AMUSEMENT PARK TABLE OF CONTENTS

Transcription

1 AMUSEMENT PARK TABLE OF CONTENTS 1 EXECUTIVE SUMMARY PROJECT DESCRIPTION MAIN GOALS SPACE PROGRAM INVESTMENT REQUIREMENTS STAFFING STRUCTURE SERVICE STRATEGY MARKET ANALYSIS TARGET MARKET SWOT ANALYSIS MARKETING PLAN FINANCIAL PLAN MAJOR ASSUMPTIONS PROJECTED INCOME STATEMENT PROJECTED BALANCE SHEET PROJECTED CASH FLOWS RATIO ANALYSIS BREAK-EVEN ANALYSIS SENSITIVITY ANALYSIS RECOMMENDATIONS AND KEY SUCCESS FACTORS ECONOMIC IMPACT EVALUATION...12

2 1 Executive Summary The proposed project consists in establishing an amusement park in Marjeyoun town. The project will offer attractive games and rides in a secure environment. It will target Marjeyoun caza inhabitants as well as neighboring regions of Hasbaya and Bint Jbeil, as it will be a unique park in this area. The initial investment is estimated at $243,085, which include the equipment, fixtures, furniture and working capital. The park will have a total area of 4,000 square meters and will include an outdoor playground, a coffee shop, a hall for birthdays and a parking lot. The annual rent of the park is assumed at $6,000 The projections are taken over a period of 5 years. The Luna Park is expected to provide average annual net profits of $61,922. The amusement park provides an internal rate of return (IRR) of 29% and a payback period of 4 years 6 months. These results show that the project is feasible. A worst case scenario was developed with the assumption of a lower number of kids playing at the park gave an average net profit of $48,216, an IRR of 23% and a payback period of 5 years 7 months. A best-case scenario based on higher number of kids gave an average net profit of $75,629, an IRR of 35% and a payback period of 3 years 9 months. The amusement park with its activities is expected to positively reshape the economic and social environment of Marjeyoun. It will offer 9 part time job opportunities for Marjeyoun residents and most importantly, it will provide a quality amusement park for the children where special events could also be organized. 2 Project description The project consists in establishing an amusement park in Marjeyoun town, which will offer attractive games and rides in a secure environment. The park will offer entertainment for the whole family. It will be operational during the summer season, i.e. around 4 months per year and will attract families from Marjeyoun and the surrounding cazas. The park will offer the following services: 7 different rides for kids A hall for birthday parties A coffee shop offering snacks, juices, ice cream and Narguilé 2.1 Main goals To offer entertainment for the kids as well as their parents. Kids enjoy the games and activities while parents can have snacks and beverages along with Narguile at the coffee shop. To offer an attractive venue for birthdays and other events. Marjeyoun - Feasibility Study Amusement Park V.2 2

3 2.2 Space program The park will have a total area of 4,000 square meters divided as follows: Space Program Item Total m2 Outdoor playground 2,500 Coffee shop + hall for parties 500 Parking 1,000 Total area in square meters 4, Investment requirements The initial investment includes the equipment, mainly small rides and games, fixtures (2 generators) and furniture for the office and the coffee shop. The total investment amounts to $243,085 as shown below: Initital Investment Equipments Train 20,000 Carousel 30,000 Mini Airplane 35,000 Dragon Board 55,000 Mini Bumper 60,000 Bungee Tramborin 10,000 Inflatables 5,000 Total Equipment 215,000 Fixtures Generator 30 KVA 4,500 Generator KVA 8,000 Total Fixtures 12,500 Furniture Office furniture 3,000 Coffee shop furniture 1,500 Total Furniture 4,500 Total Fixed Assets 232,000 Working Capital 11,085 Total investment 243,085 Marjeyoun - Feasibility Study Amusement Park V.2 3

4 Train Mini bumper 2.4 Staffing structure The amusement park will have 9 employees including a manager, one maintenance foreman, 6 rides operators and one coffee shop attendant. The rides operators are responsible for one or more rides and ensure the rides / park security. All employees will be hired on a seasonal basis, as the park will be operational only during the summer months (i.e. 4 months). ` Staff Structure N of staff Manager 1 Maintenance foreman 1 Rides operators 6 Coffee Shop Attendant 1 Total Staff 9 3 Service strategy The park will include rides for children as well as a corner for parents where they can have snacks and beverages. For the sake of the study, the following rides were selected: Train Carousel Mini Airplane Dragon Board Mini Bumper Bungee Tramborin Inflatables The amusement park will be operational only in the summer time (i.e. over 4 months). During the summer season, some expatriates and locals that reside in the Capital and other main cities come to spend the vacations in their native villages. These visitors flows create increased demand for entertainment venues. The park will offer families attractive and affordable entertainment for their kids. Marjeyoun - Feasibility Study Amusement Park V.2 4

5 4 Market Analysis Currently, there are no amusement parks in Marjeyoun Caza. In fact, there are very limited entertainment options in the caza and the neighboring areas. The closest Luna Park is in Nabatieh. The most direct competition to the Marjeyoun Luna Park would be Madinat Farah in Nabatieh. This park is well established and managed. Its owners have 3 other parks in Saida, Tyre and Beirut. Switching rides among the 3 parks has been helping to constantly attract clients and has been ensuring high turnover. The amusement parks that are available in neighboring cazas of Tyr and Nabatieh have been experiencing very high turnovers, especially that the inhabitants of these regions have very limited options for entertainment. 4.1 Target market The Luna Park will target the following groups: Kids and teenagers Summer camps outings Summer Schools (organized outings) Adults accompanying the kids would enjoy watching them while taking a snack, Narguile, or beverages. Expatriates visiting during the summer 4.2 SWOT Analysis STRENGTHS The amusement park will be unique in Marjeyoun casa and this will constitute an important advantage. It will be a motive for vacationing expatriates to spend more time in Marjeyoun OPPORTUNITIES The park could be marketed for other activities, such as kermes, birthdays, summer camps outings, etc The lack of such projects in the South makes the amusement park a destination by itself to the Marjeyoun caza. WEAKNESSES The limited rides for kids, who will constantly require new ones, thereby increasing the necessary capital expenditures budget to upkeep the business. The seasonality of this project. The amusement park will only be operational during the summer season. THREATS Generally, youngsters from the area have a tendency to go to Beirut and its suburbs, which offer larger varieties of entertainment options. The political instability at the regional level and the proximity of Marjeyoun to the border makes this caza relatively less secure than other parts of Lebanon and limits the number of returning expatriates and visitors. Marjeyoun - Feasibility Study Amusement Park V.2 5

6 5 Marketing Plan The amusement park will base its marketing strategy on the following: The Park s location will be selected to offer high visibility, convenient access and ample parking. The park will organize the launching event, where key people and potential clients are invited free of charge. A flyer displaying all rides will be distributed in schools, summer camps, and shops. Offering bundles of 10 and 20 rides at preferential discounted prices to encourage people to spend more time in the Park. Special offers could combine rides along with a snack and drink. Offering special discounts and package deals for schools in order to attract a large number of students, which in turn increases the number of parents that would accompany their kids to the Park. Offering specially priced packages for birthdays, during off peak hours, in order to maximize the revenues of the Park. 6 Financial Plan This section details the calculations, assumptions and methodology used as a basis for the financial projections of the amusement park. 6.1 Major assumptions The assumptions are based on market acceptable pricing levels. They are conservative and take into consideration the economic situation in the caza. Following are the major assumptions and the expected increase over the years: Revenues from rides Year 1 Year 2 Year 3 Year 4 Year 5 Kids per day Number of days Price per ride $0.33 $0.33 $0.33 $0.33 $0.33 Average spending per kid $5 $5 $5 $5 $5 Revenues from cafeteria Year 1 Year 2 Year 3 Year 4 Year 5 Kids buying from cafeteria per day Number of days Average spending per kid $1 $1 $1 $1 $1 Revenues from birthdays Year 1 Year 2 Year 3 Year 4 Year 5 Number of birthdays per season Rent of the hall $50 $50 $50 $50 $50 It is assumed that in year one, 2 birthdays per week will be organized over 4 months. This number will increase to 3 birthdays per week in year 2 and to 4 birthdays per week starting year 3. Birthdays could be organized in week days as well as during weekends. Marjeyoun - Feasibility Study Amusement Park V.2 6

7 Other assumptions The following table shows the income statement and the balance sheet assumptions. Income Statement Assumptions Rent expense $6,000 per year Increase in rent 5% every 3 years Fuel $500 per month Electricity $400 per month Maintenance $600 per month Cleaning $200 per month COGS - Cafeteria 0.25 of cafeteria revenues Annual increase in general expenses 2% Income tax rate 15% Balance Sheet Assumptions Inventories Expenses payable 1 month of cafeteria COGS 10% of general expenses The following table shows the depreciation rates: Depreciation Rates Equipment 10% Fixtures 10% Furniture 7.5% It is assumed that the management will purchase new equipments for the park every year for a total cost of $50,000 per year. These equipments will either replace the old rides to maintain an image of innovation for the park and continue attracting locals and visitors. Staff structure The amusement park will have a seasonal staff structure. The manager will oversee the park s daily operations. He will also be responsible for marketing activities and creating new concepts and themes for events. The maintenance foreman will be responsible for the continuous maintenance of the equipment to ensure safety and uninterrupted operations. Each one or two rides need an operator in order to start and stop the games. A coffee shop attendant will handle the sales of snacks and beverages. This person will be responsible for ticket sales as well. ` Staff Structure N of staff Monthly Salary Total Salary Manager Maintenance foreman Rides operators ,200 Coffee Shop Attendant Total Staff 9 2,650 Marjeyoun - Feasibility Study Amusement Park V.2 7

8 6.2 Projected Income Statement The following income statement is based on conservative assumptions of revenues as well as costs. AMUSEMENT PARK PROJECTED INCOME STATEMENT Year 1 Year 2 Year 3 Year 4 Year 5 Revenues from rides 105, , , , ,000 Revenues from coffee shop 10,500 12,000 13,500 15,000 16,500 Revenues from birthdays 1,600 2,400 3,200 3,200 3,200 Total revenues 117, , , , ,700 Expenses COGS - Coffee shop 2,625 3,000 3,375 3,750 4,125 Supplies and printed materials (flyers) 2,000 2,040 2,081 2,122 2,165 Fuel 2,000 2,040 2,081 2,122 2,165 Electricity 1,600 1,632 1,665 1,698 1,732 Maintenance 2,400 2,448 2,497 2,547 2,598 Rent expenses 6,000 6,000 6,000 6,300 6,300 Insurance 5,000 5,100 5,202 5,306 5,412 Cleaning 1,200 1,224 1,248 1,273 1,299 Salaries & benefits 10,600 10,600 10,600 10,600 10,600 Depreciation 23,088 28,088 33,088 38,088 43,088 Other expenses 10,000 10,200 10,404 10,612 10,824 Total General & Administrative exp 66,513 72,372 78,240 84,419 90,307 EBIT 50,588 62,029 73,460 83,781 94,393 Tax 7,588 9,304 11,019 12,567 14,159 Net profit (loss) 42,999 52,724 62,441 71,214 80,234 Net profit margin 43.2% 46.2% 48.4% 49.8% 51.1% The projected income statement shows attractive net profit margins all over the projected years. These levels are expected to be reached through an increase in revenues from rides, coffee shop and birthdays. The insurance fees cover the insurance on unexpected accidents that may occur on the premises. The average net profit margin is 47.7% and the average net income is around $61,922. Marjeyoun - Feasibility Study Amusement Park V.2 8

9 6.3 Projected Balance Sheet The balance sheet shows the projected assets and liabilities of the company. AMUSEMENT PARK PROJECTED BALANCE SHEET Year 1 Year 2 Year 3 Year 4 Year 5 Assets Cash 29,573 30,373 35,890 55,212 78,524 Inventories ,031 Total current assets 30,229 31,123 36,734 56,149 79,555 Equipment 215, , , , ,000 Fixture 12,500 12,500 12,500 12,500 12,500 Furniture 4,500 4,500 4,500 4,500 4,500 Establishment expenses 10,000 10,000 10,000 10,000 10,000 Accumulated depreciation 23,088 51,175 84, , ,438 Net Fixed Assets 218, , , , ,563 Total assets 249, , , , ,118 Liabilities & Owners' equity Expenses payable 4,143 4,224 4,307 4,421 4,505 Current liabilities 4,143 4,224 4,307 4,421 4,505 Invested Capital 232, , , , ,000 Retained earnings 12,999 35,724 58,164 89, ,612 Owners' equity 244, , , , ,612 Total liabilities & owners' equity 249, , , , ,118 STATEMENT OF RETAINED EARNINGS Year 1 Year 2 Year 3 Year 4 Year 5 Retained earnings at 1 January 0 12,999 35,724 58,164 89,379 Net profit (loss) for the year 42,999 52,724 62,441 71,214 80,234 Dividends distributed 30,000 30,000 40,000 40,000 50,000 Retained earnings at 31 December 12,999 35,724 58,164 89, ,612 Each year, the company is expected to acquire new equipment (rides) that replace the old ones for an average amount of $50,000 per year. Marjeyoun - Feasibility Study Amusement Park V.2 9

10 6.4 Projected Cash Flows The following table shows the projected cash flows of the amusement park. STATEMENT OF CASH FLOWS Year 1 Year 2 Year 3 Year 4 Year 5 Net income 42,999 52,724 62,441 71,214 80,234 Adjustments to reconcile net income to cash provided by operating activities Depreciation 23,088 28,088 33,088 38,088 43,088 Changes in inventories (656) (94) (94) (94) (94) Changes in expense payables 4, Total Adjustments 26,574 28,076 33,077 38,107 43,078 Cash provided by operating activities 69,573 80,800 95, , ,312 Cash Flow from Investing Activities Capital expenditures Investment in fixed assets (242,000) (50,000) (50,000) (50,000) (50,000) Net cash used in investing activities (242,000) (50,000) (50,000) (50,000) (50,000) Cash Flow from Financing Activities Capital injected 232, Dividends distribted (30,000) (30,000) (40,000) (40,000) (50,000) Cash provided by financing activities 202,000 (30,000) (40,000) (40,000) (50,000) Cash at beginning of year - 29,573 30,373 35,890 55,212 Changes in cash 29, ,517 19,322 23,312 Cash at end of year 29,573 30,373 35,890 55,212 78,524 The statement of cash flows shows the cash provided/used in operations, investing and financing activities. The statement shows the capital of $232,000 injected the first year, which is used to finance the acquisition of fixed assets for the business. Moreover, the company expects to acquire new equipment amounting to $50,000 each year. Those equipments are financed from the retained earnings of the company; the shareholders will not inject money to finance those equipments. The main goal for acquiring those equipments is to be able to constantly attract the people in the region with new games and rides. The statement shows the dividends distributed in each year. Marjeyoun - Feasibility Study Amusement Park V.2 10

11 6.5 Ratio analysis The following table shows the main financial ratios for the amusement park. Ratio Analysis Year 1 Year 2 Year 3 Year 4 Year 5 Liquidity Ratios Current Ratio Working Capital 26,087 26,797 32,119 51,363 74,519 Profitability Ratios Net Profit Margin 43% 46% 48% 50% 51% Financial Strength Total Debt to Owners' Equity Management Effectiveness Return on Assets 20% 23% 25% 26% 26% Return on Equity = ROE 21% 23% 25% 26% 27% Return on Investment = ROI 23% 26% 28% 31% 34% Asset Management (Efficiency) Total Assets Turnover: Sales/tot assets 20% 23% 25% 26% 26% Total Debt to Total Assets 2% 2% 1% 1% 1% The current ratio, which is equal to current assets divided by current liabilities, shows very high level throughout the years. The working capital is positive in all the years showing the ability of the company to meet its short term liabilities Net profit margin is satisfactory in all the projected years. Return on assets increases with the increase in net income. It reaches 26% by year 4. Return on equity and return on investment also increase over the years with the growth in profitability. The total assets turnover, which is sales divided by total assets, is expected to improve over the years with the growth in sales. 6.6 Break-even analysis The following table shows the annual revenue levels needed for the amusement park to breakeven. Thus, in year 1, an amount of $65,352 is needed to breakeven. The breakeven point increases with the increase in net profit. AMUSEMENT PARK BREAKEVEN ANALYSIS Year 1 Year 2 Year 3 Year 4 Year 5 Total Revenues 117, , , , ,700 Total Variable Costs 2,625 3,000 3,375 3,750 4,125 Total Fixed Costs 63,888 69,372 74,865 80,669 86,182 Break-even revenues 65,352 70,955 76,569 82,508 88,151 Marjeyoun - Feasibility Study Amusement Park V.2 11

12 6.7 Sensitivity analysis A worst-case scenario is taken by assuming a lower number of kids playing in the amusement park. In this scenario, the amusement park will have an average net profit of $48,216 and an average net profit margin of 41.3%. A best-case scenario is developed considering higher number of kids playing in the park per day. This scenario gives an average profitability of around $75,629 and an average profit margin of 52.8% Sensitivity Analysis Worst Case Most Likely Best Case Number of kids playing per day Year Year Year Year Year Profitability Average net income 48,216 61,922 75,629 Average net profit margin 41.3% 47.7% 52.8% Internal Rate of Return (IRR) 23% 29% 35% Payback Period 5 years 7 months 4 years 6 months 3 years 9 months 7 Recommendations and key success factors A key success ingredient for the amusement park is its ability to provide entertainment for kids while ensuring security through continuous maintenance for the rides. The park should capitalize on its major advantages of being unique in the region. The new equipment added each year will help to increase the step-in at the park. It is highly recommended to constantly seek new themes and rides to be able to continue attracting local clientele as well as visitors. The park should focus on increasing its marketing efforts through offering special packages to schools, summer camps, and groups. Moreover, the organization of special themes and events (kermes) will help to increase the number of visitors and ensure loyal clientele. 8 Economic Impact Evaluation The amusement park with its activities is expected to positively reshape the economic and social environment of Marjeyoun. The park will offer 9 part time job opportunities for Marjeyoun residents and most importantly, it will provide a quality amusement park for the children where special events could also be organized. Marjeyoun - Feasibility Study Amusement Park V.2 12