through

banners and launch events is highly recommended. Brochures from good quality

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

Sales & Distribution Network: Expert's advise and distribution agreements are

required.

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

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

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

before price setting. Government controlled prices shall be displayed.

Human Resources

Owner

Head Cook

Cooks / Karigars

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 Minister’s Office

www.pmo.gov.pk

Small & Medium Enterprises Development Authority (SMEDA)

www.smeda.org.pk

National Bank of Pakistan (SBP)

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


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www.sindh.gov.pk

Government of Khyber Pakhtoonkhwa

www.khyberpakhtunkhwa.gov.pk

Government of Balochistan

www.balochistan.gov.pk

Government of Gilgit Baltistan

www.gilgitbaltistan.gov.pk

Government of Azad Jamu Kashmir

www.ajk.gov.pk

Trade Development Authority of Pakistan (TDAP)

www.tdap.gov.pk

Security 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

Pakistan Institute of Fashion Design(PIFD)

www.pifd.edu.pk

Pakistan Fashion Design Council (PFDC)

www.pfdc.org

15. KEY ASSUMPTIONS


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Description

Debt Equity Ratio 90:10

Interest Rate 8%

Loan Tenure 7 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

Business

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