The Watertower Cafe

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Cafe Bistro Coffeehouse Business Plan

Market Analysis Summary

The casual dining/full service restaurant market is a $100+ billion industry in the United States, with annual increases in revenue outpacing 5% yearly. More and more people are choosing to eat out. One of the most common reasons cited by restauranteurs and industry associations is that women have joined the workforce in record numbers. In fact, from 1955 to 1995, the dollars spent for food away from home rose by almost 20%, coinciding with the number of women entering the work force. With two income earners per household, neither person may have time to fix meals. Since the 1950s, commercial food service sales have continued to rise as more and more people find that eating away from home suits their lifestyles.

Specialty coffee is a $5+ billion per year industry in the United States, and has grown at a rate in excess of 20% per year in the last decade. That sustained growth is expected into this decade according the the Specialty Coffee Association of America.

Atlanta in the mid-1990s had only a handful of specialty coffee retailers: San Francisco Roasters, Cafe Diem, Cafe Intermezzo, Aurora Coffee, J. Martinez, and others. Now, coffee roasters, shops, and suppliers take more than two full pages in the Yellow Pages. Starbucks announced last year that it expects to open 600 additional stores in 2000.

4.1 Market Segmentation

The "Market Opportunity Analysis for Residential and Commercial Uses along the Auburn Avenue Corridor," written by Robert Charles Lesser & Co., makes the following points about food retail for The Watertower at the Studioplex on Auburn site:

Studioplex is in proximity to new and existing residences, including the affluent, and immediately adjacent Inman Park neighborhood; a restaurant would be a destination space within the neighborhood.

A restaurant/coffeehouse would provide one of the best food and beverage opportunities for the more than 500,000 annual visitors to the Martin Luther King Historic District.

Location is close to employment centers or within retail corridor.

Studioplex patrons and residents will provide primary support; secondary support will come from area residents and hotel visitors/conventioneers.

Cross-selling opportunities exist with coffee beverages and magazines.

The coffee shop and the magazines sold there will be positioned to fill a niche demand for people interested in art, architecture, design photography, and home and garden pursuits.

Target market audience is a mix of Studioplex residents, artists, patrons, intown residents, downtown hotel visitors/conventioneers, and workers.

The immediate market area is within a four-mile radius of The Watertower and Studioplex and includes the neighborhoods of Sweet Auburn, Fairlie Poplar, Downtown, Grant Park, Inman Park, Poncey Highlands, Virginia Highland, Little Five Points, Lake Claire, Midtown, East Atlanta, Candler Park, Morningside, Cabbagetown, Druid Hills, and adjacent neighborhoods.


Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Atlanta Area Residents 10% 91,568 100,725 110,798 121,878 134,066 10.00%
Hotel/Convention/Visitors 15% 32,100 36,915 42,452 48,820 56,143 15.00%
Downtown Workers 20% 23,350 28,020 33,624 40,349 48,419 20.00%
Total 12.87% 147,018 165,660 186,874 211,047 238,628 12.87%

4.2 Target Market Segment Strategy

The Watertower will appeal to urban professionals residing in the targeted intown neighborhoods, the many downtown hotel visitors/conventioneers, and workers who desire a sophisticated yet casual eating, coffeehouse entertainment experience. The business will also meet an under-served need for a pedestrian-friendly dining/coffeehouse establishment for the numerous residents in the area, particularly newcomers to the immediate area.

Members of this market segment dine out frequently, approximately three times or more per week. The market segment is largely made up of singles between the ages of 25 and 40, married couples in the same age bracket without children, graduate and professional students attending area universities, tourists, and conventioneers.

4.2.1 Market Needs

Our customer's dining and entertainment needs are critical to the success of The Watertower. As a supplier of a full-service dining experience, The Watertower must appeal to people who are interested in integrating our type of cuisine regularly into their dining/food purchase experiences. Moreover, we must also appeal to those customers who regularly take advantage of Atlanta's coffeehouse and/or evening entertainment scene.

Our customers are well educated and interested in partaking of new experiences. Keeping the menu and the entertainment offerings "fresh" will remain a constant challenge to the business. Segments of the target market tend to dine out, visit coffee shops, and seek evening entertainment frequently. They tend to choose comfortable, affordable venues, and repeat appearances at places that offer familiar scenery with new twists.

Atlanta is experiencing a trend toward the creation of evening dining/entertainment venues. They are popular and gaining more recognition. Evidence of this is found in local news and magazine coverage. These venues are finding new homes in the areas close to and/or adjacent to downtown.

The city's burgeoning music scene is growing and in need of more venues to accommodate the mainstream jazz, acid jazz, Latin, and live dance music artists that are choosing Atlanta as home for their production efforts.

The market opportunity for coffee shop establishments has never been better in this area of Atlanta. The immediate area surrounding the business venue is undergoing a building renaissance as many residents chose to move into or return to the inner city.

4.2.3 Market Growth

Intown Atlanta is currently in the middle of a building and population explosion. Young singles and couples are choosing to reject long commutes in favor of living closer to their work and recreational venues. With the extra time that comes from being in a vibrant growing city with an active nightlife, intown neighborhoods that were formerly dotted with a limited number of night spots have seen their neighborhoods burgeon with new venues.

The section of Midtown Atlanta along 10th Street near Peachtree Street and Piedmont Avenue has experienced remarkable growth in it's nightlife scene. After a devastating demolition in the mid 1980s of buildings located in and around this area to make way for a mall that was never built, the area is featuring a resurgence. The development is rapidly moving south along Juniper Street and Peachtree Street.

As the area's population increases and the frustration with Buckhead congestion grows, people are opting for dining, coffeehouse, and entertainment venues closer to and in Downtown Atlanta.

4.3 Industry Analysis

The restaurants and coffeehouses that make up the community of establishments in the area surrounding The Watertower are quite diverse. Their concepts range from typical fast food/chain venues to expensive fine dining establishments. However, the predominating nature of the immediately surrounding restaurants and coffee shops is casual/upscale.

4.3.1 Competition and Buying Patterns

The general nature of the competition is typically a 70 to 150 seat restaurant with outdoor seating. The menu prices for entree's range from $7.00 to over $25.00. All of the surrounding establishments serve, at a minimum, beer and wine. Most serve liquor-spirits as well.

Some of these venues have added live entertainment to their offerings, however, most are prevented by their facilities from expanding into this area of service. Most of the live entertainment/dancing venues are located in Midtown and Buckhead to the north with a few more venues located west in Downtown Atlanta, and to the east in Little Five Points.

While historically Buckhead has remained a center for restaurants and entertainment venues, Virginia Highland, Little Five Points, and Midtown have grown tremendously in their appeal to diners and partygoers. With the tremendous rise in intown property values, a residential building boom, and a decrease in crime statistics, venues closer to downtown have seen a remarkable rise in business.

A busy population of urban professionals, intent upon working hard and playing hard, has fewer and fewer opportunities to cook at home. These people eat out often and do so with friends.

Because this population tends to eat out far more than the typical population, they look for value. While they might not regularly frequent a restaurant featuring entree prices of $17.00 and higher, they will repeat appearances at restaurants featuring entrees ranging between $7.00 and $16.00.

Many of these patrons also seek entertainment venues on the weekends that are close to their dining venues and homes. Historically, live jazz and Latin music venues in northeast Atlanta have been unavailable to patrons. The market currently suggests that such a venue on Auburn Avenue is not only desired by the populations frequenting restaurants and clubs in northeast Atlanta, it is suggested that it is needed. As Buckhead traffic and appeal has grown beyond the capacity of the neighborhood, patrons are now looking for "easier" places to go out, eat, and have fun.The parking and traffic woes of Buckhead have grown to notorious proportions. Midtowners and residents in adjacent neighborhoods would much rather patronize venues closer to downtown. The Watertower offers them an attractive dining/entertainment/coffeehouse option.

4.3.2 Main Competitors

Loca Luna: Located in the heart of Midtown, this establishment features a Latin house band which is often a group of four Brazilian musicians. The menu is primarily a Spanish tapas style menu with other entree offerings. The venue also features a small dance floor.

While its location near two longstanding Atlanta nightclubs, Backstreet and The Armory, would seem to offer considerable overflow, the restaurant is not easily seen from the street and parking is at a premium. Its concept has received very favorable press in Atlanta.

Yin Yang Cafe: Located on Spring Street, just north of Atlanta's landmark Varsity restaurant, the club features a limited menu and a regular offering of acid jazz, hip-hop, and R&B acts.

The location is very "out-of-the-way" and can be perceived as a marginally safe area. Nevertheless, the club remains wildly popular given the parking difficulties, its small size, and it's rather hidden location. It has become identified nationally as a residence of Atlanta's growing African-American music scene.

Kaya: A bistro and large scale nightclub located on Peachtree Street in Midtown, Kaya boasts an impressive array of entertainment, from Latin music, to hip-hop, disco, and live bands. The restaurant is located on the Peachtree Street side of the club. In the evening, the restaurant generally features a dj or a live band, while the large club portion in the rear of the establishment features a large dance floor and a dj.

It is very popular and regularly features large crowds. Kaya maintains limited parking immediately adjacent to the club.

Cosmopolitan: Cosmopolitan is located in a converted house in Midtown. It is a very small venue featuring a casual-upscale dining menu. The club is converted to a cocktail bar/nightclub in the evening with a small dance floor. It has no designated parking.

Newly arrived to the Atlanta scene, the club features long lines in the evenings. Quite often the club is not able to accommodate the numbers of people interested in visiting the establishment.

The Somber Reptile: Located in downtown Atlanta on Marietta Street, the club features live rock bands and a cajun oriented menu. The clientele is growing steadily as the club's reputation grows. It offers an alternative to the traditional Atlanta nightlife scene.

The Somber Reptile is part of the growing renovation trend taking place in the warehouse district along Marietta Street just west of Downtown Atlanta. While it naturally draws from the nearby residents, it competes directly with the rock music venues located in Little Five Points on the east side of the Atlanta.

Cafe/Apres Diem: Cafe Diem, the first coffeehouse/restaurant to be located south of Ponce De Leon Avenue on the northeast side of Atlanta, has enjoyed extraordinary success. Formerly located on Highland Avenue, the business recently (and reluctantly) located to a strip mall in midtown after a lengthy dispute with its former landlord. It's departure from the immediate area provides an extraordinary opportunity for The Watertower to capitalize on an even greater unmet need for a casual restaurant/coffeehouse experience.

Highland Bagel/Caribou Coffee: Located on North Highland Avenue, this is a traditional corporate coffeehouse which provides morning coffee and sandwich service. The owners are currently expanding to provide evening service.

4.3.3 Industry Participants

Establishments which combine dining and entertainment functions are a smaller segment of the overall, Downtown, Midtown, Virginia Highland, Little Five Points dining market. There are approximately five venues that combine these functions and are regularly recognized by Atlanta media outlets as "hits" in the growing Atlanta nightlife scene.

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