Business Plan for Coffee Shop in Fort Collins, Colorado - Case Study Example

BUSINESS PLAN FOR A COFFEE SHOP IN FORT COLLINS, COLORADO In a known for its natural scenic beauty and the home to Colorado and excellent schooling system, a cup of coffee cheers every one particularly youngsters in the university. The customers, mainly the students would savor every sip of the exquisite varieties of coffee served in our restaurant. Coffee Lounge would occupy the pride of place in the connoisseur’s routine during the day. This will be the place; the dreams are made of, where tension evaporates in the company of friends. For the peace loving, this is a place where one can read the favorite book surrounded by the coffee aroma and favorable environment. The Coffee Lounge would harness the closeness to the University of Colorado. The best tasting beverages in the Coffee Lounge will be prepared with ingredients of premium quality following stringent quality guidelines to ensure the satisfaction of the connoisseur. The store layout will reflect the ambience to the youth, who would throng during the day and in the evenings after the college. The menu and the advertisements will target customers for higher margin espresso drinks. Along with Espresso drinks, brewed coffee and teas will also be on offer. To go with these beverages, some snacks such as pastries, sandwiches and salads will also feature in the menu. These menu offerings could be savored while reading free books and magazines that are provided to the customers inside the Coffee Lounge. The menu of the Coffee Lounge will be developed around Espresso-based coffee drinks such as Lattes, Mochas, and Cappuccinos etc. These drinks will be on offer with skimmed, whole or soy milk. Each of these drinks is prepared with a ‘shot’ of espresso prepared in the machine by forcing hot water through ground coffee at high pressure. These ‘shots’ are combined with steamed milk with or without additives such as cocoa, caramel, etc. Our meticulous preparation techniques and trained personnel will ensure our competitive advantage. The promotion activity will begin in the University of Colorado campus, the malls and select buildings in the vicinity of the campus. The kick off for promotion would be two weeks prior to the opening of the Coffee Lounge. These will be accompanied by free post cards with endorsement of Coffee Lounge aimed at increasing the visibility of the coffee lounge. The Coffee Lounge will be close to the University of Colorado with a 2400 Sq.Ft. area. This accommodation will be acquired through a three year lease with a flexibility to extend. The hook ups to water supply and electricity exists since it is a commercially zoned premises. However it will require only minor remodeling to accommodate the espresso bar, kitchen and storage area. The interior décor and design will accentuate the feeling of cleanliness. The wooden interiors will reflect its eclectic positioning and provide ambience for relaxation with a cup that cheers. The clear window displays enable customers to see outside while enjoying their beverages. The neon sign will attract attention of the passersby. The floor plan envisages 2300 square ft. for the coffee lounge accommodating the kitchen, 15 tables storage area and two bathrooms. An area of 200 square feet is earmarked for back-office the apportioning of space would be 55% for seating, 26% per production and the balance 19% for customer service. Nestled against the foothills of the Rocky Mountains and alongside the banks of the Cache La Poudre River, Fort Collins is situated around 5000 feet above sea level. The weather here is moderate with four season climate and an average of 300 days of sunshine. Fort Collins has an area of 53.38 square miles with 492 street miles. It has a population of 137000 with a median age of 29.4 years. Nearly half the population has completed four or more years in college. The medium house hold income is $72248 (Official website of City of Fort Collins). The coffee related business has been on the upswing in the recent past with specialty coffee shining in particular. The customer education about the preparation of espresso coffee has fueled the market for specialty coffees. National Coffee Association Annual Drinking Trends Survey has found that the consumption of specialty coffee has increased from 9 percent in 2003 to 16 percent in 2007. Over half the adult population drinks coffee every day. The United States accounts for 52 million of those coffee drinkers. Seventy-seven percent of U.S. adults drink coffee daily, and gourmet coffee consumption has risen in the past five years. According to Scarborough Research, a market research firm that studies media, lifestyle, and shopping patterns in the United States, 12 percent of adults have been to a coffee shop in the past month (start coffee business.com). Over 30 million American adults drink specialty coffee beverages daily; which include mocha, latte, espresso, mocha, cappuccino, frozen/iced coffee beverages, etc. There is no difference in consumption between men and women. Both consume an average of 1.6 cups per day. Women are more price sensitive then men when it comes to consumption of coffee. The US coffee consumer on the average consumes 3.2 cups of coffee per day. Nearly 30% of the population is occasional coffee drinkers. While 65% of coffee consumption is during breakfast hours, 30% is consumed between meals and 5% with other meals. While 35% of the consumers of coffee prefer black coffee, 60% would like to add sugar and/or cream. Women find coffee drinking a way to relax, while men feel that it helps to get the job done. United States with the consumption of 400 million cups of coffee per day is the world’s leading coffee consumer. On an average, it is assessed that 250 Cups of espresso and coffee drinks are sold per day on average an espresso drive-thru business with great visibility. (500 cups per day is extraordinary). For a typical Independent coffee shop, 31% of its sales are espresso-based drinks, while the rest is brewed coffee (espressoforums.com). The Colorado State University has a full-time enrolment of 22,684. The other colleges and universities nearby have a student population of around 2000. Fort Collins has the distinction of having the unemployment below the state average. The city is relatively young compared to other places in the state with median age below the state average. Even the number of college students is higher than the state average. The demographic profile is favorable to drinking coffee. The population is homogenous with the whites constituting 86% of the total population (citydata.com). BUSINESS MODEL The owners propose to invest $150000 of the $175000 of the startup requirement. The remaining requirement will met through a commercial loan from Citibank. The coffee lounge is expected to notch revenue of $ 600,000 in the first year which would go to $700,000 in the third year. Coffee Lounge with reasonable operating expenses would be able to notch a gross profit margin of 60%. Over the three years from its inception, the company will witness the growth in profits from $100000 to $125000. START UP EXPENSES Legal expenses for obtaining licenses and permits as well as the accounting services 1500 Marketing promotion expenses 3500 Printing of marketing collaterals (2,000 flyers at $0.04 per copy) 3500 Consultant’s fee 3000 Insurance(general liability, workers compensation and property casualty) Coverage Premium 2500 Prepaid Rent 4500 Remodeling 10000 Stationary 500 Phone and Utility Deposits 3000 Total Start Up Expenses 32000 START UP ASSETS Operating capital which includes employees and owner’s salaries for the first two months and cash reserves for the first three months of operation 67000 Coffee beans (12 regular brands and five decaffeinated brands) • Coffee filters baked goods, salads, sandwiches, tea, beverages, etc, Retail supplies (napkins, coffee bags, cleaning, etc.) and Office supplies 17000 Espresso machine, Coffee Grinder, Coffee maker - $7,000 Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc.) - $18,000 • Storage hardware - $4000 • Counter area equipment - $9,500 • Serving area equipment - $3,000 • Store equipment - $13,500 • Office equipment (PC, fax/printer, phone, furniture, file cabinets) - $3,500 • Other miscellaneous expenses - $500 59000 Total Start Up Assets 143000 Total requirement of funds will be to the tune of 175000. There are two sources of funds, which are owner’s investments and loans from banks. While I and my friend Bond have contributed $20,000 and $80,000 respectively, the others have contributed $40,000. Therefore, while I hold 14.3%, Bond will hold 57.2% and the rest will hold 28.5% of the equity. The balance amount of $35,000 towards start-up expenses and assets will be funded by 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 Citibank. Coffee lounge will be managed by a full-time manager who will oversee the operational requirements. He will implement marketing strategy, manage the staff and order inventory. A profit-sharing arrangement is also envisaged for the manager, if he meets the business objectives. Coffee Lounge will retain the consulting services of ABC Espresso Services. This company is renowned with substantial knowledge base and experience in the retail coffee industry. It has a track record of successfully opening several coffee bars across the U.S. These consultants will periodically conduct market research, customer satisfaction surveys and also evaluate new business opportunities. The experienced chefs would have mastery over the culinary skills having worked in coffee shops earlier on in their career. These accompanied by the customer friendly waiters would form a synergistic team who will ensure that the customer who leaves Coffee Lounge will return day after day. Coffee Lounge will be a landmark in Fort Collins with its unique features. Its customer friendly service, differentiated food offerings, Knowledge of coffee and brewing, décor and interiors and advertising will enable to score sustainable competitive advantage over its rivals in the area. The coffee shop climate will never be the same in Fort Collins. With the resounding success expected from the business, Coffee Lounge may decide to franchise the brand across Colorado and in the long run across the United States. Reference Articles for Starting a Coffee Business, http://www.startcoffeebusiness.com/ City-Data.com, http://www.city-data.com/city/Fort-Collins-Colorado.html Espresso Forums, http://www.espressoforums.com/viewtopic.php?t=137 Official Website of City of Fort Collins http://www.fcgov.com/fcfacts.php?ID=4 Read More