Essence Premium Catering Business Plan — Sensitivity and Scenarios

How the plan responds to food cost, meal volume, labour and contract loss moving against it, with downside and upside cases.

Sensitivity and Scenarios

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16.1 Single-variable sensitivity
16.2 Scenarios
16.3 What management can do inside a bad year

16.1 Single-variable sensitivity

Figure 20. Sensitivity of Year 5 EBITDA.

Driver	Effect on Year 5 EBITDA	As a share of base EBITDA	Comment
Meal volume ±15%	±R1 432’000	68%	One lost contract; most of the cost base does not move with it
Food cost ±4 percentage points	±R1 273’000	60%	A serious protein price shock, absorbed at a fixed contract price
Contract price ±5%	±R1 591’000	75%	Renewal under procurement pressure; the risk an escalation clause addresses
Labour ±10%	±R885’000	42%	Sectoral determination and shift utilisation
Distribution and energy ±20%	±R515’000	24%	Fuel and tariff movement on tonnage-driven lines
Overhead ±10%	±R284’000	13%	The line most easily allowed to drift upward
Event covers ±20%	±R140’000	7%	Lumpy and seasonal, but R85.48 a cover
Year 5 EBITDA, base case	R2 110’000	100%

Both of the largest variables bite hard because the margin is thin to begin with. A 15 per cent volume shortfall — one lost contract — costs roughly R1.43 million of EBITDA, which is 68 per cent of it. A four percentage point rise in food cost, which a serious protein price shock delivers easily, costs about R1.27 million. A five per cent reduction in contract prices on renewal costs R1.59 million, the largest single exposure in the table.

Figure 21. Year 5 EBITDA across food cost and meal volume.

The grid shows the interaction. At the planned volume the business tolerates food cost up to roughly 43 per cent before EBITDA turns negative; at 10 per cent below plan it tolerates only about 41.5 per cent. Volume buys tolerance on food cost and food cost buys tolerance on volume, and the combination of a lost contract and a protein shock takes the business to a loss it cannot reprice its way out of.

16.2 Scenarios

Figure 22. Year 5 EBITDA across scenarios, with debt service cover.

Scenario	Definition	Year 5 revenue	Year 5 EBITDA	Cover
Base	The plan as presented: 900 500 meals, 8 200 covers, 72.1% prime cost.	R31.82m	R2.11m	1.33x
Food cost shock	Food cost four points above plan on a protein price shock, absorbed at a fixed contract price.	R31.82m	R0.84m	0.51x
Contract lost	One large contract lost — 15% of meal volume.	R27.05m	R0.68m	0.41x
Price pressure	Contract prices renewed 5% below plan under procurement pressure.	R30.23m	R0.52m	0.31x
Volume and food cost	One contract lost and food cost four points up in the same year.	R27.05m	(R0.60m)	n/m

The protection is contractual, not operational

No amount of kitchen efficiency absorbs a four-point food cost shock on a fixed contract price. The base case clears the 1.30 times cover gate at 1.33 times, and every scenario below it fails: a food cost shock takes cover to 0.51, a lost contract to 0.41, price pressure on renewal to 0.31, and the compound case to a loss with no cover at all. None of these are extreme assumptions — food inflation reached 14.0 per cent in March 2023 and institutional buyers are actively pushing prices down under constrained budgets. The only real protection is an annual escalation clause tied to a published food inflation measure, agreed at signature, and a concentration limit that prevents any single loss being decisive. The facilities should also carry the ability to defer amortisation for a season, because a caterer that must repay capital during a bad year will do it by cutting food quality, and that ends contracts.

16.3 What management can do inside a bad year

Lever	Available within	Value	Comment
Tighten food cost against costed menus	Weeks	R318 000 a percentage point	The fastest available response and the largest lever
Defer the next capacity step	One year	R1.24m to R1.48m of capital and its service	The gates in Section 10 make this automatic
Shift mix toward events	One season	R85.48 a cover against R9.92 a meal	Uses weekend capacity; requires selling, not cooking
Decline or exit government work	One contract cycle	Frees capacity earning R0.09 a meal	Costs public-sector track record for future tenders
Renegotiate supplier terms on core lines	One buying cycle	Part of the R12.89m food line	Only available if a contract relationship already exists
Reduce overhead	One quarter	R284 000 on a ten per cent cut	Not the bid function; that is what wins the replacement contract
Defer owner remuneration	Immediately	R534 000 a year at Year 5	Available, unpleasant, and the reason it is budgeted rather than assumed away

The first three are the ones that work without damaging the business. Tightening food cost is immediate and costs nothing; deferring a capacity step removes both the capital and the debt service; and shifting toward events uses capacity that is otherwise idle. Cutting the bid function is the false economy: it is the line that wins the contract replacing the one that was lost.

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