Matakuliah
Tahun
: V0246 - Operasional Tata Hidang 1
: 2009-2010
Financing And Leasing & Legal And Tax Matters
Pertemuan: 4
FINANCING & LEASING - LEGAL & TAX MATTERS
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FINANCING & LEASING
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SUFFICIENT CAPITAL
• Many would-be restaurateurs try to start
restaurants with only a few thousand dollars in
capital. Such ventures usually fail.
• Lack of finance and working capital is a close
second to lack of management when it comes to
reasons for restaurant failure.
• Working capital is the standby amount of cash to
open the restaurant & get through possibly several
unprofitable months of operation.
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THREE IMPORTANT FINANCIAL QUESTIONS TO ASK IN THE FIRST PLACE:
1. How much money do you have?
2. How much money will you need to
get the restaurant up and running?
3. How much money will it take to stay
in business?
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WHERE DOES ONE GET THE MONEY FOR A
RESTAURANT?
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LOAN SOURCES
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The local bank.
The local savings & loan association.
Friends, relatives, silent partners & syndicates.
Limited partnerships.
Small Business Administrations (SBA).
Small Business Investment Companies (SBICs).
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TYPES OF LOANS
• Loans are made for varying periods of time:
– A term loan is repaid in installments, usually over a
period longer than 1 year.
– Intermediate loans are made for up to 5 years.
– Single-use real estate loans typically run less than 20
years.
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BUDGETING
• The purpose of budgeting is to “do the numbers” & more accurately
forecast if the restaurant will be viable.
• Sales must cover all costs, including interest on loans, & allow for
reasonable profit, greater than if the money were successfully invested
in stocks, bonds, or real estate.
• Financial lenders require budget forecasts as a part of the overall
business plan.
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PROJECTING SALES & OPERATIONAL COSTS
Seven basic categories are used:
1.
2.
3.
4.
5.
6.
7.
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Sales
Cost of sales
Gross profit
Budgeted costs
Labor costs
Operating costs
Fixed costs
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FORECASTING SALES
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Sales forecasting for a restaurant is, at best, calculated guesswork.
Many factors beyond the control of the restaurant, such as unexpected economic factors & weather
affect sales.
Without a fairly accurate forecast of sales, it is impossible to predict the success or failure of the
restaurant because all expenses, fixed & variable, are dependent on sales for payment.
Sales volume has two components: the average guest check and guest counts.
The average guest check is the total sales divided by the number of guests.
The totals from each of the accounting periods add up to a yearly total sales forecast.
The sales forecast for the first few months should consider the facts that it takes time for people to
realize that the restaurant is open and that a large number of people are usually attracted to a new
restaurant.
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BUDGETING COSTS
Two main cost categories:
1. Variable:
• Change proportionately according to sales.
– Food and beverage costs
2. Fixed:
• Unaffected by changes in sales volume.
– Real estate taxes, depreciation, insurance
premiums
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PRE-OPENING EXPENSES
• Such costs are pre-opening offices; the initial purchase of all equipment, including
china, cutlery, & glassware; the hiring & training of personnel; & pre-opening
advertising costs are encountered.
• Fixed Costs (if restaurant building is owned)
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Depreciation
Insurance
Property taxes
Debt service
• Variable costs change in direct proportion to the level of sales: food, beverage,
labor, heat, light, power, telephone & other supply costs.
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INCOME STATEMENT
• Provides information to management & owners about the financial
performance of the restaurant over a given period of time.
• Allows for analysis & comparison of sales & costs.
• Shows income after expenses have been deducted (net income or loss).
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GROSS PROFIT
• Money left from sales after subtracting the cost
of sales.
• Must provide for all other operating costs &
still leave enough dollars for a satisfactory
profit.
• If gross profit is insufficient the business must
be redone.
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INCOME STATEMENT POINTS EXAMPLE
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I. Sales
A. Food
B. Beverage
C. Other
Total Sales
II. Cost of Sales
A. Food
B. Beverage
C. Others
Total Cost of Sales
III. Gross Profit
A. Other Income
Total Income
IV. Controllable Expenses
A. Salaries and Wages
B. Operating Expenses, etc
Total Controllable Expenses
Rent, interest, depreciation, etc
V. Net Income Before Taxes
A. Income Taxes
Net Income
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UNIFORM SYSTEM OF ACCOUNTS FOR RESTAURANTS
(USAR)
• Outlines uniform classifications & presentations
of operating results.
• Allows for easier comparisons to foodservice
industry statistics.
• Provides a turnkey accounting system.
• Is a time-tested system.
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BALANCE SHEET
• Used to determine a sole proprietor’s or company’s worth.
• Lists all assets & liabilities.
• Must always balance:
• Assets = Liabilities + Net Worth
• Snapshot of the restaurant financial standing at a given moment
in time.
• Usually at the end of a financial period or fiscal year.
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SAMPLE BALANCE SHEET
Current Assets
Cash, Accounts Receivable, Allowances, Inventories, etc
Prepaid Expenses
Total Current Assets
Fixed Assets
Land, Buildings, Furniture, etc.
Deferred Expenses
Other Assets
TOTAL ASSETS
Liabilities and Net Worth
Current Liabilities
Accounts Payable, Accrued Expenses, Deposits, Income Taxes, etc.
Current Portion of Long-Term Debt
Total Current Liabilities
Long-term debt, deferred taxes, etc
TOTAL LIABILITIES
Net
Worth (for individual proprietor)
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TOTAL LIABILITIES & CAPITAL
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PRODUCTIVITY ANALYSIS &
COST CONTROL
• Various measures of productivity have been developed:
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Meals produced per employee per day.
Meals produced per employee per hour.
Guests served per wait person per shift.
Labor costs per meal based on sales.
• The simplest employee productivity measure is sales generated per employee per
year.
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SEAT TURNOVER
• Number of times a seat turns over in an hour.
• Some consider it to be the most critical number in
operation.
• Goal rates vary from as high as seven an hour to less than
one an hour, depending on the type of establishment:
– The rapid-turnover style of restaurant generally has a low check
average, which produces high sales volume.
– The fast-turnover restaurant features rapid-production menu
items—those that are already prepared or those that can be
prepared quickly.
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STOCKPILING CREDIT
1. A personal financial statement:
a. Education and work history
b. Credit references
c. Copies of federal income tax statements for the previous 3 years
d. Financial statement listing assets and liabilities & life insurance
2. If in business:
a. Business history
b. Current balance sheet
c. Current profit-and-loss statement
d. Cash flow statement for last year
e. Copies of federal income tax returns for past 3 to 5 years
f. Life and casualty insurance in force
g. Lease
h. Liquor license
i. Health department permit
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COLLATERAL
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Collateral is:
– Security for the lender.
– Personal property or other possessions the borrower assigns to the lender as a
pledge of debt repayment.
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If debt is not repaid, the lender becomes owner of the collateral.
Character of the applicant is the most important type of collateral.
Collateral accepted by banks:
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Real estate
Stocks & bonds
Chattel mortgages
Life insurance
Assignment of lease
Savings account
Endorsers/Co-makers/Guarantors
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LEASING
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Restaurant buildings & equipment are more likely to be leased than
purchased by the beginner because less capital is required for leasing
than for building or buying.
The signer is obligated to pay for the entire lease period.
A restaurant lease should be good for both parties—the landlord
(lessor) and the tenant (lessee).
Beginners should try for a 5 year lease with an option to renew for
several additional 5 year periods.
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LEASING CHARACTERISTIC
• Leases generally, depending on location, approximate 5 to
8% of sales, but can go as high as 12%.
• Lease costs are calculated on a square-foot basis, with
charges ranging from $2 to $50 per square foot per month,
depending on the location.
• In making a lease, both parties should consult a lawyer
versed in real estate terminology to avoid
misunderstandings.
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RESTAURANT WORTH
1.
2 Potential Values:
Real estate value.
• Usually determined by competitive values in the community.
• Market value of real estate tends to follow the value set by similar properties in
the area.
2.
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Value as a profit generator.
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LEGAL & TAX MATTERS
• What business entity is the best?
• Buy-sell agreements.
• Legal aspects of doing business.
• Depreciation & cash flow.
• Retirement tax shelters.
• Business expenses & taxes.
• Local, state & federal taxes.
• Federal Laws.
• Legal aspects of contract services.
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BUSINESS ENTITY
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Types of entities:
– Sole proprietorship
– Partnership
– Corporation
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Under the law, all businesses are operated as
proprietorships, partnerships, or corporations.
Business ventures have a choice of these entities, each
with different tax consequences, advantages &
disadvantages.
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Federal income taxes.
Liability to creditors & other
persons.
The legal and/or personal
relationships among the
owners.
Legal life and/or transferal of
the business entity.
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SOLE PROPRIETORSHIP
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Individual Ownerships.
As sole proprietor, the restaurant operator
does not draw a salary for federal income tax
purposes.
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He or she reports as income the profit for the year
or deducts, as an expense, any loss for the year.
For tax purposes, the proprietor is not an
employee; however, his or her income is
subject to self-employment tax.
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Advantages:
• It is simple.
• Reasonable salary .
• Funds can be withdrawn without any tax
consequences.
• Business can be discontinued or sold with
minimal tax consequences.
Disadvantages:
• The owner cannot be a participant in the
company’s qualified pension and/or profit
sharing plans.
• The owner is liable for every aspect of the
business including debts.
• No legal existence apart from the owner or
owners.
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PARTNERSHIP
• Any venture where 2 or more
persons endeavor to make a
profit.
• General partnerships: Complete
liability but full management
rights.
• Limited partnerships: Share
limited liability with no services
performed.
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Advantages:
• Can be quite flexible.
• No double taxation.
• Choice of limited or general partnership.
• Allows flexibility.
Disadvantages:
• Same problems of legal liability as the sole
proprietorship.
• Ability of a partner to create debts for the partnership.
• In bad times partners always see the other as at fault.
• Difficult to divide assets if business fails.
• Can be expected to dissolve eventually.
• Death, disagreement and/or ill health can make
perfection into a nightmare!
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CORPORATION
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A legal entity similar to a person, in that it can
borrow, buy, conduct business & must pay state &
federal taxes on profits.
Deciding whether to incorporate can often depend
on the amount of insurance coverage available.
– If insurance coverage is available, a
restaurant may decide not to incorporate
because the insurance will cover & limit the
sole proprietor’s liability, which might
otherwise cause financial ruin in the event of
a mishap or lawsuit.
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Advantages:
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Disadvantages:
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Limited liability.
Ease of availability and affordability of insurance
through group plans.
Corporate fringe benefits are available.
Can sell and distribute stock.
Investor friendly.
Double taxation.
Takes a lot of money to set up.
Usually requires legal and accounting advice, which
can be costly.
Can lose control if too much stock is distributed.
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BUY–SELL AGREEMENT WITH PARTNERS
• In the sale of a business, a buy-sell agreement preserves
continuity of ownership in the business.
• A buy-sell agreement is made up of several legal clauses in a
business that can control the following business decisions:
– Who can buy a departing partner's or shareholder's
share of the business.
– What events will trigger a buyout.
– What price will be paid for a partner's share.
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LEGAL ASPECTS OF DOING BUSINESS
Steps required to start a business (USA based)
I.
Form a business entity.
II.
Identify necessary permits and licenses.
III.
Identify local restrictions on proposed business licenses.
IV.
Obtain environmental or similar permit as needed.
V.
Obtain state sales tax permit.
VI.
Determine applicability of employer registrations.
VII.
Get insurance.
VIII.
Comply with relevant statutes and regulations with respect to employee’s wages.
IX.
Fulfill occupational and health requirements.
X.
Assess applicability of other antidiscrimination laws.
XI.
Check for eligibility for government assistance.
XII.
File fictitious business name.
XIII.
Assure meeting posting requirements.
XIV.
Obtain and return tax return filings.
XV.
Learn reporting and notice procedure in event of employee injury.
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DEPRECIATION & CASH FLOW
• As a business generates income & pays immediate expenses,
including taxes, the money left over is not all profit.
• In a restaurant, the building, kitchen equipment, dining room
equipment & furnishings depreciate year after year, until finally
they have no value or only a salvage value.
• Theoretically, money is set aside for replacing these items—a
depreciation allowance.
• Actually, this money is seldom set aside and very often the
building, instead of depreciating in value, appreciates.
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ACCELERATED OR STRAIGHT-LINE DEPRECIATION
• Accelerated:
• Allow greater depreciation during the early life of a
building or equipment, less depreciation later.
• Results in lower taxes during early years of
business, when funds are tight.
• Straight-line:
• Assumes a fixed life for an item.
• Divides cost of item by expected life to arrive at
depreciation allowance.
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LOCAL, STATE & FEDERAL TAXES
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One of the most onerous of the operator’s tasks is keeping records and
submitting tax reports.
The operator not only pays taxes as required on restaurant sales but
also is responsible for collecting and paying taxes to the city, state &
federal governments.
Workers’ compensation insurance is federally mandated but
administered by the states.
Every business with at least 1 employee in addition to the owner, must
register with the IRS, acquire an employer identification number &
withhold federal payroll taxes from employees’ pay.
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EMPLOYEE INFORMATION
Operators must keep employee records that include:
1. Full name
2. Home address
3. Date of birth, if under 19
4. Sex and occupation
5. Emergency contact
6. Time and day workweek begins
7. Hourly rate of pay
8. Daily and weekly straight-time earnings
9. Total daily or weekly straight-time earnings
10. Total overtime excess compensation
11. Total additions to or deductions from wages
12. Total wages paid each period
13. Date of payment and pay period covered
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LEGAL ASPECTS OF CONTRACT SERVICES
• Restaurant operators often contract out services such as air-conditioning repairs,
maintenance, janitorial services, & pest control.
• Independent contractors have proved popular because they are skilled in their
field & the restaurant operator avoids the liabilities for unemployment insurance,
workers’ compensation, wrongful discharge, injuries to third parties & other
claims.
• To ensure that the tax authorities also view independent contractors as indeed
independent and not employees, the operator should have a written agreement
with the contractor that specifies the nature & duration of the work to be done.
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COMPLICATIONS IN DISCHARGING EMPLOYEES
• In the absence of a contract, managers used
to have the power to fire employees at will
for good cause, bad cause, or no cause.
• Today, firing decisions are restricted by a
maze of often overlapping statutes and
executive orders.
• There are a number of laws in effect that
protect employees from wrongful
discharge.
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SELLING LIQUOR
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Alcoholic Beverage Commission (ABC) regulates the selling of alcohol.
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Hours of sale of beverages, food-bar ratio of sales, etc.
Selling alcohol is regarded as a privilege, not a right.
State laws vary as to age at which liquor can be purchased.
It is the seller’s responsibility to sell to those legally entitled to buy.
Indonesia law & regulation:
Name: Surat Izin Usaha Perdagangan Minuman Beralkohol (SIUP Minol) atau
(SIUP MB)
Issued by: Ministry of Trade and Industry
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Have a nice day…
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