Coffee shop venture plan

8/7/2019 Coffee shop venture plan

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Vision and Mission Statement

The Perfect Cup will become the foremost coffee shop in the area. We will serve a perfectproduct at a very reasonable price. We will also be a meeting place for artists and writers and aplace for them to show off their work. We will create an atmosphere conducive to creative

expression and promote the creative process.

Objectives

Our primary goals over the next year are:

1. Secure financing for start-up of at least $30,000 for space and equipment.

2. Renovate our space in Old Town.

3. Acquire equipment necessary for business, i.e. coffee pots, cappuccino machines, blenders,

etc.

4. Make agreement with coffee distributors, and bakery vendors.

5. Create a cozy, artist friendly environment (i.e. choice of colors, choice of music, decor)

6. Open for business and become the foremost coffeehouse in the area.

Ownership

The Perfect Cup is a general partnership between Arlene and April Mason. Each partner is

equally involved in operation and management of the shop, each to her own abilities.

Location and Facilities

The Perfect Cup is located in the Old Town section of Somewhereville, Texas. We currently ownthe building we will occupy, though painting and renovation are sorely needed.

Products and Services

Description of Products and Services

The Perfect Cup will offer high quality coffee, tea, hot coca, and cappuccino, at a veryreasonable price.

We will also sell homemade cookies, brownies, and doughnuts, also reasonably priced.

Key Features of the Products and Services

All drinks will be made with filtered water and the highest quality ingredients we can get.


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Frozen drinks will have caramel or chocolate syrup drizzled in the glass and over the drink.Cappuccino and hot coca will have whipped cream toppings as well as the option for candysprinkles. Cookies will have the option of a chocolate or caramel dip and sprinkles.

We will offer designer flavored cream and five kinds of sweetener, i.e. sugar, honey, Equal,

Splenda, and Sweet-n-Low. Cream and sweetener is at no extra charge.

Production of Products and Services

We will use only filtered water and will brew our coffee in commercial coffeepots that will bethoroughly cleaned between uses.

We will bake cookies and brownies in our own on-site oven from proven recipes, daily.

Competitive Advantages in Production

Our low overhead and cheaper pricing will be the key to our success.

Industry Overview

Market Research

There are no other businesses that serve only coffee in Old Town.

Size of the Industry

Nationally, the coffee shop industry is quite large, but in Somewhereville, there are only three.

The nearest one to Old Town is more than 5 miles away.

Key Industry Trends

This industry is booming at the present time, there is a trend toward small cozy places and awayfrom the large generic chain.

Industry Outlook

The coffee business does not show signs of slowing down. With new innovations such asflavorings and additives, it should continue for some time.

Marketing Strategy

Target Markets


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Our target market is artists and writers who need a nice quite cozy place to think and do theirwork.

Description of Key Competitors

Of the three coffee shops in the area, one is a large chain with a very expensive product, one isreally a homestyle restaurant, the last one, and our biggest competitor is an antique store with a"tea room".

Analysis of Competitive Position

Our pricing strategy and comfortable atmosphere will be the key to our success. None of theother shops in the area can offer this.

Pricing Strategy

We will offer three sizes of drinks, small $1.00, medium $1.50 and large $2.00.

Our cookies and brownies will sell for $1.00 each.

Promotion Strategy

We intend to advertise in the local newspapers and offer a "frequent drinkers club" discount toour best customers. We will also send out ads via direct mail, which will include cents offcoupons.

Management and Staffing

Organizational Structure

Our organizational structure will be a simple pyramid style with the owners putting in as muchwork as the employees.

Management Team

April and Arlene will share management and supervisory responsibilities equally. Arlene for themorning shift. April for the afternoon shift.

Staffing

We will hire two busboys and two waitresses, these will be recruited from the local high school.

Labor Market Issues

In this area there are many high school students looking for work, part time or full time, we wantto fill that need.


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Regulatory Issues

Somewhereville and the state of Texas both have regulations regarding food serviceestablishments. We have already obtained the appropriate business permits.

Risks

Market Risks

The main risk is monetary. The area may not be ready for a place like ours and we may not do agreat business.

Implementation Plan

Implementation Activities and Dates

1. Begin building renovation 12/05

2. Complete renovation 2/15/05

3. Begin preliminary advertising 2/15/05

4. Purchase and setup equipment 2/15/05

5. Open for business 3/1/05


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Financial Plan

y Sales growth will be a minimum of 15% annually, margins excellent, profits at approximately20% - 25%, cash flow adequate.

y Marketing will remain below 5% of sales.y The company will invest residual profits into financial markets or real estate.y Future cash investments will use NPV projections to achieve maximum return with limited risk.

8.1 Important Assumptions

y The 20-year record of positive growth for specialty coffee drinking will continue at a healthyrate. The Specialty Coffee Association says that the market is far from saturation and will not

reach maturity until at least 2019.

y The resilience of the coffeehouse industry to negative national and world events will continue.Despite recession and war the coffeehouse industry has shown strong growth every year for the

past two decades.

y The quality of national chains will remain the same or decline slightly rather than improve asthey standardize their stores, increase automation of espresso drinks and mass-produce the

roasting process.

y Coffee drinks will continue to be considered an "affordable luxury."

y 15% minimum sales growth rate over the next three years as Dark Roast Java becomes wellknown.

General Assumptions

Year 1 Year 2 Year 3

Plan Month 1 2 3

Current Interest Rate 3.00% 3.00% 3.00%

Long-term Interest Rate 3.00% 3.00% 3.00%


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Tax Rate 20.00% 20.00% 20.00%

Other 0 0 0

8.2 Break-even Analysis

A break-even analysis table has been completed on the basis of average costs/prices. With fixedcosts of $26,400 and $4.50 an average sale, we need approximately $35,000 per month to break-even.

Break-even Analysis

Monthly Revenue Break-even $34,422

Assumptions:

Average Percent Variable Cost 23%

Estimated Monthly Fixed Cost $26,409


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Pro Forma Profit and Loss

Pro Forma Profit and Loss


Sales $606,579 $786,613 $1,020,314

Direct Cost of Sales $141,197 $142,609 $144,035

Other Costs of Goods $24,000 $28,000 $32,000

Total Cost of Sales $165,197 $170,609 $176,035

Gross Margin $441,382 $616,004 $844,279

Gross Margin % 72.77% 78.31% 82.75%

Expenses

Payroll $183,400 $337,000 $339,400

Sales and Marketing $12,500 $8,000 $8,000

Depreciation $6,000 $4,000 $4,000

Rent $45,900 $55,000 $60,000

Utilities $9,200 $14,000 $16,000

Insurance $2,400 $2,400 $2,500

Legal/accounting $6,000 $6,000 $6,000

Payroll Taxes $27,510 $50,550 $50,910

Mobile Kiosk $0 $0 $0

Misc - maintenance, cleaning, training, fees $24,000 $25,000 $25,000

Total Operating Expenses $316,910 $501,950 $511,810

Profit Before Interest and Taxes $124,472 $114,054 $332,469

EBITDA $130,472 $118,054 $336,469

Interest Expense $0 $0 $0

Taxes Incurred $24,894 $22,811 $66,494


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Net Profit $99,577 $91,243 $265,975

Net Profit/Sales 16.42% 11.60% 26.07%

8.4 Projected Cash Flow

We are positioning ourselves in the market as a low to medium risk concern with relativelysteady cash flows. Accounts payable is paid at the end of each month, while sales are in cash,giving Dark Roast Java an excellent cash structure. Fifty percent of cash above $20,000 will beinvested into semi-liquid stock portfolios to decrease the opportunity cost of cash held.Our initial investor contributions are designed to provide us with a strong cash position at alltimes

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $606,579 $786,613 $1,020,314

Subtotal Cash from Operations $606,579 $786,613 $1,020,314

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $606,579 $786,613 $1,020,314


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Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $183,400 $337,000 $339,400

Bill Payments $275,940 $358,649 $406,457

Subtotal Spent on Operations $459,340 $695,649 $745,857

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $17,600 $26,400 $26,400

Subtotal Cash Spent $476,940 $722,049 $772,257

Net Cash Flow $129,639 $64,564 $248,057

Cash Balance $131,139 $195,703 $443,761


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Pro Forma Balance Sheet


Assets

Current Assets

Cash $131,139 $195,703 $443,761

Inventory $16,591 $16,757 $16,925

Other Current Assets $15,000 $15,000 $15,000

Total Current Assets $162,730 $227,461 $475,685

Long-term Assets

Long-term Assets $62,000 $62,000 $62,000

Accumulated Depreciation $6,000 $10,000 $14,000

Total Long-term Assets $56,000 $52,000 $48,000

Total Assets $218,730 $279,461 $523,685

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $33,253 $29,140 $33,790

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $33,253 $29,140 $33,790

Long-term Liabilities $0 $0 $0

Total Liabilities $33,253 $29,140 $33,790

Paid-in Capital $250,500 $250,500 $250,500

Retained Earnings ($164,600) ($91,423) ($26,579)

Earnings $99,577 $91,243 $265,975

Total Capital $185,477 $250,321 $489,896


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Total Liabilities and Capital $218,730 $279,461 $523,685

Net Worth $185,477 $250,321 $489,896


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Documents

Coffee shop venture plan