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Home My WebLink AboutItem #29 - Discussion Itema, M To. Mr. Sergio Pereira City Manager FROW Miller--J. Dawkins City Commissioner IQ CITY OF MIAMI. FLORIDA INTER -OFFICE MEMORANDUM DATE: Mav 8, 1985 FILE: SUBJECT. AGENDA ITEM FOR MAY 23, 1985 PLANNING AND ZONING MEETING REFERENCES: ENCLOSURES: Please arrange to have the attached scheduled as an agenda item for discussion at the May 23, 1985 City of Miami Planning and Zoning Meeting. blp cgs ✓i u T /.SCO.SSIQN OWN N Funding *Request R P. c kg r c tin d "ananement Plaq Financial Plan C 0 N T E N T S '' S PUNbtNG REQUEST f -Super Save qupermarket is see! -zing a low interest loan from the City of Miami in the amount of $200,000, a $40,000 interest free loan frcm Development Dade FmDloyment and ^conomic ! Corporation (OFE'DCo), its current debt and the restructuring of agreement. BACKGROUND Super gave Supermarket's initial financing of $415,000 was provided through: a twelve-year term loan of $260,000 from miami Capital; purchase of $125,000 of preferred stock by Metro -Dade County; and the stockholders' equity contribution of $30,000. The initial financing was utilized in the following manner: i ! Fixtures and equipment $230,261 Initial inventory 84,864 Utility Deposits 17,O00 t supplies 5,473 Pre -opening expenses 32,575 370,194 , Working capital 44,806 $$41. ,000 For the first six weeks, average customer sales were $29.45; and for the most current Four weeks, average customer sales had declined to $11.61. Customer counts during the same periods averaged 8,569 and 5,202, respectively. The drop in sales is directly related to the working capital def iciency. A detail outline of the factors contributing to the decline in sales and financial difficulties are: A. working capital deficiency 1. Low inventory 2. Inability to cash checks B. Weak financial information system 1. Accounting period not defined 2. Financial information not timely 3. Luck of a complete financial system C. Financial management skills limited j �1� AS N aarrAative actions needed to remain in vpefatidh and put :he atbfe On. a sound financial foundation. - Obtain additional funds S. Redefine management team Obtain professional advice 1. Public relations 2. Financial management b. Reduce operating costs '. Restructure debt F. Increase gross prcfit percentage With additional funds and implementation of the corrective actions. above, the store can obtain its weekly break-even sales of $41,627. _YT___f7" "._/_ DETAIN ADDITIONAL FUNDS Additional funding is being requested to establish a check cashing fund, re- plenish inventory and bring liabilities current, Total required additional injection is $240,000. A request to DEEDCO will be made to provide a loan or become guarantor of a $40,000 check cashing fund, thereby attracting additional customers and main- taining present customers which might not be held because of the inability to cash payroll checks. Funds are also needed to replenish inventory and bring other liabilities cur- rent. The additional injection of $200,000 is to be funded as a grant from the City of Miami and will be used as follows: Inventory $70,000 Accounts payable 21,400 Rent 26,000 Payroll taxes 18,900 Advertising 15,000 Equipment repair 5,000 Malone & Hyde 26,900 Working Capital 16,800 $200, 000 This can be accomplished by flowing funds through Overtown Economic Develop- ment Corporation. REDEFINE MANAGEMENT TEAM Store Manager: Assistant Manager: Management Assistant 3rd Man Store pera- tl ons : Thomas Jones, Jr., will be responsible for the day-to-day operations of the store: scheduling, payroll, IRS taxes, cashiering, handling of vendors, reviewing day-to-day bookkeeping with bookkeeper, reviewing accounts payable along with bookkeeper, making sure bills are paid on time, ope closina store. Charlie Lowe will be responsible for ordering, stocking, inventory control, directing vendors, pricing and gross profit, department operations, receiving inventory, cashiering, - -3-a�--Mere James Wanza, Jr., will be responsible for providing coverage in all areas in the day-to-day operations of the store; stocking, cashiering and working all store department as needed; opening and closing store. In addition, Mr. 1.4anza will work with the public relations firm to implement an advertising plans for the store. N OBTAIN PROFtSStONAL ADVTCt Public Relations Within two weeks of funding, managerent will select a public relations firm to implement an advertising plan for the next twelve months. a oorticn of the proceeds, $15,000, will be used to r,ay t'ne fee for the first year, as well as provide advertising for a minimum of f-ur ronths. Financial manacement Management's financial capabilities are limited. Therefore a certified public acccuntinc firm has been retained to assist in all financial .Natters, including t.".e design and implementation of an accounting system which will provide timely financial information. REDUCE OPERATING COSTS Steps have been taken to reduce payroll costs and maintain adequate staffing to cover store operations. The cost savings and reduction in required oreak-even sales are: weekly ?eduction in cost break-even sales savincis weekly annually Manager and assistant manacer have reduced their salaries $ 200 $ 800 $ 41,600 Eliminated one adcministrative position and reduced salary 200 800 41,600 Reduced weedy payroll for employees 839 3r356 174,512 Reduced security personnel and provided for coverac_e at peak times ay Miami police 675 2,7u0 140,400 Total savings $1,R14 $7 o' $92 i2 With the reduction of $ 1,914 in weekly expenses, required weekly break-even sales can be reduced by $7,556, and required annual break-even sales can ae reduced by $3018,112 at a 25% gross profit level. AEST tUCTURE MT The existing debt structure does not meet the current business plan. Super =ave Suoermarket is requesting the debt payment structure be modified to reflect a moratorium on principal and interest during the first year of operations. This restructuring is needed to give the supermarket a chance tc return weekly sales to the break' -even point, retain adequate working capital and add stability to the store. EQUIPME`IT LOAN FROM MALONE & HYDE A balance of $57,400 is clue to `^.alone & Hyde relating to the purchase of equipment. An agreement with Malone & Hyde should ne structured whereby repayment will begin in September 1985, interest free, with a minimum payment period of 3 years, maximum of 5 years. LOAN FROM MIAMI CAPITAL OPTION I Renegotiate the loan from Miami Capital with a provision for a one year moratorium on principal and interest, and receive a $200, 000 loan from the City of Miami with' a one year moratorium on principal and interest. OPTION II Provide a loan in the amount of $100,000, purchase $100,000 of preferred stock, and provide a six month moratorium on principal and interest. FINANCIAL PLAN SUPet Save 8upermarxet needs auditional financing of $24G,C06'. The sucermar':et dial nct have adecuate wor::ing capital when it cpened in "cvemoer of 1984 and has been unable to reolenisr its inventory and maintain the customer V01Ume It en-.,cled :wring 'he first siX weers of operations. The adaitional financing will be used to establish a check cashing fun!, replenish inventory and pay off current liabilities. The break-even pcin: reflected in the -Fcllcwing financial statements was ontaine6 .)y to%inq into ccnsi:aeration the proposed reductions in ,avroll and security costs, assuming the other exaenses would remain comparable to the expenses incurred in the tour cheeks ended parch 20, 1985, and assuming a gross profit percentage of . The City of M i 3 m i ' s loan will Sear interest at the rate of 3.Ss ann will oe amortized over ten years. Using these assumpticns, the store 4ioulJ brea:C-even at 541, 64" i in wee:cly sales. 'lowever, there is tee obvious risk that the sales level will not be attained or that the gross profit margin will not oe maintained ay :management. _ The financial plan includes a proforma balance sheet which _ reflects the infection of t!ne S�40,000, a proforma statement of expenses which reflects the reduction in costs, and the second year's proforma statement of cash receipts and cash disbursements. SUPER SAVE SURERMARXET, MC. PROPORMA BALANCE SHEET ASSETS Current Assets Cash Check casting fund Accounts receivaile Inventory Prepaid expense Total Current Assets Equipment: Store fixtures & equipment Less: accumulated depreciation Other Assets Utility deposits Deferred exoense TOTAL ASSETS $290,362 20,980 17,000 28,968 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable - sales tax Malone and Hyde Payroll taxes payable Accrued expenses Notes payaole-current Total Current Liabilities Notes payable - long-term Miami Cacital $260,000 City of fiami 2G0,000 Malone and Hyde 57,478 DE7DC1_1 40,000 Stockholders' Deficit Preferred stcc:ti - 3,000 sl!ares 125, CGG Common stout-$1 par, 4,560 shares 4,5G0 Paid in cacital &5,500 Deficit (1891922) TOTAL LIABILITIES AND STOCKHOLDERS' Deficit a 18,387 40,000 3,786 .32, G24 21,292 215,4E9 269,382 45,96E $530,839 8,289 8,269 557,478. (34,928) $ 1c9 SUPER SAVE SUPERMARKET = PROPORMA STATEMENT OF EXPENSES aroected projected Four 'r.ee;: Annual Budcet audoet Operating expenses Salaries- ?xecutive 41,6CG - Others 9,940 129,220 - Payroll tares 1,2S1 15,676 Security 2,700 35,110 Utilities 5,000 65,000 Other expenses 10,900 141,700 Total cneratina expenses 33,021 428,298 - Fixed expenses Rent 3,60-2 47,86o Professional services 1,C00 13,OGC Insurance 2,500 32,500 Advertising 2,300 29,900 Interest Total fixed expenses 9,482 123,266 Total expenses $42 1 $551,564 Break-even Point 224 gross profit $1 1 $2,507,10S 25 ;toss profit .170,OI? 6 Weekly sales required 22% cress profit S ..LC 4 25 cress Prot it $a 1_ 27 i� a < Jvi ,. .. 71 Y „ I r" 1 S SUM SAVE SUPERMARKET PROPORMA STATEMENT OF EXPENSES i��O�LCt?� ?�rtS�A�tEci c c ur Xee!: Annual Bucket Bu ,pet Operating expenses Salarias- ^xecutive ;: 3,1"GO a 41,oGG - Others 9,940 1A:5,220 Payroll taxes i,2S1 15,678 Security 2,700 35,100 - Utilities 5,000 65,000 Other expenses 10,900 141,700 Total cperatina expenses 33,021 428,298 Fixed expenses Rent 3,602 47,866 Professional services 1,C00 13,0GC Insurance 2,500 32,500 Advertising 2,300 29,900 Interest - - Total fixed expenses 9,482 123,260 Total expenses $42 $51 5 4 Break-even Point 22% gross profit 3.,.-! 9 5 S2,SG7,1G� 25s gross crofit 70 C Weekly sales required 22% cross profit $47,304 25% cross profit Sal_ 27 t 700.. T T SUPER SAVE SUPERMARKET PROPORMA STATEMENT OF CASH RECEIPTS AND CASH DISSURSEMENTS ( 'TCO^ID YEAR) Sales Purchases Gross orofit Operating expenses Salaries- executive - Others Payroll taxes Security utilities Cther exoenses Total operating e:penses Fixed expenses Rent Professional services Insurance Advertising Principal and interest Total fixed expenses Total expenses Cash provided from operations $2,574,000 1►930, 500 643,500 ?lsaumptions : Average weekly customer sales of $9.00; 5,500 weekly customers Gross profit percentage - 25% Three additional part-time employees at 20 hours per week, $3.50 per dour A 10% increase in other expenses A 1 St1Pn SA'T SVEEPtiAt M- STAFFING mIXT, SALARILS AND DUTIES �C)Q%.....== : RLSPONSIBI,2 FOR THE DAY TO DAY ;1 ;CORD : ^''PING OF DAILY SALES r OF FICE CASH, ACCOUNTS PAYABLE, AND ACCOUNTS RECEIVED. SALARY: 4) 0, ooFER . HOUR . THIRTY-SIX -< / HOURS A WEEK. CASHIER : iUESPONSLZLL, F011 CHECIrING OUT CUSTOI9 RS AITD I•IAIlTTAINING THEIR REGISTERS IN T.HZ F CPdl OF CASH CONTROL AND CLEANLINESS. SALARY: :'AID Ci T:E 3ASLS OF EXmai :iCv 3A;iGi:iG Fi3CII 4 3. SfTO,j Z .� AM HOUR. AVEE AGE :10RIC I- C THMTY-SIX HOURS T11=2 CASHMMS ON STAFF. STO._ CI::•iA_J: R SPONSIBLE FOR STOCKING iQ'MCF.AlMISE, CORRECT PRICING, AIM CHANGL'IG OLD FRICIES TO IT Ed PlllIC3S . EACH STOCKIIIAN 'd= 3E REGISTZI TRAINED . SALARY: p.--..; CTO .3 1_ S,ZAN HOUR DEMiDING ON ZXFERLN AN AVEaAGr OF / HOURS A C . IMATCUT_r "r.D :CAT EAT CUTTER RESPONSIBLE FOR CUTTING NEAT Ai•,D ORDERING WITH THE SUPERVISION UVISION OF HAN- AGEIENT . !-CAT ' TRAPP R : R ESFONSIB FOR :TRAPPING '-'CAT AND FRICING. SALARY: I -CAT CUTTZR: p �. 'jJ PE.�i HOUR THIRTY HOURS " ' EEl' TEAT :iCUR THI�'tTY HOURS o_. .�zm .JIB:: L- D..WI A:'IL :._.CCU ---`:�._�iJT--• :imra DlIT�'TDi:I'G ON E::- 117i+C�.. T:;.NTY-SIX HOURS A :;'SIC. l0'i:�l OF T= E1•1 LOYM- - S . RRODUCI CL 21 : iU::SPONSIBL, FOR ORDERI iG, PRODUCE ROTATION, PRICING AND IIiV 0TORY. SALARY: % , %.J :III HOUR. FORTY(}'G) HOURS A I=. ONE CL RK. RECZIVT';G 'LZ?u:: :-ESPOITSIBLF: FOR HECLIVING TEITICH.',.I•TDISL FRO14 VENDORS AIM EiuCliIG SURE 7. ii. T IINOICES COILPARZ JITH �RCHluTDISE THAT m ZCC I`TID . ONLY 0I7 CLZRX . S�.LARY : j,.� L �.:i HOUR. T'HI = HOURS A T= :TILL 3, : A '1'OT.iL OF THL�T E:i �� :3) I ii=LOY S :r 0i31n_'.1G AT TIiIS Tr i t . n i-Is�ra-r NAME SUP, ER SAVE SUPERMARKET ADD Rt-SS 1490 N W 3RD AVENUE CITY MIAMI FLA 33136 OWNER CORP•-THOMAS JCNES DOE' STORE CODE 90-153-8 BRANCH d0 CURRENT 11-04-4 TO 12-20-4 WEEKS 06 Y T O 11-04-4 TO 12-20-4 WEEKS J! U N A U 0 I T. E D_ F I N A N'. C I A L S T A T E M E N T S RESTRICTED FOR INTERNAL USE BY'STORE CWNER'ONLY• OPERATING STATEMENT UR RENT YTD CIJR A `YTO_ 'SALES-. GROCERY, ; � 164, 890.44 164, 890.44 61.01 61. C - 'AL -ES.- AF-A7 ___._. 6-4•,1i49t..Z4 644609.24 23�91 ---- 23 G SALES - PRODUCE 201869.98 207869.98 7.72 7.' SALES - DELI 19r888.81 19,888.81 7.36 7.3 � IITAL . SAL ES . 270,253.47 270,258.47. 100..00 100 C GROSS PROFIT - GROCERY 269153.96 26,153.96 15.86 15. GROSS PROFIT - MEAT 109620.51- 10,620.51- 16.44- 15. P0(1PTT - onfinurF PROFIT - OELI 15,758..77 157T51 77 79.23 79. " �3.i'iQSS rrnmA r R.0 S.S--P-RO F_ i T-___ .-- ---37., 335.-9Z � _ -3Z; 33 5. 97 * 13+81 1�A1.LA ELZ-FX4�ENS•ES 9 3 - 2 7 9 - 5.7 93 , 2 7 9 57 34�51-_ 34 % D-:EXPENSES 18,530.48 18,530.48. - 6:86 6.8 PER A-T-I PNG--E XP. ENS ES •---- 11-1, 81 ODDS=-* - _1�1 , g 1 �:_Q5 41�7- * _ 41. 3 -I.'--I-yGL'rMF40SS- 749�iT4�-OS--* 74,�i7si.�8- 2?-.-* .. 27.5 9T"-rAt= OT-H-E -1 NC-G4E/-L-GS.S- 652 C .�1,�'._,`..--. i _.. ._.....•.v i•,'�::.: fir.. .,a,<. __ � ., r _ s . •i, �i. tip, f _ r 542�-6-9= -** 28.2 W-E--Z4-, -Y-SA Dbl X-EAR-10-oATF .74 MEAT 10,768.21 10,768.21 >= ; PRODUCE 39478.33 3,478.33 ..11TOTAL- 45043.08 45,043.08- . ,ti�:a•.'• •. • - =-U-.N--A•-i1--1-�'=E-1 F-I-N-A-1V-C-I--A--L=S T-A-T-E-ME-N-.-T--S _ *_ .- .... . .. � e . c 3 lire i�.'rl. !Uf'L-fl :lIH4 91/f•t:KliNhhLi IsMiYt;Il klRl!'i`If�lu�l.a; WiY�.i1 f'h�:.i ` AUbkCSS 1490 N . W 3Nd AVENUE Mike CCOE 90i153-8 • �, CtTY AtAM1 FLA 33136 BRANCH C0 -: CURAF.Nt 2-21-5 TO 3-20-5 WEEKS 04 Y T D 12-21-4 TO 3-2C-5 WEEKS 13 ** U N A U U I T E 0 F I N A N C I A L S T A T E M E N T S *••• 'y * RESTRICTED FOR INTERNAL USE 8Y STORE CHNER COYLY R GPERATING STATEMENT � OESCRIPT[ON CURRENT YTO CURB ; YTO S SALES - GROCERY 57,267.14 227,86!.91 66.97 65.86 SALES - MEAT 15,415.55 68.664.37 18.C3 19.84 ;- SALES - PRODUCE 5,904.86 239622.26 6.91 6.83 SALES - DELI 69925.96 259857.73 8.10 7.47 • TOTAL SALES 859513.51 3469011.27 100.00 1CO. 0:. iu GROSS PROFIT - GROCERY 10t887.99 339319.23 19.C1 14.62 - �''a GROSS PROFIT - MEAT 65.85 49283.74- .43 6.24 GROSS PROFIT - PRODUCE 29903.11 89683.78 49.17 36.76 ' GROSS PROFIT - DELI 59043.89 15055.86 72.83 61.71 - TOTAL GROSS PROFIT 18,900.94-* 53#675.13.* 22.10 • 15.51 L' CONTROLLA@LE EXPENSES - -'--36,285.44 - 118s967.16 42.43 34.38 FIXED EXPENSES 14,557.23 379434.17 17.02 10.82 = ! r--••TOTAL- OPERATING- EXPENSES'---. --50s842.67-*.-- 156*401.•33 * 59.46- *-----45.20 I •--- TOTAL OPERATING INCOME/LOSS--31s'941.73-*- - 1029726.20-*-- -37.35-* 29.69- �t4r TOTAL -OTHER- INCOME/LOSS-- -- -----'_.___.._ _ .00 --- ~-- 40.78 *- .CO * .CI TOTAL OTHER EXPENSES 3*948.72 4.62 * 2.68 f i••. TOTAL NET INCOME/LOSS- - -•-- 35.890.45-** 111s964.93-**•• - 41.97-*• 32.36- '' 1 AVERAGE -WEEKLY -SALE CURRENT PERI00 YEAR -TO -OATS - -- - ` --- GROCERY _. __ _ 14*316.79 - 17s528.15 MEAT 39853.89 58281.87 t--- PRODUCE 1#476.22 1s817.17 DELI ... -.. _ _ .._._ .. ... - 1 s 731.49 1.989.06 - , TOTAL 21#378.38 26,616.25 - *• *«* U N A U 0 1 T-E 0 F I N A N C I AL' STATEMENT S •••+ 1 . -.. •••.+'*•••l••. ^•r.M.*s•_tfr .ra tuer f+e•n.r *•nn1.r.4Urree»•►•mwpte +••arern- ra'tafRt .•. r s - � .s•s,.•.e.aa i*:r•..;: ,. � . .. q�' ..• • r:eat®rewtsws#Nir'i .. . s IIe g,„T..L. e,�sar.x.as t;rlT+ferwt r• r t