Oceanside Pub Tuckerton, New Jersey

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1 EB5 Direct Investment Business Plan May 2017

2 Table of Contents 1.0 Executive Summary Project Description Location NAICS Code Financial Summary Sources and Uses Project Cost Breakdown Forecast Summary Return of Investment Return on Investment Cash Flow to Equity Potential Rate of Return Project Timelines Hiring Timeline Project Milestones Market Potential Local Market Potential Cautionary Statement Matter of Ho Business Plan Compliance Targeted Employment Area Designation Management Management Team Development Team Staffing Organization Chart Job Descriptions Oceanside Pub Tuckerton Seaport Ocean County Demographic and Economic Summary Market Demand Analysis Local Market Demand Tuckerton Target Market Overview 30

3 7.1.2 Local Market Analysis Key Takeaways New Jersey Tourist Market Overview Industry Demand Overview Market Analysis Competition Strategy and Implementation Financials Income Statement Cash Flow Summary Balance Sheet 56 Data Sources 57

4 1.0 Executive Summary The Oceanside Pub is located in, a historical port city with lots of charm and tourist draw. Famous for duck decoy carvers, ship building and the export of salt and wood; Tuckerton provides a rich history for tourist to enjoy. Ocean County, where Tuckerton is situated, saw its tourism dollars grow another three percent in 2016 bringing the amount tourism injects into the local economy to $4.68 billion. Our premier boardwalks, beaches, amusement parks, and recreational activities have collectively drawn hundreds of thousands of people to Ocean County during the summer season, said Ocean County Freeholder Director Joseph H. Vicari, who serves as liaison to tourism and business development. Tourism brings jobs and helps our economy, he said. I am happy to see this growth. Ocean County had a five percent increase in tourism revenues in 2015 bringing the number to $4.6 billion. According to a report issued by the state Division of Travel and Tourism, Ocean County continues to account for more than 10 percent of all tourism dollars generated in the state. In 2016, Ocean County tourism generated $463 million in state and local tax revenue, an increase of $12 million. Additionally, more than 37,000 tourism-related jobs were created in the county. Statewide, tourism demand grew 2.9 percent in 2016 to reach $44.1 billion. In 2016, Ocean County expanded its promotional efforts to draw more tourists to the region including a new website, Facebook page, a revised events calendar, expanded distribution of information, aggressive marketing and the continuation of promotional grants. 1.1 PROJECT DESCRIPTION This business plan establishes the basis for an EB5 direct investment into a renovation of the Oceanside Pub in the borough of Tuckerton in Ocean County, New Jersey. The business will operate under the trade name Oceanside Pub. The entire Project will require $2,025,000, of which $1,500,000 will be EB5 foreign investor funding. Project funding will be used for the purchase of the existing restaurant and land as well as renovation and outfitting of the P a g e 1 57

restaurant. Thirty-three full-time employees will staff the operation, which means that three investors will accrue 11 jobs each for their $500,000 investment.

Within walking distance from the Tavern is the Tuckerton Seaport, a working maritime museum and village.

5 restaurant. Thirty-three full-time employees will staff the operation, which means that three investors will accrue 11 jobs each for their $500,000 investment. Eleven jobs exceeds the minimum 10 jobs required per investor. 1.2 LOCATION The Pub is located at 123 South Main Street, in Ocean County. Within walking distance from the Tavern is the Tuckerton Seaport, a working maritime museum and village. It features several re-created historic buildings and has been a major attraction to the area since it opened in The Pub is strategically positioned on a major New Jersey highway Route 9 which runs north south from Cape May to New York along the Jersey Shore areas. Local traffic as well as tourist traffic has easy access to the restaurant. 1.3 NAICS CODE Restaurants This industry comprises establishments primarily engaged in one of the following: (1) providing food services to patrons who order and are served while seated (i.e., waiter/waitress service), and pay after eating; (2) providingf food services to patrons who generally order or select items and pay before eating; or (3) preparing and/or serving a specialty snack and/or nonalcoholic beverages for consumption on or near the premises. ( 1.4 FINANCIAL SUMMARY Sources and Uses SOURCES EB5 Equity $1,500,000 Construction Loan $350,000 Cash Equity $175,000 TOTAL SOURCES $2,025,000 USES Construction Total $1,090,750 Restaurant Purchase $650,000 Financing Fees $75,000 Soft Cost $59,808 Working Capital $54,904 Pre Opening Cost $54,538 Interest Reserve $40,000 TOTAL USES $2,025,000 P a g e 2 57

6 ACCOUNTING NOTES: 1. The Oceanside Pub developers will invest $100,00 into the venture. 2. The $650,000 restaurant purchase amount reflects the cost of the Land and Building, $415,000; Equipment, Furnishings and Liquor License, $160,000; Goodwill, $70,000; and, Covenant Not to Compete, $5, The renovation contractor estimate is $1,090,750 (please refer to section 1.4.2) 4. The construction loan amount reflects one obtained at 4.5% Project Cost Breakdown RS Means Validation Overview CLIENT RS MEANS RS MEANS WITH LOCATION Tax Rate 35.0% 35.0% 35.0% Depreciation, Straight-Line, Years (Residual, $0,00) Land Area In Square Feet 46,225 46,225 46,225 Building, Total Square Feet 3,200 3,200 3,200 Building Cost Per Square Foot, Base Construction $182.4 $163.9 $177.0 Building Cost Per Square Foot, Contractor Fees $6.3 $16.4 $17.7 Building Cost Per Square Foot, Architect Fees $13.2 $13.2 $14.3 Building Cost Per Square Foot, Total $201.9 $218.2 $235.6 Building Cost Per Square Foot, Base Construction % 90.3% 75.1% 75.1% Building Cost Per Square Foot, Contractor Fees 10.0% 25.0% 25.0% Building Cost Per Square Foot, Architect Fees 7.0% 7.0% 7.0% Building Cost Per Square Foot, Location Factor, Vineland, New Jersey 1.08 P a g e 3 57

7 RS Means Cost Per Square Foot Breakdown PER SQUARE FOOT COSTS RS MEANS WITH CATEGORY CLIENT CATEGORY CLIENT RS MEANS LOCATION FACTOR D20 Plumbing Plumbing $10.0 $13.7 $14.81 D30 HVAC HVAC $7.5 $38.3 $41.39 D50 Electrical Electric $6.9 $8.4 $ Partitions Interior Walls $16.3 $2.8 $ Roof Construction New Roof $6.9 $7.4 $ Exterior Walls Exterior Façade $19.4 $10.6 $ Exterior Windows Windows $10.0 $4.5 $ Roof Coverings Insulation (roof) $8.1 $2.5 $ Floor Finishes Flooring $23.4 $8.6 $ Ceiling Finishes Ceiling $11.7 $4.7 $ Lighting and Wiring Lighting $11.9 $10.0 $10.78 Demolition/Site Work Demolition $10.9 $11.3 $12.23 Specialty Construction Deck Deck and Pergula $10.2 $8.6 $9.32 Landscaping Landscaping and Irrigation $5.6 $9.1 $9.80 Fireplace Fireplace $7.8 $7.8 $8.44 Fireplace Stone Fireplace Stone $5.9 $5.9 $6.41 Paint Paint $5.0 $5.0 $5.40 Signage Signage $4.9 $4.9 $5.27 Contractor s Fees General Conditions $6.3 $41.0 $44.28 Architectural Architectural $13.2 $13.2 $14.29 TOTAL SQUARE FOOTAGE COSTS $201.9 $218.2 $ The developer has estimated $ per square foot for Project renovation. According to RS Means, Square Foot Costs, 37th Annual Edition (2016), the cost per square foot for renovation of a stone veneer, steel frame restaurant would be $ Costs are adjusted to a specific location by multiplying the base cost by the factor for that city (in this case, Vineland New Jersey was the closest comparator) of 1.08; this brings the RS Means base cost of $218.2 per square foot to $ per square foot. While the developer s base construction costs are considerably higher than those indicated by RS Means, their contractor s fees are lower by equal measure thus compensating for the difference. Overall construction costs for a building of this type were estimated to be $ per square foot. When evaluated in the context of the RS Means industry standard, the developer's estimate of $ is less than and well within the industry norm. RSMeans Square Foot Costs ( This book is designed to be as comprehensive and as easy to use as possible. To that end they have made certain P a g e 4 57

All costs and adjustments in this manual were developed from the RSMeans Building Construction Cost Data, Assemblies Cost Data, Residential Cost Data, and Light Commercial Cost Data.

8 assumptions and limited its scope in two key ways: 1. They have established material prices based on a national average; 2. They have computed labor costs based on a 30-city national average of union wage rates. All costs and adjustments in this manual were developed from the RSMeans Building Construction Cost Data, Assemblies Cost Data, Residential Cost Data, and Light Commercial Cost Data. Costs include labor, material, overhead and profit, and general conditions and architects fees where specified. No allowance is made for sales tax, financing, premiums for material and labor, or unusual business and weather conditions Forecast Summary Operating Income and Net Income In this scenario, operating income increases steadily over five years with revenue increasing at a rate equal to or greater than expense. Net income decreases in year three when the payment to EB5 investors begins and then continues to increase. Cash, Total Assets and Total Owner Equity Positive cash flow, increasing for all five years, enables total assets to increase even accounting for accumulated depreciation; and ensures a consistent increase in owner equity Return of Investment Each Investment carries significant risks related to the repayment of principal. Liquidity events at the asset level, repayment of the loan, and ultimately, return of capital to the Investor may occur through sale, refinance, or some other liquidity event. In no event may the Investor s capital investment be returned to the Investor prior to satisfying USCIS requirement for successful attainment of permanent resident status. P a g e 5 57

1.4.5 Return on Investment EB-5 investors will be offered a return of 5.0% annually on their investment after the two-year conditional residence period has been satisfied.

9 1.4.5 Return on Investment EB-5 investors will be offered a return of 5.0% annually on their investment after the two-year conditional residence period has been satisfied. The Investor s principal must be at risk throughout the term of investment as outlined by the USCIS and in no event will be returned to the investor prior to achieving all criteria necessary to satisfy removal of conditions at the time of I-829 adjudication by the USCIS Cash Flow to Equity Potential Rate of Return Based on an internal rate of return of 11%, a $500,000 investment has the potential to increase in value from $500,000 to $756,728 over a five-year period. This projected return will be dependent on fluctuations, if any, in actual cash flow. Investor Return Schedule Year 1 Year 2 Year 3 Year 4 Year 5 Investment Offerings 1 Total Investment Opportunity $500,000 Investment Value $500,000 $554,578 $615,113 $682,256 $756, PROJECT TIMELINES Hiring Timeline POSITION FULL-TIME EMPLOYEES SALARY ANNUAL PAYROLL ANTICIPATED 2018 HIRE DATE Owner Managers 2.00 $25,000 $50,000 March 18, 2018 Management Staff 3.00 $37,500 $112,500 March 18, 2018 Head Chef 1.00 $27,500 $27,500 March 18, 2018 Sous-chef 2.00 $21,330 $42,660 March 18, 2018 Cooks 2.00 $31,270 $62,540 March 18, 2018 Food Preparation Workers 3.00 $21,330 $63,990 March 18, 2018 Servers $18,780 $187,800 March 18, 2018 Bar Staff 8.00 $26,020 $208,160 March 18, 2018 Hostess 2.00 $20,960 $41,920 March 18, 2018 TOTALS 33 $797,070 The average annual salary for Oceanside Pub employees is anticipated to be $25,521, which is above the New Jersey Department of Labor average of $24,850 for restaurant employees. P a g e 6 57

998 annually (based on a four percent penetration rate) within one-mile radius of the Oceanside Pub based on an average spend of $25 per individual Potential capture of market outside of the

10 1.5.2 Project Milestones 1.6 MARKET POTENTIAL Local target market area defined as Tuckerton area, zip code Potential year one gross revenue of $1,629,348 Potential demand from the yearround local target market of 998 annually (based on a four percent penetration rate) within one-mile radius of the Oceanside Pub based on an average spend of $25 per individual Potential capture of market outside of the local market made up primarily of tourist visitors to the area of 25,913 based on a four percent penetration rate for that market Location in Ocean County, New Jersey, which exhibited 3.1 percent growth in tourism impacts in 2016 Renovation of the Tuckerton Pub, a name and location well recognized in the community, into a full-service restaurant and bar. P a g e 7 57

11 1.6.1 Local Market Potential The market potential for the Oceanside Pub exists on two levels: The year-round local population and nonresident visitors to Tuckerton Potential Target Market Local Resident Market 998 1,038 1,064 1,090 1,118 Visitors to Ocean County 1,241 1,272 1,304 1,336 1,370 Total Potential Market 2,405 2,310 2,368 2,427 2,488 Potential Target Market Local Resident Market $710,429 $738,999 $757,474 $776,411 $795,821 Visitors to Ocean County $918,919 $955,676 $993,903 $1,033,659 $1,075,005 Total Potential Market $1,629,348 $1,694,675 $1,751,377 $1,810,070 $1,870,826 Anticipated Project Sales $1,627,348 $1,692,675 $1,749,377 $1,808,070 $1,868,826 Projections are based on historical percentage change for these categories. 1.7 CAUTIONARY STATEMENT The forward-looking statements included herein are also based on certain current budgeting considerations, and other assumptions relating to the ability of the Company to obtain returns for the investors in the Oceanside Pub, successfully market its services, procure sufficient capital to expand operations, and maintain strict regulatory procedures while conducting business. Assumptions relating to the proceeding and foregoing information involve judgments by the Company that are difficult to predict accurately and are subject to numerous factors that may materially affect the Company s results. Budgeting, investment, and other managerial decisions are subjective and are thus susceptible to interpretations and periodic revisions based on actual experience and business developments. The impact of such revisions may cause the Company to alter budgets and amend strategies, any or all of which may materially affect the Company s results. The foregoing considerations, as well as a variety of other factors not set forth herein, could cause the actual results and experience of the Company to differ widely or materially from the anticipated results or other expectations in the forward-looking statements. The Oceanside Pub has prepared projections regarding the anticipated financial performance of the Project. The projections are hypothetical and are based on the accounting assumptions listed in this section, assumptions that may prove to be inaccurate and that are subject to future conditions that may be beyond the control of the Company. Oceanside Pub may experience unanticipated costs or lower revenues than forecasted. There are no assurances that the results that may be shown in the projections would in fact be realized by the Company. The projections have been prepared by the Company based on industry-standard performance standards and the results of market studies validating this information. All such statements are based on the Company s expectations and are subject to a number of risks and P a g e 8 57

12 uncertainties, many of which are beyond the Company s control. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained herein will in fact occur. 1.8 MATTER OF HO BUSINESS PLAN COMPLIANCE Regarding Matter of Ho, 22 I&N Dec. 206: A comprehensive business plan as contemplated by the regulations should contain, at minimum, a description of the business, its products and/or services, and its objectives. A description of the business, its products and/or services, and its objectives (Please refer to Sections 1.0 and 4.0). The plan should contain a market analysis (this Plan contains a project-specific market and demand analysis; Please refer to Sections 6.0 and 7.0) The plan should list the required permits and licenses obtained. (Will be obtained, as necessary) If applicable, it should describe the manufacturing or production process, the materials required, and the supply sources. (Not applicable) The plan should detail any contracts executed for the supply of materials and/or the distribution of products. (Please refer to Section 3.4) The plan should set forth the business's organizational structure and its personnel's experience. (Detailed in Section 3.0) It should explain the business staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions. (The projected hiring timeline is presented in Sections and 3.3) It should contain sales, costs, operating expense, and income projections and detail the bases on which they were calculated. Most importantly, the business plan must be credible. (The business plan contains a full set of five-year financials in Section 11.0 and Sources and Uses, a Forecast Summary and Potential Investor Return in Section 1.0) The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses (Both the market analysis and competition are a part of sections 6.0 and 7.0, but are also evaluated in section 8.0). A comparison of the competition s products and pricing structures (This is part of Section 8.0) The Plan should discuss the marketing strategy of the business, including pricing, advertising, and servicing (This is discussed in Section 9.0). A description of the target market/prospective customers of the new commercial enterprise (This is explored in Section 6.1.1). P a g e 9 57

13 2.0 Targeted Employment Area Designation P a g e 10 57

14 P a g e 11 57

15 3.0 Management 3.1 MANAGEMENT TEAM Andrew Merriweather : Co-Owner Oceanside Pub Andrew is a third generation restaurant owner. He grew up in the restaurant business learning all aspects of the business and operations first hand. His family has owned and operated restaurants in New Jersey and Pennsylvania for over 60 years. He attended and graduated from the Culinary Institute of America and continues his education through memberships, trade shows and educational classes offered by industry institutions. In addition to his restaurant experience Andrew has a successful real estate investment and property management experience owning and managing year round vacation rentals on Long Beach Island. Jim Brewster: Co-Owner Jim has worked under Andrew s tutelage for twenty years as a manger at other restaurants and bars owned by the Merriweather family. He started as a bar back and worked his way up into management. This experience gave him a wide array of skills utilized in dealing with guest, staff and vendors. Jim has a strong design to please and that shows as he interacts with guest making him a local draw. 3.2 DEVELOPMENT TEAM ABC Associates, Inc. Design Architect and Owner s Representative ABC Associates, Inc is based in Trenton, New Jersey and is an international firm specializing in the multi-disciplinary facets of entertainment and hospitality architecture, design and planning. ABC embraces all aspects of the design project with an emphasis in supporting the client s needs.the firm is made of architects, designers, project managers and branding experts in the gaming and hospitality industries working for the best in class operators. The industry s most talented architects, designers, planners and artist come together at ABC to deliver quality and innovative revenue producing facilities for their clients. ABC s involvement includes project master planning for sites in excess of $700,000,000 in development value as well as detailed architectural design for projects from $5,000,000 to $700,000,000. Thomas Erdogan, R.A. Architect of Record Thomas was credited as Architect of Record for the Trump Casino Properties in Atlantic City, New Jersey for a duration of 16 years. He has also conducted architectural design and construction management for the Sands Casino in Atlantic City as well as various projects for Bally s Casino, Atlantic City. He served in New Jersey s Department of Community Affairs as the chief examiner for assisted living facility projects for another 15 years and has coordinated with ABC Group on a number of projects over 25 years of his architectural career. Crohn, Merkel & Associates, Inc. Civil Engineer A New Jersey coastal region land engineering firm serving on many area municipal planning P a g e 12 57

16 boards, zoning boards as well as area utility authorities for over 30 years. The firm has a range of seasoned principals with diverse expertise in all aspects of land development and regulatory criteria. The Walsh Group Structural Engineer The Walsh Group provides structural engineering, parking planning and design, and construction engineering services to clients the world over. Our projects run the gamut in both size and complexity. But in every case we work collaboratively with other team members to design projects that get built successfully, within budget and on schedule. Their strength really lies in our highly specialized team. With diverse skill sets, the best tools and most advanced technology The Walsh Group engineers better buildings. From advanced structural analysis techniques and building information modeling to the latest advances in supplemental damping systems, we are at the forefront of building technology. ABC first engaged with The Walsh Group in 1990 for design development at casino properties in Atlantic City (and later at other properties across the United States,) for their efficient and vastly capable design related to the hospitality and entertainment industry. Their capabilities are considerably more diverse however and have led them to be recipients of many prestigious awards for premier properties worldwide out of their offices in New York and Philadelphia. Assisi MEP and F Engineer Founded in 1986 with E.I. Dupont de Nemours as its first client, Assisi has established a benchmark for other professional engineers by developing a strong discipline toward cutting edge technology implementation in it s projects which range from major airport facilities throughout the United States, large manufacturing sector facility designs and finally in the hospitality sector. The firm has over 16 mature principals with advanced degrees and decades of experience. The firm maintains a very strong commitment to contribution to it s community as well as it s involvement in professional association guidance efforts. In addition to the principal team members mentioned above ABC has retained professional consulting and testing services from firms with certain expertise in areas such as marine environmental testing, landside geological testing and engineering as well as traffic engineering services. 3.3 STAFFING The Company believes that a staff of 33 full-time employees will enable the Oceanside Pub to operate efficiently and to effectively compete in the target market area. P a g e 13 57

17 3.3.1 Organization Chart OWNER/MANAGER (1) OWNER/MANAGER (1) Service Manager (1) Chef Manager (1) Bar Manager (1) Servers (10) Head Chef (1) Bartenders (4) Hostesses (2) Cooks (2) Baristas (4) Sous Chefs (2) Food Preparation (3) Job Descriptions Owner/Managers 2 (Two) Full-Time Employees The restaurant will be collaboratively managed by the owner/managers. While both men will have oversight responsibility for restaurant operation, it is likely that one will be responsible for the policies and procedures that will provide the framework for how the restaurant functions in order to meet goals and objectives; the other will oversee day-to-day operations and will ensure that operations in all departments ensure seamless service delivery. Policy and procedure management will involve such things as development of the restaurant s operating framework, business strategy, performance guidelines, quality control guidelines, and governing service and food service policies and procedures. Day-to-day operational oversight will involve supervision of department managers, development of the operating budget, purchasing and inventory control, ensuring that quality control is maintained, and overall management of food preparation and food service standards. P a g e 14 57

18 Service, Chef and Bar Manager 3 (Three) Full-Time Employees Plan, direct, and coordinate the activities of their respective departments; establish job descriptions and position requirements; establish departmental policies and procedures; oversee quality control; coordinate operations with other section managers; and, report to management. Head Chef and Cooks 3 (Three) Full-Time Employees Establish the methodology and quality levels for the preparation, seasoning, and cooking of salads, soups, fish, meats, vegetables, desserts, or other foods. May plan and price menu items, order supplies, keep records and accounts, and report to the Chef Manager. Sous-chefs 2 (Two) Full-Time Employees Prepare and cook food in restaurant under the supervision of cooks. Duties of these cooks are limited to preparation of a few basic items and normally involve operating large-volume singlepurpose cooking equipment. Food Preparation Workers 3 (Three) Full-Time Employees Perform a variety of food preparation duties other than cooking, such as preparing cold foods and shellfish, slicing meat, and brewing coffee or tea. Servers 10 (Ten) Full-Time Employees Servers will take orders, assure that the orders are filled correctly, serve items ordered from the bar, serve food items ordered, ensure that customers do not need anything and are happy with their service, and ensure that restaurant tabs are tallied correctly. Hostesses 2 (Two) Full-Time Employees Welcome patrons, seat them at tables or in lounge, and help ensure quality of facilities and service. Bartenders 4 (Four) Full-Time Employees Mix and serve drinks to patrons, directly or through waitstaff, manage baristas, and ensure customer satisfaction. Baristas 4 (Four) Full-Time Employees Prepare and serve alcoholic beverages based on a broad-based knowledge of the ingredients in most commonly-ordered drinks. P a g e 15 57

4.0 Oceanside Pub Oceanside Pub Project Highlights Tuckerton New Jersey location Located on major Route #9 3,200 square foot restaurant and bar Dining Room seating for 110 Bar seating for 20 Patio

19 4.0 Oceanside Pub Oceanside Pub Project Highlights Tuckerton New Jersey location Located on major Route #9 3,200 square foot restaurant and bar Dining Room seating for 110 Bar seating for 20 Patio seating for 45 Liquor license 1,400 square foot patio addition Land area of 3.66 square miles New Jersey public transit available Open for lunch and dinner Tourist attractions, beach and golf courses within a four-mile radius Restaurant Concept A new company is being formed for the purchase and management of an existing restaurant in. The restaurant will be renovated both interior and exterior. In addition to the renovations the menu will be revised and both operational and inventory controls will be implemented. The restaurant will have a bar with casual dining booths, a main dining room and an outdoor patio dining area all totaling 175 guest seating. The design will incorporate the local history emphasizing the maritime past industries as well as the wood carving artisans that flourished in P a g e 16 57

20 the area. A casual comfortable design is the focus to attract the local year round business in addition to the summer tourist. Co-op marketing will be implemented both online and via promotional coupons with various local hotels and museums. These activities will help build a database of guest for targeted promotions. Live entertainment will be utilized in the bar creating a fun atmosphere promoting frequent returns. Public Relations activities on Facebook and Twitter will keep the bar scene electrified. An exclusive selection of beers will be available to guest providing new experiences and opportunity for flavor experimenting. In the dining areas seasonal local farm products, meats and seafood, will be used for featured menu items providing an opportunity for an unique experience year round. The fare will be casual, simple and fresh. The restaurant will be positioned in the market place as a quality restaurant offering value and a fun experience. New technology plans include the creation of a website, guest database for promotional marketing, cross marketing with other businesses and tourist attractions and cost management software. Inventory software will optimize and reduce food spoilage and a vendor database will help management single out top purveyors with quality products at best prices. A new Point of Sale system will help streamline and optimize daily operations by providing extensive reports to management for cost control, purchasing and payroll. Existing Pub P a g e 17 57

21 Renderings of Renovated Restaurant P a g e 18 57

5.0 Tuckerton Seaport Once known as the Barnegat Bay Decoy and Baymen s Museum, the Tuckerton Seaport has evolved into a maritime village located along historic Tuckerton Creek in Tuckerton, New

Tuckerton Seaport includes 17 historic and recreated buildings connected by a boardwalk, a maritime forest and wetlands nature trail, two houseboats, a decoy gallery, a working boatworks building in

22 5.0 Tuckerton Seaport Once known as the Barnegat Bay Decoy and Baymen s Museum, the Tuckerton Seaport has evolved into a maritime village located along historic Tuckerton Creek in Tuckerton, New Jersey. This 40-acre site south of the junction of County Road 539 and State Road 9 at 120 West Main Street brings to life the history and heritage of the Jersey shore. Tuckerton Seaport includes 17 historic and recreated buildings connected by a boardwalk, a maritime forest and wetlands nature trail, two houseboats, a decoy gallery, a working boatworks building in which restoration of sneakbox designs of the Barnegat Bay occurs, a historic marine railway (currently under reconstruction), decoy carving workshops and the recreated Tucker s Island Lighthouse. Daily demonstrators and traditional artists bring the Jersey Shore s rich maritime heritage to life. The replica of Tucker's Island Lighthouse displays permanent and temporary exhibits. The Tuckerton Yacht Club also houses interpretive exhibits. Two other buildings one featuring the history of South Jersey Shore hotels and resorts and the other showcasing an extensive decoy collection are on site. Bring the family and spend the day exploring exhibits and meet the people who lived, worked and played along the Barnegat Bay: decoy carvers, boat builders, basket makers, P a g e 19 57

quilters, commercial fishermen, artists and other baymen and women. General programs offered include hands on activities, workshops, tours and classes taught by Jersey Shore artists.

intra and international trade and travel, the origins of the U.S. Life Saving Service, shipwrecks and the Jersey Shore s first resort.

23 quilters, commercial fishermen, artists and other baymen and women. General programs offered include hands on activities, workshops, tours and classes taught by Jersey Shore artists. The Tucker s Island Lighthouse features exhibits on privateers and pirates of the Jersey Coast, Tuckerton designated as a third Port of Entry at the start of a new nation for receipt and departure of intra and international trade and travel, the origins of the U.S. Life Saving Service, shipwrecks and the Jersey Shore s first resort. Tuckerton Seaport is also home to the Jersey Shore Folklife Center. The Center researches, documents, supports and presents the diverse communities and traditions of the Jersey Shore and the Pinelands. The Center presents folk art programs and exhibits at Tuckerton Seaport and manages the artist roster and guest demonstrator schedule, the Folk and Traditional Artist in Residence Program, the Jersey Traditions outreach program and changing artist exhibits in J.C. Parker s Decoy workshop. JSFC celebrates the profoundly creative spirit of the region, its traditional arts, and its occupational and recreational folklife. The Jacques Cousteau National Estuarine Research Reserve Interpretive Center and its Life on the Edge exhibit, housed in the Tuckerton Yacht Club at the seaport, are managed by the Institute of Marine and Coastal Sciences of Rutgers, The State University of New Jersey. The Borough of Tuckerton and Tuckerton Creek is located in one of the least disturbed places on the northeast coast of the United States. The Jacques Cousteau Coastal Center in Tuckerton, New Jersey serves as the hub for education and as an outreach programs associated with the Jacques Cousteau National Estuarine Research Reserve. The Center is a state-of-theart facility that includes a classroom equipped with video conferencing capability, P a g e 20 57

24 computer workstations with Internet, a library of K-12 curriculum materials, and a 16-bed dormitory. Managed by the Institute of Marine & Coastal Sciences at Rutgers University, the Center is designed to primarily serve adult learners including K-12 educators and coastal decisionmakers. Programs for families, senior citizens, and students are held at the Coastal Center and the Tuckerton Seaport. The Reserve encompasses habitat in and around the estuary where fresh water from the Mullica River and saltwater from the Atlantic Ocean mix in the Great Bay. Named for the famed Ocean Explorer Jacques Cousteau, the reserve conducts scientific research, hosts a variety of education and interpretive programs and encourages stewardship of these unique natural resources. At the Life on the Edge exhibit, visitors can go back in time to explore New Jersey s environmental past, present and future within the Jacques Cousteau National Estuary. Dive into an amazing experience that takes you through the Pinelands, Great Bay, Barrier Island and Open Ocean ecosystems that make up this pristine natural reserve. Tuckerton is a borough in Ocean County, New Jersey, named for founder Ebenezer Tucker ( ). Tuckerton was incorporated as a borough by an act of the New Jersey Legislature on February 18, 1901, from portions of Little Egg Harbor Township. The borough is surrounded by Little Egg Harbor Township, but is politically independent. Because Tuckerton and Little Egg Harbor share the same ZIP code and Little Egg Harbor has no true "downtown" area, many refer to Little Egg Harbor and surrounding suburbs as "Tuckerton". The area that is now Tuckerton was settled in Some of the early settlers were Andrews, Falkinburgs, Shourds, Ongs, Willets and Osborns. Edward Andrews settled on the east side of the Pohatcong Creek; his brother, Mordecai Andrews settled on the west side of the same creek. Edward, tired of going to Mount Holly Township with his grain, constructed a cedar log grist mill on the site of a dam built by beavers at the mouth of what is known as Tuckerton Creek. He built the grist mill in 1704, and it still stands to this day. P a g e 21 57

Tuckerton became a Port of Entry of the United States, but not the third port as is commonly believed, with Ebenezer Tucker appointed Collector, his commission bearing the date March 21, 1791, signed

25 Tuckerton became a Port of Entry of the United States, but not the third port as is commonly believed, with Ebenezer Tucker appointed Collector, his commission bearing the date March 21, 1791, signed by George Washington and Thomas Jefferson. It was six years later that Tuckerton became a post town with Reuben Tucker as its first postmaster. What was probably New Jersey's first summer resort was on Tucker's Island off shore from Little Egg Harbor. The island sported boarding houses, private cottages, and a school. In 1848 a Lighthouse was erected there, with Eben Rider as its first light keeper. In 1869 the Little Egg Harbor Lifesaving's Station was constructed there. Also known as Sea Haven, the island contained two hotels. The island was wiped away in a storm, including its lighthouse, which fell into the sea. At the Tuckerton Seaport Museum a re-created lighthouse has been built as well as other recreated buildings that were on Tuckers Island. In the lighthouse there are several wall-mounted pictures showing the instant that the original lighthouse fell into the sea. The original island remains under water. The area surrounding present-day Tuckerton was part of Burlington County until 1891 when it joined with Ocean County. Tuckerton was established in March 1901 with its first Mayor being Frank R. Austin. P a g e 22 57

26 6.0 Ocean County Demographic and Economic Summary POPULATION SUMMARY 2000 Total Population 510, Total Population 576, Total Population 587, Total Population 598, Annual Rate 0.38% Median Household Income 2016 $59, $60,326 Median Home Value 2016 $265, $317,389 Per Capita Income 2016 $31, $32,932 P a g e 23 57

27 Current median household income is $59,928 in the area, compared to $54,149 for all U.S. households. Median household income is projected to be $60,326 in five years, compared to $59,476 for all U.S. households. Current average household income is $81,180 in this area, compared to $77,008 for all U.S. households. Average household income is projected to be $86,620 in five years, compared to $84,021 for all U.S. households. Current per capita income is $31,127 in the area, compared to the U.S. per capita income of $29,472. The per capita income is projected to be $32,932 in five years, compared to $32,025 for all U.S. households. Currently, 54.7% of the 1,089,560 housing units in the area are owner occupied; 40.2%, renteroccupied; and 5.2% are vacant. Currently, in the United States, 55.4% of the housing units in the area are owner occupied; 32.9% are renter occupied; and 11.7% are vacant. HOUSING UNIT SUMMARY 2000 Housing Units 248,711 Owner Occupied Housing Units 67.1% Renter Occupied Housing Units 13.5% Vacant Housing Units 19.4% 2010 Housing Units 278,052 Owner Occupied Housing Units 64.5% Renter Occupied Housing Units 15.0% Vacant Housing Units 20.5% 2016 Housing Units 281,411 Owner Occupied Housing Units 62.1% Renter Occupied Housing Units 16.8% Vacant Housing Units 21.1% 2021 Housing Units 284,823 Owner Occupied Housing Units 61.9% Renter Occupied Housing Units 17.0% Vacant Housing Units 21.1% HOUSEHOLDS BY INCOME BY PERCENTAGE CHANGE PERCENTAGE CHANGE Household Income Base 222, ,641 4% <$15, % 10.2% 16% $15,000 - $24, % 8.4% 15% $25,000 - $34, % 9.1% 8% $35,000 - $49, % 15.0% 5% $50,000 - $74, % 9.7% 1% $75,000 - $99, % 13.3% -9% $100,000 - $149, % 15.0% -9% $150,000 - $199, % 8.3% -14% $200, % 5.9% -18% Average Household Income $81,180 $117,276 9% P a g e 24 57

28 Over the next five years, the number of Ocean County households are expected to increase by four percent. Income categories that will see the greatest increase in the number of households will be those in the $75,000 to over $200,000 range while the number of households in the income categories below $75,000 will decrease. Average household income over the same period will increase by nine percent. Data Note: Household population includes persons not residing in group quarters. Average Household Size is the household population divided by total households. Persons in families include the householder and persons related to the householder by birth, marriage, or adoption. Per Capita Income represents the income received by all persons aged 15 years and over divided by the total population. Source: U.S. Census Bureau, Census 2010 Summary File 1. Esri forecasts for 2016 and Esri converted Census 2000 data into 2010 geography CIVILIAN POPULATION OVER 16 IN LABOR FORCE Civilian Employed 95.7% Civilian Unemployed 4.3% 2016 EMPLOYED POPULATION OVER 16 BY INDUSTRY Total 264,045 Agriculture/Mining 0.3% Construction 7.9% Manufacturing 5.1% Wholesale Trade 2.9% Retail Trade 12.4% Transportation/Utilities 6.1% Information 2.3% Finance/Insurance/Real Estate 6.6% Services 51.0% Public Administration 5.3% 2016 EMPLOYED POPULATION OVER 16 BY OCCUPATION Total 264,045 White Collar 61.3% Management/Business/Financial 13.5% Professional 21.4% Sales 11.9% Administrative Support 14.5% Services 18.9% Blue Collar 19.8% Farming/Forestry/Fishing 0.3% Construction/Extraction 6.4% Installation/Maintenance/Repair 4.3% Production 3.0% Transportation/Material Moving 5.8% P a g e 25 57

Employment Regional Focus: Data and analysis for the Middlesex-Monmouth-Ocean and Trenton labor areas (Mercer, Middlesex, Monmouth and Ocean counties) Regional Focus is a quarterly publication of the

29 Employment Regional Focus: Data and analysis for the Middlesex-Monmouth-Ocean and Trenton labor areas (Mercer, Middlesex, Monmouth and Ocean counties) Regional Focus is a quarterly publication of the New Jersey Department of Labor, Division of Work- force Research and Analytics. Regional Employment Continues to Rise Employment advanced in both the Central Region (Mercer, Middlesex, Monmouth, and Ocean counties) and the state over the year. Total nonfarm jobholding increased by 31,100 or 2.8 percent in the Central Region between March 2015 and March The private sector added 27,600 of the total job gain while the public sector accounted for the remaining 3,500 jobs. Total employment in the Central Region has increased each year over the March-to-March period since Within the region, all of the employment sectors, except manufacturing (-1,100), posted gains over the year. Professional and business services (+8,000), trade, transportation and utilities (+5,600), construction (+4,600), and educational and health services (+4,400) posted the largest gains, respectively. However, construction was the fastest-growing sector with a gain of 11.8 percent. At the state level, all private industry sectors posted gains while government employment remained stable over the year. In the public sector, the region gained 3,500 jobs for a 1.8 percent increase over the year. State government jobs accounted for 2,300 jobs or 3.0 percent of the increase while local government, the largest employer of public workers, added 900 jobs or 0.8 percent. State government jobs are highly concentrated in Mercer County, which is home to the state capitol of Trenton. The region is also home to other major state government employers such as Rutgers University located in New Brunswick (Middle- sex County). In comparison, government jobs changed insignificantly at the state level (+300) over the year. A number of residential projects, especially in Lakewood and Jackson Townships (Ocean County), construction of large warehouses in South Brunswick and Cranbury (Middlesex County), and the continuing rebuilding of shore com- munities damaged during Hurricane Sandy contributed to the increase in construction activity. Trade, transportation and utilities was up by 3,000 jobs or 1.6 percent with job growth primarily concentrated in the transportation, warehousing and utilities industry (+2,300 or +6.3%). Professional and business services also experienced a significant job gain (+6,000 or +4.2%). P a g e 26 57

30 In the Trenton Labor Area, trade, transportation and utilities added 2,600 jobs over the year. The transportation, warehousing and utilities industry was the primary contributor to the increase of jobs in this sector. Robbinsville and Hamilton townships have been emerging as distribution hubs and continue to attract warehouse developments. Leisure and hospitality (-400) and construction (-200) declined over the year ending March The slowdown in construction could have resulted from the completion of some projects, even though the construction of a Costco store (Lawrence) and a Walmart (Hamilton) are underway in Mercer County. In the Middlesex-Monmouth- Ocean Labor Area, the region s largest labor area, employment rose to a level of 866,400 in March 2016, a gain of 23,400 jobs or 2.8 percent from the same month a year ago. However, job-holding in the Trenton Labor Area advanced at a slightly faster pace (+3.0% or +7,700 jobs). Construction expanded by a notable 4,800 jobs or 14.1 percent in the Middlesex- Monmouth-Ocean Labor Area during the year. Labor Area Outpaces Job Growth Changes in Nonfarm Employment March 15, 2015 to March 15, 2016 Region State Industry Sector Net % Net % Total Nonfarm Employment 31, , Private Sector 27, , Construction 4, , Manufacturing -1, Trade, Transportation and Utilities 5, , Information Financial Activities 2, , Professional and Business Services 8, , Education and Health Services 4, , Leisure and Hospitality 2, , Other Services 1, , Information 3, New Jersey 3,793 3,849 3,887 3,894 3,939 4,016 Central Region 1,032 1,046 1,059 1,074 1,098 1,129 Middlesex-Monmouth-Ocean Labor Area (Middlesex, Monmouth, and Ocean counties) Trenton Labor Area (Mercer County) P a g e 27 57

LABOR FORCE DATA The not seasonally adjusted unemployment rate for the Central Region was 4.7 percent in March 2016, declining from the 6.0 percent posted a year earlier.

By county, the March 2016 unemployment rate was fairly consistent across Mercer (4.3%), Middlesex (4.4%) and Monmouth (4.5%) counties. Ocean County had the highest rate in the region at 5.5 percent.

31 LABOR FORCE DATA The not seasonally adjusted unemployment rate for the Central Region was 4.7 percent in March 2016, declining from the 6.0 percent posted a year earlier. Statewide, the unadjusted unemployment rate in March 2016 was 5.0 percent, down by 1.5 percentage points from March By county, the March 2016 unemployment rate was fairly consistent across Mercer (4.3%), Middlesex (4.4%) and Monmouth (4.5%) counties. Ocean County had the highest rate in the region at 5.5 percent. Overview of Impact of Hurricane Sandy on the Ocean County Economy In the wake of devastating loss, the resiliency of Tuckerton s residents was never more apparent than during Hurricane Sandy and its aftermath. Where was the greatest impact? The Community Hardship Index provides the measure to compare the wide range of types of damage across New Jersey counties and towns. Monmouth and Ocean counties suffered the most overall, especially in terms of power outages, residential damage, residents in shelters and gasoline shortages. It also reveals that Somerset, Middlesex, Union, Hunterdon and Morris counties suffered significant residential damage; and Hudson, Union, Essex, Middlesex, Bergen and Passaic counties suffered significant commercial damage. Cape May and Atlantic counties suffered municipal damage, but they did not lose power for long when compared to other counties and residential and commercial damage was not as P a g e 28 57

32 widespread. The Index also reveals that Superstorm Sandy did not cause significant hardship in most of Gloucester, Camden, Cumberland or Salem counties, and was a minor event in Mercer, Burlington, Sussex and Warren counties. Ocean County is a place with an established sense of responsibility. People are proud of being from Ocean County and neighbors have a history of working together in good times and bad. This community pride has been important to both short- and long-term recovery. Volunteer participation is very high, and entities like the Ocean County Long-Term Recovery Group illustrate that Ocean County residents are committed to working together to restore their community. Throughout Ocean County, partnerships are an essential strength. Ocean County and its municipalities have been working not only across boundaries but also with private and non-profit partners working on sustainability, resilience, and recovery across New Jersey. Groups such as New Jersey Future, the Sustainable Jersey Resilience Network, the Jacques Cousteau National Estuarine Research Reserve, and the Barnegat Bay Partnership have and will continue to provide essential support for whole-community recovery. Perhaps the most important of Ocean County s strengths is its iconic sense of place. Ocean County is the embodiment of the Shore. With one-third of New Jersey s coastline and 17 coastal communities, Ocean County conjures images of sun, sand, and surf in close-knit communities. From the Barnegat Lighthouse to the Seaside Heights Boardwalk to Six Flags Great Adventure, people identify with the essence of Ocean County. Another aspect of this sense of place is the rich natural resources base in Ocean County. Barnegat Bay, Forsythe National Reserve, Island Beach State Park, and the Pinelands (among others) add value to the quality of life in Ocean County, as do conservation and open space preservation efforts. P a g e 29 57

7.0 Market Demand Analysis 7.1 LOCAL MARKET DEMAND The local market demand is based on a target market that has two components: Local residents and tourists.

33 7.0 Market Demand Analysis 7.1 LOCAL MARKET DEMAND The local market demand is based on a target market that has two components: Local residents and tourists. Using visitation and potential revenue from both of these sources, it appears that there is a sufficient market to support this new business in Tuckerton Target Market Overview Local Market Analysis In order to define the target market for the Oceanside Pub, first the sales from both resident and nonresident customers were determined. These numbers were specific to the Tuckerton target market area (zip code 08087). From Esri demographic profiles, the average spend per year was used to establish the number of visitors (Tuckerton sales divided by the average annual spend). In this case, the market consisted of two elements: The actual sales to local residents and the demand potential for sales to customers that came from outside the target market area (tourists). Inherent in determining the target market was the requirement for establishing the market penetration rate that would enable the Oceanside Pub to meet its sales goals. At a four percent share of the local residential market and a six percent share of sales to people that lived outside of the market area, the enterprise could pay operating expenses, service its debt load and show an increasing cash balance over five years. The level of revenue that the Company could expect based on this market share was determined. P a g e 30 57

Tuckerton Actual Restaurant Sales Annual Revenue Penetration Rate Base Year Revenue Total Full-Service Revenue Market $32,486,989 $1,594,005 Actual Local Sales $17,760,723 4% $710,429 Sales Based on

34 Tuckerton Actual Restaurant Sales Annual Revenue Penetration Rate Base Year Revenue Total Full-Service Revenue Market $32,486,989 $1,594,005 Actual Local Sales $17,760,723 4% $710,429 Sales Based on Potential Demand $14,726,266 6% $883,576 The year one baseline figures were established using the potential revenue calculations in the table above. Market Share Calculation Customer Market Share Monthly Annual Spend Per Individual Annual Spend Per Individual Potential Revenue Local Demand $25.00 $712 $710,429 Nonresident Demand 108 1,291 $25.00 $712 $918,919 Totals 191 2,288 $25.00 $712 $1,629,348 Using the market share required in operating year one as the baseline, the number of customers needed to make up the Oceanside Pub target market was projected over five years. Market Share by Customer Number Total Number of Customers Required from Local Population 998 1,038 1,064 1,090 1,118 Total Number of Customers Required from Tourist Population 1,241 1,272 1,304 1,336 1,370 Total Number of Customers Required Annually 2,405 2,310 2,368 2,427 2,488 Five-Year Calculation of Potential Revenue Potential Sales within the Local Target Market $710,429 $738,999 $757,474 $776,411 $795,821 Potential Sales from Outside the Market Area (Tourism) $918,919 $955,676 $993,903 $1,033,659 $1,075,005 Total Potential Sales $1,629,348 $1,694,675 $1,751,377 $1,810,070 $1,870,826 Anticipated Oceanside Pub Sales $1,627,348 $1,692,675 $1,749,377 $1,808,070 $1,868,826 P a g e 31 57

35 The other essential component of Tuckerton s target market is tourist visitors that spend their money in Ocean County. The table below shows the significance of these impacts. Location Lodging Food and Beverage Retail Recreation Transport Tourism Direct Sales (Millions) 2016 Second Homes New Jersey $11,471 $10,448 $7,775 $5,167 $7,019 $4,273 $41,881 Ocean County $1,383 $1,148 $998 $643 $508 $1,228 $4,679 Total 2015 New Jersey $11,160 $10,070 $7,663 $5,014 $6,815 $4,176 $40,721 Ocean County $1,359 $1,095 $972 $621 $490 $1,217 $4,537 Ocean County Year-Over-Year Change 2016 Versus % 4.6% 2.5% 3.4% 3.5% 0.9% 3.0% Direct Tourism Employment Percent Change New Jersey 312, , , , , , % Ocean County 24,716 25,979 25,737 25,666 26,119 26, % Ocean County Tax Impacts Percent Share of Change State Ocean County % 9.5% Key Takeaways 1. The demand from the local market is sufficient to potentially provide revenue at a level threequarters of that from tourist customers. 2. Tourist customers are sufficient in number to make up the remaining revenue required to make this enterprise profitable. 3. It is believed that the market share that has been anticipated by the new enterprise is realistic and reasonable, in line with industry standards. 4. If either the resident or tourist markets change, there should be sufficient demand in one or the other markets to enable the Company to achieve profitability if appropriate adjustments are made in operating expenses. P a g e 32 57

Oceanside Pub Target Market Within One-Mile Radius 7.2 NEW JERSEY TOURIST MARKET OVERVIEW 2016 Market Trends With increased visitation and good summer weather, New Jersey tourism flourished in 2016.

36 Oceanside Pub Target Market Within One-Mile Radius 7.2 NEW JERSEY TOURIST MARKET OVERVIEW 2016 Market Trends With increased visitation and good summer weather, New Jersey tourism flourished in marks seven straight years of spending and visitation growth Tourism demand grew 2.9% in 2016 to reach $44.1 billion Visitation expanded 3.3% For the first time in 10 years, casino win increased, supporting tourism sales. Visitor spending on food, recreation, and non-casino lodging drove much of the spending growth with continued low gas prices freeing up travel budgets. With continued growth in tourism sales, the employment and wages paid to New Jersey tourism workers rose in P a g e 33 57

37 Tourism Indicators In 2016, the tourism industry directly supported 321,231 jobs in New Jersey and sustained 517,559 jobs including indirect and induced impacts. Including all impacts, the industry accounts for 9.8% of total employment or nearly 1-in- 10 jobs in New Jersey. The tourism sector generated $38.2 billion of state GDP in 2016, representing 6.5% of the entire state economy. Including indirect and induced impacts, tourism in New Jersey generated $4.9 billion in state and local tax revenues. Without the tourism industry, New Jersey households would each need pay $1,525 in order to maintain the current level of state and local government services. Visits to New Jersey destinations grew 3.3% to 98.0 million in 2016 (source: DKSA, NTTO) Hotel room demand rose 2.3% (source: STR) The hotel average daily rate increased by 3.9% in 2016, helping overall hotel room revenue grow 4.6% (source: STR) State and municipal bed tax receipts grew 3.0% in 2016 (source: State Treasurers Office) Casino win increased 1.4% (source: Division of Gaming Enforcement) Lodging employment increased for the first time in three years Anticipated Trends in Visitor Volume Visitor volume reached 98.0 million in 2016, a 3.3% increase over P a g e 34 57

We expect visitation growth to continue to be positive in 2017, for a combination of reasons: Continued wage gains in the United States in 2017 Consumer confidence remains solid Uptick in vacation

visitation growth A key wildcard: the weather.

38 We expect visitation growth to continue to be positive in 2017, for a combination of reasons: Continued wage gains in the United States in 2017 Consumer confidence remains solid Uptick in vacation intentions in early 2017 Potential for turn-around in business travel in 2017 with pro-businesses governmental policies out of Washington These strengths will be countered by weak international visitation growth A key wildcard: the weather. As we have seen in the past couple of years, an ill-timed hurricane or winter storm that either impacts travel or forces evacuations of certain communities can have a significant impact on visitation. Tourism Employment As the cornerstone of the EB5 Visa program, impacts from employment are paramount. Tourism-related impacts in New Jersey are significant and the indirect and induced impacts from tourist activities are felt throughout the economy. All sectors of the New Jersey economy benefit from tourism activity directly and/or indirectly. The tourism sector directly and indirectly supported 517,559 jobs, or 9.8% of all employment in New Jersey last year. P a g e 35 57

39 Tourism generated the most employment in the restaurant, lodging, and retail sectors. Secondary benefits are realized across the entire economy through the supply chain and incomes as they are spent. 7.3 INDUSTRY DEMAND OVERVIEW Restaurant Industry 2016: Tableservice Trends Highlights The tableservice restaurant segment will continue to expand at a moderate pace in 2016, according to the National Restaurant Association s 2016 Restaurant Industry Forecast. Food and beverage sales in the tableservice segment are expected to total $259.2 billion in 2016, a 4.9 percent gain over the 2015 sales volume of $210.9 billon. In inflation-adjusted terms, tableservice restaurant sales are projected to increase at a 2.1 percent rate in 2016, which is essentially on par with the 2.2 percent real sales gain registered in Growth in the tableservice segment will be fueled by an economy that continues to improve, as well as elevated levels of pent-up demand among consumers across all income levels. In addition, there continues to be growth in the number of higher-income households, which are prime customers for tableservice restaurants. The tableservice segment will still face a host of challenges. Margins are expected to remain dampened, as cost pressures are present across several areas. Still, 2016 is expected to be a positive year for the tableservice segment, with food and beverage sales exceeding two percent real growth for the second consecutive year. Operators Are Optimistic About 2016 A solid majority of tableservice operators across all three segments are optimistic that their business will expand in Family-dining operators are the most bullish about 2016, with 69 percent expecting their business to improve and only four percent saying their sales will decline. Tableservice operators are also generally optimistic that their margins will improve in A majority of operators in each of the three segments think their profitability will be better in 2016 than it was in 2015, led by 60 percent of fine-dining operators. Current Business Environment For the most part, tableservice operators have positive things to say about the current business environment. When asked in December 2015 to rate business conditions for the overall U.S. restaurant industry, roughly three in four described business conditions as either excellent or good. When it came to their own business, tableservice operators were equally upbeat. Family- P a g e 36 57

dining operators were the most optimistic, with more than eight in 10 saying business conditions for their own restaurants were either excellent (34 percent) or good (48 percent).

When asked in December 2015, roughly seven in 10 tableservice operators said attracting new customers is a significant or moderate challenge for their business.

40 dining operators were the most optimistic, with more than eight in 10 saying business conditions for their own restaurants were either excellent (34 percent) or good (48 percent). Customers More Plentiful As the economy continues to improve, tableservice operators are finding it somewhat easier to fill seats, compared to recent years. When asked in December 2015, roughly seven in 10 tableservice operators said attracting new customers is a significant or moderate challenge for their business. Flash back to 2013, more than nine in 10 tableservice operators said this was a significant or moderate challenge for their business. Operators are also reporting an easier time getting patrons to return to their restaurants. Thirty-three percent of fine-dining operators and roughly four in 10 family-dining and casual-dining operators say bringing back repeat customers is a significant or moderate challenge. This was down across the board from 2013, particularly for family-dining and casual-dining operators. Importance of Repeat Customers With repeat customers representing a median of 60 percent of sales for tableservice operators, finding ways to bring them back is critical for creating a healthy business. In 2015, operators were generally successful in this endeavor. Thirty-five percent of family-dining operators say repeat customers were a larger proportion of their sales in 2015 than they were in 2014, while just five percent say they represented a smaller share. Among casual-dining and fine-dining operators, three in 10 say repeat customers comprised a larger share of their business in Food Matters Customers have different wants and needs when it comes to choosing a tableservice restaurant, so the NRA looked at how food and menu attributes stacked up among consumers. P a g e 37 57

41 Consumers number-one priority when they pick a tableservice restaurant is the opportunity to order their favorite food. Eighty-four percent of adults say it is important that some of their favorite food items are on the menu, a sentiment that is shared among consumers across all demographic groups. Many consumers also look to restaurants for new culinary experiences. Sixty-one percent of adults say an important factor is the chance to have innovative or creative food they can t make at home, while 51 percent want food they haven t tried before. Younger consumers are more likely to place an emphasis on those attributes when they choose a tableservice restaurant. The availability of healthy menu items is also a top draw for consumers, particularly among women and older adults. Fifty-seven percent of consumers say locally sourced food is important to them, while 42 percent are drawn to tableservice restaurants that offer organic or environmentally friendly food. Attracting Customers Familiarity is important to many consumers when it comes to choosing a tableservice restaurant. Eighty-two percent of adults say they often pick a tableservice restaurant that they have been to in the past and liked. Women and older adults were the most likely to rate this as an important factor in their decision-making process. On the other hand, many consumers also like to try new places. Fifty-eight percent of adults say an important attribute in choosing a tableservice restaurant is that it is one they haven t been to before. Cost Concerns Remain Tableservice operators faced rising costs across several areas in recent years, and although the growth rates have abated somewhat, they continue to impact margins. A prime example are food costs, which three in four tableservice operators say are a significant or moderate challenge for their business. However, this was down from more than nine in 10 operators who reported similarly in More than seven out of 10 operators in each tableservice segment say labor costs are posing challenges for their business, while two-thirds report similarly about energy/utility costs. While these levels are elevated, they are well below what they were in Reaching Customers The emergence of technology options gives tableservice operators a variety of cost-effective ways to reach their customers. At the same time, it is important to know which methods are the most effective among demographic groups. P a g e 38 57

Consumers appear to be most receptive of email marketing, with 42 percent saying they would like email notifications of a tableservice restaurant s specials or events.

Spotting these trends, many tableservice operators are placing a higher emphasis on technologydriven marketing tools.

42 Consumers appear to be most receptive of marketing, with 42 percent saying they would like notifications of a tableservice restaurant s specials or events. While the acceptance of marketing is generally consistent across age groups, younger consumers are more likely to be receptive to marketing via Facebook, Twitter or text messages. Spotting these trends, many tableservice operators are placing a higher emphasis on technologydriven marketing tools. Fifty-three percent of fine-dining operators and 38 percent of familydining operators say they plan to devote more resources to social-media marketing in In addition, one-third of fine-dining operators and 30 percent of family-dining operators are planning to invest more in and text-message marketing in Meanwhile, operators in the casual-dining and fine-dining segments are more likely to reduce the amount of resources that they spend on traditional marketing, such as direct mail or newspaper ads. Customer Demographics Roughly two-thirds of operators in each of the three tableservice segments say 35-to-54-yearolds are the most important demographic group in their current customer base. Looking ahead over the next five years, a majority of operators in each tableservice segment still plan to focus on growing the 35-to-54-year-old demographic group. However, 39 percent of casual-dining operators and 34 percent of family-dining operators will try to expand the under- 35-yearold cohort. P a g e 39 57

43 8.0 Market Analysis NAICS Code: Definition: This industry comprises establishments primarily engaged in one of the following: (1) providing food services to patrons who order and are served while seated (i.e., waiter/waitress service), and pay after eating; (2) providing food services to patrons who generally order or select items (e.g., at a counter, in a buffet line) and pay before eating; or (3) preparing and/or serving a specialty snack (e.g., ice cream, frozen yogurt, cookies) and/or nonalcoholic beverages (e.g., coffee, juices, sodas) for consumption on or near the premises. ( Industry Overview Companies in this industry operate restaurants and other eating places, including full-service restaurants, quick-service restaurants, cafeterias and buffets, and snack bars. Major companies include Bloomin' Brands, Darden Restaurants, McDonald s, Starbucks, and YUM! Brands (all based in the United States), as well as Greggs (the UK), Jollibee Foods (the Philippines), Skylark (Japan), and Restaurant Brands International (Canada). The global food service industry, which includes restaurants as well as catering services, generates about $2.7 trillion in annual revenue, according to Euromonitor. Cross-border franchising of restaurants has helped boost growth in recent years. The largest restaurant markets are Asia/Pacific, North America, and Western Europe. Latin America and the Middle East/Africa region are the industry s fastest-growing markets. The United States restaurant industry includes about 630,000 restaurants with combined annual revenue of about $540 billion. Competitive Landscape Demographics, consumer tastes, and personal income drive demand. The profitability of individual companies can vary: while quick-service restaurants rely on efficient operations and high volume sales, full-service restaurants rely on high-margin items and effective marketing. Large companies have advantages in purchasing, finance, and marketing. Small companies can compete by offering superior food or service. The United States industry is highly fragmented: the 50 largest companies account for about 15% of revenue. Restaurants compete with companies that serve meals or prepared foods, including grocery stores, warehouse clubs, delis, and convenience stores. In addition, restaurants compete with home cooking. Products, Operations and Technology Products include appetizers, entrées/main dishes, desserts, and beverages. Companies may P a g e 40 57

44 specialize in certain types of cuisines, entrées, or specialty food items. Among full-service restaurants, most establishments focus on ethnic cuisines, led by Asian food (20%), American food (10%), and European food (10%), according to Mazzone & Associates. Hamburger restaurants account for more than one-third of sales among United States limited-service establishments, while pizza parlors account for about 15% and sandwich shops make up about 10%, according to Technomic. Bakery-cafés and Mexican food are the largest categories in the fast-casual segment. Industry revenue is roughly split equally between full-service restaurants and limited service. At quick-service restaurants, customers generally order and pay before eating. While most quickservice restaurants are fast-food restaurants, quick-service restaurants also include fast-casual restaurants, which offer higher quality, more expensive food without table service. In full-service restaurants, waiters take orders, serve beverages and meals, present the check, and process payment. full-service restaurants include casual dining (full bar); family dining (limited bar); and fine dining establishments. The industry includes national and regional chains, franchises, and independent operators. The majority of companies are independently owned and operated, although many quick-service restaurants are franchises of large national chains.franchises allow individual owners to leverage a well-known brand name and benefit from the purchasing efficiencies and operational expertise of the franchiser. Franchise agreements generally cover a specific geographical market and outline restaurant operating requirements, such as hours of operation, menu offerings, and pricing. The food preparation area of a restaurant is known as the "back of house," while the dining area is known as the "front of house." Food prep areas include the kitchen, cold storage, and dishwashing areas. Because the restaurant industry is highly competitive, site selection is critical: companies may consider population density, household income, competition, visibility, accessibility, and traffic. Food preparation varies depending on restaurant type. quick-service restaurants typically offer a limited number of simple items, which allows companies to train unskilled workers to prepare food. Most chains have strict operating procedures for food preparation to ensure consistent quality and food safety. full-service restaurants offering expensive fare or a wide variety of menu options have more complex operations and require larger staff. An executive chef, assisted by a sous chef, oversees kitchen operations and may be involved in the business end of restaurant management. Line cooks are responsible for various kitchen stations, such as the grill, sauté, or fryer. Prep cooks prepare ingredients for cooking. Pastry chefs create desserts. P a g e 41 57

45 Companies typically buy supplies from food distributors. Some restaurants buy directly from local farms or farmers markets. Large chains may contract with suppliers to minimize volatile commodity costs. Companies carefully manage inventory of perishable food products, such as fresh seafood and dairy goods, to reduce losses due to spoilage. When developing menus, restaurants consider ingredient availability, cooking equipment, labor requirements, physical space, and cost. Some companies change menu selections seasonally, with some high-end restaurants creating new menus daily. Alcoholic beverages are important contributors to total sales, particularly for full-service restaurants and especially for high-end restaurants. Companies may offer an alternative menu for children or those with special dietary needs. Technology Computerized information systems can improve and link food preparation and serving operations. Timing systemsmonitor meal progress and can alert staff if an order is running behind schedule. Reservations programs maximize traffic flow and seating. Inventory management systems track supply levels and can help reduce waste due to spoilage. Cost accounting programs help companies determine the profitability of individual menu items. Restaurant operators are devoting more resources to customer-facing technology. Touchscreen ordering programs ensure accurate communication of customer orders. Handheld point-of-sale (POS) devices allow servers to place orders and print checks tableside, improving accuracy and reducing ordering time. Some handhelds can also print customer checks and process credit card payments. About 80% of consumers believe restaurant technology improves convenience, and about 30% consider technology to be an important factor in deciding where to eat, according to the National Restaurant Association. Technology is an increasingly important consideration in restaurant marketing strategies. More than 80% of restaurant operators are active on social media, led by the casual dining segment. Establishments are also making an effort to connect with the 70% of smartphone users who view menus on their mobile devices several times per year. Sales and Marketing While restaurants appeal to a broad demographic, young adults without children are most likely to dine out, according to NPD Group. Young men are an important segment for quick-service restaurants, tourists are more likely to visit full-service restaurants, and households with children tend to order take-out. Younger people and Hispanics are expected to drive the nation's eating behaviors over the next five years. P a g e 42 57

46 Marketing and promotional vehicles include online, TV, print, radio, and outdoor advertising; direct mail; and newspaper insert coupons. Franchises typically contribute to corporate advertising funds and may run separate local marketing programs. Relationships with hotels can help drive tourist traffic. Word-of-mouth is especially important for small, independent restaurants with limited marketing budgets. Companies may also implement loyalty programs by offering discounts and free food for frequent visits. Customer service is a critical element of the dining experience for full-service restaurants, particularly in the high-end segment. Expensive restaurants may assign multiple waiters to a single table to ensure attentive service. Customers may expect waitstaff to have in-depth knowledge of menu offerings and recommend wine pairings. Developing personal relationships with regular patrons helps create a loyal customer base. Most QSR customers expect fast service and accurate order fulfillment. Restaurants use websites to post basic information, including menus, directions, and hours of operation. Some companies allow customers to make reservations or place take-out, dine-in, or delivery orders through websites. Customers can sign up for and cell phone notifications that communicate daily specials. Finance and Regulation Sales are slightly seasonal, peaking during the summer. Bad weather can depress sales. Receivables are low -- about 10 days' sales on average -- because most customers pay with cash or third-party credit card at the time of service. Many ingredients are perishable, so most companies keep low inventories. Cost accounting is important, since the profitability of individual dishes can vary significantly. Gross margins are about 55% of net sales. The industry is labor-intensive: annual revenue per worker is about $50,000. The cost of building a restaurant can vary and depends heavily on whether companies own or lease property and if the restaurant is a new concept, an existing business, or a franchise. The investment for a new restaurant, including leasing a property or buying land, can run into the hundreds of thousands of dollars. Franchise agreements typically include an initial payment, royalties based on a percentage of sales, and marketing fees. Regulation In the United States, federal, state, and local government laws regulate restaurant operation, food safety, and worker protection. Local officials regularly inspect restaurants to enforce health, sanitation, safety, fire, and liquor licensing regulations. Noncompliance can result in temporary or permanent closure. Highly publicized food poisoning incidents involving contaminated ingredients and improper preparation have increased attention on restaurant sanitation. Immigration laws can affect restaurants' available labor pool. P a g e 43 57

47 International Insights The global food service industry, which includes both restaurants and catering services, generates about $2.7 trillion in annual revenue, according to Euromonitor. Major companies based outside the United States include Greggs (the UK), Jollibee Foods (the Philippines), Skylark (Japan), and Restaurant Brands International (Canada). United States-based chains such as McDonald s and Subway have thousands of franchised locations around the world. The world s largest food service markets are Asia/Pacific (about 40% of global sales), North America (20%), and Western Europe (20%). Latin America and the Middle East/Africa are the industry s fastest-growing regional markets. With their large populations and emerging middle classes, China and India are particularly fertile areas for restaurant industry expansion. Developing markets have been targeted mainly by lower-cost fast-food chains like KFC and McDonald s that cater to local markets with targeted menu items. For example, McDonald's offers green tea ice cream and rice dishes in China, while customers in India can order a McVeggie burger made primarily from fried potatoes and peas. Other growth markets include Brazil, where higher incomes could lead to increasing demand for full-service restaurants. Some developing countries may lack sufficient infrastructure to support the sophisticated food supply chains needed for large chain restaurants. Food quality and safety issues may need to be addressed in some areas as the industry expands and matures. Expanding into developing economies can also expose a company to risks associated with unstable currencies and global economic conditions. Although the United States restaurant market is dominated by domestic companies, a few international chains are making some inroads. Hong Kong-based Café de Coral operates more than 200 Manchu Wok locations in North America, and Philippines-based fast-food chain Jollibee has a small but growing presence in the United States. Regional Highlights In the United States, restaurants tend to thrive in rapidly growing areas of the country. States with the highest population growth in recent years include Texas, California, Florida, Georgia, and Washington. States that are forecast to have the highest rates of restaurant job growth over the next decade include Arizona, Texas, Florida, South Carolina, and North Carolina, according to the National Restaurant Association. Local markets with high rates of new restaurant openings in recent years include Los Angeles, Dallas, and Houston, according to NPD Group. Regulations governing the industry may vary among states and among local governments. P a g e 44 57

Heightened consumer and government concern over obesity has resulted in certain jurisdictions restricting the use of trans fats and requiring restaurants to post detailed nutrition information.

48 Heightened consumer and government concern over obesity has resulted in certain jurisdictions restricting the use of trans fats and requiring restaurants to post detailed nutrition information. Human Resources Many entry-level jobs, such as servers, dishwashers and bus staff, require few skills, with some positions paying at or slightly above minimum wage. Most servers rely on tips to supplement income. Average hourly wages at food service and drinking establishments, including restaurants, are significantly lower than the average for all United States workers; as a result, the industry depends on part-time help. In some areas, companies rely on undocumented workers to maintain staffing. Unpredictable restaurant traffic and rapid worker turnover make staffing and scheduling a constant challenge. The injury rate in the restaurant industry is about the same as the United States average. Industry Employment Growth Bureau of Labor Statistics Average Hourly Earnings and Annual Wage Increase Bureau of Labor Statistics Demand: Tied to consumer demographics, spending, and tastes Need efficient use of low-cost labor P a g e 45 57

49 Risk: Volatile supply costs and increasing competition Trend: Fast-Food Chains Pursue Growth in China through Franchises - McDonald s and KFC parent Yum Brands are selling off many of their company-owned stores in China to franchisees, both to reduce their exposure to various business risks and to better align the outlets with evolving local tastes. The Chinese market has become more challenging for fast-food operators in recent years, as new competitors are offering larger varieties of menu items and catering to consumers growing interest in healthier foods. McDonald s and KFC have also both been involved in high-profile food safety scandals that have shaken consumer confidence and caused stiff declines in earnings. To turn things around, McDonald s is seeking partners to operate most of its 2,200 China locations, only about 35% of which currently operate as franchises, compared to 90% in the United States and 82% in Europe, according to China Daily. Meanwhile, Yum which now has more than 7,200 KFC locations in the country is preparing to spin off its China division into a separate company that will rely heavily on local franchises to drive growth at a more granular level. Franchising will allow the chains to free up capital, generate steady cash flow, and benefit from market growth while better insulating themselves from volatile economic conditions and operational hurdles. Regional partners with better knowledge of local markets will take on many of those risks while helping the companies expand into smaller cities that are becoming more urbanized, Nikkei Asian Review reports. Industry Impact - Intensifying competition and weak economic conditions are creating volatility in China s restaurant sector, but the market will likely be lucrative for fast-food operators in the years ahead. Working with local franchisees may be the best way for companies to drive growth while minimizing risk. Industry Forecast Domestic demand for United States eating and drinking places, including restaurants, is forecast to grow at an annual compounded rate of 4% between 2016 and Data Published: February 2016 P a g e 46 57

Critical Issues Volatile Supply Costs - Unstable manufacturer prices for ingredients used in restaurants can significantly impact restaurant profitability.

50 Critical Issues Volatile Supply Costs - Unstable manufacturer prices for ingredients used in restaurants can significantly impact restaurant profitability. Commodity markets affect wholesale prices for beef, poultry, and fish, which can change more than 10% in a single year. Supply issues can affect the cost of seafood. The wholesale price of flour, eggs, dairy products, fats, and oils can also increase rapidly and affect restaurant margins. Consumer price sensitivity can limit a restaurant's ability to completely pass through cost increases. Increasing Competition - Restaurants face increasing competition from a broad range of businesses vying for consumers' food dollars. Grocery stores and warehouse clubs are providing more ready-to-eat meals and sides, often at a better value than restaurants. Convenience stores, gas stations, coffee shops, and delis sell sandwiches and beverages, cutting into restaurants' share of the lunch market. Home cooking is also a source of competition. Industry Challenges Ingredient Contamination - Deaths and illnesses caused by contaminated food and raw ingredients have been well publicized, and can affect sales across all types of restaurants. Contamination through poor sanitation or worker error can destroy a company's reputation. The presence of E. coli, mad cow disease, or salmonella affects the entire supply chain, and can leave restaurants scrambling to find alternative suppliers. Avian flu scares can affect supply and demand for poultry products. Labor Issues - Restaurants struggle to deal with labor shortages, immigration policy changes, high turnover, and minimum wage policies. The labor shortage of young workers significantly challenges restaurants as they try to expand and provide acceptable customer service. As some restaurants rely on undocumented workers, tightening immigration policies can further shrink the labor pool. Due to low pay, recruiting and retaining entry-level workers is a constant challenge. Minimum wage hikes at the federal and state level can detrimentally affect labor costs. P a g e 47 57

51 Demand Dependent on Consumer Spending - Restaurant meals are generally more expensive than home cooking, and sales depend on consumer spending. During the late 2000s recession, sales growth in restaurants slowed and QSR employment declined as consumers cut unnecessary expenses. Slow restaurant traffic during tough economic times can depress sales. Maintaining Franchise Relations - Keeping franchisees happy while ensuring franchise agreement compliance is a difficult balancing act for many companies. For some large companies, franchise outlets outnumber company-owned by a wide margin. Disagreement over national ad campaigns, media spending, capital projects, and new products can lead to tenuous relationships. Poorly managed franchises can damage consumer perception of an entire chain; many companies struggle to turn around underperforming outlets. Health Concerns - Growing consumer and government concern over the high fat/high calorie content and excessive portion size of some restaurant foods has resulted in bad publicity and state-sponsored legislation. Multiple customer lawsuits accusing fast-food restaurants of contributing to obesity have resulted in harmful publicity. The remote possibility of a settlement could have a drastic effect across the food industry. State and federal bans on certain food additives such as trans fats have required restaurants to change recipes and incur additional costs. Liability Associated with Serving Alcohol - Risks associated with serving alcohol include liability for the actions of intoxicated customers and legal consequences from selling to underage patrons. Certain states have "dram shop" laws that hold restaurants liable for damages caused by inebriated customers. Companies that serve alcohol to underage customers may incur fines and risk temporary or permanent closure. Industry Opportunities Customer Loyalty Programs - A frequent diners program can help restaurant operators build customer loyalty and increase repeat business. Such programs typically offer discounts or gift certificates to customers after a set number of visits. Nearly 40% of restaurant loyalty program members increased the frequency of their visits after joining full-fledged programs, and nearly 25% increased the amount they spent, according to a report from Boston Consulting Group. Adding Organic Menu Options - Companies can leverage consumer interest in the environment and healthy eating by adding organic and locally produced menu choices. By using organic ingredients, sustainable seafood, and antibiotic and hormone-free meats, restaurants can appeal to environmentally conscious customers. Locally sourced meat and seafood, locally grown produce, and environmental sustainability are also becoming more common on full-service P a g e 48 57

restaurant menus, according to the National Restaurant Association. Many consumers are willing to pay a premium for food from environmentally conscious producers.

52 restaurant menus, according to the National Restaurant Association. Many consumers are willing to pay a premium for food from environmentally conscious producers. Social Media Marketing - Many fine-dining restaurant operators use social media services like Facebook and Twitter to market themselves online. Young, tech-savvy consumers frequently choose restaurants based on information found through social media networks, especially those that are recommended by friends. In addition to online media, technologies such as electronic ordering systems, self-ordering kiosks, and menus on tablet devices may help shape the restaurant business in the future. Growth Potential in Small Markets - Restaurant operators can increase sales and customer traffic by expanding into smaller markets that have lower costs and less competition than locations in large cities. Establishments in small towns often spend less on rent, employee wages, and marketing, and they have less difficulty securing real estate in central, high-visibility locations, according to the NPD Group. Restaurants that serve fare such as burgers, pizza, and sandwiches are in the best position to succeed in small markets, which tend to be less receptive to niche and international concepts. Mobile Payments - A growing number of restaurants are introducing mobile apps and digital payment platforms that allow customers to pay for their meals using their smartphones. Chains including McDonald's, Subway, Taco Bell, and Outback Steakhouse have incorporated mobile payments into their branded smartphone apps. Some establishments are also installing radioenabled terminals that use near-field communication (NFC) technology to accept digital transactions from third-party payment services like Apple Pay and Google Wallet. Accepting mobile and digital payments can help restaurants gain a competitive edge by offering faster service during peak rush hours while appealing to technically inclined consumers. Economic Statistics and Information Annual Construction Put into Place Census Bureau P a g e 49 57

Retail Annual Sales Growth Census Bureau Change in Consumer Prices Bureau of Labor Statistics Financial Ratios Company Size by Revenue Company Count All 522,119 Large Over $50M 607 Medium $5M - $50M

53 Retail Annual Sales Growth Census Bureau Change in Consumer Prices Bureau of Labor Statistics Financial Ratios Company Size by Revenue Company Count All 522,119 Large Over $50M 607 Medium $5M - $50M 8,426 Small Under $5M 513,086 Quick Ratio Current Ratio Current Liabilities to Net Worth 36.3% 36.8% 37.6% 35.5% Current Liabilities to Inventory x6.07 x7.05 x6.34 x5.68 Total Debt to Net Worth x1.14 x1.11 x1.17 x1.14 Fixed Assets to Net Worth x0.98 x0.95 x0.98 x0.99 Days Accounts Receivable Inventory Turnover x32.41 x35.90 x33.21 x31.01 Total Assets to Sales 48.6% 49.3% 48.8% 48.4% Working Capital to Sales 5.1% 4.6% 5.2% 5.2% Accounts Payable to Sales 2.7% 2.7% 2.7% 2.7% Pre-Tax Return on Sales 2.2% 2.1% 2.2% 2.1% Pre-Tax Return on Assets 4.5% 4.3% 4.5% 4.4% Pre-Tax Return on Net Worth 9.6% 9.1% 9.8% 9.5% Interest Coverage x2.95 x2.77 x2.93 x3.01 EBITDA to Sales 7.2% 7.4% 7.2% 7.1% Capital Expenditures to Sales 4.4% 4.5% 4.2% 4.4% P a g e 50 57

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EXECUTIVE SUMMARY OVERALL, WE FOUND THAT:

EXECUTIVE SUMMARY OVERALL, WE FOUND THAT: THE ECONOMIC IMPACT OF CRAFT BREWERIES IN LOS ANGELES LA s craft brewing industry generates short-term economic impacts through large capital investments, equipment purchases, and the construction of new