CAFE B - ASSET MANAGEMENT Caf B has been operating since 2015. It is located within The Regency Plaza (a 12 story, 4 star hotel of 200 rooms) situated on the banks of River Torrens in Adelaide, South Australia. The cafe has 150 seats (both indoor and outdoor seating) and services all meal periods. It competes directly with The Bradman (a pub style outlet and sports bar with a beer garden and barbeque facilities) which is also located within The Regency Plaza hotel. The Cafe finds that on average approximately 60% of business comes from guests staying at The Regency Plaza, while the remainder comes from foot traffic and local customers. On 1 July 2017, Cafe B was established as a single owner private company with an initial investment of $200,000. At this point all assets and liabilities of the Cafe were transferred to the new company and a new loan of $115,000 was taken out to assist in the funding of the Cafe. From this loan, $50,000 was set aside for working capital (Cash at Bank) as a contingency to assist with operational expenses associated with the start up The Cafe works closely with the management structure of the hotel in order to achieve the best results for both businesses. The advantages of this relationship include the ability to promote each business to customers internally, and having increased employee skills and knowledge of multiple departments within the hotel structure and Cafe. Loyalty and motivation assists staff retention rates. The Cafe has a plan to increase patronage by improving the current open-air seating; this area has historically been used as an overflow for the Cafe. Management plan to enclose and refurbish this area and promote it as a Pizza & Beer Garden, in direct competition to the Bradmans beer garden. The key business objectives for the next 3 5 years are: Revenue growth of at least 4% per annum from the next financial year (year 1) ending,in June. Achieve a Net profit before tax of 8% in the next 2 financial years. Achieve a Net Profit before tax of 10% for the following financial years. Allocate $45,000 to partially enclose the Alfresco Dining Area (currently an open-air dining area) with work to be conducted in the next financial year (year 1) Expand the capacity for pizza production through the purchase of a new Impinger oven with a minimum capacity of 60 pizzas per hour. Introduction of an online paperless booking system and iPad POS system by the end of year 2. o This POS system will includethe following features: - paperless iPad POS ordering - paperless Inventory Control Increase owner dividend payments from $30,000 to $35,000 by June of year 3. The Cafe to position itself as an Environmentally Sustainable venue with a Green Table accreditation. Key Operational Requirements: Salaried & full time staff pay to increase with 1.5% CPI annually. Fixed costs not to exceed the annual CPI increase Existing maintenance contract remains in place until June of year 2 and then are able to be renegotiated o Maintenance contract stipulates a 2% annual increase Expenditure on casual staff is expected to be reduced to 15% of sales from year 2 due to increased revenue. Staff will be trained and promoted internally and in conjunction with The Regency Plaza where possible. The following staff are expected to be employed over the next 3 years: End of Year 1 o Active Owner 1 o Employees full time (3) 3 o Employees - part time/casual (4 @ .5 each) 2 o Full time equivalent (FTE) 6 End ofYear 2 o Another part time cook employed primarily to help with the increased pizza sales this will increase the FTE staff members to 6.5 Endof Year 3 o Another casual waiter employed to help with increased sales this will increase the FTE staff members to 7. Suppliers and services will be sourced locally (providing quality and availability is suitable). Refurbishment of Alfresco dining area will include refurbished Decking, installation of new Roofing, Guttering & Lighting as well as weather protection via Plantings and Roller Blinds. It is anticipated to reduce sales by 20% during the month of construction due to noise and reduced seating capacity. Following refurbishments sales are expected to increase by 10% each month. The Impinger oven will replace the Convotherm 6/6 electric combi-steamer oven, currently used for pizza production, to improve product quality and service times. o The Regency Plaza has agreed to purchase this unit from Cafe B for the write-down value current at the time of transfer of ownership The iPad POSsystem is being introduced to help improve customer service quality by reducing staff error rates compared to using a hand written docket system o The system will require the purchase of 2 terminals initially, with the capacity to expand o All FOH staff will be allocated an iPad to use - the ability to upgrade these when new technology becomes available is important o Software fees to be paid monthly All procedures within the Cafe must consider the integration of technology and practices that support environmental sustainability as the owner is aware of the value of promoting the business as an environmentally sustainable venue to the business image and profitability. Taxes & Employee On costs Goods & Services Tax (GST) 10% Being a service industry, all sales have GST applied. Approx. 70% of all expenses (except payroll) are eligible for GST input tax credits Any outstanding balance (GST received GST Paid) is paid based on the previous quarter to the ATO (July, October, February & April) using online BAS. PAYG income tax 30% Estimated based on the company tax rate, 30% of the estimated Net Profit before Tax. This is equally apportioned for each quarterly payment (July, October, February & April) using online BAS PAYG withholding % From Gross Wages calculated on previous quarter expense paid in July, October, February & April using online BAS. Estimated at 8% for Year 1, 9% for Year 2 and11% for Year 3 Thus the remaining % Net Wages is paid directly into employee bank accounts weekly via direct debit Superannuation Guarantee 9.5% Compulsory rate of 9.5% for year ending June 2016 (until year 2021) Paid based on previous quarter expense in July, October, February & April. WorkCover 3% Calculated at the current industry rate (Cafe & Restaurants), 3% of Gross wages & Superannuation expense. Paid based on previous quarter expense in July, October, February & April. 1. Using the Cafe B Scenario and Business Objectives provided (MPA - Cafe B-Scenario and Objectives.docx) youmust research the acquisition of the following assets that have been mandated for purchase, or refurbishment; a. Refurbishment of the Alfresco Dining Area b. Purchase of an Impinger Oven c. Introduction of an online paperless booking system and iPad POS system