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Coffee Shop & Cafe icon Coffee Shop Business Plan

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Java Culture

Executive Summary

Opportunity

Problem

People near the University of Oregon need not just coffee and tea, or pastries and snacks, but also a place to meet comfortably, have a group discussion, or just sit quietly, work, and read. That is available now near the University of Oregon campus, but too crowded too often, and not the right combination of factors for everybody.

Solution

Java Culture coffee bar is determined to become a daily necessity for local coffee addicts, a place to dream of as you try to escape the daily stresses of life and just a comfortable place to meet your friends or to read a book, all in one.

Market

Java Culture will focus its marketing activities on reaching the University students and faculty, people working in offices located close to the coffee bar and on sophisticated teenagers. Our market research shows that these are the customer groups that are most likely to buy gourmet coffee products. Since gourmet coffee consumption is universal across different income categories and mostly depends on the level of higher education, proximity to the University of Oregon campus will provide access to the targeted customer audience.

Competition

Java Culture’s direct competitors will be other coffee bars located near the University of Oregon campus. These include Starbucks, Cafe Roma, The UO Bookstore, and other Food service establishments that offer coffee.

Why Us?

Great coffee, pastries, additional options for tea etc, very welcoming atmosphere, good wireless, desk space, comfortable chairs and tables, good pastries, a location close to the university campus.

Expectations

Forecast

We plan to grow as shown in the chart below, taken from our sales forecast. We aim to maintain an industry-standard 60% gross profit margin and reasonable operating expenses, and to produce reasonable profits in the second and third year.

Financial Highlights by Year

Chart visualizing the data for Financial Highlights by Year

Financing Needed

The owners will invest $140,000 and take out a bank loan for $30,000  to cover the start-up expenses and assets needed plus deficient spending in the early months.

The start-up expenses of $27,000 include:

  • Legal expenses for obtaining licenses and permits as well as the accounting services totaling $1,300.
  • Marketing promotion expenses for the grand opening of Java Culture in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
  • Consultants fees of $3,000 paid to ABC Espresso Services <name changed> for the help with setting up the coffee bar.
  • Insurance (general liability, workers’ compensation and property casualty) coverage at a total premium of $2,400.
  • Pre-paid rent expenses for one month at $1.76 per square feet in the total amount of $4,400.
  • Premises remodeling in the amount of $10,000.
  • Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500).

These expenses will be incurred before launch, so they take their place in our financial projections as negative retained earnings of $27,680 at the end of the month before we begin. That number shows up in the balance sheet.

The required start-up assets of $143,000 include:

  • Cash in the bank in the total amount of $67,000, which includes enough to cover employees and owner’s salaries of $23,900 for the first two months and cash reserves for the first three months of operation (approximately $14,400 per month).
  • Start-up inventory of $16,000, which includes:
    • Coffee beans (12 regular brands and five decaffeinated brands) – $6,000
    • Coffee filters, baked goods, salads, sandwiches, tea, beverages, etc. – $7,900
    • Retail supplies (napkins, coffee bags, cleaning, etc.) – $1,840
    • Office supplies – $287
  • Equipment for the total amount of $60,000:
    • Espresso machine – $6,000
    • Coffee maker – $900
    • Coffee grinder – $200
    • Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc.) – $18,000
    • Storage hardware (bins, utensil rack, shelves, food case) – $3,720
    • Counter area equipment (counter top, sink, ice machine, etc.) – $9,500
    • Serving area equipment (plates, glasses, flatware) – $3,000
    • Store equipment (cash register, security, ventilation, signage) – $13,750
    • Office equipment (PC, fax/printer, phone, furniture, file cabinets) – $3,600
    • Other miscellaneous expenses – $500

Funding for the company comes from two major sources–owners’ investments and bank loans. Two major owners, Arthur Garfield and James Polk, have contributed $70,000 and $30,00 respectively. All other investors have contributed $40,000, which brings the total investments to $140,000. The remaining $30,000 needed to cover the start-up expenses and assets came from the two bank loans–a one-year loan in the amount of $10,000 and a long-term (five years) loan of $20,000. Both loans were secured through the Bank of America. Thus, total start-up loss is assumed in the amount of $27,000.

The amounts show up in the balance sheet in the month prior to opening. The $140,000 investment shows up as Paid-in Capital. The $27,000 expenses show up as negative retained earnings. Assets and liabilities are there. This is all according to financial standards.

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Opportunity

Problem & Solution

Problem Worth Solving

People near the University of Oregon need not just coffee and tea, or pastries and snacks, but also a place to meet comfortably, have a group discussion, or just sit quietly, work, and read. That is available now near the University of Oregon campus, but too crowded too often, and not the right combination of factors for everybody. 

Our Solution

Java Culture will make its best effort to create a unique place where customers can socialize with each other in a comfortable and relaxing environment while enjoying the best brewed coffee or espresso and pastries in town. We will be in the business of helping our customers to relieve their daily stresses by providing piece of mind through great ambience, convenient location, friendly customer service, and products of consistently high quality. Java Culture will invest its profits to increase the employee satisfaction while providing stable return to its shareholders.

Target Market

Market Size & Segments

Coffee consumption has shown a steady 2.5% growth rate in the United States over the last decade. The retail coffee industry is flourishing in the U.S. Pacific Northwest. The local climate, with a long rainy season, is very conducive for the consumption of hot non-alcoholic beverages. At the same time, hot dry summers drive people into cafes to order iced drinks. Furthermore, coffee has really become a part of the lifestyle in the Pacific Northwest. Its discerning coffee drinkers are in favor of well-prepared, strong coffee-based beverages, which they can consume in a relaxing environment.

More specifically, the University of Oregon as close to 25K students and another 5-10K faculty and staff. And it is embedded in the Eugene, OR community of 200K people. Our main market will be students, faculty, staff, and nearby residents. But the campus area is a hub for the community and will attract other customers. 

Competition

Current Alternatives

 Java Culture’s direct competitors will be other coffee bars located near the University of Oregon campus. These include Starbucks, Cafe Roma, The UO Bookstore, and other Food service establishments that offer coffee. Starbucks will definitely be one of the major competitors because of its strong financial position and established marketing and operational practices. However, despite of Starbuck’s entrenched market position, many customers favor smaller, independent establishments that offer cozy atmosphere and good coffee at affordable prices. Cafe Roma is a good example of such competition. We estimate that Starbucks holds approximately 35% market share in that neighborhood, Cafe Roma appeals to 25% of customers, The UO Bookstore caters to another 10%, with the remaining market share split among other establishments. Java Culture will position itself as a unique coffee bar that not only offers the best tasting coffee and pastries but also provides home-like, cozy and comfortable environment, which established corporate establishments lack. We will cater to customers’ bodies and minds, which will help us grow our market share in this competitive market.

Our Advantages

Java Culture will cater to people who want to get their daily cup of great-tasting coffee in a relaxing atmosphere. Such customers vary in age, although our location close to the University campus means that most of our clientele will be college students and faculty. Our market research shows that these are discerning customers that gravitate towards better tasting coffee. Furthermore, a lot of college students consider coffee bars to be a convenient studying or meeting location, where they can read or meet with peers without the necessity to pay cover charges. For us, this will provide a unique possibility for building a loyal client base.

Keys To Success

Keys To Success

The keys to success will be:

  • Store design that will be both visually attractive to customers, and designed for fast and efficient operations.
  • Employee training to insure the best coffee preparation techniques.
  • Marketing strategies aimed to build a solid base of loyal customers, as well as maximizing the sales of high margin products, such as espresso drinks.
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Execution

Marketing & Sales

Marketing Plan

Java Culture will position itself as unique coffee bar where its patrons can not only enjoy a cup of perfectly brewed coffee but also spend their time in an ambient environment. Comfortable sofas and chairs, dimmed light and quiet relaxing music will help the customers to relax from the daily stresses and will differentiate Java Culture from incumbent competitors.

In order to build up its client base, Java Culture will use some strategic banners and fliers during the launch period, utilize customer referrals and cross-promotions with other businesses in the community from time to time, and loyalty programs that work with android and IOS and other mobile phones, which is the preference of our market.

Our main thrust will be getting people to know, like, and trust us with content and engagement in Facebook, Instagram, Snapchat, and Twitter.  We intend to maintain social media presences that are light on self-serving promotional quasi-advertising content, heavy on community participation, content, and engagement. 

Sales Plan

Java Culture baristas will handle the sales transactions. To speed up the customer service, at least two employees will be servicing clients–while one employee will be preparing the customer’s order, the other one will be taking care of the sales transaction. All sales data logged on the computerized point-of-sale terminal will be later analyzed for marketing purposes.

Operations

Locations & Facilities

Java Culture coffee bar will be located on the ground floor of the commercial building at the corner of West 13th Avenue and Patterson Street in Eugene, OR. The company has secured a one-year lease of the vacant 2,500 square feet premises previously occupied by a hair salon. The lease contract has an option of renewal for three years at a fixed rate that Java Culture will execute depending on the financial strength of its business.

The floor plan will include a 200 square feet back office and a 2,300 square feet coffee bar, which will include a seating area with 15 tables, a kitchen, storage area and two bathrooms. The space in the coffee bar will be approximately distributed the following way–1,260 square feet (i.e., 55% of the total) for the seating area, 600 square feet (26%) for the production area, and the remaining 440 square feet (19%) for the customer service area.

This property is located in a commercial area within a walking distance from the University of Oregon campus on the corner of a major thoroughfare connecting affluent South Eugene neighborhood with the busy downtown commercial area. The commercially zoned premises have the necessary water and electricity hookups and will require only minor remodeling to accommodate the espresso bar, kitchen and storage area. The coffee bar’s open and clean interior design with modern wooden decor will convey the quality of the served beverages and snacks, and will be in-line with the establishment’s positioning as an eclectic place where people can relax and enjoy their cup of coffee. The clear window displays, through which passerby will be able to see customers enjoying their beverages, and outside electric signs will be aimed to grab the attention of the customer traffic.

Milestones & Metrics

Milestones Table

Milestone Due Date Who’s Responsible
Summer Promotion
Sept 13, 2018
Social Media Setup
Sept 14, 2018 Marketing
Launch Promotion
Sept 18, 2018 Team
Back to school promotion
Apr 16, 2019 team

Key Metrics

We have our forecasts for sales, direct costs, and operating expenses. As we get into the business we’ll develop standards based on experience for Facebook likes, Twitter follows, and other social media engagement. We expect to watch these very carefully. 

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Company

Overview

Ownership & Structure

Java Culture is majority-owned by Arthur Garfield and James Polk. Mr. Garfield holds a Bachelor’s Degree in Business Administration from the University of ZYX. He’s worked for several years as an independent business consultant. Previously, he owned the ABC Travel Agency, which he profitably sold four years ago. Mr. Garfield has extensive business contacts in Oregon that he will leverage to help his new venture succeed. Mr. Polk has a Bachelor’s Degree in Psychology from the XYZ State University. For the last five years he has worked as a manager of DEF Ristorante, a successful Italian restaurant in Portland, OR. Under Mr. Polk’s management, the restaurant has consistently increased sales while maintaining a lower than average level of operating expenses.

Investors will not be involved into the daily management decisions at Java Culture. They will hire a professional manager who will oversee all the coffee bar operations. Three full-time baristas will be in charge of coffee preparation. They will hire two more part-time employees to fulfill the staffing needs. In the second and third year of operation will add additional employees if and when needed. 

Team

Management Team

A full-time manager will be hired to oversee the daily operations at Java Culture. The candidate (who’s name is withheld due to his current employment commitment) has had three years of managerial experience in the definitely industry in Oregon. This person’s responsibilities will include managing the staff, ordering inventory, dealing with suppliers, developing a marketing strategy and perform other daily managerial duties. We believe that our candidate has the right experience for this role. A profit-sharing arrangement for the manager may be considered based on the first year operational results.

Personnel Table

FY2019 FY2020 FY2021
Manager $60,000 $66,000 $72,600
Baristas (3) $90,000 $94,500 $99,225
Other employees (2) $43,200 $45,360 $47,628
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Financial Plan

Forecast

Key Assumptions

  1. We assume a steadily growing potential market in line with growth at the university, trends. 
  2. We assume industry standard gross margins
  3. We assume relative status quo regarding technology and trends in the coffee industry

Revenue by Month

Chart visualizing the data for Revenue by Month

Expenses by Month

Chart visualizing the data for Expenses by Month

Net Profit (or Loss) by Year

Chart visualizing the data for Net Profit (or Loss) by Year

Financing

Use of Funds

The start-up expenses include an estimated $17,000 consisting of several items:

  • Legal expenses for obtaining licenses and permits as well as the accounting services totaling $1,500.
  • Insurance (general liability, workers’ compensation and property casualty) coverage at a total premium of $1,500.
  • Premises remodeling in the amount of $10,000.
  • Other start-up expenses including website ($4,000) and phone and utility deposits ($2,500).

The required start-up assets of $71,000 include:

  • Plates, glasses, etc. worth approximately $2,000
  • Equipment for the total amount of approximately $69,000
    • Espresso machine
    • Coffee maker
    • Coffee grinder 
    • Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc.)
    • Storage hardware (bins, utensil rack, shelves, food case) 
    • Counter area equipment (counter top, sink, ice machine, etc.)
    • Serving area equipment (plates, glasses, flatware)
    • Store equipment (cash register, security, ventilation, signage) 
    • Office equipment (PC, fax/printer, phone, furniture, file cabinets) 
    • Other miscellaneous expenses

Sources of Funds

Funding for the company comes from two major sources–owners’ investments and bank loans. Two major owners, Arthur Garfield and James Polk, have contributed $70,000 and $30,00 respectively. All other investors have contributed $40,000, which brings the total investments to $140,000. The remaining $30,000 needed to cover the start-up expenses and assets came from the two bank loans–a one-year loan in the amount of $10,000 and a long-term (five years) loan of $20,000. Both loans were secured through the Bank of America. Thus, total start-up loss is assumed in the amount of $27,680.

Statements

Projected Profit & Loss

FY2019 FY2020 FY2021
Gross Margin $336,606 $392,700 $445,800
Operating Expenses
Salaries & Wages $193,200 $205,860 $219,453
Employee Related Expenses $38,640 $41,172 $43,891
Rent $36,000 $38,000 $42,000
Marketing $28,051 $32,725 $37,150
Utilities, phones, Internet etc. $6,000 $6,000 $6,000
Interest Incurred $951 $583 $427
Depreciation and Amortization $12,000 $12,000 $12,000
Gain or Loss from Sale of Assets
Income Taxes $3,265 $8,454 $12,732
Total Expenses $542,511 $606,593 $670,853
Net Profit $18,499 $47,907 $72,147

Projected Balance Sheet

Starting Balances FY2019 FY2020 FY2021
Cash $67,000 $80,234 $133,240 $214,467
Accounts Receivable $0 $0 $0 $0
Inventory $16,000 $21,815 $24,765 $24,765
Other Current Assets
Total Current Assets $83,000 $102,048 $158,005 $239,232
Long-Term Assets $60,000 $60,000 $60,000 $60,000
Accumulated Depreciation ($12,000) ($24,000) ($36,000)
Total Long-Term Assets $60,000 $48,000 $36,000 $24,000
Accounts Payable $0 $0 $0
Income Taxes Payable $2,232 $2,116 $3,184
Sales Taxes Payable $0 $0 $0
Short-Term Debt $13,683 $3,833 $3,989 $4,152
Prepaid Revenue
Total Current Liabilities $13,683 $6,065 $6,105 $7,336
Long-Term Debt $16,317 $12,484 $8,495 $4,343
Long-Term Liabilities $16,317 $12,484 $8,495 $4,343
Paid-In Capital $140,000 $140,000 $140,000 $140,000
Retained Earnings ($27,000) ($27,000) ($8,501) $39,406
Earnings $18,499 $47,906 $72,148

Projected Cash Flow Statement

FY2019 FY2020 FY2021
Net Cash Flow from Operations
Net Profit $18,499 $47,907 $72,147
Depreciation & Amortization $12,000 $12,000 $12,000
Change in Accounts Receivable $0 $0 $0
Change in Inventory ($5,815) ($2,950) $0
Change in Accounts Payable $0 $0 $0
Change in Income Tax Payable $2,232 ($116) $1,068
Change in Sales Tax Payable $0 $0 $0
Change in Prepaid Revenue
Investing & Financing
Assets Purchased or Sold
Investments Received
Dividends & Distributions
Change in Short-Term Debt ($9,850) $156 $163
Change in Long-Term Debt ($3,833) ($3,989) ($4,152)
Cash at Beginning of Period $67,000 $80,234 $133,240
Net Change in Cash $13,234 $53,007 $81,226
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