Katarina Bakery

8/7/2019 Katarina Bakery

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13

7.5

Projecte

d



Katarina Bakery

1.0 Executive Summary

Katarina Bakery is a new organic bakery specializing in gluten, wheat and dairy free

products. Within the last three years there has been significant increases in demand for these

bakery products. This can be explained to a large degree by the fact that up until recently

lots of people have had food allergies that have been undiagnosed. It has been only in the lastfew years that medical doctors have begun to diagnosis food allergies correctly. What was

once an unknown problem that affected so many people with no recourse has become a

manageable ailment that is easily dealt with through modification of diets. This is very positive

for both those people that are affected as well as bakeries such as Katarina that specialize

in these products.

The Products

Katarina offers a wide range of exciting products. The first group is spelt breads, muffins,

and pastries. Spelt is used as there are far fewer people that are allergic to this grain. Yeast

allergies are also common and Katarina offers a menu of yeast free breads. Dairy free

muffins and pastries are offered for vegans. Lastly, egg free breads, muffins, and pastries are

offered.

Customers

Katarina will focus on three distinct customer segments. The first group is the Allergy

group. This segment is growing at 15% a year with 32,000 potential customers. The second

niche is the Doctor group. This segment is also growing at 15% with 14,200 potential people.

The last group is the Dieters group. This segment is typically making modifications to their diet

based on their desire to lose weight. This niche also is growing at 15% with 48,000 possible

customers.

Management Team

Recognizing the importance of human capital, Katarina has assembled a strongmanagement team. The team is led by Anna David. Anna comes to Katarina with 10

years of banking experience. In addition to her industry specific experience, Anna has had 2

years of management experience. Laura Thomas brings financial skills to Katarina after a

15 year CPA career. Beatrice Chonjo will lead the marketing efforts having participated in her

own PR firm. Lastly, Enna Chonjo will be on the team as an assistant baker with over five

years of experience.

Katarina is an exciting opportunity that combines, fresh baked goods with spelt, yeast free,

dairy free, and egg free products, addressing the recent need for these new products. Demand

for these products is expected to grow exponentially as medical doctors become more and

more aware of food allergies the population is afflicted with. Profitability is forecasted to occur by

month three. Profits of $806 and $47,000 will be generated in years one and three

respectively. Through a combination of a strong management team, a solid business model,and exciting, market demanded products will allow Katarina to quickly gain market

penetration and cash richness.

Page 1



Katarina Bakery

Highlights

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$02010/ 2011 2013

1.1 Objectives

1. To establish a working storefront for Katarina bakery.

2.

3.

1.2 Mission



Katarina Bakery

2.1 Company Ownership

Currently Katarina Bakery is a sole proprietorship owned by Catherine Chonjo. Eventually, as

the company becomes established, Katarina Bakery will apply to be incorporated.

2.2 Start-up Summary

The primary expense to establish the Katarina Bakery is the mortgage loan estimated at

$175,000 to purchase the vacant space on Julius Nyerere street. The building was previously

used as a bakery and we plan to buy the used equipment along with the space. This cost is

also calculated into the loan estimate. Catherine Chonjo intends to invest $7,500 of her savings t

cover the other cost of start-up.

These costs include:

•

••

•



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an

ce.

Ba

ke

ry

ac

cess

ori

es,i.e

.

pa

pe

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gs,

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ns,

etc

.

Start-up

$200,000

$180

,000

$160

,000

$140

,000

$120

,000

$100

,000

$80,0

00

$60,0

00

$40,0

00

$20,0

00

$0

Expenses Assets

Investment Loans



Katarina Bakery

Table: Start-up

Start-up

Requirements

Start-up Expenses

LegalStationery etc.BrochuresConsultantsInsuranceMortgageResearch and developmentBakery IngredientsOther Total Start-up Expenses

Start-up Assets Needed

Cash Balance on Starting DateOther Current AssetsTotal Current Assets

Long-term AssetsTotal AssetsTotal Requirements

Funding

Investment

UntitledDonna SharpOther Total Investment

Current Liabilities

Accounts PayableCurrent BorrowingOther Current Liabilities

Current Liabilities

Long-term Liabilities

Total Liabilities

Loss at Start-up

Total CapitalTotal Capital and Liabilities

3.0 Products



,500

$0$7,500

$0$7,500

$0$0

$12,000$12,000

$173,000$185,000

($5,408)

Katarina Bakery provides non-gluten baked goods and pastries to diet-conscious and

wheat-allergic consumers. Special considerations are made for all common food allergies such

as dairy, yeast, wheat, and eggs.

Example of goods:

Spelt breads, muffins and pastries

Spelt flour is the most common wheat-alternative flour as it has the same characteristics as

wheat which provides similar taste, consistency and behaviors creating goods that are just as

good as any wheat baked good.

Yeast-free breads

Many people have an allergy to yeast, or have been warned by their doctors not to eat it. We

provide a line of yeast-free breads.

Page 4



Katarina Bakery

Dairy-free muffins and pastries

Most breads do not require any dairy products, so they are not a consideration. Muffins and

pastries most often require butter. To avoid this, we use a soy substitute.

Egg-free breads, muffins and pastries

Eggs are most common in muffins and pastries. Applesauce can be used as a substitute as it

provides the same amount of moisture that is required.

4.0 Market Analysis Summary

Our target market includes people who are health conscious and/or have common food

allergies. This is a niche market since most bakeries do not cater to these needs with the

exception of high-fiber diets.

4.1 Market Segmentation

Our target market consists of three groups:

The Allergy GroupAccording to Health Magazine, one out of five people suffer from a common food allergy,

however many bakeries do not cater to their needs.

The Doctor Diet GroupFor health reasons, many people are warned off certain foods by their doctors because of high

cholesterol and blood pressure. Many people aged 50+ are going on special diets to

prevent heart disease.

The Diet Craze Group

According to Self Magazine, the year 2000 saw 20 new diet fads that discouraged certain foodssuch as wheat and dairy. The bestselling book on the New York Time list for health was the "

Blood Type Diet " which encourages readers to eat only non-gluten flours such as spelt, and to

avoid dairy. While this target market is quite large, it is ever fluctuating since most people who

diet yo-yo between different diets (Self Magazine September 2000).

Page 5



Katarina Bakery

Market Analysis (Pie)

The Allergy Group

The Doctor Group

The Dieters Group

Table: Market Analysis

Market AnalysisPotential CustomersThe Allergy GroupThe Doctor GroupThe Dieters GroupTotal

Growth15%15%15%

15.00%

201032,00019,20048,00099,200

201136,80022,08055,200

114,080



4.2 Target Market Segment Strategy

In our target market, we will mainly focus on the "allergy group" since they are the most

prevalent and steady of customers. We expect that the "doctor diet group" and the '"diet

craze" group will make up a smaller portion of our customers. We have not listed "regular

customers" as a target group since the customers who do not fit into any of our groups are too

varied to segment. We are specifically filling the needs of the "allergy group" so we expect the

most business from this group.

4.3 Industry Analysis

Katarina bakery competes in the Food Services Industry. In addition to competing with

other organic and non-wheat bakeries, it competes with all restaurants, delis, bakeries and

supermarkets for a share of its customers' food dollar. Katarina is most concerned with

competitors who differentiate their products and services with a healthy, organic focus.

Because this group is so large, Katarina has chosen to limit its analysis to other gluten-free

bakeries.

Page 6



Katarina Bakery

4.3.1 Competition and Buying Patterns

Currently there are two bakeries in town that provide non-wheat goods.

Great Harvest Bread Company

Strengths: Makes spelt bread, muffins and cookies every Monday, Wednesday and Friday. Well-

established bakery in town. Sells breads in local grocery stores.

Weaknesses: Does not provide a wide selection of non-wheat goods. Furthermore the texture

and flavor of their spelt goods is very dense and flavorless. They use whole spelt bread which

makes a denser, crumby consistency bread. We use white spelt in our spelt breads and other

goods which has a texture and flavor similar to wheat.

The Sweet Life Patisserie

Strengths: Makes spelt bread, muffins and brownies every day. Will make custom-ordered non-

gluten cakes.

Weaknesses: Does not produce a wide selection or large quantity of non-wheat goods. Their

main focus is wheat goods.

5.0 Strategy and Implementation Summary

Our strategy focuses on serving a niche market with quality goods. We are determined to

become a part of the community—an establishment that becomes as much of the community

as a church or local grocery store. To achieve these goals, we will provide the following:

• Friendly, neighborhood-feel atmosphere.

• Quality baked goods for everyone to enjoy at a fair price.• Special diet menus in relation to the advice of local healthcare providers.

5.1 Competitive Edge

Our competitive edge is our quality of goods. We use only organic flours of the highest quality

that create incredible non-gluten goods that can't be matched anywhere else in town. We also

focus mainly on non-gluten goods. The other bakeries in town focus on wheat goods and

sometimes, as an afterthought, use alternative flours.

Page 7



Katarina Bakery

5.2 Sales Strategy

Our strategy focuses on building a customer base by providing good customer experience.

With the addition of the coffee bar and lunch menu, we hope to have customers

make the bakery their one-stop destination for breakfast or lunch. When we

open the outdoor patio, more and more customers will make the bakery a destination for theirlunches more often since the atmosphere will be so pleasing.

We would also like to work closely with local doctors and elder care homes to bring in

customers with health problems. We are already in negotiations with Dr. Good's office to

insure referrals to the bakery for his patients.

5.2.1 Sales Forecast

Our sales forecast assumes the following changes:

• Bread sales in the summer months will be slightly higher since more people will behaving BBQs and picnics requiring items such as hamburger and hotdog buns.

• Bread and pastry sales will be higher in November and December because of the food-

oriented holidays.

• Coffee sales will be higher in winter months, and for summer months sales of sodas

and iced beverages will increase.

Sales Monthly

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$0



es

Lunch Items (Soups & Sandwiches)

Pastries/Sweets

Page 8



Katarina Bakery

Table: Sales Forecast

Sales ForecastSalesBreadsCoffee/BeveragesLunch Items (Soups & Sandwiches)

Pastries/SweetsTotal Sales

Direct Cost of Sales

BreadsCoffee/BeveragesLunch Items (Soups & Sandwiches)Pastries/SweetsSubtotal Direct Cost of Sales

5.3 Milestones

2010$75,900$36,400$80,000

$59,400$251,700

2010

$22,770$10,920$32,000$23,760$89,450



The table below displays the milestones that Katarina Bakery would like to accomplish in

the first three years. Emphasis in the first year will be on advertising to make the Katarina

Bakery an established business in town.

Table: Milestones

MilestonesMilestoneFirst Advertising Campaign

Full-Service Coffee Bar

IntegrationEstablishing a Lunch Menu

Outdoor Cafe SeatingTotals

6.0 Management Summary

Start Date12/1/11

2/1/12

3/1/12

5/1/12

End Date3/1/12

02/29/12

3/30/12

9/30/12



Department

Catherine Chonjo is the founder of Katarina Bakery. She brings to the bakery her experience as

an entrepreneur. As a teenager she helped her parents

at the family's general store, both in sales and marketing. For her last two years at her

family's store, she was the general employee manager. Her duties at the bakery will include

employee hiring and training, head baker and store management.

Anna David has run her own successful CPA consulting firm for 15 years. Her duties will

include the bookkeeping, inventory management and stock fulfillment.

Beatrice Chonjo runs her own PR company and will be assisting the Katarina Bakery in its

marketing campaigns on a part-time basis.

Laura Thomas has worked as a baker for over five years and will be the assistant baker. Herresponsibilities will also include the management of the bakery shopping list.

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Katarina Bakery

6.1 Personnel Plan

Once the bakery becomes established and the cash flow is steady, we would like to hire one

person for counter help and another assistant baker.

The table below illustrates the needs of the current employees, plus the integration of twomore employees within three months of operation. The new hiring's will coincide with the

opening of a lunch menu and coffee bar which will most certainly require more help.

Table: Personnel

Personnel Plan2010

Catherine Chonjo - Head Baker $24,000Anna David $21,000Beatrice Chonjo - Part-time $9,000Counter Help - Full Time $18,000Assistant Baker - Part time $9,000Laura Thomas - Bookkeeper $24,000

Total People 6Total Payroll $105,000

7.0 Financial Plan

2011$26,400$23,100

$9,900$19,800

$9,900$26,400

6$115,500

The following sections will outline important financial assumptions.



7.1 Important Assumptions

The current economic climate appears to be breaking out of the recession. However, we

do not believe that if the country does enter a recession again that our business will be undulyaffected. Since our products are ones that help contribute to and maintain good health, we

believe that people will continue to buy our products over traditional wheat bread. We are

operating in a niche market, and in addition, the price of our breads and sweets although

slightly higher than traditional bakeries they are not positioned as expensive, luxury items.

Table: General Assumptions

General Assumptions2010

Plan Month 1Current Interest Rate 9.00%Long-term Interest Rate 8.50%Tax Rate 25.00%Other 0.00%Calculated TotalsPayroll Expense $105,000New Accounts Payable $234,422

20112

9.00%8.50%

25.00%0.00%

$115,500

$280,168



Katarina Bakery

7.2 Break-even Analysis

Our Break-Even Analysis assumes that our average per-unit revenue is $3.00. Our lowest

price for any good would be $0.75 (cookies) and our highest would be $5.50 (sandwiches), so

$3.00 is a fair estimate of the average per-unit revenue.

The running costs of production are fairly low since we manufacture all of our goods at a low

cost to us. Here are the items included in the average per-unit variable cost:

•

•

••

•



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an

d

bu

tte

r.

Pa

yr

oll.

Mortg

ag

e.Uti

liti

es.

The Break-Even Analysis as it appears below indicates that the break-even point will be

attainable each month.

Break-even Analysis

$15,000

$10,000

$5,000

$0

($5,000)

($10,000)

($15,000)

$0 $6,000 $11,000

Monthly break-even point

Break-even point = where line intersects with 0

Table: Break-even Analysis

Break-even Analysis:Monthly Units Break-evenMonthly Revenue Break-even

Assumptions:

Average Per-Unit RevenueAverage Per-Unit Variable CostEstimated Monthly Fixed Cost



Page 11



Katarina Bakery

7.3 Projected Profit and Loss

The following table shows the projected profit and loss for Katarina Bakery.Table: Profit and Loss

Pro Forma Profit and Loss

2010Sales $251,700Direct Costs of Goods $89,450Production Payroll $0Other $0

------------Cost of Goods Sold $89,450Gross Margin $162,250Gross Margin % 64.46%Expenses:Payroll $105,000Sales and Marketing and Other Expenses $13,040Depreciation $3,492Utilities $519Insurance $1,800Mortgage $10,800

Payroll Taxes $12,600Other $0

------------Total Operating Expenses $147,251Profit Before Interest and Taxes $14,999Interest Expense $13,924Taxes Incurred $269Net Profit $806Net Profit/Sales 0.32%Include Negative Taxes TRUE TRUE

2011$324,000$115,200

$0$0

------------$115,200$208,800

64.44%

$115,500

$14,640$3,492

$600$2,400

$15,096

$13,860$0

------------$165,588

$43,212$13,249

$7,491$22,472

6.94%TRUE



7,050

$16,640$3,492

$800$2,800

$15,096$15,246

$0------------$181,124

$76,876$13,219$15,914$47,74311.94%

Page 12



Katarina Bakery

7.4 Projected Cash Flow

The following chart illustrates a healthy cash balance for the first three years, enabling the

company to grow through reinvestment.

Cash

$12,000

$10,000

$8,000

$6,000

$4,000

Net Cash Flow$2,000

Cash Balance$0

($2,000)

($4,000)

($6,000)

($8,000)

Jan Feb Mar Apr May Jun



Page 13



Katarina Bakery

7.5 Projected Balance Sheet

The following table represents the financial position of the Katarina Bakery at the end of

each of the three upcoming fiscal years.Table: Balance Sheet

Pro Forma Balance Sheet

Assets

Current AssetsCashOther Current AssetsTotal Current AssetsLong-term AssetsLong-term AssetsAccumulated DepreciationTotal Long-term AssetsTotal Assets

Liabilities and Capital

Accounts Payable

Current BorrowingOther Current LiabilitiesSubtotal Current Liabilities


Total Liabilities

Paid-in Capital

Retained EarningsEarningsTotal CapitalTotal Liabilities and CapitalNet Worth

2010$11,967

$0$11,967

$175,000

$3,492$171,508$183,475

2002$11,825

($12,000)$12,000$11,825

$168,752

$180,577

$7,500

($5,408)$806

$2,898$183,475

$2,898



Appendix

Appendix Table: Sales Forecast

Sales Forecast

SalesBreadsCoffee/BeveragesLunch Items (Soups & Sandwiches)Pastries/SweetsTotal Sales

Direct Cost of Sales

BreadsCoffee/BeveragesLunch Items (Soups & Sandwiches)

Pastries/SweetsSubtotal Direct Cost of Sales

Jan$3,000

$0$0

$2,000$5,000

Jan

$900$0$0

$800$1,700

Feb$4,800$3,500

$0$4,600

$12,900

Feb

$1,440$1,050

$0

$1,840$4,330

Mar $6,000$3,500$8,000$5,000

$22,500

Mar

$1,800$1,050$3,200

$2,000$8,050

Apr $6,000$3,000$8,000$5,000

$22,000

Apr

$1,800$900

$3,200

$2,000$7,900



Appendix

Appendix Table: Personnel

Personnel Plan

JanDonna Sharp - Head Baker $2,000Lucy Hamilton $1,750Tara Juniper-Reid - Part-time $750Counter Help - Full Time $1,500Assistant Baker - Part time $750Donovan Hamilton - Bookkeeper $2,000Total People 6Total Payroll $8,750

Feb$2,000$1,750

$750$1,500

$750$2,000

6$8,750

Mar $2,000$1,750

$750$1,500

$750$2,000

6$8,750

Apr $2,000$1,750

$750$1,500

$750$2,000

6$8,750



Appendix

Appendix Table: General Assumptions

General Assumptions

JanPlan Month 1Current Interest Rate 9.00%Long-term Interest Rate 8.50%Tax Rate 25.00%Other 0.00%Calculated TotalsPayroll Expense $8,750New Accounts Payable $12,593

Feb2

9.00%8.50%

25.00%0.00%

$8,750

$16,139

Mar 3

9.00%8.50%

25.00%0.00%

$8,750

$20,802

Apr 4

9.00%8.50%

25.00%0.00%

$8,750

$19,837

9.8.

25.0.

$8

$20



Appendix

Appendix Table: Profit and Loss

Pro Forma Profit and Loss

JanSales $5,000Direct Costs of Goods $1,700Production Payroll $0Other $0

------------Cost of Goods Sold $1,700Gross Margin $3,300Gross Margin % 66.00%Expenses:Payroll $8,750

Sales and Marketing and Other Expenses $1,820Depreciation $291Utilities $50Insurance $150Mortgage $900Payroll Taxes 12% $1,050Other $0

------------Total Operating Expenses $13,011Profit Before Interest and Taxes ($9,711)Interest Expense $1,215Taxes Incurred ($2,732)Net Profit ($8,195)Net Profit/Sales -163.90%Include Negative Taxes

Feb$12,900

$4,330$0$0

------------$4,330$8,570

66.43%

$8,750

$1,820$291

$50$150$900

$1,050$0

------------$13,011($4,441)

$1,205($1,412)($4,235)-32.83%

Mar $22,500

$8,050$0$0

------------$8,050

$14,45064.22%

$8,750

$1,820$291

$48$150$900

$1,050$0

------------$13,009

$1,441$1,195

$61$184

0.82%

Apr $22,000

$7,900$0$0

------------$7,900

$14,10064.09%

$8,750

$720$291

$45$150$900

$1,050$0

------------$11,906

$2,194$1,185

$252$756

3.44%



Appendix

Appendix Table: Cash Flow

Pro Forma Cash Flow

Cash Received

Cash from Operations:Cash SalesCash from Receivables

Subtotal Cash from Operations

Additional Cash Received

Non Operating (Other) IncomeSales Tax, VAT, HST/GST Received 0.00%New Current Borrowing

New Other Liabilities (interest-free)New Long-term LiabilitiesSales of Other Current AssetsSales of Long-term AssetsNew Investment Received

Subtotal Cash Received

Expenditures

Expenditures from Operations:Cash SpendingPayment of Accounts Payable

Subtotal Spent on Operations

Additional Cash Spent

Non Operating (Other) ExpenseSales Tax, VAT, HST/GST Paid OutPrincipal Repayment of Current BorrowingOther Liabilities Principal RepaymentLong-term Liabilities Principal Repayment

Purchase Other Current AssetsPurchase Long-term AssetsDividends

Subtotal Cash Spent

Net Cash Flow

Cash Balance

Jan

$5,000$0

$5,000

$0$0$0$0

$0$0$0$0

$5,000

Jan

$310

$9,893$10,203

$0$0

$1,000$0

$354$0

$0$0

$11,557

($6,557)

$5,535

Feb

$12,900$0

$12,900

$0$0$0$0

$0$0$0$0

$12,900

Feb

$704

$12,712$13,416

$0$0

$1,000$0

$354$0

$0$0

$14,770

($1,870)

$3,664

Mar

$22,500$0

$22,500

$0$0$0$0

$0$0$0$0

$22,500

Mar

$1,222

$16,295$17,517

$0$0

$1,000$0

$354$0

$0$0

$18,871

$3,629

$7,293

A

$22,00$

$22,00

$$$$

$$$$

$22,00

A

$1,11

$20,77$21,88

$$

$1,00$

$35$

$$

$23,23

($1,23

$6,05



Appendix

Appendix Table: Balance Sheet

Pro Forma Balance Sheet

Assets

Current AssetsCashOther Current AssetsTotal Current AssetsLong-term AssetsLong-term AssetsAccumulated DepreciationTotal Long-term AssetsTotal Assets

Liabilities and Capital

Accounts Payable

Current BorrowingOther Current LiabilitiesSubtotal Current Liabilities


Total Liabilities

Paid-in Capital

Retained EarningsEarningsTotal CapitalTotal Liabilities and CapitalNet Worth

StartingBalances

$12,092

$0

$12,092

$175,

000

$0

$175,000$187,092

$0 $0

$12,000$12,000

$173,

000

$185,000

$7,

500

($5,408)

$0

$2,092

$187,092

$2,092

Jan$5,535

$0$5,535

$175,000

$291$174,709$180,244

Jan$2,700

($1,000)$12,000$13,700

$172,646

$186,346

$7,500

($5,408)($8,195)($6,103)

$180,244($6,103)

Feb$3,664

$0$3,664

$175,000

$582$174,418$178,082

Feb$6,128

($2,000)$12,000$16,128

$172,292

$188,420

$7,500

($5,408)($12,430)($10,338)$178,082($10,338)

Mar $7,293

$0$7,293

$175,000

$873$174,127$181,420

Mar $10,636($3,000)$12,000$19,636

$171,938

$191,574

$7,500

($5,408)($12,245)($10,153)$181,420($10,153)

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