AFC Consultants International

AMUSEMENT PARK
TABLE OF CONTENTS
1 2 2.1 2.2 2.3 2.4 3 4 4.1 4.2 5 6 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 7 8 EXECUTIVE SUMMARY ............................................................................... 2 PROJECT DESCRIPTION ............................................................................ 2 MAIN GOALS ...................................................................................................... 2 SPACE PROGRAM .................................................................................................. 3 INVESTMENT REQUIREMENTS .................................................................................... 3 STAFFING STRUCTURE ............................................................................................ 4 SERVICE STRATEGY .................................................................................. 4 MARKET OVERVIEW .................................................................................. 5 TARGET MARKET .................................................................................................. 5 SWOT ANALYSIS ................................................................................................ 5 MARKETING PLAN ..................................................................................... 6 FINANCIAL PLAN ...................................................................................... 6 MAJOR ASSUMPTIONS ............................................................................................ 6 OTHER ASSUMPTIONS ............................................................................................ 7 STAFF COSTS...................................................................................................... 7 PROJECTED INCOME STATEMENT ................................................................................ 8 PROJECTED BALANCE SHEET..................................................................................... 9 PROJECTED CASH FLOWS ...................................................................................... 10 RATIO ANALYSIS ................................................................................................ 11 BREAK-EVEN ANALYSIS ......................................................................................... 11 SENSITIVITY ANALYSIS ......................................................................................... 12 RECOMMENDATIONS AND KEY SUCCESS FACTORS.................................. 13 ECONOMIC IMPACT EVALUATION............................................................ 13

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1 Executive Summary
The proposed project consists in establishing an amusement park in the Akkar region. The project will offer attractive games and rides in a secure environment. It will target inhabitants from North of Lebanon such as Tripoli and neighboring villages, as it will be a unique park in this area as there exist only one small park in Halba-Akkar. The initial investment is estimated at $233,195, which includes 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 $5,000 The projections are taken over a period of 5 years. The Amusement Park is expected to provide average annual net profits of $62,534. The amusement park provides an internal rate of return (IRR) of 28% and a payback period of 4 years 3 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 (lower by 25% than the base scenario). This scenario gives an average net profit of $31,566 and an average net profit margin of 32.4%. The IRR in this scenario is 9% and the payback period is 9 years and 9 months. A best-case scenario based on higher number of kids by 20% from the base scenario gave an average net profit of $87,495, an IRR of 40% and a payback period of 3 years. The amusement park with its activities is expected to positively reshape the economic and social environment of Akkar. It will offer 9 part time job opportunities for Akkar region 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 the Akkar region, 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 Akkar region and the surrounding cazas. The park will offer the following services: 7 different rides for kids Slides and swings that are free of charge A hall for birthday parties A coffee shop offering snacks, juices, ice cream and Narguil

2.1

Main goals
To offer entertainment for the kids as well as their parents. Kids can enjoy the games and activities while the parents can have snacks and beverages along with Narguile at the coffee shop. To offer an attractive venue for birthdays and other events. Some free activities for younger kids such as slides and swings and free activity equipment.

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2.2

Space program

The park will have a total area of 4,000 square meters divided as follows:

Space Program Item Outdoor playground Coffee shop + hall for parties Parking Total area in square meters

Total m2 2,500 500 1,000 4,000

2.3

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 $233,125 as shown below:

Initital Investment Equipments Train Carousel Swings, slides and free activity equipment Dragon Board Mini Bumper Bungee Tramborin Inflatables Total Equipment Fixtures Generator 30 KVA Generator 60-70 KVA Total Fixtures Furniture Office furniture Coffee shop furniture Total Furniture Total Fixed Assets Working Capital Total investment

20,000 30,000 25,000 55,000 60,000 10,000 5,000 205,000 4,500 8,000 12,500 3,000 1,500 4,500 222,000 11,125 233,125

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Train

Mini bumper

Swings 2.4 Staffing structure

Slides and activity equipment

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 Manager Maintenance foreman Rides operators Coffee Shop Attendant Total Staff N of staff 1 1 6 1 9 Monthly Salary 800 400 200 250 Total Salary 800 400 1,200 250 2,650

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 Swings, Slides and free activity equipment Dragon Board Mini Bumper Bungee Tramborin

Feasibility Study Amusement Park Akkar, Minyeh, Donniyeh

LBN/B7-4100/IB/99/0225/JC20/0105 Inflatables Slides and activity equipment (free of charge) Swings (free of charge)

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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.

4 Market Overview
Currently, there are no amusement parks in the Akkar region. In fact, there are very limited entertainment options in the caza and the neighboring areas. The closest Luna Park is in Halba and the facilities are very basic and need renovations. Thus, the new amusement park will enjoy limited or no competition. Most families living in the region suffer from lack of entertainment activities for their kids during the summer.

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
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.

STRENGTHS The amusement park will be unique in the Akkar region and this will constitute an important advantage. It will be a motive for vacationing expatriates to spend more time in Akkar

OPPORTUNITIES The park could be marketed for other activities, such as kermes, birthdays, summer camps outings, etc The lack of such projects in the North makes the amusement park a destination by itself to the Akkar
region.

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 Akkar region to the border makes this caza relatively less secure than other parts of Lebanon and limits the number of returning expatriates and visitors.

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5 Marketing Plan
The amusement park will base its marketing strategy on the following: The Parks 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. Some parts of the park can offer for younger kids free rides such as the swings and the slides and the free activity equipment. These free rides would encourage the parents to come into the park and eventually spend some money on food and beverages.

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 Average spending per kid
Revenues from cafeteria

220 120 $0.33 $4

Year 1

250 120 $0.33 $4

Year 2

275 120 $0.33 $4

Year 3

280 120 $0.33 $4

Year 4

285 120 $0.33 $4

Year 5

Kids buying from cafeteria per day Number of days Average spending per kid
Revenues from birthdays

176 120 $1
Year 1

200 120 $1
Year 2

220 120 $1
Year 3

224 120 $1
Year 4

228 120 $1
Year 5

Number of birthdays per season Rent of the hall

16 $50

32 $50

48 $50

48 $50

48 $50

It is assumed that in year one birthday per week will be organized over 4 months. This number will increase to 2 birthdays per week in year 2 and to 3 birthdays per week starting year 3. Birthdays could be organized in week days as well as during weekends.

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6.2

Other assumptions

The following table shows the income statement and the balance sheet assumptions.
Income Statement Assumptions

Rent expense Increase in rent Fuel Electricity Maintenance Cleaning COGS - Cafeteria
Annual increase in general expenses Income tax rate

$5,000 5% $500 $400 $600 $200 0.25 2% 15%

per year every 3 years per month per month per month per month of cafeteria revenues

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 Fixtures Furniture

10% 10% 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.

6.3

Staff costs

The amusement park will have a seasonal staff structure. The manager will oversee the parks 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 Manager Maintenance foreman Rides operators Coffee Shop Attendant Total Staff N of staff 1 1 6 1 9 Monthly Salary 800 400 200 250 Total Salary 800 400 1,200 250 2,650

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6.4

Projected Income Statement

The following income statement is based on conservative assumptions of revenues as well as costs.
AMUSEMENT PARK PROJECTED INCOME STATEMENT Revenues from rides Revenues from coffee shop Revenues from birthdays Total revenues Expenses COGS - Coffee shop Supplies and printed materials (flyers) Fuel Electricity Maintenance Rent expenses Insurance Cleaning Salaries & benefits Depreciation Other expenses Total General & Administrative exp EBIT Tax Net profit (loss) Net profit margin

Year 1 105,600 21,120 800 127,520 5,280 2,000 2,000 1,600 2,400 5,000 5,000 1,200 10,600 22,088 10,000 67,168 60,353 9,053 51,300 47.3%

Year 2 120,000 24,000 1,600 145,600 6,000 2,040 2,040 1,632 2,448 5,000 5,100 1,224 10,600 27,088 10,200 73,372 72,229 10,834 61,394 49.6%

Year 3 132,000 26,400 2,400 160,800 6,600 2,081 2,081 1,665 2,497 5,000 5,202 1,248 10,600 32,088 10,404 79,465 81,335 12,200 69,135 50.6%

Year 4 134,400 26,880 2,400 163,680 6,720 2,122 2,122 1,698 2,547 5,250 5,306 1,273 10,600 37,088 10,612 85,339 78,341 11,751 66,590 47.9%

Year 5 136,800 27,360 2,400 166,560 6,840 2,165 2,165 1,732 2,598 5,250 5,412 1,299 10,600 42,088 10,824 90,972 75,588 11,338 64,249 45.4%

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 48.2% and the average net income is around $62,500.

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6.5

Projected Balance Sheet

The balance sheet shows the projected assets and liabilities of the company.
AMUSEMENT PARK PROJECTED BALANCE SHEET Assets Cash Inventories Total current assets Equipment Fixture Furniture Establishment expenses Accumulated depreciation Net Fixed Assets Total assets Liabilities & Owners' equity Expenses payable Current liabilities Invested Capital Retained earnings Owners' equity Total liabilities & owners' equity

Year 1 26,375 1,320 27,695 205,000 12,500 4,500 10,000 22,088 209,913 237,608

Year 2 24,793 1,500 26,293 255,000 12,500 4,500 10,000 49,175 232,825 259,118

Year 3 35,971 1,650 37,621 305,000 12,500 4,500 10,000 81,263 250,738 288,358

Year 4 39,701 1,680 41,381 355,000 12,500 4,500 10,000 118,350 263,650 305,031

Year 5 36,068 1,710 37,778 405,000 12,500 4,500 10,000 160,438 271,563 309,340

4,308 4,308 222,000 11,300 233,300 237,608

4,424 4,424 222,000 32,694 254,694 259,118

4,530 4,530 222,000 61,828 283,828 288,358

4,613 4,613 222,000 78,419 300,419 305,031

4,672 4,672 222,000 82,668 304,668 309,340

STATEMENT OF RETAINED EARNINGS Retained earnings at 1 January Net profit (loss) for the year Dividends distributed Retained earnings at 31 December

Year 1 0 51,300 40,000 11,300

Year 2 11,300 61,394 40,000 32,694

Year 3 32,694 69,135 40,000 61,828

Year 4 61,828 66,590 50,000 78,419

Year 5 78,419 64,249 60,000 82,668

Each year, the company is expects to acquire new equipment (rides) that replace the old ones for an average amount of $50,000 per year. These amounts will be invested from the cash flows of the business generated by the operations. The company will be able to distribute dividends amounting to $40,000 in year 1 through year 3, $50,000 in year 4 and $60,000 in year 5.

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6.6

Projected Cash Flows

The following table shows the projected cash flows of the amusement park.

STATEMENT OF CASH FLOWS Net income Adjustments to reconcile net income to cash provided by operating activities Depreciation Changes in inventories Changes in expense payables Total Adjustments Cash provided by operating activities Cash Flow from Investing Activities Capital expenditures Investment in fixed assets Net cash used in investing activities Cash Flow from Financing Activities Capital injected Dividends distribted Cash provided by financing activities Cash at beginning of year Changes in cash Cash at end of year

Year 1 51,300

Year 2 61,394

Year 3 69,135

Year 4 66,590

Year 5 64,249

22,088 (1,320) 4,308 25,076 76,375

27,088 (180) 116 27,024 88,418

32,088 (150) 105 32,043 101,177

37,088 (30) 83 37,141 103,731

42,088 (30) 59 42,117 106,366

(232,000) (232,000)

(50,000) (50,000)

(50,000) (50,000)

(50,000) (50,000)

(50,000) (50,000)

222,000 (40,000) 182,000 26,375 26,375

(40,000) (40,000) 26,375 (1,582) 24,793

(40,000) (40,000) 24,793 11,177 35,971

(50,000) (50,000) 35,971 3,731 39,701

(60,000) (60,000) 39,701 (3,634) 36,068

The statement of cash flows shows the cash provided/used in operations, investing and financing activities. The statement shows the capital of $222,000 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 operations of the company; the shareholders will not inject money to finance the equipments. The main goal for acquiring these 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.

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6.7

Ratio analysis

The following table shows the main financial ratios for the amusement park.

Ratio Analysis
Liquidity Ratios Current Ratio Working Capital Profitability Ratios Net Profit Margin Financial Strength Total Debt to Owners' Equity Management Effectiveness Return on Assets Return on Equity = ROE Return on Investment = ROI Asset Management (Efficiency) Total Assets Turnover: Sales/tot assets Total Debt to Total Assets

Year 1 6.43 23,387 47% 0.02 25% 26% 29% 25% 2%

Year 2 5.94 21,869 50% 0.02 28% 28% 31% 28% 2%

Year 3 8.31 33,091 51% 0.02 28% 29% 32% 28% 2%

Year 4 8.97 36,769 48% 0.02 26% 26% 30% 26% 2%

Year 5 8.09 33,106 45% 0.02 24% 25% 28% 24% 2%

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 28% in year 3, then slightly declines as the companys assets continue growing with new equipment being acquired each year. Return on equity and return on investment also increase with the growth in profitability, but then decline due to the continuous increase in investment in new equipment. The Return on equity declines in years 4 and 5 due to the continuous growth in equity in these years. The total assets turnover, which is sales divided by total assets, is expected to improve over the years with the growth in sales. It declines slightly in years 4 and 5 due to growth in total assets.

6.8

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 $64,561 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 Total Variable Costs Total Fixed Costs

Break-even revenues

127,520 5,280 61,888

64,561

145,600 6,000 67,372

70,267

160,800 6,600 72,865

75,984

163,680 6,720 78,619

81,985

166,560 6,840 84,132

87,735

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6.9

Sensitivity analysis

A worst-case scenario is taken by assuming a lower number of 25% less kids playing in the amusement park. In this scenario, the amusement park will have an average net profit of $31,566 and an average net profit margin of 32.4%. The IRR is 9% and the payback period is 9 years and 9 months. A best-case scenario is developed considering 20% higher number of kids playing in the park per day. This scenario gives an average profitability of around $87,495 and an average profit margin of 56.1% The IRR is 40% and the payback period is 3 years.

Sensitivity Analysis
Number of kids playing per day Year 1 Year 2 Year 3 Year 4 Year 5 Profitability Average net income Average net profit margin Internal Rate of Return (IRR) Payback Period

Worst Case (25% less) 165 190 200 210 215

Most Likely 220 250 275 280 285

Best Case (20% more) 265 300 330 336 345

31,566 32.4% 9% 9 years 9 months

62,534 48.2% 28% 4 years 3 months

87,495 56.1% 40% 3 years

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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 Akkar. The park will offer 9 part time job opportunities for Akkar region residents and most importantly, it will provide a quality amusement park for the children where special events could also be organized.

Feasibility Study Amusement Park Akkar, Minyeh, Donniyeh

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