Start-up | |
Requirements | |
Start-up Expenses | |
Legal | $1,500 |
Stationery etc. | $400 |
Office Supplies | $500 |
Kitchen Supplies | $1,000 |
Janitorial Supplies | $400 |
Insurance | $719 |
Rent | $5,182 |
Utilities | $1,085 |
Sales and Marketing | $2,800 |
Website Development | $4,000 |
Leasehold Improvements | $140,000 |
Licenses/Permits | $422 |
Construction Fees / Permits | $35,000 |
Outdoor Sign | $3,500 |
Miscellaneous | $200 |
Total Start-up Expenses | $196,708 |
Start-up Assets | |
Cash Required | $34,000 |
Start-up Inventory | $9,000 |
Other Current Assets | $8,000 |
Long-term Assets | $42,000 |
Total Assets | $93,000 |
Total Requirements | $289,708 |
What’s For Dinner? is a privately held Sub Chapter S-corporation. This allows for the protection allowed by the corporate legal structure combined with the “fall through” Generally Accepted Accounting Principals that will make personal financial sense to the corporations principle owners. The principle owners of What’s For Dinner? are Alan and Kim Kirby; each owns a 50% stake in the company. This company operates under the jurisdiction of the State of Texas and the United States of America.
What’s For Dinner? will provide its customers with twelve home cooked meals that they will freeze until customers are ready to serve them. These meals will be chosen from a set menu designed weekly by us and the meals will be prepared in our location. All of the planning, shopping, food preparation, recipe directions and containers will be provided to help make it as easy as possible for our customers to enjoy their time at our establishment.
Our customers will prepare their meals in a fun, party-like atmosphere where they can relax, meet new friends or spend time with old friends while preparing dinners for their families for the next month.
The Key benefits our customers will receive from using What’s For Dinner? are:
Our menus and portion sizes are tailored for the group and individual customers. Seniors get added benefits, with diabetic, low-cholesterol, and low-sodium choices. Families can increase portion sizes for a small fee to accommodate more children or guests.
The Dallas area’s meal preparation market is untapped. As a matter of fact, there is no other business of this kind in the Dallas/Ft. Worth area. Though there are no exact replicas of our company there are some types of companies that we would have to consider to be indirect competitors. These include such companies and service professionals as caterers and those that will come to your home and prepare meals for you to freeze. What’s For Dinner?, at this time, has few direct competitors, with exception to area restaurants and your basic home cooking. At the inception of What’s For Dinner?, there will be no type of company like ours in the area, thus giving us the overwhelming competitive advantage of first entry.
The What’s For Dinner? market is primarily in the Collin County area: Plano, Frisco, Allen and McKinney. We will be focusing on households in these areas that have more than one person. Primarily, those households whose income is over $50,000, with someone under the age of 18 living there. As a secondary target market, we will market to the elderly population in the aforementioned areas. Initially, the greater portion of our customers will be busy, working class people and the growing group of single-parent families, but it will be of great benefit now and in the future to market our services to the highest growing population demographic – senior citizens.
The following statistics were taken from Table DP-1 Profile of General Demographic Characteristics: 2000 for Collin County.
What’s For Dinner? has three distinct target populations:
We will market several menus designed for the diet needs of the senior populace (diabetic, low cholesterol, low sodium), with pick-up and drop-off coordinated with a local senior-transportation center. All prep and measuring will be done beforehand, so they will need only to stir and combine ingredients. In addition to meeting their practical needs, we will create the social experience that this group consistently hunts for, and help them to enhance their lifestyle through a higher quality of health.
Market Analysis | |||||||
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |||
Potential Customers | Growth | CAGR | |||||
Households with children | 10% | 73,864 | 81,250 | 89,375 | 98,312 | 108,144 | 10.00% |
Households with no children | 10% | 58,404 | 64,244 | 70,668 | 77,735 | 85,509 | 10.00% |
Seniors | 12% | 25,852 | 28,954 | 32,428 | 36,319 | 40,677 | 12.00% |
Total | 10.33% | 158,120 | 174,448 | 192,471 | 212,366 | 234,330 | 10.33% |
These target market segments were chosen based on their greater need for our services. Families with children are very busy, and they can end up spending a great deal on fast food and junk food because they don’t have time to cook healthy meals at home. Busy working couples and individuals without children are also busy, and may not have the skills or desire to plan and cook entire meals at home just for themselves; they can spend a lot on going out to eat. Seniors have special challenges in obtaining and preparing quality ingredients to feed themselves, including the loneliness of cooking for oneself. Options like “Meals on Wheels” are generally last-resorts, and many would prefer alternate food preparation arrangements, if any were available at a reasonable price – fixed incomes can be hard on the palate.
Our marketing strategies for all groups will emphasize our relatively inexpensive, fun, and easy approach to preparing healthy meals. We will vary our serving sizes, menu options, and level of preparation for each group; the family-size entree just right for a family of four makes no sense for a single individual. Different sized families have different needs, and it will be our goal to look to accommodate most family sizes through our variations in serving size.
Our service is unique among Dallas meal preparation options. There are no direct competitors for What’s For Dinner? The closest competitors are personal chefs, who will come to your home and prepare your chosen meals for you and freeze them, at a very high price. Our target market segments cannot afford personal chefs.
Our indirect competitors are area restaurants. These include family-oriented, inexpensive diners and casual restaurants, as well as fast food and takeout. We will generally not be competing with upscale, adult-oriented restaurants, since those are “special occasion” locations, and do not fulfill local residents’ daily meal needs.
Our competitor restaurants compete on price, perceived convenience, and atmosphere. They succeed when they convince customers that going out to eat is an affordable “treat” that is easier and more pleasant than preparing meals at home. In truth, the restaurants with the lowest prices also offer poor quality food and atmosphere, and the struggle to get children ready, out the door, and have them behave in a restaurant setting can make these choices less appealing in families’ realities than in their imagination. For all customers, the time it takes to get ready, travel to a restaurant, order dinner, eat, pay, and get home make going out to a eat a full-evening’s commitment – hardly the convenience it claims.
With the introduction of What’s For Dinner? to the Dallas market, we will revolutionize the way that the community looks at cooking convenience. Our prices really are much lower than restaurant meals, with much higher quality meals. In addition, our “convenience” comes in two ways – preparing meals at a set time, outside the daily routine, so they are ready in advance, and eating and minimal clean-up right in the customer’s own home, which saves time and energy at the end of a long day.
Even though What’s For Dinner? has no direct competitors, we will set up our business as if we are entering an already aggressive and hostile market. This is aimed at helping us to become successful through a constant drive for increased service model efficiencies and marketing effectiveness. We will strive to excel in customer service excellence, continuing our menu varieties and achieving the highest standards for our food products. As owners, we feel that word of mouth and customer retention are significant factors in our success. Our convenient locations, sanitary facilities, competitive pricing structure and honorable reputation will all play a part in satisfying our customers and increasing our clientele at an accelerating rate. What’s For Dinner? will focus on these factors and always strive to improve our business model and service offerings. We will strive to be the very best in our industry and will not rest until we not only have the largest market share in our industry, but also have the most satisfied customers.
The buying patterns of our customer base will be affected by our initial meal prep party prices. We have concluded through our exhaustive focus market groups that we could set our prices high, since there is no direct competitor, but we feel that to attract and retain customers and be able to steadily grow our customer base, so we should price ourselves at a lower level first. By setting ourselves at the lower end of our pricing range, we will not only gain the attention of the vast majority of our target markets, but we will also be able to start our revenue streams off with an upward growth pattern. The price that we will choose will be reasonable for our customers and be adequate for the business to maintain a gross margin around 25%.
What’s For Dinner? will gradually gain market share in the four focal geographic markets (Plano, Frisco, Allen and McKinney) by leveraging its competitive edges. These edges are superior attention to detail in the local food service market, a revolutionary food-servicing outlook and excellent nutritional meals at competitive price. These advantages have been unavailable in this market for some time. We will market our services with a targeted advertising campaign and networking.
What’s For Dinner? will begin with a critical competitive edge: we have no direct competitors in the Dallas/Ft. Worth area. By being the first-mover and (for at least a while) the only service of our kind, we will have the initial market buzz that is normally reserved for the first company of its kind into a given market. Our positioning is very hard to match, but only if we maintain focus on our strategy, marketing, business development, and fulfillment of quality and customer service will we be able to continually grow and outpace the “copy-cat” businesses that are sure to follow our market lead. We are aware that the tendency to relax due to lack of competition could weaken our competitive edge. What’s For Dinner? will be operated as if our direct competitors were conducting the same service business that we are in and we will be looking for additional enhancements to our operating procedures from day one.
In addition to our unique positioning, we offer the following advantages to our customers:
As a food service business, our main goal is to provide high quality food with excellent customer service. Our challenge as a new company is to quickly establish a reputation for such quality among our potential markets. With this in mind, the initial focus of our marketing strategy will be to get our name and reputation out to the public to create “buzz.” Creating brand recognition for our new concept will be the first measurable milestone in our marketing strategy.
This will be one of the most important factors when measuring success within the first couple of months after inception. The basis for our ideology is simple; the more people that hear our name and become familiar with our services, the more people will use it. The marketing campaign will involve a targeted advertising campaign, different specials to entice the customers to try our business and a very intense networking campaign. All of these tactics will be used to help gain a loyal clientele aimed at fostering our happy customer base.
At start-up, we will begin a focused advertising campaign toward target segments in our geographical area. We will update our advertising campaign regularly to fill in gaps based on follow-up research: do people recognize our name? Do they know what we do? What is their impression of our services’ costs and quality?Marketing campaigns will work via:
What’s For Dinner? will also have a networking campaign that will start with the owner’s contacts and friends attending our first months’ meal prep parties. This will be the “word of mouth” campaign that will feature:
In the food service business, as in any customer service intensive business, sales revenue is our lifeblood. The way in which we present ourselves to our customers and deal with the public will determine the success of our business. The food service industry is facilitated by repeat business and referrals. In order to continuously compete against other food providers, we need to enhance our repeat customer service business by making this our main sales focus. We cannot expect to have a satisfied customer by selling them one month’s of meals and then never seeing them again. We must make our sales strategy revolve around making the customer’s experience with us the best it possibly can, and further, making every effort to get our current customer base to visit us again. It is much more expensive to get new customers than to keep the customers you already have. Our customers cannot stop eating, but they could stop using our services. We will be selling our service to our current customers each time they come, in order to have repeat business and new business through their word of mouth.
These are just a few of the ways we will sell to our customers to gain repeat business and word of mouth advertising:
The What’s For Dinner? website will serve as a productive and consistent selling tool. Our website will be set up to explain what we offer and the many benefits customers will receive for using our meal prep services. The website will help “close the sale;” customers will be able to register for the meal prep party they would like to attend and accepting payments online. This will be our main source of registrations for parties. The ease of use allowed by the Internet will be key to driving our customer pipeline. Our sales and marketing campaigns will help focus our customer traffic through our website, so that people can see how easy it will be to interact with our company. This element of efficiency will also help enhance our bottom line by allowing for a 24 hour customer service mechanism without having to keep a customer rep staffed all the time.
Through our research of other businesses like ours in Seattle, WA and Omaha, NE, we found that all of them quickly increased their sales over their first year. All of these researched companies went from their first month of 100 customers on average to over 1,000 customers within their first year of business. One company opened in Seattle against two other competitors and now has over 2,000 customers with three different locations.
We are optimistic that What’s For Dinner? will grow and prosper just as these other companies have, but we want to set reasonable forecasts for growth. We have therefore taken a conservative approach in preparing our Sales Forecast Table.
The following table and chart give a run-down on forecasted sales. We have forecasted that sales will increase each month with the exception of the summer months, when vacations and other seasonal activities may reduce purchases. Once we get our first few customers, our sales will increase through customer retention, and gaining new customers through networking. We expect sales to grow incrementally over the first year, reaching profitability by the fifth month of operation.
After the first year of operation, we expect sales to continue increasing, from 10% the first year up to 25% by the third year. As sales increase, we will make modifications to our facility and hire new employees to share in the work. Our proposed location allows room for expansion. Based on our research, and the size of our potential market, we expect to reach close to one million dollars in sales by the end of 2005.
Our direct costs of sales listed here are inventory used up in sales, including the meal ingredients and additional supplies, such as themed-party decorations, containers, napkins, and so on. Fixed operating expenses are listed in the Profit and Loss.
Sales Forecast | |||
Year 1 | Year 2 | Year 3 | |
Sales | |||
Party Fees | $857,674 | $1,072,093 | $1,340,116 |
Other Fees | $24,505 | $30,631 | $38,289 |
Total Sales | $882,179 | $1,102,724 | $1,378,405 |
Direct Cost of Sales | Year 1 | Year 2 | Year 3 |
Ingredients | $612,624 | $765,780 | $957,225 |
Other Supplies | $44,109 | $55,136 | $68,920 |
Subtotal Direct Cost of Sales | $656,733 | $820,917 | $1,026,146 |
The accompanying table lists important program milestones, with dates and budgets for each. The milestone schedule indicates our emphasis on planning for implementation. What the table doesn’t show is the commitment behind it. Our business plan includes complete provisions for plan -vs. – actual analysis, and we will follow-up often to discover variances and course corrections.
What’s For Dinner? will have several milestones, including:
Milestones | |||||
Milestone | Start Date | End Date | Budget | Manager | Department |
Business Plan Completion | 7/1/2003 | 9/1/2003 | $250 | Alan Kirby | Administration |
Site Selection | 8/22/2003 | 9/1/2003 | $0 | Alan Kirby | Administration |
Architect Designs | 7/20/2003 | 9/1/2003 | $5,000 | Alan Kirby | Administration |
Licensing | 9/1/2003 | 10/1/2003 | $500 | Alan Kirby | Administration |
Site Construction | 9/15/2003 | 12/15/2003 | $0 | Alan Kirby | Administration |
Website Design | 10/1/2003 | 12/15/2003 | $1,280 | Alan Kirby | Web |
Business Funding Secured | 9/1/2003 | 12/30/2003 | $0 | Alan Kirby | Administration |
Site Set-Up | 11/1/2003 | 1/15/2004 | $0 | Alan Kirby | Administration |
First Party | 1/15/2004 | 1/30/2004 | $0 | Alan Kirby | Administration |
Profitability | 1/1/2004 | 12/1/2004 | $0 | Alan Kirby | Administration |
Totals | $7,030 |
The What’s For Dinner? website will be the virtual business card, party scheduler and payment acceptance source all rolled into one. It will showcase our services and highlight the benefits of using our company. The website will be a crucial portal for party scheduling, as well as having availability cross-referenced with party menus. Customers will also use this website to register for their parties and pay for them using PayPal, which accepts MasterCard, Discover Card, Visa, or e-checks.
The What’s For Dinner? website will be a strategic and very important part of our marketing mix. It will be used as a marketing tool to attract new customers, and as a sales tool to schedule parties, select menus, and pay. We will be promoting our website in all marketing programs, including newspaper ads, yellow page ads, business cards and flyers. We will also purchase targeted key word searches to help potential customers find our website. In addition, our website will feature prominently on all napkins, packaging, and receipts which current customers bring home, making repeat business easy and convenient.
Our main internet strategy is to direct the majority of our potential clients to our website first, as the introduction to our services, prices, and availability. This will reduce the time necessary for staff to provide basic information over the phone, allowing them to answer customer questions and provide more details, once customers know who we are, what we do, and how we might help them.
To encourage customers to use the website, we will offering special discounts to those who register their parties with our website and pay online. Our website must be easy to access and navigate, and must answer every customer question we can anticipate. It must use a legitimate, well-respected security feature and a reliable payment method. If it is all these things, many of our repeat customers will be happy to save time by researching party options and scheduling them online.
Clearly, we expect website use to be highest among younger, internet-savvy customers. We anticipate that our senior customers will use phone and direct contacts for most scheduling and payment interactions.
The What’s For Dinner? website will be developed with the technical resources of a local web design artist. He has designed websites for over 325 businesses, most with e-commerce capabilities. He is designing a database interface which will let us adjust the schedule and track click/sales ratios, and easily update menu offerings.
As the website development progresses, he will work with a local graphic artist we have hired to come up with the website logo and graphics. We are still researching hosting possibilities, but feel our needs will be best served by subcontracting out the hosting of the site and the technical back-end supporting.
The What’s For Dinner? management team will initially consist of the founders/owners themselves, Alan and Kim Kirby. We do not anticipate the need to hire anyone else on a full time basis during the first year, because all of the services that a normal small business needs will be outsourced. These services include the e-commerce infrastructure, accounting, marketing, and legal services. We do plan to employ one part-time employee from the beginning to help with cleaning and dishwashing.
Alan and Kim have 15 years of experience in the food service and entertainment industries, as a party planner and personal chef, respectively. Until the second year, Kim will continue to work part-time as a personal chef for several couples in Plano, doing the prep work and menu planning for What’s for Dinner? in the mornings. Alan will host the majority of the parties, after having prepared test batches of every menu item with Kim. The owners anticipate possibly hiring local high-school students as sous-chefs in years 2 and 3; Kim’s experience with local restaurants has shown that these students can often do quite well, paid only minimally in exchange for professional restaurant and food preparation training. Alan’s existing contacts with local social and community groups, and Kim’s ongoing relationships with food distributors, specialty grocers, and high-end clients will all help to generate high sales from early in the first year.
Throughout the first two years we will conduct an aggressive cost analysis as to what our capabilities are as owners and with what activities we need assistance.
The following table summarizes our personnel expenditures for the first three years, with compensation increasing from $34K the first year to about $60K in the third. We believe this plan is a fair compromise between fairness and expedience, and meets the commitment of our mission statement. The detailed monthly personnel plan for the first year is included in the appendices.
Personnel Plan | |||
Year 1 | Year 2 | Year 3 | |
Alan Kirby | $24,000 | $30,000 | $40,000 |
Kim Kirby | $5,000 | $7,500 | $10,000 |
Part-time cleaner | $5,000 | $7,500 | $10,000 |
Total People | 3 | 3 | 3 |
Total Payroll | $34,000 | $45,000 | $60,000 |
What’s For Dinner expects strong sales, based on research into our target market, similar businesses in other parts of the country, lack of direct competition, and the experience, reputations, and know-how of its owners/managers. By steadily repaying our long-term loan and holding down costs, we will generate a net profit midway through the first year and increase net worth dramatically by year 3. Our major fixed expenses are payroll and rent.
The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendices.
Three of the more important underlying assumptions are:
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 7.00% | 7.00% | 7.00% |
Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
Tax Rate | 24.00% | 24.00% | 24.00% |
Other | 0 | 0 | 0 |
The following chart and table summarize our break-even analysis. With fixed costs of $10,520 per month at the outset (to cover payroll and other operating costs), and variable costs (inventory) at 74% of sales, we need to bill $41,167 to cover our costs. We do not expect to reach break-even until the sixth month into the business operation.
Break-even Analysis | |
Monthly Revenue Break-even | $39,503 |
Assumptions: | |
Average Percent Variable Cost | 74% |
Estimated Monthly Fixed Cost | $10,095 |
What’s For Dinner?’s projected profit and loss is shown in the following table, with sales increasing from $10K the first month to close to $1.4M by the third year. We will reach profitability in the middle of our first year.
We are projecting very conservatively regarding cost of sales and gross margin. Our costs of sales are based on grocery store prices, which will decrease once we are to consistently able to buy our food in larger quantities from a food distributor. This will significantly lower our cost of sales, and increase our gross margin more than in this projection. We prefer to project conservatively so that we make sure we have enough cash.
The Sales and Marketing Expenses vary from the food preparation industry norms. Our Sales and Marketing Expenses will be to consistently maintain our advertising and promotions, while our biggest marketing will be word of mouth from our customers. We are budgeting for a high level of service from our website hosting company and payment processor, since the website is a key component of our Sales and Marketing Strategies.
The detailed monthly projections are included in the appendices.
Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $882,179 | $1,102,724 | $1,378,405 |
Direct Cost of Sales | $656,733 | $820,917 | $1,026,146 |
Other Costs of Sales | $0 | $0 | $0 |
Total Cost of Sales | $656,733 | $820,917 | $1,026,146 |
Gross Margin | $225,446 | $281,807 | $352,259 |
Gross Margin % | 25.56% | 25.56% | 25.56% |
Expenses | |||
Payroll | $34,000 | $45,000 | $60,000 |
Sales and Marketing and Other Expenses | $3,000 | $3,000 | $3,000 |
Depreciation | $4,200 | $4,200 | $4,200 |
Rent | $53,304 | $54,000 | $54,500 |
Utilities | $13,160 | $14,476 | $15,924 |
Office Supplies | $1,200 | $1,200 | $1,200 |
Insurance | $3,000 | $3,000 | $3,000 |
Payroll Taxes | $0 | $0 | $0 |
Accountant | $3,000 | $3,200 | $3,500 |
Lawyer | $1,000 | $1,100 | $1,100 |
Bank Charges | $180 | $180 | $180 |
Website Payment Fees | $600 | $700 | $800 |
Website Hosting & Support | $1,500 | $1,600 | $1,650 |
Repairs and Maintenance | $3,000 | $3,000 | $3,000 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $121,144 | $134,656 | $152,054 |
Profit Before Interest and Taxes | $104,302 | $147,151 | $200,205 |
EBITDA | $108,502 | $151,351 | $204,405 |
Interest Expense | $17,342 | $15,861 | $14,316 |
Taxes Incurred | $20,870 | $31,510 | $44,614 |
Net Profit | $66,089 | $99,780 | $141,276 |
Net Profit/Sales | 7.49% | 9.05% | 10.25% |
The following cash flow projections show the annual amounts only. Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendices.
Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $882,179 | $1,102,724 | $1,378,405 |
Subtotal Cash from Operations | $882,179 | $1,102,724 | $1,378,405 |
Additional Cash Received | |||
Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
New Current Borrowing | $0 | $0 | $0 |
New Other Liabilities (interest-free) | $0 | $0 | $0 |
New Long-term Liabilities | $0 | $0 | $0 |
Sales of Other Current Assets | $0 | $0 | $0 |
Sales of Long-term Assets | $0 | $0 | $0 |
New Investment Received | $0 | $0 | $0 |
Subtotal Cash Received | $882,179 | $1,102,724 | $1,378,405 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $34,000 | $45,000 | $60,000 |
Bill Payments | $758,414 | $1,055,142 | $1,197,241 |
Subtotal Spent on Operations | $792,414 | $1,100,142 | $1,257,241 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $0 | $0 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $22,080 | $22,080 | $22,080 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $814,494 | $1,122,222 | $1,279,321 |
Net Cash Flow | $67,685 | ($19,498) | $99,083 |
Cash Balance | $101,685 | $82,187 | $181,270 |
The balance sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position. Our negative net worth, due to borrowed capital for start-up, makes a significant increase by the second year, and becomes positive in year three. It is common for start-up businesses to have a negative net worth their first few years.
The monthly estimates are included in the appendices.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $101,685 | $82,187 | $181,270 |
Inventory | $137,714 | $172,142 | $215,178 |
Other Current Assets | $8,000 | $8,000 | $8,000 |
Total Current Assets | $247,399 | $262,329 | $404,448 |
Long-term Assets | |||
Long-term Assets | $42,000 | $42,000 | $42,000 |
Accumulated Depreciation | $4,200 | $8,400 | $12,600 |
Total Long-term Assets | $37,800 | $33,600 | $29,400 |
Total Assets | $285,199 | $295,929 | $433,848 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $148,189 | $81,220 | $99,942 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $148,189 | $81,220 | $99,942 |
Long-term Liabilities | $237,628 | $215,548 | $193,468 |
Total Liabilities | $385,817 | $296,768 | $293,410 |
Paid-in Capital | $30,000 | $30,000 | $30,000 |
Retained Earnings | ($196,708) | ($130,619) | ($30,838) |
Earnings | $66,089 | $99,780 | $141,276 |
Total Capital | ($100,619) | ($838) | $140,438 |
Total Liabilities and Capital | $285,199 | $295,929 | $433,848 |
Net Worth | ($100,619) | ($838) | $140,438 |
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 2099, Food Preparation, are shown for comparison.
The following table outlines some of the more important ratios from the Food Preparation industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 2099.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 25.00% | 25.00% | 5.54% |
Percent of Total Assets | ||||
Inventory | 48.29% | 58.17% | 49.60% | 11.58% |
Other Current Assets | 2.81% | 2.70% | 1.84% | 22.16% |
Total Current Assets | 86.75% | 88.65% | 93.22% | 53.03% |
Long-term Assets | 13.25% | 11.35% | 6.78% | 46.97% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 51.96% | 27.45% | 23.04% | 27.29% |
Long-term Liabilities | 83.32% | 72.84% | 44.59% | 20.18% |
Total Liabilities | 135.28% | 100.28% | 67.63% | 47.47% |
Net Worth | -35.28% | -0.28% | 32.37% | 52.53% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 25.56% | 25.56% | 25.56% | 30.90% |
Selling, General & Administrative Expenses | 17.88% | 16.00% | 15.03% | 16.61% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 1.28% |
Profit Before Interest and Taxes | 11.82% | 13.34% | 14.52% | 1.33% |
Main Ratios | ||||
Current | 1.67 | 3.23 | 4.05 | 1.54 |
Quick | 0.74 | 1.11 | 1.89 | 0.98 |
Total Debt to Total Assets | 135.28% | 100.28% | 67.63% | 55.42% |
Pre-tax Return on Net Worth | -86.42% | -15658.38% | 132.36% | 2.12% |
Pre-tax Return on Assets | 30.49% | 44.37% | 42.85% | 4.76% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 7.49% | 9.05% | 10.25% | n.a |
Return on Equity | 0.00% | 0.00% | 100.60% | n.a |
Activity Ratios | ||||
Inventory Turnover | 10.91 | 5.30 | 5.30 | n.a |
Accounts Payable Turnover | 6.12 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 42 | 27 | n.a |
Total Asset Turnover | 3.09 | 3.73 | 3.18 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.00 | 0.00 | 2.09 | n.a |
Current Liab. to Liab. | 0.38 | 0.27 | 0.34 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $99,209 | $181,110 | $304,506 | n.a |
Interest Coverage | 6.01 | 9.28 | 13.99 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.32 | 0.27 | 0.31 | n.a |
Current Debt/Total Assets | 52% | 27% | 23% | n.a |
Acid Test | 0.74 | 1.11 | 1.89 | n.a |
Sales/Net Worth | 0.00 | 0.00 | 9.82 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
Sales Forecast | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Sales | |||||||||||||
Party Fees | 0% | $10,500 | $17,500 | $26,250 | $35,000 | $44,297 | $66,445 | $66,445 | $66,445 | $99,667 | $112,125 | $149,500 | $163,500 |
Other Fees | 0% | $300 | $500 | $750 | $1,000 | $1,266 | $1,898 | $1,898 | $1,898 | $2,848 | $3,204 | $4,271 | $4,671 |
Total Sales | $10,800 | $18,000 | $27,000 | $36,000 | $45,563 | $68,343 | $68,343 | $68,343 | $102,515 | $115,329 | $153,771 | $168,171 | |
Direct Cost of Sales | Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
Ingredients | $7,500 | $12,500 | $18,750 | $25,000 | $31,641 | $47,461 | $47,461 | $47,461 | $71,191 | $80,089 | $106,786 | $116,786 | |
Other Supplies | $540 | $900 | $1,350 | $1,800 | $2,278 | $3,417 | $3,417 | $3,417 | $5,126 | $5,766 | $7,689 | $8,409 | |
Subtotal Direct Cost of Sales | $8,040 | $13,400 | $20,100 | $26,800 | $33,919 | $50,878 | $50,878 | $50,878 | $76,316 | $85,856 | $114,474 | $125,194 |
Personnel Plan | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Alan Kirby | 0% | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 | $2,000 |
Kim Kirby | 0% | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 |
Part-time cleaner | 0% | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 | $417 |
Total People | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | |
Total Payroll | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 |
General Assumptions | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Plan Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |
Current Interest Rate | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | |
Long-term Interest Rate | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | 7.00% | |
Tax Rate | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | 24.00% | |
Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Pro Forma Profit and Loss | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Sales | $10,800 | $18,000 | $27,000 | $36,000 | $45,563 | $68,343 | $68,343 | $68,343 | $102,515 | $115,329 | $153,771 | $168,171 | |
Direct Cost of Sales | $8,040 | $13,400 | $20,100 | $26,800 | $33,919 | $50,878 | $50,878 | $50,878 | $76,316 | $85,856 | $114,474 | $125,194 | |
Other Costs of Sales | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Total Cost of Sales | $8,040 | $13,400 | $20,100 | $26,800 | $33,919 | $50,878 | $50,878 | $50,878 | $76,316 | $85,856 | $114,474 | $125,194 | |
Gross Margin | $2,760 | $4,600 | $6,900 | $9,200 | $11,644 | $17,466 | $17,466 | $17,466 | $26,198 | $29,473 | $39,297 | $42,977 | |
Gross Margin % | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | 25.56% | |
Expenses | |||||||||||||
Payroll | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | |
Sales and Marketing and Other Expenses | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | |
Depreciation | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | $350 | |
Rent | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | $4,442 | |
Utilities | $980 | $1,030 | $1,030 | $1,030 | $1,030 | $980 | $980 | $980 | $1,280 | $1,280 | $1,280 | $1,280 | |
Office Supplies | $100 | $100 | $100 | $100 | $100 | $100 | $100 | $100 | $100 | $100 | $100 | $100 | |
Insurance | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | |
Payroll Taxes | 15% | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Accountant | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | |
Lawyer | $500 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $500 | |
Bank Charges | $15 | $15 | $15 | $15 | $15 | $15 | $15 | $15 | $15 | $15 | $15 | $15 | |
Website Payment Fees | $50 | $50 | $50 | $50 | $50 | $50 | $50 | $50 | $50 | $50 | $50 | $50 | |
Website Hosting & Support | 0% | $125 | $125 | $125 | $125 | $125 | $125 | $125 | $125 | $125 | $125 | $125 | $125 |
Repairs and Maintenance | 15% | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 | $250 |
Other | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Total Operating Expenses | $10,395 | $9,945 | $9,945 | $9,945 | $9,945 | $9,895 | $9,895 | $9,895 | $10,195 | $10,195 | $10,195 | $10,695 | |
Profit Before Interest and Taxes | ($7,635) | ($5,345) | ($3,045) | ($745) | $1,698 | $7,570 | $7,570 | $7,570 | $16,003 | $19,278 | $29,102 | $32,282 | |
EBITDA | ($7,285) | ($4,995) | ($2,695) | ($395) | $2,048 | $7,920 | $7,920 | $7,920 | $16,353 | $19,628 | $29,452 | $32,632 | |
Interest Expense | $1,504 | $1,493 | $1,483 | $1,472 | $1,461 | $1,451 | $1,440 | $1,429 | $1,418 | $1,408 | $1,397 | $1,386 | |
Taxes Incurred | ($2,193) | ($1,641) | ($1,087) | ($532) | $57 | $1,469 | $1,471 | $1,474 | $3,500 | $4,289 | $6,649 | $7,415 | |
Net Profit | ($6,946) | ($5,198) | ($3,441) | ($1,685) | $180 | $4,651 | $4,659 | $4,667 | $11,084 | $13,581 | $21,056 | $23,481 | |
Net Profit/Sales | -64.32% | -28.88% | -12.75% | -4.68% | 0.40% | 6.81% | 6.82% | 6.83% | 10.81% | 11.78% | 13.69% | 13.96% |
Pro Forma Cash Flow | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Cash Received | |||||||||||||
Cash from Operations | |||||||||||||
Cash Sales | $10,800 | $18,000 | $27,000 | $36,000 | $45,563 | $68,343 | $68,343 | $68,343 | $102,515 | $115,329 | $153,771 | $168,171 | |
Subtotal Cash from Operations | $10,800 | $18,000 | $27,000 | $36,000 | $45,563 | $68,343 | $68,343 | $68,343 | $102,515 | $115,329 | $153,771 | $168,171 | |
Additional Cash Received | |||||||||||||
Sales Tax, VAT, HST/GST Received | 0.00% | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
New Current Borrowing | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
New Other Liabilities (interest-free) | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
New Long-term Liabilities | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Sales of Other Current Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Sales of Long-term Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
New Investment Received | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal Cash Received | $10,800 | $18,000 | $27,000 | $36,000 | $45,563 | $68,343 | $68,343 | $68,343 | $102,515 | $115,329 | $153,771 | $168,171 | |
Expenditures | Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
Expenditures from Operations | |||||||||||||
Cash Spending | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | $2,833 | |
Bill Payments | $480 | $14,790 | $26,201 | $34,869 | $42,144 | $51,001 | $78,542 | $60,501 | $62,351 | $115,990 | $110,789 | $160,756 | |
Subtotal Spent on Operations | $3,314 | $17,624 | $29,034 | $37,703 | $44,977 | $53,834 | $81,375 | $63,334 | $65,184 | $118,824 | $113,622 | $163,589 | |
Additional Cash Spent | |||||||||||||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Principal Repayment of Current Borrowing | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Other Liabilities Principal Repayment | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Long-term Liabilities Principal Repayment | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | $1,840 | |
Purchase Other Current Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Purchase Long-term Assets | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Dividends | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Subtotal Cash Spent | $5,154 | $19,464 | $30,874 | $39,543 | $46,817 | $55,674 | $83,215 | $65,174 | $67,024 | $120,664 | $115,462 | $165,429 | |
Net Cash Flow | $5,646 | ($1,464) | ($3,874) | ($3,543) | ($1,254) | $12,669 | ($14,872) | $3,169 | $35,491 | ($5,335) | $38,309 | $2,742 | |
Cash Balance | $39,646 | $38,183 | $34,309 | $30,766 | $29,512 | $42,181 | $27,309 | $30,478 | $65,969 | $60,633 | $98,942 | $101,685 |
Pro Forma Balance Sheet | |||||||||||||
Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | ||
Assets | Starting Balances | ||||||||||||
Current Assets | |||||||||||||
Cash | $34,000 | $39,646 | $38,183 | $34,309 | $30,766 | $29,512 | $42,181 | $27,309 | $30,478 | $65,969 | $60,633 | $98,942 | $101,685 |
Inventory | $9,000 | $8,844 | $14,740 | $22,110 | $29,480 | $37,311 | $55,966 | $55,966 | $55,966 | $83,948 | $94,441 | $125,922 | $137,714 |
Other Current Assets | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 | $8,000 |
Total Current Assets | $51,000 | $56,490 | $60,923 | $64,419 | $68,246 | $74,822 | $106,146 | $91,274 | $94,444 | $157,917 | $163,075 | $232,864 | $247,399 |
Long-term Assets | |||||||||||||
Long-term Assets | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 | $42,000 |
Accumulated Depreciation | $0 | $350 | $700 | $1,050 | $1,400 | $1,750 | $2,100 | $2,450 | $2,800 | $3,150 | $3,500 | $3,850 | $4,200 |
Total Long-term Assets | $42,000 | $41,650 | $41,300 | $40,950 | $40,600 | $40,250 | $39,900 | $39,550 | $39,200 | $38,850 | $38,500 | $38,150 | $37,800 |
Total Assets | $93,000 | $98,140 | $102,223 | $105,369 | $108,846 | $115,072 | $146,046 | $130,824 | $133,644 | $196,767 | $201,575 | $271,014 | $285,199 |
Liabilities and Capital | Month 1 | Month 2 | Month 3 | Month 4 | Month 5 | Month 6 | Month 7 | Month 8 | Month 9 | Month 10 | Month 11 | Month 12 | |
Current Liabilities | |||||||||||||
Accounts Payable | $0 | $13,927 | $25,047 | $33,474 | $40,476 | $48,362 | $76,525 | $58,484 | $58,476 | $112,355 | $105,422 | $155,646 | $148,189 |
Current Borrowing | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
Subtotal Current Liabilities | $0 | $13,927 | $25,047 | $33,474 | $40,476 | $48,362 | $76,525 | $58,484 | $58,476 | $112,355 | $105,422 | $155,646 | $148,189 |
Long-term Liabilities | $259,708 | $257,868 | $256,028 | $254,188 | $252,348 | $250,508 | $248,668 | $246,828 | $244,988 | $243,148 | $241,308 | $239,468 | $237,628 |
Total Liabilities | $259,708 | $271,795 | $281,075 | $287,662 | $292,824 | $298,870 | $325,193 | $305,312 | $303,464 | $355,503 | $346,730 | $395,114 | $385,817 |
Paid-in Capital | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 | $30,000 |
Retained Earnings | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) | ($196,708) |
Earnings | $0 | ($6,946) | ($12,144) | ($15,585) | ($17,270) | ($17,090) | ($12,439) | ($7,780) | ($3,113) | $7,972 | $21,553 | $42,608 | $66,089 |
Total Capital | ($166,708) | ($173,654) | ($178,852) | ($182,293) | ($183,978) | ($183,798) | ($179,147) | ($174,488) | ($169,821) | ($158,736) | ($145,155) | ($124,100) | ($100,619) |
Total Liabilities and Capital | $93,000 | $98,140 | $102,223 | $105,369 | $108,846 | $115,072 | $146,046 | $130,824 | $133,644 | $196,767 | $201,575 | $271,014 | $285,199 |
Net Worth | ($166,708) | ($173,654) | ($178,852) | ($182,293) | ($183,978) | ($183,798) | ($179,147) | ($174,488) | ($169,821) | ($158,736) | ($145,155) | ($124,100) | ($100,619) |
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Vice President Kamala Harris' proposal to combat grocery inflation hasn't elicited a range of opinions from economists, and many have turned to history to dispute her idea.
Last week, the Democratic presidential nominee unveiled early details of her economic platform, which included a pledge to ban grocery price gouging .
Price gouging skepticism
The plan has elicited a range of responses from experts and economists, with some deriding it as an unnecessary overstep by the government to address a problem that is not at the heart of the inflation dilemma.
"I hope she walks this one back. She had some good ideas, some mixed ideas," Harvard professor Kenneth Rogoff told CNN . "This was a horrible idea."
Rogoff's position was based on doubts about whether retailers were to blame for the wave of inflation that has weighed on Americans' spending power in the last two years.
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Harris called for a first-ever federal ban on the basis that firms have notched record profits at a time when many households have struggled to adjust to runaway costs. Since January 2020, grocery prices have jumped 25%.
But according to market veteran Ed Yardeni, data doesn't suggest gouging is the problem.
He wrote this week that the ratio between the consumer price index and supermarket producer price index has been dropping since 2000, suggesting that profit margins in the industry have been trending down, not up. CPI tracks prices paid by consumers, while PPI measures the prices paid by wholesalers.
And yet, consumers feel strongly that corporate greed is a central factor for why prices have risen abruptly. In a study from May, price gouging was the second leading perceived cause of inflation among surveyed consumers.
Real-world examples do exist. Cal-Maine, the largest egg producer in the US, saw its profits rocket 718% in the first quarter of 2023 . By December, the distributor was found liable for artificially inflating prices.
'Price controls' a partisan label?
Whether gouging deserves the blame for inflation, some have also criticized Harris' plan as an ineffective government overreach.
Pundits have alluded to the price controls under President Richard Nixon. The Republican executive froze prices and wages over fifty years ago to clamp down on inflation, but it eventually jumped much higher, according to Cato Institute , a libertarian think tank.
"I think all of us would agree that price controls have never worked," Stephen Moore, visiting senior fellow at the conservative think tank Heritage Foundation, told CNBC . "They certainly were a complete failure in the 1970s when we had major inflation that hit 11%-12% and the government couldn't get rid of it."
Broader examples through history show that price ceilings can distort the allocation of goods and supply, as prices no longer serve to signal a surplus or scarcity. This can eventually lead to shortages and higher pricing.
However, supporters of the plan argue that such comparisons are an overreaction to Harris's proposal, as the details thus far say nothing about fixing costs.
"This is not 'price controls.' 40 states have price gouging laws on the books. These are red states. These are blue states," Groundwork Collaborative executive director Lindsay Owens said, noting that Donald Trump also cracked down medical supply price gouging during the pandemic. "This is a common-sense set of policies."
The federal ban would help patch up legal inconsistencies between each state's approach, experts told Business Insider . Harris would likely find success by empowering the Federal Trade Commission to pursue bad actors, though the challenge would lie in carefully defining price gouging.
While the plan's advocates have cheered this on, anonymous campaign sources that spoke with The New York Times noted that even allies may have the wrong idea about what it can do .
Given that it would be modeled on state laws, the ban would really only come into effect in emergencies, officials said, stating that just as price-control critiques are misguided, so are expectations that the ban will immediately cut down on grocery costs.
For that to happen, a campaign official cited Harris' other policy ideas, such as efforts to spur competition and support small businesses in the food sector.
While economists are divided, voters seem supportive of the proposal. Summer polling from the Democratic firm Blueprint found that four out of five voters are in favor of price-gouging prosecution, as well as price fixing.
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News Analysis
The plan does not appear to amount to government price controls. It also might not bring down grocery bills anytime soon.
By Jim Tankersley
Jim Tankersley covers economic policy in Washington.
Vice President Kamala Harris threw her support behind a federal ban on price-gouging in the food and grocery industries last week. It was the first official economic policy proposal of her presidential campaign, and it was pitched as a direct response to the high price of putting food on the table in America today.
“To combat high grocery costs, VP Harris to call for first-ever federal ban on corporate price-gouging,” the Harris campaign proclaimed in the subject line of a news release last week, ahead of a speech laying out the first planks of her economic agenda.
It is still impossible to say, from publicly available details, what exactly the ban would do. Republicans have denounced the proposal as “communist,” warning that it would lead to the federal government setting prices in the marketplace. Former President Donald J. Trump has mocked the plan on social media as “SOVIET Style Price Controls.”
Progressives have cheered the announcement as a crucial check on corporate greed, saying it could immediately benefit shoppers who have been stunned by a 20 percent rise in food costs since President Biden took office.
But people familiar with Ms. Harris’s thinking on the ban now say it might not resemble either of those characterizations. The ban, they also suggest, might actually not do anything to bring down grocery prices right now. Those who spoke about the strategy behind the emerging policy did so on the condition of anonymity.
Ms. Harris’s campaign has created the space for multiple interpretations, by declining to specify how that ban would work, when it would apply or what behaviors it would prohibit.
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Topic: Gambling
Thailand is considering legislation to legalise casinos as part of "entertainment complexes" similar to those found in Singapore and Macau. ( Reuters: Steve Marcus )
Thailand's government has proposed a bill to legalise gambling in massive "entertainment complexes" featuring facilities like hotels, restaurants, convention centres, music venues, sports arenas and amusement parks.
However, critics have warned legalised casinos could exacerbate problem gambling and provide opportunities for organised crime syndicates.
The bill may have a tough time getting through parliament after its main proponent, former prime minister Srettha Thavisin, was removed.
Thailand's stunning beaches, delicious food, unique cultural heritage and red light districts are already big drawcards for tourists.
Soon the country could add roulette, blackjack, pokies and other forms of currently illegal gambling to its list of attractions.
The Thai government has developed draft legislation to legalise casinos as part of gigantic "entertainment complexes" that must include at least four facilities from a list that includes hotels, restaurants, convention centres, music venues, sports arenas and amusement parks.
The two-week public exhibition period for the Entertainment Complex Business Operation Bill closed this weekend.
However, the controversial bill's passage through parliament is not assured as critics warn the hope for economic benefits come with "considerable risks".
Tourism is one of Thailand's primary industries. ( ABC News: Mazoe Ford )
The long-debated proposal comes amid a long period of economic stagnation in Thailand, which already relies heavily on tourism.
It's hoped the casinos will attract more tourists from China, where gambling is banned apart from in Macau.
A study commissioned by Thailand's parliament last year found that the entertainment complexes, which are envisioned to be similar to those already in Singapore and Macau, could boost tourism revenue by at least $US12 billion ($18.1 billion) in the first year.
The Bangkok Post reported that licences were expected to be issued for five casinos with two in Bangkok, one each in Chiang Mai and Phuket and one in the Eastern Economic Corridor (Chachoengsao, Chonburi and Rayong provinces).
Thai citizens will have to pay an entry fee of 5,000 baht ($215) but admission for foreigners will be free.
In a post on X earlier this year, former prime minister Srettha Thavisin said the casinos would have to comprise only 3 per cent to 10 per cent of the entertainment complexes' total area.
"We can regulate the grey economy and collect taxes," Mr Srettha said.
"We do not want to promote gambling, but would rather supervise it and use the investment to create jobs."
The Thai government says the casinos will also provide employment opportunities. ( Reuters: Tyrone Siu )
Casinos have a long history in Thailand.
According to James A Warren's book Gambling, the State and Society in Thailand, legal gambling houses were a valuable source of revenue for the country's rulers as far back as the 17th century, mainly catering to the growing Chinese population.
When King Chulalongkom came to the throne in 1868, about 20 per cent of taxes came from gambling.
However, even then gambling was seen by many as a disease with the symptoms "poverty, debt slavery, and crime", and during the late 19th century King Chulalongkom began shutting down the proto-casinos with the last abolished in 1917.
Other forms of gambling were increasingly regulated and restricted until the current Gambling Act was adopted in 1936.
Warren noted that between 1939 and 1945, the government tried opening a series of state-owned casinos, but all were short lived.
Those casinos were in some ways similar to the ones the Thai government is now proposing, with locals charged much more for entry than foreigners.
"Despite the revenue it provided, the casino experiment had been a failure, primarily because the government was unable to attract the 'right' clientele — whether foreign tourists or wealthy Thais — or to exclude the majority of the population that could ill afford to gamble," Warren wrote.
These days, legal gambling in Thailand is restricted to licensed horse racing and the national lottery.
However, other kinds of illegal gambling — including underground casinos and unlicensed sports betting and lotteries — are commonplace.
Thais also often travel to gamble in casinos in Cambodia, Vietnam, Myanmar and Laos.
A survey by Thailand's Centre for Gambling Studies and Centre for Social and Business Development in 2019 found that 57 per cent of Thais had gambled in the previous year with government lotteries the most popular form of gambling, followed by underground lotteries, card games and football betting.
"We have to admit that there is illegal gambling in the country, we are trying to get rid of (it) but it cannot be wiped out, so we have to rethink and see that it is time for this," Deputy Finance Minister Julapun Amornvivat told reporters earlier this year.
Gambling is illegal everywhere in China except for in Macau. ( Reuters: Bobby Yip )
A number of international casino operators have flagged interest in establishing operations in Thailand if the law is passed.
Robert Goldstein, the chief executive of casino and resort company Las Vegas Sands which operates casinos in Macau and the Marina Bay Sands in Singapore, earlier this year said the company "absolutely" had interest in Thailand.
"It's a very, very exciting market in a lot of levels," he said on an investor call .
"Just the sheer size of population, the accessibility and the willingness of people to travel to Thailand. It's obviously, I think, number one resort destination city in Asia.
"I think it's conceivable. It's early days, although we still have work to do with the numbers and understanding it."
The Marina Bay Sands, with its iconic boat-shaped skyway, opened in 2010. ( Reuters: Edgar Su )
The government has said Thailand would emulate Singapore, which legalised casinos in 2005.
Two huge "integrated resorts" — Resorts World Sentosa and the Marina Bay Sands — opened there in 2010 and together now employ tens of thousands of workers and contribute 1 or 2 per cent to the city state's annual GDP.
However, attempts to harness the revenue generating potential of casinos have fared less well in other parts of South-East Asia.
In Cambodia, a rush of Chinese-backed casino resort developments in the late 2010s intended to turn the beach side town of Sihanoukville into the country's version of Macau disenfranchised the local population, failing to provide them work opportunities while forcing up property prices and living costs.
The development boom spiralled into a nightmare of violence and crime and eventually led to the proliferation of online scam operations that have since metastasised across the region.
The sudden influx of casino developments in Sihanoukville in the late 2010s attracted gangsters and organised crime. ( Reuters: Matthew Tostevin )
Adam Simpson, a senior lecturer in International Studies at the University of South Australia, said the law's passage still faced significant challenges, especially following the surprise removal of Srettha Thavisin as prime minister by the country's Constitutional Court this week.
The court ruled on Wednesday Mr Srettha had violated the constitution over a cabinet appointment .
He was replaced as prime minister on Friday after Thailand's parliament voted in Pheu Thai party leader Paetongtarn Shinawatra , the daughter of billionaire former prime minister Thaksin Shinawatra.
Dr Simpson said the vast majority of the population, including the former king, had in the past opposed legalising gambling.
"Thai society is changing but it's not clear that there is majority support for legalising casinos," he said.
Srettha Thavisin landed in hot water over a cabinet appointment. ( Reuters: Chalinee Thirasupa )
Critics argue that legalising casinos would not eliminate illegal gambling, while also exacerbating problem gambling.
"At present the bill excludes Thais unless they pay around $200 to enter the casino, however once the casinos are established there will be constant pressure from the casinos and their political backers to make it easier for Thais to enter the casinos to expand the revenue base," said Dr Simpson.
Dr Simpson said the Bhumjaithai Party, which is the junior party in the governing coalition, opposed the legislation, arguing the benefits will not outweigh the negative impact.
"There has also been opposition from the Democrat Party," he said.
"It is not clear whether the People's Party (Prachachon), the successor to the MFP [Move Forward Party], will support the legislation but it seems unlikely."
Dr Simpson said the big push for the legalisation of casinos had come from Mr Srettha, a property developer and businessman who always took a pro-business approach to policy.
"Srettha being removed from office may well impact on the legislation," he said.
"Thailand already has a thriving tourism industry and there are plenty of avenues for increasing foreign exchange from tourism without resorting to this socially harmful policy."
Richard Horsey, a senior adviser to the Crisis Group thinktank, said the move to legalise casinos came with other "considerable risks" — including providing opportunities for criminal syndicates and irritating Beijing.
"Casinos are attractive to criminal syndicates not only as a lucrative revenue stream in their own right – for example by providing online gambling services to mainland Chinese punters, illegal in China – but also because they are an attractive means to launder profits from other criminal activities, from drug trafficking to scam centres," he said.
"Given that a large proportion of the revenues of Thai casinos are likely to come from visitors from mainland China, Thailand also faces the risk that Beijing may take a dim view of this development.
"China is concerned not only about the moral and social consequences of gambling, but also that junkets and other overseas gambling have been a key conduit for capital flight."
Mr Horsey said that even Singapore was struggling to deal with money laundering and other activities by transnational criminal organisations.
"Thailand will hope to emulate Singapore by putting in place a fairly credible and effective regulatory infrastructure for casinos," he said.
"But the risk is that it ends up being more like some other jurisdictions in the region that have struggled to control rampant criminality in the gaming sector."
He said that criminal syndicates generally gravitated to the least well-regulated jurisdictions.
"So the question is not only whether Thailand can emulate Singapore, but also whether it can do better than Cambodia, the Philippines, Laos and Myanmar," he said.
"It probably can, but one thing is clear from the recent history of transnational crime in the region, which is that these syndicates try to diversify as much as possible across multiple jurisdictions, so that they are more resilient to crackdowns.
"This means that Thailand will inevitably have to grapple with these difficult challenges."
President Joe Biden, right, listens as Democratic presidential nominee Vice President Kamala Harris speaks about the administration’s efforts to lower costs during an event at Prince George’s Community College in Largo, Md., Thursday, Aug. 15, 2024. (AP Photo/Susan Walsh)
President Joe Biden, left, and Democratic presidential nominee Vice President Kamala Harris arrive to speak about the administration’s efforts to lower costs during an event at Prince George’s Community College in Largo, Md., Thursday, Aug. 15, 2024. (AP Photo/Susan Walsh)
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WASHINGTON (AP) — Vice President Kamala Harris is zeroing in on high food and housing prices as her campaign previews an economic policy speech Friday in North Carolina, promising to push for a federal ban on price gouging on groceries and laying out plans to cut other costs as she looks to address one of voters’ top concerns.
Year-over-year inflation has reached its lowest level in more than three years, but food prices are 21% above where they were three years ago. Republican presidential nominee Donald Trump has pointed to inflation as a key failing of the Biden administration.
The cost of housing is another major driver of inflation, and Harris plans to use federal resources to promote the construction of 3 million new housing units if elected, pass legislation to slow rent increases, and provide a $25,000 in down-payment assistance for first time homebuyers.
Harris is drawing closer to President Joe Biden’s legislative and economic record, casting her initiatives as an extension of the work their administration has done over the last three and a half years.
The Harris housing plan includes establishing a tax credit for homebuilders who construct starter homes for first-time homebuyers, and doubling a $20 billion Biden administration “innovation fund” for housing construction. The down-payment assistance would significantly expand on a Biden proposal to provide federal support to first-time buyers.
Earlier Thursday, Biden and Harris celebrated their efforts to cut prescription drug prices at an event in Maryland as she made her first joint speaking appearance with Biden since she replaced him at the top of the Democratic ticket nearly four weeks ago.
They announced that drug price negotiations will knock hundreds of dollars — in some cases thousands — off the list prices of 10 of Medicare’s most popular and costliest drugs . The program was created through the 2022 health care- and climate-focused Inflation Reduction Act. Harris’ vote Senate vote, as vice president, helped Democrats overcome unanimous GOP opposition to make the bill law.
“The tiebreaking vote of Kamala,” Biden told the audience, “made that possible.”
He added that Harris is “gonna make one helluva president.”
Biden undertook his own efforts to contain rising food prices , including creating a “competition council” that tried to reduce costs by increasing competition within the meat industry, part of a broader effort to show his administration is trying to combat inflation .
Asked Thursday if he was concerned Harris would seek to distance herself from his economic record, Biden told reporters, “She’s not going to.”
Americans are more likely to trust Trump over Harris when it comes to handling the economy, but the difference is slight: 45% say Trump is better positioned to handle the economy, while 38% say that about Harris. About 1 in 10 trust neither Harris nor Trump to better handle the economy, according to the latest Associated Press-NORC Center for Public Affairs Research poll .
Trump, speaking Thursday at his golf club in Bedminster, New Jersey, argued Harris is proposing “communist price controls” that would lead to shortages, hunger and more inflation. He was flanked by popular grocery store items as he sought to highlight the rising cost of food.
Harris, in her housing plan, also wants to crack down on data-sharing and price-setting tools that landlords to set rents, and to remove a tax incentive that has led investment firms to purchase wide swaths of the country’s housing stock. She intends to contrast her plan with Trump, who was sued by the Justice Department for housing discrimination five decades ago.
What to know about the 2024 Election
Consumer confidence surveys show that high prices remain a persistent source of frustration for shoppers, particularly among lower-income Americans, even as inflation has cooled. Overall prices are about 21% higher than before the pandemic. Average incomes have risen by slightly more than that, boosting spending even as Americans report a gloomy outlook on the economy.
Some meat prices have risen by even more than overall inflation: Beef prices have increased nearly 33% in the 4 1/2 years since the pandemic began, while chicken prices have jumped 31%. Pork is 21% more expensive, according to government data.
Supply disruptions during the pandemic were one reason prices rose. Many meat processing plants closed temporarily after COVID-19 outbreaks among their workers.
But the Biden administration has charged that corporate consolidation in the meat processing industry has played a larger role by enabling a small number of companies to raise their prices by more than their their costs.
Four large companies control 55% to 85% of the beef, chicken, and poultry markets, the White House said in late 2021, including Tyson Foods and JBS. Several of the biggest meat companies have collectively paid out hundreds of millions of dollars to settle lawsuits accusing them of fixing prices for chicken, beef and pork, but they didn’t admit any wrongdoing.
Some economists have argued that large food and consumer goods companies took advantage of pandemic-era disruptions. Economist Isabella Weber at the University of Massachusetts, Amherst, called it “seller’s inflation.” Others referred to it as “greedflation.”
Harris’ proposals on price gouging come as there is some evidence that “sellers’ inflation” is fading. Consumers have become more discriminating, and are passing on some higher-price purchases while seeking out cheaper alternatives.
Grocery prices, on average nationwide, have risen just 1.1% in the past 12 months, in line with pre-pandemic increases, the government said Wednesday.
The meat industry has been fending off allegations of price gouging and price fixing for years, and the major players dispute the notion that the extreme consolidation in the industry is to blame for high prices.
Kansas State University agricultural economist Glynn Tonsor said “the cost of raising the animal, the cost of converting it into meat, and the cost of getting that meat to people is higher than it was.”
“Yes, consumers are seeing higher prices, but it doesn’t necessarily mean somebody is gouging them,” Tonsor said.
The head of the Meat Institute trade group, President and CEO Julie Anna Potts, said Harris’ idea would not solve the problems of inflation driving up the price of everything.
“Consumers have been impacted by high prices due to inflation on everything from services to rent to automobiles, not just at the grocery store,” Potts said. “A federal ban on price gouging does not address the real causes of inflation.”
AP Business Writers Josh Funk in Omaha, Nebraska, and Chris Rugaber in Washington, and Associated Press writer Darlene Superville in Largo, Maryland, contributed to this report.
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Economists are divided over Kamala Harris' plan to clamp down on food inflation. Filip De Mott. 2024-08-24T12:31:02Z ... and business — delivered daily. Read preview. Thanks for signing up!
Vice President Kamala Harris threw her support behind a federal ban on price-gouging in the food and grocery industries last week. It was the first official economic policy proposal of her ...
Thailand's stunning beaches, delicious food and unique cultural heritage are already big drawcards for tourists. Soon the country could add roulette, blackjack and pokies to its list of attractions.
Kamala Harris allies say plan to ban 'price gouging' has been misconstrued The vice president's proposal has spurred backlash from GOP and some Democratic economists. 5 min
Vice President Kamala Harris is zeroing in on high food and housing prices as her campaign previews an economic policy speech coming up in North Carolina. Menu. ... The Harris housing plan includes establishing a tax credit for homebuilders who construct starter homes for first-time homebuyers, and doubling a $20 billion Biden administration ...