Executive Summary:
This document is for the proposal of a Whataburger
franchise. In this document you will find:
1: The company background out lining the history of
Whataburger and how their business is doing today.
2: A description of the property where this Whataburger is
being proposed, in Montgomery, Tx.
3: A market analysis describing the area around the proposed
site as well as the demographics of the peoples living in the area.
4: An analysis of the financial planning that it will take
to accomplish this project.
5: A section on how I plan on financing this investment
Company Background:
“Way back in 1950, an adventurous and determined entrepreneur
named Harmon Dobson opened up the world’s first Whataburger on Ayers Street in
Corpus Christi, Texas. He had a simple goal, to serve a burger
so big that it took two hands to hold and so good that with one bite customers would say, “What a burger!” He succeeded on both accounts and turned that one little burger stand into a legend known throughout Texas
and the South.
so big that it took two hands to hold and so good that with one bite customers would say, “What a burger!” He succeeded on both accounts and turned that one little burger stand into a legend known throughout Texas
and the South.
Today, each and every Whataburger is made to order, right when
it’s ordered. And they’re still made with 100% pure American beef and served on
a big toasted five-inch bun with all ‘the extras’ to suit your taste. Grilled
jalapenos, extra bacon, three slices of cheese, no tomatoes, extra pickles? No
problem, your Whataburger will be made just like you like it 24 hours a day 7
days a week.
More than half a century later, with Harmon’s son, Tom, at the
company helm, Whataburger still remains family-owned and operated. Employees at
Whataburger are even referred to as Family Members and it is the privilege and
promise of each and every one to uphold the tradition that Harmon began. So now
with over 700 Whataburger restaurants across ten states, road-trippers and hometown
folks alike continue gathering under the big orange and white roofs for the
fresh made to order burgers and friendly service.”1
Property/Project Description:
I am proposing to open a Whataburger franchise in Montgomery, Tx.
The proposed Whataburger franchise will be located at 1916 Eva Street,
Montgomery Tx, 77356. It is a roughly 1.5 acre, (65,340 sq ft.), plot with 200
ft. on the main highway that runs through Montgomery. It is also less than one
mile from Montgomery High School with easy ingress/egress traveling both East
and West.
The actual building will be roughly 3,300 square feet in size, and
the rest of the property will be used for necessary parking space. The
Whataburger sign will be 35 ft in the air with the actual sign its self being
12 ft x 12 ft. with 12 inch letters on it.
Market Analysis:
The primary target market for this business are the students at
Montgomery High School with a total of
roughly 3,000 students. The restaurant will be on their way to and from school
each day where they can get breakfast and lunch. I have done research by
talking to some of the students from the school and 90% said they would stop at
Whataburger for at least one of the meals. There are only two fast food
restaurant competitors in Montgomery which are McDonalds and Subway.
One of the franchise’s strengths is the fact that it is one of
the few restaurants in the city as well as its close vicinity to the school.
Also, the Montgomery area is growing at a rapid rate due to its proximity to
Lake Conroe. A weakness is that due to lack of traffic during evening hours,
there might not be a whole lot of sales during this time. However, I believe
that the amount of sales in the morning and afternoon will make up for this. An
opportunity for this investment is to talk to the school and see if the
Whataburger would be able to provide the concessions for the football games on
Friday nights. No threats come to mind at this time due to the low number of
fast food restaurants in the area.
Although the population of Montgomery City is only 640, this is
because the city itself is not very large. However, within the area are roughly
51,000 people. This does not include all of the people who travel the highway
running through the city going to college station, especially for the football
games. 12,000 of these residents are under 18 who is our primary target market.
Financial Analysis:
The required start up costs for a Whataburger franchise are
$600,000 which includes the construction of the building. The average sales per
unit of a Whataburger is $1,709,000/yr2 with a projected growth of
4.1%. The average monthly franchise fee for the food industry is 5%. The
average profit margin for the fast food, and more specifically the burger
industry, is around 15%3. So with the profit margin and the
franchise fee the operating expenses should be roughly 90% of the revenue. We
will use this as our most likely scenario, with our worst and best case
scenarios being 10% and 20% profit margin respectively. Other Whataburger
franchises are selling anywhere from $1,200,000 to $1,900,000. With this I will
use a $1,500,000 as a most likely scenario selling price with the far ends of
the scale as my worst and best case scenarios. The required rate of return that I will be
expecting on this investment is 10%.
Financing:
To start
this investment I will need $830,000 which includes the cost of the land and
costs required by Whataburger. I can get a loan with the following
characteristics:
LTV: 75%
Interest rate: 4.5%
Amortization period: 20 yrs
PMTS: $5400/ mo
Holding period: 10 yrs
Discount points are not a realistic
option at this time because interest rates are so low no one is buying a
cheaper rate. For the rest of the amount of the investment, I will have raised
that amount of capital by myself from previous ventures.
| Most Likely Scenario | ||||||||||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
| PGI | $0.00 | $1,709,000.00 | $1,779,069.00 | $1,852,010.83 | $1,927,943.27 | $2,006,988.95 | $2,089,275.49 | $2,174,935.79 | $2,264,108.16 | $2,356,936.59 | $2,453,570.99 | |
| OI | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| (VCL) | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| EGI | $0.00 | $1,709,000.00 | $1,779,069.00 | $1,852,010.83 | $1,927,943.27 | $2,006,988.95 | $2,089,275.49 | $2,174,935.79 | $2,264,108.16 | $2,356,936.59 | $2,453,570.99 | |
| (OE) | $0.00 | $1,538,100.00 | $1,601,162.10 | $1,666,809.75 | $1,735,148.95 | $1,806,290.05 | $1,880,347.94 | $1,957,442.21 | $2,037,697.34 | $2,121,242.93 | $2,208,213.89 | |
| NOI | $0.00 | $170,900.00 | $177,906.90 | $185,201.08 | $192,794.33 | $200,698.89 | $208,927.55 | $217,493.58 | $226,410.82 | $235,693.66 | $245,357.10 | |
| (DS) | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | ||
| BTCF | $0.00 | $106,100.00 | $113,106.90 | $120,401.08 | $127,994.33 | $135,898.89 | $144,127.55 | $152,693.58 | $161,610.82 | $170,893.66 | $180,557.10 | |
| (Tax) | $0.00 | $37,135.00 | $39,587.42 | $42,140.38 | $44,798.01 | $47,564.61 | $50,444.64 | $53,442.75 | $56,563.79 | $59,812.78 | $63,194.98 | |
| Selling Price | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $1,500,000.00 | |
| ATCF | ($830,000.00) | $68,965.00 | $73,519.48 | $78,260.70 | $83,196.31 | $88,334.28 | $93,682.91 | $99,250.83 | $105,047.03 | $111,080.88 | $1,617,362.11 | |
| Residual Cap rate | 16% | IRR | 14% | |||||||||
| NPV | $261,288.19 | |||||||||||
| Worst Case Scenario | ||||||||||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
| PGI | $0.00 | $1,709,000.00 | $1,779,069.00 | $1,852,010.83 | $1,927,943.27 | $2,006,988.95 | $2,089,275.49 | $2,174,935.79 | $2,264,108.16 | $2,356,936.59 | $2,453,570.99 | |
| OI | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| (VCL) | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| EGI | $0.00 | $1,709,000.00 | $1,779,069.00 | $1,852,010.83 | $1,927,943.27 | $2,006,988.95 | $2,089,275.49 | $2,174,935.79 | $2,264,108.16 | $2,356,936.59 | $2,453,570.99 | |
| (OE) | $0.00 | $1,623,550.00 | $1,690,115.55 | $1,759,410.29 | $1,831,546.11 | $1,906,639.50 | $1,984,811.72 | $2,066,189.00 | $2,150,902.75 | $2,239,089.76 | $2,330,892.44 | |
| NOI | $0.00 | $85,450.00 | $88,953.45 | $92,600.54 | $96,397.16 | $100,349.45 | $104,463.77 | $108,746.79 | $113,205.41 | $117,846.83 | $122,678.55 | |
| (DS) | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | ||
| BTCF | $0.00 | $20,650.00 | $24,153.45 | $27,800.54 | $31,597.16 | $35,549.45 | $39,663.77 | $43,946.79 | $48,405.41 | $53,046.83 | $57,878.55 | |
| (Tax) | $0.00 | $7,227.50 | $8,453.71 | $9,730.19 | $11,059.01 | $12,442.31 | $13,882.32 | $15,381.38 | $16,941.89 | $18,566.39 | $20,257.49 | |
| Selling Price | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $1,200,000.00 | |
| ATCF | ($830,000.00) | $13,422.50 | $15,699.74 | $18,070.35 | $20,538.16 | $23,107.14 | $25,781.45 | $28,565.41 | $31,463.52 | $34,480.44 | $1,237,621.06 | |
| Residual Cap rate | 10% | IRR | 6% | |||||||||
| NPV | ($206,546.91) | |||||||||||
| Best Case Scenario | ||||||||||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
| PGI | $0.00 | $1,709,000.00 | $1,779,069.00 | $1,852,010.83 | $1,927,943.27 | $2,006,988.95 | $2,089,275.49 | $2,174,935.79 | $2,264,108.16 | $2,356,936.59 | $2,453,570.99 | |
| OI | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| (VCL) | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | |
| EGI | $0.00 | $1,709,000.00 | $1,779,069.00 | $1,852,010.83 | $1,927,943.27 | $2,006,988.95 | $2,089,275.49 | $2,174,935.79 | $2,264,108.16 | $2,356,936.59 | $2,453,570.99 | |
| (OE) | $0.00 | $1,452,650.00 | $1,512,208.65 | $1,574,209.20 | $1,638,751.78 | $1,705,940.61 | $1,775,884.17 | $1,848,695.42 | $1,924,491.93 | $2,003,396.10 | $2,085,535.34 | |
| NOI | $0.00 | $256,350.00 | $266,860.35 | $277,801.62 | $289,191.49 | $301,048.34 | $313,391.32 | $326,240.37 | $339,616.22 | $353,540.49 | $368,035.65 | |
| (DS) | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | $64,800.00 | ||
| BTCF | $0.00 | $191,550.00 | $202,060.35 | $213,001.62 | $224,391.49 | $236,248.34 | $248,591.32 | $261,440.37 | $274,816.22 | $288,740.49 | $303,235.65 | |
| (Tax) | $0.00 | $67,042.50 | $70,721.12 | $74,550.57 | $78,537.02 | $82,686.92 | $87,006.96 | $91,504.13 | $96,185.68 | $101,059.17 | $106,132.48 | |
| Selling Price | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $1,900,000.00 | |
| ATCF | ($830,000.00) | $124,507.50 | $131,339.23 | $138,451.06 | $145,854.47 | $153,561.42 | $161,584.36 | $169,936.24 | $178,630.55 | $187,681.32 | $2,097,103.17 | |
| Residual Cap rate | 19% | IRR | 22% | |||||||||
| NPV | $764,172.68 | |||||||||||
Works Cited
