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REGISTERED NUMBER: 07737600 (England and Wales)















KAIZEN RESTAURANTS LTD

Strategic Report, Report of the Director and

Financial Statements for the Year Ended 31 December 2023






KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)






Contents of the Financial Statements
for the year ended 31 December 2023




Page

Company Information 1

Strategic Report 2 to 3

Report of the Director 4 to 5

Report of the Independent Auditors 6 to 7

Income Statement 8

Other Comprehensive Income 9

Balance Sheet 10

Statement of Changes in Equity 11

Cash Flow Statement 12

Notes to the Cash Flow Statement 13

Notes to the Financial Statements 14 to 21


KAIZEN RESTAURANTS LTD

Company Information
for the year ended 31 December 2023







Director: K Tomkins





Secretary: S Tomkins





Registered office: McDonald's Restaurant
Barnsdale Drive
Westcroft
Milton Keynes
MK4 4DD





Registered number: 07737600 (England and Wales)





Auditors: Cooper Parry Group Limited
New Derwent House
69-73 Theobalds Road
London
WC1X 8TA

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Strategic Report
for the year ended 31 December 2023

The director presents his strategic report for the year ended 31 December 2023.

Review of business
The company currently operates eight stores, employing more than 950 staff in Milton Keynes and its suburbs.

As a result of the 2023 menu and marketing strategy, alongside the execution of incremental price rises, the company has seen increased sales growth as the company continues to operate against the backdrop of significant macro-economic challenges.

Given the direct link between our approach to pricing, the external environment, and our success in relation to our customers, we will continue to remain close to understanding this relationship and look constantly to evaluate how our internal actions are impacting our customers.

Despite the net current liabilities position and a fall in the net assets from £1.37 million in 2022 to £1.09 million in 2023, the strength of the business remains strong and the directors consider the company to have adequate resources to meet liabilities as they fall due.

Key performance indicators
Sales for the year amounted to £31.28 million, an increase of £1.06 million from 2022 giving an overall sales increase of approximately 3.50%. The growth in sales is predominantly due to price rises during the year. On a like for like basis for the seven stores trading over the full financial year, sales have increased by 2.88%.

The gross profit margin is 64.12% compared to 64.35% in 2022 and is in line with expectations.

Future developments
2023 economic trends are broadly expected to continue into 2024.

As in 2023, sales growth in 2024 will be predominantly driven by year on year pricing benefit. This will particularly benefit Q1 (Quarter 1) before we annualise price moves made in 2023. To counter any potential negative GC (Guest Count) impact from price rises, we have a strong marketing calendar, with particular focus on value at key parts of the year. The calendar also includes a higher number of innovative promotional pies and new McFlurry flavour variants, both of which drove strong incremental sales and visits in 2023. Given the uncertain market environment, we will as ever need to remain flexible and adaptive should we begin to see any risks to this plan.

We also expect to see continued incremental sales benefit in 2024 from the MyMcDonald's application, with a greater customer base engaged with the MyMcDonald's Rewards scheme, and refined CRM communications to encourage customer frequency.

Instores and Drive Thrus are likely to see similar levels and phasing of sales growth in 2024, as we move away from any lingering COVID-19 impact. The percentage of sales and phasing coming through McDelivery is likely to remain stable year on year.

The 2023 pricing strategy has been bold, utilising a front-loaded approach, with five pricing rounds overall. From this, circa 5% MBI (Menu Board Index) benefit will be carried into 2024.

The Price Strategy Group will continue to take a strategic, customer-led approach throughout 2024, for which four price moves are planned. Rather than utilising a front-loaded approach, the price rounds are expected to be more balanced in 2024, with the timing, scale and menu items included in the pricing recommendations leveraging the exciting marketing plan that is in place. As with recent years, the group will remain agile against the backdrop of a challenging external environment.

The 2024 pricing strategy will ensure gross margin growth, whilst maintaining the business' value proposition. The group will focus on driving sustainable growth - for example, building upon the work which has been done so far on value and delivery, and refining the long-term view of pricing and menu architecture.

The company also plans to acquire more restaurants should the opportunity arise.


KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Strategic Report
for the year ended 31 December 2023

Principal risks and uncertainties
The company is continually assessing all risks with an aim to mitigate any future threats these may have on the business.

Economic risk
Following some very challenging times, we are optimistic about the economic future. Customer confidence continues to rise and unemployment rates are falling. A cautious approach is still required as real disposable income continues to decline as the Cost of Living and interest rates continue to rise. Principal risks are increasing commodity prices, increased utility costs and labour rates adding pressure to margins with significant upward movements in interest rates that may also increase costs. The first mentioned risk is controlled by McDonald's collective purchasing initiatives.

The level of borrowing is such that interest rate increases remain manageable.

Supply Chain Inflation
We have continued to work at mitigating the impact of food and paper inflation within our 2024 outlook - this has resulted in further improvement with a range of 3% - 6% food and paper inflation now anticipated for the UK. We are also continuing to see increased levels of cost certainty, with an expectation that circa 40% of our costs will be secured by the end of December.

As with previous outlook, we expect a relatively flat profile through the year. The increases we are expecting continue to be driven by commodity price on particular categories, as well as market labour increases. The focus of McDonald's negotiations remains on assured supply and to put farmers and growers in a position to continue developing alongside the business.

Our 2024 forecast is made up of two elements:
- Baseline inflation of circa 1.5% carry over from 2023 increases.
- In-year inflation of 1.5% - 4.5% on prices negotiated for 2024.

Regulatory risks
The company's operations demand a high level of compliance within a wide range of regulatory requirements. In particular:
- Health and safety
- Hygiene procedures
- Employment laws
- Licensing
The above, along with a number of other areas, are monitored in detail by McDonald's, as being in the fast food industry brings a high level of regulatory concerns.

Consumer taste
Any material changes in the way the consumer views the fast food industry could have an adverse effect on the company. However, this can also work in the opposite direction and could assist the company to achieve growth. As a result, the company focuses, in detail, on recognising demographic trends, ensuring innovation and the use of the freshest and highest quality products through its stores. The company has strict policies to ensure that all stores are maintaining the McDonald's ethos.

Competitors
The fast food market is a very competitive market, with a high number of large competitors trading in the sector. In order to remain as one of the main players, McDonald's have dedicated teams who focus on ensuring they remain a leading company within the market. This allows them to compete with other large fast food chains.

With these risks and uncertainties in mind, we are aware that any plans for the future development of the business may be subject to unforeseen future events outside our control, hence we are constantly assessing our plans in line with the current environment.

On behalf of the board:





K Tomkins - Director


24 September 2024

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Report of the Director
for the year ended 31 December 2023

The director presents his report with the financial statements of the company for the year ended 31 December 2023.

Principal activity
The principal activity of the company in the year under review was that of the operation of McDonald's franchised restaurants.

Dividends
Interim dividends per share were paid as follows:
Ordinary A £1 shares £400 - 15 December 2023
Ordinary B £1 shares £1,200 - 15 December 2023


The director recommends that no final dividends be paid.

The total distribution of dividends for the year ended 31 December 2023 will be £ 60,000 .

Research and development
The company does not carry out any independent research and development. However the franchisor, McDonald's Restaurants Limited, carries out its own research and development on behalf of all franchisees. The company makes a contribution towards this through its existing payments to the franchisor.

Director
K Tomkins held office during the whole of the period from 1 January 2023 to the date of this report.

Going concern
The company is in a net current liabilities position at the balance sheet date, however this is a reflection of the nature of the fast food industry and not a reflection of the strength of the business.

The directors have considered the application of the going concern basis of accounting in doing so they have considered the period from the date of this report until 31 December 2025. The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. However, owing to the uncertainty surrounding the level of financial support being provided by the franchisor, there is a material uncertainty that may cast significant doubt on the company's ability to continue as a going concern.

Employment of disabled persons
The company operates a policy of giving full & fair consideration to employment applications from disabled persons.

Provision of information to employees
The company has a system for providing employees with information of concern to them. It also consults employees on a regular basis so that their views can be taken into account in making decisions affecting them. It regularly explains to employees the financial and economic factors affecting the performance of the company and makes them aware of the provision of training, career development and employment of disabled employees.

Director's responsibilities statement
The director is responsible for preparing the Strategic Report, the Report of the Director and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the director is required to:

-select suitable accounting policies and then apply them consistently;
-make judgements and accounting estimates that are reasonable and prudent;
-prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The director is responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable him to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Report of the Director
for the year ended 31 December 2023


Statement as to disclosure of information to auditors
So far as the director is aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

Auditors
The audit business of Haines Watts Birmingham LLP was acquired by Cooper Parry Group Limited on 14 November 2023. Haines Watts Birmingham LLP has resigned as auditor and Cooper Parry Group Limited has been appointed in its place.

The auditors, Cooper Parry Group Limited, are deemed re-appointed under Section 487(2) of the Companies Act 2006.

On behalf of the board:





K Tomkins - Director


24 September 2024

Report of the Independent Auditors to the Members of
Kaizen Restaurants Ltd

Opinion
We have audited the financial statements of Kaizen Restaurants Ltd (the 'company') for the year ended 31 December 2023 which comprise the Income Statement, Other Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:
-give a true and fair view of the state of the company's affairs as at 31 December 2023 and of its loss for the year then ended;
-have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
-have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern
We draw attention to Note 2 in the financial statements, which indicates that the company incurred a net loss after tax of £219k during the year ended 31 December 2023 and, as of that date, the company's current liabilities exceeded its current assets by £2.93 million. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information
The director is responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Director, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Strategic Report and the Report of the Director for the financial year for which the financial statements are prepared is consistent with the financial statements; and
- the Strategic Report and the Report of the Director have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Director.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
- the financial statements are not in agreement with the accounting records and returns; or
- certain disclosures of director's remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.

Report of the Independent Auditors to the Members of
Kaizen Restaurants Ltd


Responsibilities of director
As explained more fully in the Director's Responsibilities Statement set out on page four, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the director is responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Based on our understanding of the industry, we identified that the principal risks of non-compliance related to breaches of health and safety, including food hygiene. We considered the extent to which non-compliance might have a material affect on the financial statements. We also considered those laws and regulations that have a direct impact on preparation of the financial statements, such as the Companies Act 2006. We examined management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of overriding of controls) and determined that the principal risks were relating to management bias in accounting estimates, in particular those of accrued liabilities and the useful life of tangible assets. We also discussed with management the possibility of non-compliance with health and safety and food hygiene regulations and reviewed the management controls in place to detect such irregularities. Audit procedures included challenging assumptions made by management in their significant accounting estimates. There are inherent limitations in the Audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions described in the financial statements, the less likely we would become aware of it. Also the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one due to error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.




Nicola Pearson FCA (Senior Statutory Auditor)
for and on behalf of Cooper Parry Group Limited
New Derwent House
69-73 Theobalds Road
London
WC1X 8TA

24 September 2024

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Income Statement
for the year ended 31 December 2023

2023 2022
Notes £ £

Turnover 3 31,280,545 30,222,419

Cost of sales (11,223,357 ) (10,772,960 )
Gross profit 20,057,188 19,449,459

Administrative expenses (20,266,800 ) (19,918,994 )
Operating loss 5 (209,612 ) (469,535 )

Interest receivable and similar income 4,530 -
(205,082 ) (469,535 )

Interest payable and similar expenses 6 (86,465 ) (61,835 )
Loss before taxation (291,547 ) (531,370 )

Tax on loss 7 72,728 143,397
Loss for the financial year (218,819 ) (387,973 )

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Other Comprehensive Income
for the year ended 31 December 2023

2023 2022
Notes £ £

Loss for the year (218,819 ) (387,973 )


Other comprehensive income - -
Total comprehensive income for the year (218,819 ) (387,973 )

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Balance Sheet
31 December 2023

2023 2022
Notes £ £ £ £
Fixed assets
Intangible assets 9 1,804,543 932,311
Tangible assets 10 2,499,887 2,315,797
Investments 11 8,750 8,750
4,313,180 3,256,858

Current assets
Stocks 12 120,097 148,822
Debtors 13 357,906 346,489
Cash at bank and in hand 2,056,810 2,728,127
2,534,813 3,223,438
Creditors
Amounts falling due within one year 14 5,464,048 4,744,803
Net current liabilities (2,929,235 ) (1,521,365 )
Total assets less current liabilities 1,383,945 1,735,493

Provisions for liabilities 18 290,217 362,946
Net assets 1,093,728 1,372,547

Capital and reserves
Called up share capital 19 100 100
Retained earnings 20 1,093,628 1,372,447
Shareholders' funds 1,093,728 1,372,547

The financial statements were approved by the director and authorised for issue on 24 September 2024 and were signed by:





K Tomkins - Director


KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Statement of Changes in Equity
for the year ended 31 December 2023

Called up
share Retained Total
capital earnings equity
£ £ £
Balance at 1 January 2022 100 1,843,420 1,843,520

Changes in equity
Dividends - (83,000 ) (83,000 )
Total comprehensive income - (387,973 ) (387,973 )
Balance at 31 December 2022 100 1,372,447 1,372,547

Changes in equity
Dividends - (60,000 ) (60,000 )
Total comprehensive income - (218,819 ) (218,819 )
Balance at 31 December 2023 100 1,093,628 1,093,728

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Cash Flow Statement
for the year ended 31 December 2023

2023 2022
Notes £ £
Cash flows from operating activities
Cash generated from operations 1 743,353 883,013
Interest paid (86,465 ) (61,835 )
Tax paid (1,921 ) (45,178 )
Net cash from operating activities 654,967 776,000

Cash flows from investing activities
Purchase of intangible fixed assets (946,521 ) -
Purchase of tangible fixed assets (951,069 ) (176,201 )
Interest received 4,530 -
Net cash from investing activities (1,893,060 ) (176,201 )

Cash flows from financing activities
New loans in year 1,200,000 -
Loan repayments in year (540,721 ) (549,742 )
Amount introduced by directors 60,000 83,000
Amount withdrawn by directors (92,503 ) (278,811 )
Equity dividends paid (60,000 ) (83,000 )
Net cash from financing activities 566,776 (828,553 )

Decrease in cash and cash equivalents (671,317 ) (228,754 )
Cash and cash equivalents at beginning of year 2 2,728,127 2,956,881

Cash and cash equivalents at end of year 2 2,056,810 2,728,127

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Cash Flow Statement
for the year ended 31 December 2023

1. Reconciliation of loss before taxation to cash generated from operations
2023 2022
£ £
Loss before taxation (291,547 ) (531,370 )
Depreciation charges 841,268 813,058
Finance costs 86,465 61,835
Finance income (4,530 ) -
631,656 343,523
Decrease/(increase) in stocks 28,725 (42,070 )
Increase in trade and other debtors (9,496 ) (90,525 )
Increase in trade and other creditors 92,468 672,085
Cash generated from operations 743,353 883,013

2. Cash and cash equivalents

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 December 2023
31/12/23 1/1/23
£ £
Cash and cash equivalents 2,056,810 2,728,127
Year ended 31 December 2022
31/12/22 1/1/22
£ £
Cash and cash equivalents 2,728,127 2,956,881


3. Analysis of changes in net funds/(debt)

At 1/1/23 Cash flow At 31/12/23
£ £ £
Net cash
Cash at bank and in hand 2,728,127 (671,317 ) 2,056,810
2,728,127 (671,317 ) 2,056,810
Debt
Debts falling due within 1 year (2,096,381 ) (659,280 ) (2,755,661 )
(2,096,381 ) (659,280 ) (2,755,661 )
Total 631,746 (1,330,597 ) (698,851 )

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements
for the year ended 31 December 2023

1. Statutory information

Kaizen Restaurants Ltd is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

The presentation currency of the financial statements is the Pound Sterling (£).


2. Accounting policies

Basis of preparing the financial statements
These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

Going Concern
The company made a net loss after tax of £219k and is in a net current liabilities position at the balance sheet date, however this is a reflection of the nature of the fast food industry and not a reflection of the strength of the business.

The directors have considered the application of the going concern basis of accounting in doing so they have considered the period from the date of this report until 31 December 2025. The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. However, owing to the uncertainty surrounding the level of financial support being provided by the franchisor, there is a material uncertainty that may cast significant doubt on the company's ability to continue as a going concern.

Turnover
Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have transferred to the buyer, usually at the point of sale, the amount of revenue can be reliably measured, it is probable that the associated economic benefits will flow to the entity and the costs incurred or to be incurred in respect of the transactions can be reliably measured.

Franchise rights and fees
Franchise rights and fees are initially recognised at cost and are subsequently measured at cost less accumulated amortisation and impairment losses. They are amortised over their useful lives, which is taken as the twenty year term specified in the franchise agreements.

Tangible fixed assets
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.
Short leasehold - at varying rates on cost
Plant and machinery - at varying rates on cost
Fixtures and fittings - at varying rates on cost
Computer equipment - at varying rates on cost

Stocks
Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Cash at bank and in hand
Cash at bank and in hand are basic financial assets comprising of cash in hand, demand deposits with bank, other short-term liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within current liabilities.


KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements - continued
for the year ended 31 December 2023

2. Accounting policies - continued
Taxation
Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments
Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits
The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Impairment of fixed assets
At each reporting end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to each asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Holiday pay accrual
A liability is recognised to the extent of any unused holiday pay entitlement which is accrued at the Balance Sheet date and carried forward to future periods. This is measured at the undiscounted cost of the future holiday entitlement so accrued at the Balance Sheet date.

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements - continued
for the year ended 31 December 2023

2. Accounting policies - continued

Financial instruments
The Company only enters into basic financial instruments that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.

For financial assets measured at amortised cost, the impairment cost is measured at the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the assets effective interest rate. If the financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

For assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the balance sheet date.

Creditors
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

Finance costs
Finance costs are charged to the Profit and Loss Account over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.

Dividends
Equity dividends are recognised when they legally become payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.

Judgements in applying accounting policies and key sources of estimation uncertainty
In the process of applying the company's accounting policies, management are required to make certain estimates and judgements. The key estimates and judgements are as follows:

Depreciation and residual values
The director has reviewed the asset lives and associated residual values of all fixed asset classes, and has concluded that asset lives and residual values are appropriate.

Impairment of fixed assets
A review for indicators of impairment is carried out at each reporting date, with the recoverable amount being estimated where such indicators exist. Where the carrying value exceeds the recoverable amount, the asset is impaired accordingly. Prior impairments are also reviewed for possible reversal at each reporting date.

Holiday pay accrual
A liability is recognised to the extent of any unused holiday pay entitlement which is accrued at the Balance Sheet date and carried forward to future periods. This is measured at the undiscounted cost of the future holiday entitlement so accrued at the Balance Sheet date.

3. Turnover

The turnover and loss before taxation are attributable to the one principal activity of the company.

An analysis of turnover by class of business is given below:

2023 2022
£ £
Food 30,775,852 29,456,650
Non product 504,693 765,769
31,280,545 30,222,419

The whole of turnover is derived from the United Kingdom.

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements - continued
for the year ended 31 December 2023

4. Employees and directors
2023 2022
£ £
Wages and salaries 8,741,815 8,560,274
Social security costs 328,703 333,410
Other pension costs 91,703 84,841
9,162,221 8,978,525

The average number of employees during the year was as follows:
2023 2022

Crew labour 934 834
Management labour 35 32
969 866

2023 2022
£ £
Director's remuneration 8,400 8,400

5. Operating loss

The operating loss is stated after charging:

2023 2022
£ £
Other operating leases 2,997,128 3,368,567
Depreciation - owned assets 766,979 742,712
Franchise rights amortisation 63,451 -
Franchise fees amortisation 10,838 70,346
Auditors' remuneration 7,500 6,750
Taxation compliance services 1,950 1,950
Other non- audit services 3,405 2,090

6. Interest payable and similar expenses
2023 2022
£ £
Bank loan interest 86,465 61,835

7. Taxation

Analysis of the tax credit
The tax credit on the loss for the year was as follows:
2023 2022
£ £
Current tax:
UK corporation tax - (45,178 )

Deferred tax (72,728 ) (98,219 )
Tax on loss (72,728 ) (143,397 )

UK corporation tax has been charged at 25% (2022 - 19%).

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements - continued
for the year ended 31 December 2023

7. Taxation - continued

Reconciliation of total tax credit included in profit and loss
The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:

2023 2022
£ £
Loss before tax (291,547 ) (531,370 )
Loss multiplied by the standard rate of corporation tax in the UK of 25% (2022 -
19%)

(72,887

)

(100,960

)

Effects of:
Expenses not deductible for tax purposes (9,249 ) 966
Capital allowances in excess of depreciation (81,001 ) -
Depreciation in excess of capital allowances - 54,606
Movement in deferred tax provision (72,728 ) (98,219 )
Losses to carry forward 163,137 210
Total tax credit (72,728 ) (143,397 )

Deferred tax has been calculated at 25% (2022 - 25%).

8. Dividends
2023 2022
£ £
Ordinary A shares of £1 each
Interim 30,000 41,500
Ordinary B shares of £1 each
Interim 30,000 41,500
60,000 83,000

9. Intangible fixed assets
Franchise Franchise
rights fees Totals
£ £ £
Cost
At 1 January 2023 - 1,283,651 1,283,651
Additions 916,521 30,000 946,521
Reclassification/transfer 1,073,651 (1,073,651 ) -
At 31 December 2023 1,990,172 240,000 2,230,172
Amortisation
At 1 January 2023 - 351,340 351,340
Amortisation for year 63,451 10,838 74,289
Reclassification/transfer 281,523 (281,523 ) -
At 31 December 2023 344,974 80,655 425,629
Net book value
At 31 December 2023 1,645,198 159,345 1,804,543
At 31 December 2022 - 932,311 932,311

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements - continued
for the year ended 31 December 2023

10. Tangible fixed assets
Fixtures
Short Plant and and Computer
leasehold machinery fittings equipment Totals
£ £ £ £ £
Cost
At 1 January 2023 114,749 4,592,805 2,061,946 8,007 6,777,507
Additions 17,592 862,859 70,618 - 951,069
At 31 December 2023 132,341 5,455,664 2,132,564 8,007 7,728,576
Depreciation
At 1 January 2023 33,056 2,745,568 1,676,149 6,937 4,461,710
Charge for year 6,097 598,442 162,010 430 766,979
At 31 December 2023 39,153 3,344,010 1,838,159 7,367 5,228,689
Net book value
At 31 December 2023 93,188 2,111,654 294,405 640 2,499,887
At 31 December 2022 81,693 1,847,237 385,797 1,070 2,315,797

11. Fixed asset investments
Unlisted
investments
£
Cost
At 1 January 2023
and 31 December 2023 8,750
Net book value
At 31 December 2023 8,750
At 31 December 2022 8,750

Fixed asset investments consists of 8,750 (2022 - 8,750) ordinary shares of £1 each in Fries Holding Company Limited, a company registered in Guernsey. The investments are included in the accounts at cost.

12. Stocks
2023 2022
£ £
Food 88,336 114,765
Paper 24,003 28,775
Non product 7,758 5,282
120,097 148,822

13. Debtors: amounts falling due within one year
2023 2022
£ £
Trade debtors 4,269 1,461
Other debtors 142,576 130,053
Corporation tax 47,099 45,178
Prepayments 163,962 169,797
357,906 346,489

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements - continued
for the year ended 31 December 2023

14. Creditors: amounts falling due within one year
2023 2022
£ £
Bank loans and overdrafts (see note 15) 2,755,661 2,096,381
Trade creditors 954,352 752,178
Social security and other taxes 166,068 112,779
VAT 579,251 629,554
Other creditors 680,818 347,233
Directors' current accounts 81,379 113,882
Accrued expenses 246,519 692,796
5,464,048 4,744,803

15. Loans

An analysis of the maturity of loans is given below:

2023 2022
£ £
Amounts falling due within one year or on demand:
Bank loans 2,755,661 2,096,381

The loans are due for repayment in equal monthly instalments with terms as stated above. They are unsecured with interest charged at rates between 1.4% and 2.0% above the Bank of England base rates.

The loan balance includes four loans from HSBC which contain a covenant in respect of debt service coverage. If adjusted cashflow falls below 120% of debt service, the bank has the right to default the loan.

Whilst the company was able to fulfill all of its loan repayment obligations, it was unable to meet the debt servicing requirements during the year ended 31 December 2023. The breach was reported to HSBC following the year end and, on 4 July 2024, HSBC indicated that it will not take any action pursuant to an Event of Default but reserves its right to take any action if they deem appropriate to do so.

16. Leasing agreements

Minimum lease payments under non-cancellable operating leases fall due as follows:
2023 2022
£ £
Within one year 1,275,180 1,164,828
Between one and five years 5,100,720 4,659,312
In more than five years 10,855,103 10,371,302
17,231,003 16,195,442

Lease payments recognised as an expense in the year totalled £2,997,128 (2022 - £3,368,567).

The Company's restaurant premises are leased from McDonalds Restaurants Limited under non-cancellable operating leases with expiry terms of more than five years. Rent is calculated as a percentage of sales above base, the above operating lease commitment only relates to base rent. Each restaurant pays its own unique base rent based on its circumstances, with the remainder of the rent being based on the performance of the restaurant.

KAIZEN RESTAURANTS LTD (REGISTERED NUMBER: 07737600)

Notes to the Financial Statements - continued
for the year ended 31 December 2023

17. Financial instruments

Financial Assets 2023 2022
£    £   
Financial assets as an equity instrument 8,750 8,750
Financial assets that are debt instruments measured at amortised cost 2,203,655 2,859,641
2,212,405 2,868,391


Financial Liabilities 4,718,729 4,002,470
4,718,729 4,002,470

18. Provisions for liabilities
2023 2022
£ £
Deferred tax 290,217 362,946

Deferred tax
£
Balance at 1 January 2023 362,946
Provided during year (72,729 )
Balance at 31 December 2023 290,217

19. Called up share capital

Allotted, issued and fully paid:
Number: Class: Nominal 2023 2022
value: £ £
75 Ordinary A £1 75 75
25 Ordinary B £1 25 25
100 100

20. Reserves
Retained
earnings
£

At 1 January 2023 1,372,447
Deficit for the year (218,819 )
Dividends (60,000 )
At 31 December 2023 1,093,628

21. Related party disclosures

During the year, total dividends of £60,000 (2022 - £41,500) were paid to the director .

At the balance sheet date, amounts owed by the company to the directors Mr K Tomkins and Mrs S Tomkins amounted £81,379 (2022 - £113,882). This amount bears no fixed rate of interest and is repayable on demand.

22. Ultimate controlling party

The ultimate controlling party is K Tomkins.