1 Executive
Summary
An example company – “Java
Culture coffee” bar is taking in its plans to become number one necessity for
all local coffee addicts, a resort to go to away from the stresses of life, a
place to have the comfort of reading a book and meeting with friends.
The increased demand for gourmet
coffee with high quality and the special service made Java Culture think of capitalizing
on its proximity to the University of Oregon Campus to build a core group of
repeat customers.
Java Culture will show and make
its customers try the best prepared coffee in the area which will be
complimented with parties. In addition to that it will provide free books to
its patrons to read and enjoy their visit.
The company is going to operate
about 2.300 square foot coffee bar within a walking distance from the
University of the Oregon campus. The
owners have made this location secured through a three-year lease with an
option for extending.
They have also provided all the
required R1.7 million start-up funds.
The remaining capital is to be obtained through the commercial loans
from Bank of America.
A sales revenue from R584 000 in
FY2001 to R706 000 is expected to be grown by the company in year three. As Java Culture is going to strive to keep a
65% gross profit and reasonable operating expenses, the net profits are
expected to be grown from R1 Million to R1.25 Million during the same period.
1. Objectives
The objectives of Java Culture in
its first year of operations are:
To become chosen as the
"Best New Coffee Bar in the area" by the local restaurant guide.
To gain profits from the first
month of operations.
To get a 65% gross margin.
2. Keys to
Success
The main keys to success will be:
The design of the store should be containing
both visual attractiveness to customers and well designing for fast and
efficient operations.
Providing good training for the employees to
insure the best coffee preparation techniques.
To enable creative marketing
strategies that have the purpose of creating a solid base of customers, in
addition to maximizing the sales of high margin products such as espresso
drinks.
3. Mission
Java Culture is intending to make
its greatest effort to create a unique place where customers can familiarize
with each other in a comfortable and relaxing atmosphere during enjoying the
best brewed coffee or espresso and pastries in the town..
We are going to be in the
business of aiding our customers to relieve their daily pressures by providing
piece of mind through great ambience, convenient location, friendly customer
service and products of consistently high quality.
In addition to that, Java culture
is going to invest its profits to increase the satisfaction of the employees
and in the same time providing stable return to its shareholders.
Coffee-shop-location
Java Culture, an Oregon limited
liability company, sells coffee, snacks and other beverages in its 2.300 square
feet premium coffee bar located near the university of Oregon Campus.
The major investors of Java
Culture are Arthur Garfield and James Polk who own over 70% of the company
cumulatively. The start-up loss of the
company is assumed in the amount of R270 680.
1. Company
Ownership
The registration of Java Culture
is as a Limited Liability Corporation in the state of Oregon. Arthur Garfield owns 51% of the company. His
Cousin, James Polk, as well as Mehan Flanigan and Todd Barkley hold minority
stakes in Java Culture, Limited Liability Corporation.
2. Company
Locations and Facilities
The location of Java Culture
coffee bar is going to be on the ground floor of the commercial building at the
corner of West 13th Avenue and Patterson Street in Eugene, OR.
The company has booked a one-year
lease of the vacant 2.500 square feet premises previously occupied by a
barber's shop. The lease contract
contains an option of renewal for more three years at a fixed rate that Java
Culture will execute depending on the financial strength of its business.
Products
Java Culture offers to the customers the best
tasting coffee beverages in the region. This is going to be achieved by using
high-quality and perfect ingredients and strictly following the preparation
guidelines. There will be main focus on
the store layout, menu listing and marketing activities to maximize the sales
of higher margin espresso drinks. Beside
the espresso drinks, other drinks like brewed coffee, teas and other some
beverages will be sold in the coffee bar.
Small salads and sandwiches are also going to be offer to customers by
Java Culture. For the gourmet customer that prefers to prepare his coffee at
home, Java Culture will also be selling coffee beans.
Free books and magazines are going to be
supplemented to the menus offerings so that the customers can read inside the
coffee bar.
3.1 Product Description
The menu of the Java Culture coffee bar is
going to be built around espresso-based coffee drinks such as mochas,
cappuccinos, etc. Each of the espresso-based drinks will be served with whole,
skimmed, or soy milk. Each one of these beverages is built on a 'shot' of
espresso that is prepared in the espresso machine by making hot water go
through ground coffee at high pressure. Such espresso shots are put together
with steamed milk and other additives like cocoa, caramel, etc, to prepare the
espresso-base beverages. The prepare
preparation techniques are of great importance for such drinks. Any minor deviation in the amount of coffee
in the shot or the size of the coffee particles or the temperature of the milk,
etc., can affect the quality of the prepared drink in a negative way.
3.2 Sales Literature
About two thousand flyers are going to be distributed
in the neighborhood, on the university campus, at the malls and in the selected
office buildings two weeks earlier to the opening of Java Culture. Alternatively,
free postcards with Java Culture logo are going to be printed to increase the
company's visibility among customers.
Market Analysis Summary
The growth of U.S coffee consumption has been
remarkably noticed and the gourmet coffee showed the strongest growth. Coffee
drinkers in the Pacific Northwest are the most demanding ones. Their favorite
type of coffee is the well-brewed gourmet coffee drinks and demand great
service. The weather of Eugene, OR with its long winter, has traditionally made
it a perfect place for coffee establishments. Java Culture is going to grow a
loyal customer base by offering a great unique taste of coffee in a relaxing
atmosphere of its coffee bar located close to bustling University of Oregon
Campus.
4.1 Market Segmentation
The focus of Cava Culture marketing activities
is going to be on reaching the University students and faculty, people working
in offices located close to the coffee bar and also on sophisticated teenagers.
Our done market research shows that these are the customer groups that are
likely to buy gourmet coffee products. Since the consumption of gourmet coffee
is universal across different income categories and mostly depends on the level
of higher education, proximity to the University of Oregon campus is going to
provide access to the targeted customer audience.
4.2 Target Market Segment Strategy
Java Culture is going to target people who
want to get their daily cup of great-tasting coffee in a relaxing environment.
These customers vary in age, although our location close to th University
campus means that most of the customers will be college students and faculty.
Our market research shows that these are discerning customers that
gravitate towards better tasting coffee. In addition to that, a lot of college
students regard coffee bars to be a convenient studying or meeting location,
where they can study or meet with peers without having to pay cover charges.
This will provide us a unique possibility for building a loyal client base.
4.2.1 Market Needs
The general trend among U.S customers of
course plays a significant role in the recent growth in gourmet coffee. In
addition to that, such factores as desire for small indulgencies for something
more exotic and unique provide a good selling opportunity for coffee bars.
4.3 Industry Analysis
The rate of coffee consumption has been
noticed as a steady 2.5% in the United States over the last decade. By 1994,
The total revenue of coffee were about 7.5$ billion with gourmet coffee
representing about 33% ( or 2.5$ billion) of that. The retail coffee industry
is flourishing in the U.S. Pacific Northwest. The local weather with a long
rainy season urges the consumption of hot non-alcoholic beverages. At the same
time, hot dry summers drive people into cafes to order iced drinks. Further,
coffee has really become a part of the lifestyle in the Pacific Northwest. The
discreming coffee drinkers of the Java Culture are in favor of well-prepared,
strong coffee-based beverages which they can consume in a relaxing atmosphere.
4.3.1 Competition and Buying Patterns
Competition
According to the 1997 Oregon Food service
Statistics (NAICS 72), Eugene had 45 established snack & non-alcoholic
beverage bars (NAICS 722213) with total sales of $14.2 million. Other corporations
that provide coffee drinks to their customers are like Eugene's limited- and
full- service restaurants. The direct competitors of Java Culture are going to
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. Starbuck also is going to 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 prefer smaller, independent establishments that provide cozy
environment and good coffee at affordable prices. Cafe Roma is a good example
of such competition. We consider that Starbucks holds about 35% market share in
that neighborhood, Cafe Roma appeals to 25% of customers, The UO bookstore
addresses about 10% with the remaining market share split among other establishments.
Java Culture is going to take a position for itself as a unique coffee bar that
not only offers the best taste of coffee and pastries, but also provides
home-like, cozy and comfortable atmosphere which established corporate
establishments lack. We are going to address customers 'bodies and minds, which
will help us to grow our market share in such competitive market.
Buying Patterns
The major reason for customers to shift to a
specific coffee bar is a great taste of coffee, quick service and pleasant
atmosphere. Although, as stated before, coffee consumption is uniform across
different income segments, Java culture is going to price its products
offerings in a competitive way. We strongly think that the way of selling
coffee with great service in a nice setting will aid us build a strong base of
loyal customers.
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 is
going to be distributed in 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 propert is placed 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 neighbor
hood with the commercial busy downtown area.
The premises which are
commercially zoned have the necessary water and electricity hookups and it is
going to require only minor re-modeling to accommodate the espresso bar,
kitchen and storage area.
Strategy and
Implementation Summary
The marketing
strategy of Java Culture is going to be focused at getting new customers,
retaining the existing customers, getting the customers to spend more and come
back more often. Establishing a loyal customer base is of a significant
importance since such customer core will not only generate the most of the
sales but also will give favorable referrals.
5.1 Competitive Edge
Java Culture is
going to position itself as a unique coffee bar where its customers can not
only enjoy a cup of perfectly brewed coffee but also spend their time in a
comfortable atmosphere. 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.
5.2 Sales Strategy
Java Culture
baristas is going to handle the sales transactions. To make the service fast,
at least two employees will be servicing the clients-- as 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.
To build up its
client base, Java Culture will use banners and fliers, utilize customer referrals
and cross-promotions with other businesses in the community. At the same time,
there will be customer retention programs 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 50% for retail beans and pastries.
Proximity to the University campus will dictate certain sales seasonality with
revenues slightly decreasing during the school vacation periods.
Management Summary
The majority
ownership of Java Culture is by Arthur Garfield and James Polk. Mr. Garfield
holds a Bachelor's Degree in Business Administration from the University of
ZYX. He worked for several years as a business consultant. In the past he owned
the ABC Travel Agency, which he profitable 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. He has worked as a manager of DEF Restaurant for the last
five years, a successful Italian restaurant in Portland, OR. The restaurant has
consistently increases sales under Mr. Polk's management while maintaining a
lower than average level of operating expenses.
However, because
of other commitments of the investors, they won't be involved into daily
management decisions of Java Culture. A professional manager ($35,000/yr) will
be hired who will oversee all the coffee bar operations. Two full-time baristas
($25,000/yr each) will be in charge of coffee preparation. Four more part-time
employees will be hired to fulfill the staffing needs. In the second and third
year of operation one more part-time employee will be hired to handle the
increased sales volume.
6.1 Management Team
A manager will be
hired as full time to oversee the daily operations at Java Culture. The
candidate (whose name is withheld due to his current employment commitment)
should be having at least 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 highly believe
that our candidate has the right experience for this role. An arrangement of
the profit sharing for the manager may be considered based on the first year
operational results.
6.2 Management Team Gaps
Despite the
owners' and manager's experience in the definitely industry, the company will
retain the consulting services of ABC Espresso Services, the consultants who
have helped to develop the business idea for Java Culture. This company has
experience of about over twenty years in the retail coffee industry and has
successfully opened dozens of coffee bars around the U.S. Consultants are going
to be primarily used for the market research, customer satisfaction surveys and
to provide additional input into the evaluation of the new business
opportunities.
Financial Plan
Java Culture is
going to focus on the strong demand for high-quality gourmet coffee. The owners
have already provided the company with a sufficient start-up capital. The
company is expecting to see its net worth doubling in two years if there is
successful management aimed at establishing and growing a loyal customer base.
Java Culture is going to get a healthy 65% gross margin, which combined with
reasonable operating expenses, is going to provide enough cash to finance
additional growth.
Recommendation:
According to the results we obtained from:
·
Tools of Capital Budgeting.
·
Scenario Analysis.
·
Basic simulation.
The decision is seen significantly
accepted with the promising numbers we got from all previous analysis.
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