ABUSINESS PLAN ON COFFEE CAFE

INSTIUTE OF MANAGEMENT SCIENCE, UNIVERSITY OF LUCKNOW

SUBMITTED TO:-

DR. RAJ KUMAR SINGH SUBMITTED BY: SHILPI SINGH

MBA (HR & IR)-IV SEM

ROLL NO.- 11001116054

DECLARATIONI, SHILPI SINGH hereby declare that the project entitled Mid Town Coffee Cafe, The Coffee Bar is my original work, done by me except the material and information gathered from the various coffee cafe. This has not been previously submitted for any other degree or diploma.

I have done my comprehensive project under the guidance of Mrs. ARCHANA SINGH, coordinator of MBA HR department IMS ,University of Lucknow.

SHILPI SINGH MBA(HR & IR)- IV Sem

IMS ,University of Lucknow

ACKNOWLEDGEMENTThe study was conducted by the assistance of several individuals. Their co-operation and guidance has resulted in the completion of the entire comprehensive project, without which this task was almost impossible. I really appreciate their help and hereby thank them.

I would like to give special thanks to the following people:

Firstly, I would like to thank Director Dr. Rajkumar singh and coordinator Mrs. Archana Raj maam for providing me the opportunity to take up this project and for his valuable guidance, academic and moral support which made this report a reality.

I also thank my family members and friends whose support and encouragement has meant a lot to me personally and also for the completion of the report.

Finally, my acknowledgement goes to all those people who have helped me in carrying out this project work in an effective manner.

SHILPI SINGHTABLE OF CONTENTS

SL. NO.PARTICULARSPAGE NO.

1Executive Summary5

2Company Summary7

3Company Ownership8

4Start-up Summary8

5Products12

6Market Analysis Summary13

7Market Segmentation14

8SWOT Analysis16

9Strategy and Implementation Summary18

10Sales Forecast20

11Management Summary21

12Personnel Plan23

13Financial Plan26

14Projected Cash Flow28

15Projected Profit & Loss Account and Balance sheet30

Executive Summary

Mid Town Coffee Cafe 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 andjust acomfortable place to meet your friends or to read a book, all in one. With the growing demand for high-quality gourmet coffee and great service, MTCC will capitalize on its proximity to the Kanpur University campus to build a core group of repeat customers. The Cafe will offer its customers the best prepared coffee in the area that will be complimented with pastries.

The company will operate a 500 square foot coffee bar within a walking distance from the Kanpur University campus. The owner has secured this location on a lease contract with an option to extend up to three years. The owner have also provided Rs. of the required Rs.539,900 start-up funds.

The company is expected to grow sales revenue from Rs.191,2500 in FY2014-15 to Rs.2988281 in FY2015-16 . As MTCC will strive to maintain a 37.5% gross profit margin in FY2014-15 and it will grow to 42.3% in FY2015-16 with reasonable operating expenses,it will seenet profits grow from Rs.166,768 to Rs.486388.875 during the same period.

1.1 Objectives

Mid Town Coffee Cafe's objectives for the first year ofoperations are:

Become selected as the "Best New Coffee Bar in the area" by the local restaurant guide.

Turn in profits from the first month of operations.

Maintain a 37.5% gross margin in first year1.2 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.

1.3 Mission

Mid Town Coffee Cafe 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 coffeeor 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. Mid Town Coffee Cafe will invest its profits to increase the employee satisfaction.2 Company Summary Mid Town Coffee Cafe, limited liability Company, sells coffee, other beverages and snacks in its 500 square feet premium coffee bar located near the Kanpur University campus. 2.1 Company OwnershipMTCC is a sole proprietorship firm, and the owner contributes the entire capital. This gives increased profit margins from the start and as the company grows, the debt-free philosophy will be maintained. However, recognizing that in reality not all variables are controllable. The founder owns a shop and has enough funds to start the business.2.2 Start-up SummaryThe start-up expenses include:

Legal expenses for obtaining licenses and permits as well as the accounting services totaling Rs. 2,000.

Marketing promotion expenses for the grand opening of MTCC in the amount of Rs.60,000 in the start . Insurance (general liability, workers' compensation and property casualty) coverage at a total premium of Rs.10,000.

Pre-paid rent expenses for three month at Rs.20 per square feet in the total amount of Rs.30,000.

Other start-up expenses including stationery (Rs.500) and phone and utility deposits (Rs.24, 000).

The required start-up assets of Rs.262, 600 include:

Furniture & fitting of the total amount of Rs.160, 000.

Espresso Machine of Rs. 11,000. Coffee Grinder & maker of Rs. 600 and 1500 Respectively.

Computer, Air conditioner and Billing Machine of the total amount of Rs.89,500.The following table summarizes the start-up assumptions.ParticularsAmount (in Rs.)

Start Up Expenses

Legal expenses2000

Insurance10000

Stationary 500

Menus1000

Advertisement60000

Total start up expenses73500

Start Up Assets

Furniture & fittings160000

Espresso machine11000

Coffee Grinder600

Coffee maker1500

Computer40000

Air conditioner40000

Billing Machine9500

Total Start Up Assets 262600

Cash Reserve#203800

Total start Up Costs A+B+C539900

#Cash Reserve (in Rs.)

Utilizes8000324000

salaries*26600379800

Rent10000330000

supply cost20000360000

Emergencies10000-10000

Total203800

Salaries *(in Rs.) per month

Waiters 2Rs.15 per hour12 a day 10800

Coffee makers 2Rs.15 per hour10800

Accountant 150005000

Total26600

2.3 Company Locations and Facilities

MTCC, coffee bar will be located on the ground floor of the commercial place near Kanpur University Campus in Kalyanpur. The company has secured a one-year lease of the vacant 500 square feet.

The lease contract has an option of renewal for three years at a fixed rate that MTCC will execute depending on the financial strength of its business.

The floor plan will include a 200 square feet back office and a 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--275 square feet (i.e., 55% of the total) for the seating area, 130 square feet (26%) for the production area, and the remaining 95 square feet (19%) for the customer service area.

This property is located in a commercial area within a walking distance from the Kanpur University campus. 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.ProductsMTCC will offer its customers the best tasting coffee beverages in the area. This will be achieved by using high-quality ingredients and strictly following preparation guidelines. The store layout, menu listings and marketing activities will be focused on maximizing the sales of higher margin espresso drinks. Along with the espresso drinks, brewed coffee and teas, as well as some refreshment beverages, will be sold in the coffee bar. MTCC will also offer its clients cakes and cookie. For the gourmet clientele that prefers to prepare its coffee at home, MTCC will also be selling coffee powder.3.1 Product Description

The menu of the MTCC, coffee bar will be built around espresso-based coffee drinks such as lattes, mochas, cappuccinos, etc. Each of the espresso-based drinks will be offered with whole, skimmed, or soy milk. Each of these coffee beverages is based on a 'shot' of espresso, which is prepared in the espresso machine by forcing heated water through ground coffee at high pressure. Such espresso shots are combined with steamed milk and/or other additives like cocoa, caramel, etc., to prepare the espresso-based beverages. Proper preparation techniques are of paramount importance for such drinks. A minor deviation from the amount of coffee in the shot, the size of the coffee particles, the temperature of milk, etc., can negatively affect the quality of the prepared drink.

3.2 Sales Literature

Two thousand flyers will be distributed in the adjacent neighborhood, on the University campus, at the malls and in the selected office buildings within two weeks prior to the opening of MTCC. Subsequently, pamphlet of MTCC endorsement will be printed to increase the company visibility among the patrons.Market Analysis Summary

Coffee consumption has shown steady growth, with gourmet coffee having the strongest growth. Coffee drinkers in that area are among the most demanding ones. They favor well-brewed gourmet coffee drinks and demand great service. MTCC will strive to build a loyal customer base by offering a great tasting coffee in arelaxing environment of its coffee bar located close to the Kanpur University campus.

4.1 Market Segmentation

MTCC 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 Kanpur University campus will provide access to the targeted customer audience.

The chart and table below outline the total market potential (in number of customers) of gourmet coffee drinkers in Kanpur.

4.2 Target Market Segment Strategy

MTCC 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 theseare 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.4.2.1 Market Needs

General trend toward quality among consumers definitely plays an important role in the recent growth in gourmet coffee. Additionally, such factors as desire for small indulgencies, for something more exotic and unique, provide a good selling opportunity for coffee bars.4.3 SWOT Analysis

Before opening a coffee shop, it is wise to do a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). This is a few things that I could think of:

Strengths:

Its a youth oriented brand, hence huge potential since 40 % population is below 20. Strong management

Weaknesses:

Small Staff

Growing Operation without enough space

Online Presence

Weak BrandOpportunities:

Coffee cafe industry is one of the fastest growing industry in India.

More people like to visit coffee cafe for informal meetings.

Threats: Competition with local coffee cafes and cafeteria of university.4.3.1 Competition and Buying Patterns

CompetitionMTCC's direct competitors will be other coffee bars located near the Kanpur university campus and cafeteria of university. MTCC will position itself as a unique coffee bar that not only offers the best tasting coffee, cakes and cookie 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.Buying PatternsThe major reason for the customers to return to a specific coffee bar is a great tasting coffee, quick service and pleasant atmosphere. Although, as stated before, coffee consumption is uniform across different income segments, MTCC will price its product offerings competitively. We strongly believe that selling coffee with a great service in a nice setting will help us build a strong base of loyal clientele.Strategy and Implementation Summary

MTCC's marketing strategy will be focused at getting new customers, retaining the existing customers, getting customers to spend more and come back more often. Establishing a loyal customer base is of a paramount importance since such customer core will not only generate most of the sales but also will provide favorable referrals.

5.1 Competitive Edge

MTCC 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 MTCC from incumbent competitors.

5.2 Sales Strategy

MTCC baristas will handle the sales transactions. To speed up the customer service, at least five employees will be servicing clients--while two employee will be preparing the customer's order, two waiters and 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.

In order to build up its client base, MTCC will use banners and fliers, utilize customer referrals and cross-promotions with other businesses in the community. At the same time, customer retention programs will be used to make sure the customers are coming back and spending more at the coffee bar.

5.2.1 Sales Forecast

Food costs are assumed at 25% for coffee beverages and for retail cookie and cakes. Proximity to the University campus will dictate certain sales seasonality with revenues slightly decreasing during the school vacation periods.

The chart and table below outline our projected sales forecast for the First years. FORECASTED SALES

COFFEE CAKE COOKIE

Price per Unit (IN Rs.)152025202540101520

Forecasted sales (in Units)506040403020302520

Total sale p/d75012001000800750800300375400

Days in month252525252525252525

Total sale p/m1875030000250002000018750200007500937510000

No. of months121212121212121212

Total sales for 12 months22500036000030000024000022500024000090000112500120000

SALE (in Rs.)1912500

COST OF FORCASTED SALES

COFFEE CAKE COOKIE

Cost per Unit (IN Rs.)8111713172461114

Forecasted sales (in Units)506040403020302520

Total Cost of sale p/d400660680520510480180275280

Days in month252525252525252525

Total Cost p/m100001650017000130001275012000450068757000

No. of months121212121212121212

Total Cost for 12 months120000198000204000156000153000144000540008250084000

COST (in Rs.)1195500

Management Summary

MTCC is owned by the owner holds a Master Degree in Business Administration from the Department of Business Administration, University of Lucknow.

However, because of various activities and functions there will be need to hire some employee who can perform these activities. An Accountant (Rs.60,000/yr) will be hired who will oversee all the coffee bar operations. Four other employees (Rs.54,000/yr each) will be in charge of coffee preparation and serving. These four employees will be hired to fulfill the staffing needs on part time basis. In the second and third year of operation, salary will increase by 10% .

6.1 Management Team

A full-time accountant will be hired to oversee the daily operations at MTCC. The candidate (who's name is withheld due to his current employment commitment) has had three years of experience in accounting. This person's responsibilities will include managing the staff, ordering inventory, dealing with suppliers, developing a marketing strategy and perform other daily duties. We believe that our candidate has the right experience for this role.HUMAN RESOURCE PLANNINGHuman resource management (HRM) is the strategic and coherent approach to the management of an organizations most valued assets - the people working there who individually and collectively contributes to the achievement of the objectives of the business. The terms "human resource management" and "human resources" (HR) have largely replaced the term "personnel management" as a description of the processes involved in managing people in organizations. Human Resource management is evolving ra. As such, HRM techniques, when properly practiced, are expressive of the goals and operating practices of the enterprise overall. HRM is also seen by many to have a key role in risk reduction .Synonyms such as personnel management are often used in a more restricted sense to describe activities that are necessary in the recruiting of a workforce, providing its members with payroll and benefits, and administrating their work-life needs. So if we move to actual definitions, Torrington and Hall (1987) define personnel management as being rapidly a series of activities which: first enable working people and their employing organizations to agree about the objectives and nature of their working relationship and, secondly, ensures that the agreement is fulfilled".

While Miller (1987) suggests that HRM relates to:

".......those decisions and actions which concern the management of employees at all levels in the business and which are related to the implementation of strategies directed towards creating and sustaining competitive advantage"

. Human resources management comprises several processes. Together they are supposed to achieve the above mentioned goal. These processes can be performed in an HR department, but some tasks can also be outsourced or performed by line-managers or other departments.

Human Resources Planning (HRP)

Design of Organization and Job Selection and Staffing Training and Development Organization Development (OD) Compensation and Benefits Employee Assistance Nature of HRMSimply put, Human Resource Management (HRM) is a management function that helps managers to recruit, select, train and develop members for an organization. Obviously, HRM is concerned with the people's dimension in organizations. Following are few definitions of HRM:

1. HRM is a series of integrated decisions that form the employment relationship; their quality contributes to the ability of the organizations and the employees to achieve their objective.2. HRM is concerned with the people dimension in management. Since every organization is made up of people, acquiring their services, developing their skills, motivating them to higher levels of performance and ensuring that they continue to maintain their commitment to the organization are essential to achieving organizational objectives. This is true, regardless of the type of organization- government, business, education, health, recreation, or social action.

3. HRM is the planning, organizing, directing and controlling of the procurement, development, compensation, integration, maintenance and separation of human resources to the end that individual, organizational, and social objectives are accomplished. HR ACTIVITES1. RECRUITMENT/SELECTION

2. TRAINING AND DEVELEPMENT

3. PERFORMANCE APPRAISAL

4. RECLOCATION

5. INDUCTION

6. DOMESTIC TRAVEL POLICY

7. SEPARATION

8. EXIT INTERVIEWS

9. ATTENDENCE/AWARD/REWARD

10. CONFIRMATION PROCESS

In Human resource management is a process of bringing people and organizations together so that the goals of each are met. It is that part of the management process which is concerned with the management of human resources in an organization. It tries to secure the best from people by winning their whole hearted cooperation. In short, it may be defined, as the art of procuring, developing and maintaining competent workforce to achieve the goals of an organization in an efficient and effective manner. Human Resource DevelopmentAtPBPLthemainactivitiesundertakenbyHRDdepartmentarerecruitment,performanceappraisalTraininganddevelopment,welfareactivities,personalgrowth&promotion.

Performance Appraisal.Toachievethisobjectivethecompanycarriesoutperformance appraisal of its employees so as to assess their weaknesses& strengths& to take measures accordingly like providing training or giving rewards or incentives RecruitmentRecruitment at OPEN AIR RESTAURENT is carried out in close co-ordination with the department requiring the personnel. It is a process where the qualification and other skills needed for the job are taken into account & based on this the incumbent is selected after proper screening & interviewing. He is then inducted & provided training if needed. Training andDevelopmentTraining & development is an important aspect. Coffee shop believes in training and development of its employees so as to help them taken higher responsibilities & to prepare to meetthechallengingbusinessenvironment. Coffee shop believes in training and development of its employees so as to help them taken higher responsibilities & to prepare to meetthechallengingbusinessenvironment. HR Techniques Will Adopt By coffee shop KAIZENS Total Quality Management(TQM)

6.2 Personnel Plan

The table below outlines the personnel needs of MTCC coffee bar.Personnel Plan Per Year

waiters 2Rs.15 per hour12 a day 108000

Coffee makers 2Rs.15 per hour12 a day108000

Accountant 1500060000

Total salary (in Rs.)276000

Financial Plan

MTCC will capitalize on the strong demand for high-quality gourmet coffee. The owners have provided the company with sufficient start-up capital. With successful management aimed at establishing and growing a loyal customer base, the company will see its net worth doubling in two years. MTCC will maintain a healthy 40% gross margin average, which combined with reasonable operating expenses, will provide enough cash to finance further growth.

7.1 Projected Cash Flow

As the table below present, the company will maintain a healthy cash flow position, which will allow for timely debt servicing and funds available for future development.

FORECASTED CASH FLOW (in Rs.)

FY2012-13FY2012-13FY2012-13

Operating

Sales191250023906252988281.25

COGS-1195500-1434600-1721520

Salaries-276000-303600-333960

Rent-120000-132000-145200

Insurance0-10000-10000

Advertisement-24000-24000-24000

Taxes@ 30%-71472-128299.5-208452.375

Cash flow from operating activities225528358125545148.875

Financing

Preliminary expenses-7350000

Investing000

Cash at beginning282700434728792853.5

Cash at end434728792853.51338002.375

7.2 Break-even Analysis

With average monthly fixed costs of Rs.262,700 in FY2012 and an average margin of 37.5%, MTCC's break-even sales volume is around 35027 units. As shown further, the company is expected to generate such sales volume from the out start.

7.3 Projected Profit and Loss

Annual projected sales of Rs.191, 2500 in FY2012-13.The table below outlines the projected Profit and Loss Statement for FY2012-13 to 2014-15.Income statement (in Rs.)

ParticularsFY2012-13FY2013-14FY2014-15

sale revenue191250023906252988281.25

less: cost of sale119550014346001721520

Gross margin7170009560251266761.25

Less: Office Expense

Salaries 276000303600333960

Rent120000132000145200

Advertisement 240002400024000

Utilities000

Insurance01000010000

Depreciation furniture*160001600016000

Preliminary Expenses245002450024500

Depreciation Espresso*226022602260

Depreciation computer& AC *160001600016000

Total office expense478760528360571920

EBIT238240427665694841.25

Tax Rate@30%71472128299.5208452.375

Net income166768299365.5486388.875

*The rate of Depreciation is taken as 10% in furniture and espresso machine and for computer and AC it is 20%.7.4 Projected Balance SheetBalance Sheet (in Rs.)

ParticularsFY2012-13FY2013-14 FY2014-15

Owner's fund545300545300545300

Reserves0166768466133.5

Net Profit166768299365.5486388.875

Liabilities000

Total Liabilities and Owner's Fund7120681011433.51497822.375

Furniture & Fittings144000128000112000

Coffee machine990088007700

Computer320002400016000

Air conditioners320002400016000

Total depreciation342603426034260

Net Assets228340194080159820

Other equipments1044092808120

Preliminary Expenses49000245000

Cash 434728792853.51338002.375

Total Assets7120681011433.51497822.375

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