FEASIBILITY STUDY

a creative, objective and rational process whereby marketing & financial

data are collected, assimilated and analyzed
Objectives of a Feasibility Study:
1. To determine whether or not to proceed with the project
2. To define the optimum scope and quality of facilities
3. To quantify its prospects for success or failure
FLOWCHART
Ideas for Study

Informal Screening

IDENTIFICATION

Is Informal Analysis Favorable?

YES
Feasibility Study

NO
TERMINATE
ANALYSIS

Conduct Market Analysis

Is Market Analysis Favorable?

YES
Financial Analysis

NO
TERMINATE

Conduct Financial Analysis

EVALUATION

Is Financial Analysis Favorable?

YES
Prepare Investment
Proposal for Funding

NO
TERMINATE

What is your CONCEPT?

Help us visualize what your concept is all about?

PHASE 1 Concept Paper VERY IMPORTANT

I.

Brief Introduction
Briefly describe the nature of your business (it should be related to the
hospitality, tourism & culinary industries). Your brief introduction may include a
SHORT history of your business type or current trends in the foodservice
industry that helped you decide to choose your business concept.

II.

Company Profile
A. Company Name

What is the name of the management company running the behind-thescenes of your business? This is the name of the holding / managing
company behind a trade name.

B. Company Mission / Service Philosophies

A mission statement can tell a lot about your business. It is a cross between
a slogan and an executive summary of your business. Think of a mission
statement that will guide you in your operations!

C. Company Vision

A vision statement can pave the way for your business success and can help
get your team members to be on the same page. Ready to dream BIG? How
far do you think your concept will go? Are you thinking of franchising,
branching out, etc.? Will you be expanding your operations through the
internet?

D. Owners Profile

What are your essential skills & qualifications, experiences, and dreams &
aspirations? What will be your contributions to the company? It does not
have to be long - one short paragraph for each member will do.

III.

Business Name
A. Business Trade Name

Your trade name is your commercial name or the name that your
product/service will be commercially known. This is different from the
company name. Explain how came up with this name. If it is a foreign term,
what does it translate to?

B. Business Trade Logo

What do the symbols on your logo represent? What prompted you to use
such colors? Does it tell your would-be customers what your business is all
about or do they have to keep guessing?

IV.

Concept Development
A. Business Type
Are you a coffee shop, a cafeteria, an ethnic restaurant, a fast food, a
delicatessen, a dessert place, a casual dining or family restaurant, a fine
dining or gourmet restaurant, are you a food cart, a kiosk or stand, a bar, a
catering business, a food manufacturer? Will you be setting up a travel
agency or an event management company? A hotel(2,3,4,5-star) resort or
spa perhaps?

B. Operating Hours / Business Hours

Will you be serving breakfast, brunch, lunch and dinner? What time will you
be open? What time will you close? Will you be open 24-7, Monday to
Sunday?

C. Target Market (Demographics and Pyschographics)

Who is your target market? Is it the see and be seen crowd, or the
healthy options group, or the romantic-getaway couples? Are you going for
the upmarket or the masses? What are their jobs? How much are they
willing to spend or what is their buying power? Are they students, local
and/or foreign travelers, or the business sector?
1.
2.
3.
4.
5.

Age Group
Gender
Profession / Occupation
Income Bracket
Social / Consumer Behavior

D. Concept & Themes

I am hungry for details!!! Tell me more about your concept! Better yet,
show me your initial plans for the following:
1. Exterior / Facade
2. Lighting
3. Music
4. Color Schemes
5. Dcor & Interior Design
6. Furniture
7. Staff Uniform

E. Menu / Menu of Services

What type of food will you be serving? Pasta, pizza, Chinese, Japanese, rice
meals, exotic food, breads & pastries, what have you. If you are an events
management company, what services will be catering to? If you are a spa,
what type of massages or other related services will you be offering?

ULTIMATELY:
What is so special about your concept? It is unique
enough to attract the initial interest of the consumers?

Location! Location! Location!

Will your location bring in the greatest number of customers at
the lowest cost to you?

PHASE 2 Site Selection & Analysis

I.

Site Description
A. Exact Location / Business Address
B. Vicinity Map
Dont show me the whole map of Manila. Instead show me how to get there

C. Boundaries: North, South, East, West NOT NEEDED

Landmarks! Whats in front of you or behind you or to your left & right?
These will help your customers find you.

For Free Standing Establishments:

D. Lot Size & Shape: Land Parcellary Map
E. Topography Survey & Subsoil Conditions NOT NEDED
Will your piece of land be able to hold a building or your type of structure?
Is the terrain suitable for your project? Information may be obtained from
the City Planning Office of the City Hall governing your location

F. Area Drainage Problems

Flash floods are big problems for hotel & restaurant owners! Does it flood
in your proposed area? Information may be obtained from the City Planning
Office of the City Hall governing your location

For Space Rentals:

D. Floor Size & Shape: Floor Plan
E. Area Drainage Problems
II.

Site Evaluation
A. Visibility
Is road frontage adequate? Is your location in between tall building, or at
the end of the street or at the top floor of a mall? Is it visible to
customers riding their car or to pedestrians?

B. Accessibility NOT NEEDED

Tell me how to get via major arteries or streets or several points of origin
(i.e. from Makati, Ortigas, Alabang, etc.) using both public transportation
and private vehicles

C. Suitability
Does your location fit your concept? Is it suitable with regard to
competition and target market? Is parking a problem? Is rent competitive?

Adequacy of Lot Size for Proposed Project and Future

Expansion
Will your front of the house and back of the house fit into your proposed
location? Will it be able to house your ground floor & mezzanine, your
garden & walkways, your parking space, etc.

D. Zoning
Is your area under a residential, commercial or industrial zone? Information
may be obtained from the City Planning Office.

E. Rental or Lease Fee / Sale Price / Estimated Value

How much is RENT!!!! If you are to buy the lot, how many millions will you
need? If you are going to lease it, how long is the lease contract and how
much per square meter? If the lot is already yours, consider the business as
a separate entity paying you rent or lease.

III.

Local / General Area Evaluation

Tell me more about your captured market or the people that live in the area.

A. General Statistics of Population of Area

Does your initial target market match with the general statistics of the
population?
1. Age group
2. Gender
3. Income Bracket
*Information maybe obtained from the City Planning Office

B. Area Growth Pattern NOT NEEDED

Does the government and/or any private sector have future plans for your
area? Will they make it the next shopping district of Asia? Food for
thought . . .
* Information maybe obtained from the City Planning Office

C. Visual Appeal / Attractions of the Area

What other attractions will prompt people to visit your area? Remember,
they need to eat at some point after a long tour? While your customers are
in your establishment, is there a constant fear that their cars will be
napped?
* Information maybe obtained from the Local Tourism Office

D. List and Proximity of Businesses that Generate Major Demand

for your products and services

Where will all these people stay and eat? Your hotel/restaurant,
hopefully!!!! Does the business climate need a distressing business such as
your spa? Do the businessmen need a place to stay in for the night?
1. Major Retail Business
2. Major Industries
3. Schools / Universities
4. Theaters / Movie Houses
5. Banks, Savings & Loan Associations, Insurance Companies
6. Hotels
* Information maybe obtained from City Planning Office or personal ocular
visits

E. New Construction / Renovation

Determining future competition and future crowd magnets can help you a lot
in your decision!
* Information maybe obtained from the City Engineers Office

Ultimately:

Is your location favorable or feasible for

your type of business?
How will you attract and retain your
customers?
PHASE 3 Marketing Strategy
I.

S.W.O.T. Analysis SIMPLE

What are your strengths and weaknesses as a company, as a food concept, your
location, as compared to your competitors, etc. ? What opportunities to foresee
that you can take advantage of? What threatens your survival?

1. Strengths

INTERNAL

2. Weaknesses
3. Opportunities
4. Threats

EXTERNAL

Your SWOT ANALYSIS has to be thorough enough to support a Marketing Plan!

II.

COMPETITION SURVEY

Yikes! Who are you up against? Hope its not going to be a David and Goliath
situation . . .

1. Direct Competition

Establishments that offer the same type of products and services or close to
what your offering within the vicinity. If you are a mobile business or a
management company, you can list down your closest competitors even outside of
your vicinity.

2. Indirect Competition

Encompasses the different types of restaurants or establishments nearby that

you have to share potential customers with

Note:
To assess your survival, you may also need to assess your competitors
strengths and weaknesses and business/marketing strategies

III.

Marketing Strategies

Todays marketplace is a sea of opportunity . . .

A. Products Strategies
Whats so special about your product/hotel? How do you intend to use your
products as a marketing tool? Aside from your food & beverage, will you be
selling other merchandise such as cups, mugs, t-shirts, etc.? Will you be
adopting the American style of serving big portions? Will you be putting your
logos on your coffee cups, take-out bags, napkins, etc.? The Westin Hotel uses
their Heavenly Bed and Bath as a competitive advantage. Some spas advertise
the use of Dead Sea salts from Israel.
Will there be live-bands playing in your establishment? What type of piped-in
music will you be incorporating? Chill-out music for your caf, Italian classics for
your Italian restaurant, French music for your French wine store, relaxing
nature sounds for your spa perhaps? Will you be having cultural shows for your
foreign guests?

B. Service Strategies

Will you be using some sort of interesting technique in serving your products?
Chilis staff is required to kneel down when taking orders. Apparently customers
are kings and queens that should look down on their servers and not the other

way around. Gerrys Grill uses a unique order-taking device. Travel agencies
offer ticketless travels.

C. Pricing Strategies

Are your products and/or services of best value to your customers? Will you be
pricing your products based on what your competitors are charging?

D. Image Strategies
Decide how you want your business to look like to customers. Your business
should project an image that will attract your target market. For example, food
sellers should present an image of cleanliness and safe food, etc.

E. Advertising / Public Relations / Promotions Strategies

Will you be advertising through the use of flyers (where will you distribute
these), TV ads (which channels and time slots), radio ads , print ads, etc.? What
are your establishments promotions for every month? Will you be having a
happy hour?

Just how much money are

we talking about?
PHASE 4 Total Cost of Investment VERY
IMPORTANT
CAPITAL EXPENDITURES (CAPEX)
I.

Buy, Rent or Lease

If you are going to buy the lot, how much is it per square meter? If you are
going to rent or lease, how much is it per month and how much advance payments
and deposits are required.

II.

Construction Costs
A. Actual Construction Costs
Ask construction companies how much is the cost per square meter and
what does this include (this depends on the quality and design or project).
Some charge cheaper for renovation costs as compared to start-fromscratch projects.

B. Architects Fee
Usually 10% of total construction costs but inquire just the same

C. Interior Designers Fee

Some charge per square meters and may include a lot of things

D. Landscape Costs

III.

Furniture, Fixture and Equipment Costs

Now this is the hard part! You have to quantify your estimated costs here. I
want to know what pieces of furnitures and equipments (aircon, freezer, coffee
machines, etc.) you will need and how much each of these will cost you. You can
ask manufacturers or suppliers or simply shop around . . .
(SAMPLE LIST FOR A RESTAURANT BUSINESS)

A. Front of the House

1. Signage
2. Dining Tables & Chairs
3. Service Stations
4. Utensils
5. Glassware & Dinnerware
6. Service Ware & Hollow Ware
7. Sound System
8. Air-conditioning System
9. Ventilation System
10. Lighting Fixtures
11. Sales Control Equipment

(Cash Registers, Point of Sales, etc.)

B. Back of House
1. Kitchen Equipment (Range, Burners, etc.)
2. Kitchen Utensils
3. Employees Lockers, Meal/Rest Area
4. Office Furnitures and Equipment
5. Storage Facilities (Refrigerators, Freezers, etc.)

OPERATIONAL EXPENDITURES (OPEX)

I.

Staffing Requirements
A. Positions & quantity required for operation and back office
B. Salaries & Wages

C. Government Payables (Company Share) DOWNLOAD FROM

INTERNET
1. SSS (get table from SSS)
2. Pag-ibig (P100 per employee)
3. Philhealth (refer to Philhealth form)
D. Outsourced Staff
1. Marketing Team ( may also be part of regular
employees)
2. External Auditor
II.

III.

Monthly Utilities Estimated Expenses

A. Gas
B. Electricity
C. Water
D. Telecommunications
E. ADD OTHER EXPENSES IF NECESSARY
Starting Inventory: Projected Cost of Goods Sold
You can go back to this after you have finished your projected income
statement. When you are done just copy and paste the figures of your food &
beverage cost. For other types of businesses, the cost of goods sold will be
used.

IV.

Miscellaneous Expenses
A. Petty Cash Fund
B. Loose Change Fund
C. Office Supplies
D. Cleaning Supplies

IV.

Business Permits Fees

A. SEC Registration
B. DTI Registration
C. Mayors Permit
D. Other Government fees
* You may inquire from existing establishments or search the various
government agencies websites.

V.

Uniform Expenses
How many employees and how many sets each?

A. Front of the House

(example, = 30 employees x 3 sets each x P2000 per set)

B. Back of the House

VI.

Insurance Expenses

Ask a reliable insurance company for their rates. Choose which one/s is/are
best for your type of business and ask how much the MONTHLY/ANNUAL
PREMIUMS are for the coverage that you decide on.

A. Building & Contents Fire Insurance

B. Liability Insurance (to customers)
V.

Revolving Fund / Operating Fund

Why do we need this? You have to be able to operate, pay utilities & salaries
within a six month period even without income. What if the first three months
you dont make money?

A.
B.
C.
D.
E.
F.

VI.

Starting Inventory x 6 months

Salaries & Wages x 6 months
Utilities x 6 months
Professional Fees x 6 months
Transportation Expenses x 6 months
Other operating expenses( you deem necessary per your income
statement) x 6 months

Contingency: 10% of Total CAPEX and OPEX

Everything is estimated so this will hopefully offset your shortcomings. Serves
as a buffer.

NOTE:
Be sure to mention your references. Hopefully most of the items above are
based on actual costs and not just estimated. Fax quotations from your
suppliers should be attached as an appendix to your plan.

TOTAL COST OF INVESTMENT =

CAPEX + OPEX + 10% Contingency

How much money will I be

making?
PHASE 5 Projected Income Statement VERY
IMPORTANT
You are tasked to make a 12-month projection for your business. You will have to determine
which months are considered peak and which ones are considered slow for your type of
business and project your figures accordingly.
(This is a sample for a Restaurant Business)

I.

Food & Beverage Sales

It is always better to be CONSERVATIVE in your sales figures rather than be
disappointed later on. Follow the following guidelines to help you in your
estimation.
Choose a restaurant of existing operations competitive in type to your project
and interview the owner or manager. Ask him how the business is doing.
Remember, no owner in his right mind will tell you outright how much money he is
making! Here are some tips in getting his average sales. . .
Ask him the following:

A. No. of Seats Available

What is the maximum capacity of the restaurant?

B. Average Guest Check

How much do customers, on an average, usually pay at the end of his meal
at his restaurant?

C. Seat Turnover

The number of times a seat in the dining area is occupied during a meal
time. For a sit-down restaurant, an ideal seat turnover is between 1.5 to
2 per meal period.

D. Peak Days / Slow Days

Which days does he make the most money and which days does he sit
around counting sheep?

E. Peak Hours / Slow Hours

At certain periods of the day, when is all his staff on their toes and
when do they have time for chit chat?

After asking him the above-mentioned information, compute the following

Estimated Monthly Gross Sales = sum of your computations below

Heavy Days
Lunch
Seat Turnover x No. of Seats x No. of Heavy Days x 4 Weeks
x Average Guest Check
Dinner
Seat Turnover x No. of Seats x No. of Heavy Days x 4 Weeks
x Average Guest Check
Slow Days
Lunch
Seat Turnover x No. of Seats x No. of Slow Days x 4 Weeks x
Average Guest Check
Dinner
Seat Turnover x No. of Seats x No. of Slow Days x 4 Weeks x
Average Guest Check
Beverage Sales

Beverage Sales can be estimated at 30% of the estimated monthly food sales. But
if you are a bar or an establishment that sell beverages as your main product, this
should be bigger than your food sales.

If you are interviewing an owner/manager that sells products by the piece

(e.g. French fries from potato corner, coffee by the cup from Figaro, or
hotdog on a stick), you can use an alternative formula:
Heavy Days
Average No. of Pieces Sold per heavy day x Average Price per piece x No. of
Heavy Days x 4 weeks
Slow days
Average No. of Pieces Sold per slow day x Average Price per piece x No. of
Heavy Days x 4 weeks

II.

Cost of Sales

Pre determine your food & beverage cost targets

A. Food Cost

It varies from one establishment to another. You set the targets! Catering
companies usually have a 50% food cost. Restaurants would have an
estimated 35-40% food cost

B. Beverage Cost

You can make a killing with your beverages. Beverages cost range from 1020% only.

III.

Operating Expenses

You can get some of these figures from your Total Investment (Opex)

A. Salaries & Wages

On peak months, your salaries and wages may go up. For restaurants, they
hire additional on-call waiters to help.

B. Employee Benefits
1. Labor Meals

Budget per meal x No. of Employees x No. of Operating Days

2. 13th Month Pro-rata

Divide your total monthly salaries amount by 12. This is commonly

practiced so that each month you are actually saving for their 13th
month pay. Come December, you wont be shocked with what you
have to give to your employees.

C. Government Payables

You can use the figures that you already computed in your OPEX section.

D. Utilities
1. Gas
2. Water
3. Electricity
4. Phone
E. Kitchen & Dining Supplies
F. Monthly Rental Expense
G. Advertising / Promotions Expense
H. Other expenses
IV.

General & Administrative Expense

A. Professional Fees

How much are you paying your outsourced staff monthly?

B. Office Supplies
C. Cleaning Supplies

D. Transportation Expenses
1. Gasoline Allowance
2. Public Transportation Allowance
d. Other expenses
e.
V.
Income Tax
Death and taxes are the only certainties in life! So pay the right taxes! Income
tax is pegged at 30% of your net income.

VERY IMPORTANT COMPUTATIONS:

1. Return on Investment (ROI): Annual
What percentage of your investment will be returned to you in one year? Banks usually
give an annual interest rate of 3-10%. Hopefully, your computations will help you decide
whether or not to proceed with the project.

Annual Net Income

x 100 = ROI (%)
Total Cost of Investment

2.Payback (Months/years)
Total Cost of Investment = Payback (Months)
Average Monthly Net Income
Total Cost of Investment
Average annual Net Income

= Payback (years)

3.Other ratios to be given later

How soon can I get back my

investment?
Will my money be better off in a
bank?

FINAL PROJECT
1. Written Feasibility Plan
Requirements:
Must follow the given format
Must be ring-bound
Must include all references as an appendix
Must be submitted before the presentation is made

2. Presentation & Defense

The presentation format:
Summary / highlights of concept, location, & marketing strategies
Perspective Drawings: Exterior/Faade, Interiors
Actual Menu Card / Menu of Services
Financial Analysis: 12-month Projected Income Statement, ROI, and
Payback
NOTE:
Do not simply transfer your written report onto your PowerPoint
presentations. Use bullets and only include highlights/summaries.
Requirements:
Presentations should start and end on time; maximum of 30
minutes per group; 15 minutes will be allotted for Q & A
Use visual aids (multimedia, overhead, etc.) to support your
presentation; set-up 15-20 minutes in advance
All group members must know their report inside-out. Questions
will be directed to anyone of you.
Do not read your report; instead, present like you are enticing a
group of investors to support your project.
Succeeding groups are not allowed to prepare for or work on their
presentation while a group is reporting.
Themed costumes and presentation gimmicks are most welcome;
otherwise, business attire is required

Failure to adhere to the final project requirements will merit

appropriate deductions. This is 25% of your Pre-Final Grade.
Good Luck!