London Coffee Restaurant-Start-up Business Plan - Assignment Example

London Coffee Restaurant-Start-up Business Plan Executive Summary London Coffee restaurant is a family co-owned start-up business incorporated with the main aim of providing the residents of London with the best-prepared coffee in the entire city. The restaurant will also act as a meeting place for friends, families, and providing a comfortable environment for novel reading. Therefore, our coffee will be served in complement with pastries and novels that our customers can read as they wait for their friends and families. London Coffee will capitalize mainly on the travelers and tourists visiting the town to establish a strong loyal customer for the business. The business will be located along the busy Oxford Street on the western end of London city. The location has been found to be favorable for the business because it is very busy and is frequented by visitors including tourists drawn from all over the world. London city has also been found to be the best for this type of business because it is one of the fastest growing cities in the U.K., and presently has a population of over 8 million people according to the latest population census. The number is also projected to grow in the near future thereby favoring a coffee industry. The premises where the business is to be located has been acquired by owners through a ten-year lease but with the possibility of extension. The analysis of the location established that the business major competitor is found half a mile way. However, the owners intend to provide quality prepared products, services, and fair prices in order to build customer loyalty and compete favorably in the industry. The business start-up capital has been estimated at £150,000 out of which £100,000 has already been serviced by the co-owners. The owners intend to raise the remaining capital through bank loan. Objectives To provide the residents of London with the best prepared coffee and meeting services at fair prices and excellent customer experience. Become the most preferred coffee shop in London. Be able to attract at least 500 regular customers daily to the restaurant within the first year of operation. To break-even within the first two months of operation Generate a profit margin of at least 30 percent of sales turnover. Mission London Coffee will strive to establish a peculiar and comfortable place where its customers can freely meet and socialize as they enjoy the best-prepared coffee in London. The environment will be established in a manner that promotes relaxation by ensuring that the rooms are well equipped with soft music plays at the background, as well as rooms fitted with television where customers can watch their preferred programs as they socialize. In addition, the restaurant through its teams of experts will ensure that customers receive the best customer experience and products of high quality. The owners also understand that the key to better performance lies on satisfaction level of its employees and other stakeholders. In this regard, London Coffee intends to invest significant part of its profits in areas that improves satisfaction of its workers. London Coffee also intends to ensure that the environment is adequately protected and concerned through its corporate social responsibility. Vision The vision of London Coffee is to become the most preferred and respected Coffee restaurant in London by maintaining high number of loyal customers as possible. London Coffee also intends to maintain a highly motivated workforce through provision of better services and remuneration packages. Values London Coffee believes that the ethical values that the company stands for clearly differentiate it from its competitors. The company also believes that by perusing the values its stands for, it will be able to achieve its goals and visions. London Coffee’s core value includes: Strive to excellence: as a company, we are committed to ensuring that the expectations are meet or exceeded through hard work and commitments. Integrity: the managers will always maintain high levels of integrity by ensuring that customer and all the stakeholders of the company are treated with dignity and respect. Further, the company will ensure that high ethical standards are maintained and ensuring that customers are handled with a lot of professionalism. The management is also committed to teamwork and ensures that there is respect and trust for each other to promote efficient delivery of services to customers. Key to Success Establish a modern restaurant that will be both attractive to customers, as well as promoting fast and efficient delivery of services to customers. Ensuring that strong marketing strategies are employed that are capable of attracting and maintaining loyalty of as many customers as possible to the restaurant. Ensuring that employees are adequately trained to ensure that the coffee prepared is of high quality that makes customers keep coming by maintain loyalty. Offering quality coffee and other services at reasonable prices The business is strategically located at Oxford Street, the busiest street in London thereby promoting the business. Ensure that customer’s satisfaction is maximized and making sure that the products and services offered is far above those of the competitors in the city. Controlling costs of operations without compromising on the quality of products and services offered. The company is committed to enhancing the quality of products and services in line with the trends in the market coupled with the tastes and preferences. Ensure that high ethical standards are maintained by management and employees when dealing with customers and other stakeholders of the company. Promote the business’ culture and corporate image of London Coffee. Company Summary London Coffee is a London-Based private limited liability company selling coffee, snacks, and other beverages to the residents of London. The business is located along Oxford Street situated on the western end of London City. London Coffee is a co-owned family business made up of Victor Cameron and Elizabeth Cameron. Start-up Summary Below are some of the projected start-up costs: Consultancy fees paid to consultants who helped in setting up the coffee restaurant £2,000. Legal fees paid for business permits and licenses to the city authority £1,000. Insurance coverage for the business premises £2,000. Advertising expenses for brand opening of London Coffee £3,000. Rental expenses (pre-paid) £4,000. Expenses incurred for modeling the business premise £8,000. Stationery expenses £300. Phone and Utility expenses £2,000. Start-up assets needed amounting to £120,000 includes: Start-up stock projected to cost £10,000 and is made up of: Coffee beans £3,000 Retail supplies £1,000 Coffee filters, salads, beverages, baked goods, and tea £5,000. Office supplies £200. Operating capital amounts £50,000 out of which £20,000 will cover salaries to the company’s management and employees for the first two months of operation and the rest acting as cash reserves. Equipment projected to cost approximately £40,000, which includes: Coffee maker £500 Espresso machine £4,000 Coffee grinder £100 Equipment for counter area £6,000 Equipment for preparing food such as toasters, refrigerators, microwaves, blenders and dishwashers among others £ 15,000 Storage equipment £2,000 Equipment for serving area such as plates, and cups £1,500 Office Equipment £2,000 Storage equipment £10,000 Miscellaneous expenses £200. The business is funded from two major sources namely the co-owners and the bank loans. In this regard, the co-owners comprising of Victor Cameron and Elizabeth Cameron, have contributed £150,000 towards staring the business. The remaining £50,000 will be sourced through bank loans to bring the capital to the projected £150,000. The owners intend to secure the loan from the Bank of England, where a formal application has already been made. The company’s financial statement shows London Coffee’s ability to service the loan within a stipulated time of two years. This is evident from the company’s cash flow statement, as well as the statement of comprehensive income indicating huge profits in the future. In addition, the statement of financial position of the company also indicates high liquidity level implying that London Coffee will operate on a going concern. In this regard, we strongly believe that the Bank of England will grant us the loan based on the company’s ability to repay the loan including the interests that shall have accrued within the period of the loan. However, the company has projected a start-up loss of about £15,000. The location and facilities of London Coffee Restaurant It was challenging coming up with a convenient place to locate the restaurant. Therefore, it took us more than one and a half years until we unanimously agreed to lease one of the commercial buildings located along the busy Oxford Street in the central London. The commercial building measures approximately 3,000 square feet and is located on the ground floor in a five-story building. The premises will, however, be leased for a period of ten-years with a possibility of extension. In this regard, the lease contract has a renewal possibility of five years at a predetermined fixed rate which the company which the company intends to execute depending on its financial position after the expiry of the ten-year lease. The flour area will be divided into sections with the main rooms being the coffee bar and a sitting area fitted with about 20 tables, a bathroom, and kitchen and storage area. To en able efficient operation, the coffee bar will be sectioned in a manner than about 50% of the entire space will form the sitting area, 30% production area and the remaining 20% being created for serving customers. The commercial building is located at a busy commercial place visited by many people who come to London. Our choice for the premise is also because the building has sufficient water and electricity connected. As such, the premises will only re quire minor modeling in order to bring it to the state necessary for the business. The interior part of the building will also be furnished beautifully to create a superb place where customers can sit and relax as they socialize. There will also be clear windows that will ensure that customers can easily be spotted from any part of the building as they enjoy their drink. In addition, the inside part of the building will be beautifully illuminated with different neon lights switched in accordance with the customers preferences. Moreover, there will also be enough television screens in the room, where customers can follow their preferred programs. We also intend to illuminate outside the business premises with electric signs to attract the attention of customers walking along the street. Products London Coffee will provide its esteemed customers with the best-prepared and tasty coffee in the entire London City. To ensure that this is achieved, the company will ensure that the best ingredients and the latest technology are factored in preparing the coffee for its customers. The company’s menu listing, layout of the store and marketing strategies will all be geared towards optimizing the sales turnover of coffee drinks particularly the espresso drink. However, the Company also intends to cater for the needs of every customer by providing brewed coffee, tea, and other refreshments alongside espresso drink. Apart from the drinks, London Coffee will also provide its customers with pastries sandwiches and salads. London Coffee has also projected that some of its customers will prefer preparing their coffee at home. In this regard, the company will also operate a section where such customers will be sold coffee beans to enable them prepare their own coffee at home. Since our aim is to make our customers get the best from the restaurant, we shall also provide free novels and magazines that our customers can read as a complement to our best menu. Market Analysis A survey indicates that coffee leads as the most popular drink in the world. In this regard, a report showed that an estimated 400 billion cups of coffee are drunk yearly (Allegra 2011). U.K. is one among the countries with huge number of coffee drinkers according a survey. For instance, a report indicates that over £730 million was spent in 2012 on the consumption of coffee in the U.K. The survey also revealed that an estimated 500g of coffee is consumed every year in Britain by a single person (Allegra 2011). It was also noted that the espresso drink is the most preferred coffee in the U.K. with the main consumers being found in the South East and Central Britain (Fullen 2005, p.16). It was also established that a majority of coffee drinkers in the U.K. are men. In addition, the survey also found out that much coffee is drunk in the morning during breakfast, which constitutes about 57%, while about 34% is drunk between meals and the remaining 13% being drunk at other meals according to Kumar (2005). The However, on average, London city leads in terms of coffee consumption in the country according to a survey (Kumar 2005). A research indicated that a majority of the residents of London city favor espresso coffee drinks and request for exemplary service. The London city being a very populous city with a population of more than 8 million residents coupled with its rainy winter weather experienced in most parts of the year form a great place for the establishment of a coffee bar. Therefore, London Coffee will endeavor to ensure that the residents of London city are served with best-prepared tasty coffee in a cool and relaxing environment of its coffee restaurant located along Oxford Street. Future Trend Shaun (2009) argues that there is a positive projection as regards the growth prospects of coffee restaurants in the U.K. It is noted that globalization has increased the chances of people eating away from home. In this regard, many people are finding it easy and less time consuming eating and drinking in a restaurant than at home. In fact, the figure is estimated to reach about 35% from 2013 all the way to 2017 (Shaun 2009). The same survey also indicated that more consumers would spend more of their salaries on foods and drinks prepared in the restaurants. This revelation as regards the future trend in consumption, therefore, favors the establishment of a coffee shop in London in order to capitalize on the move. Target Market As earlier stated, Oxford Street is one of the busiest streets in London city. The street hosts a beehive of activities ranging from traders, shopping malls, travelers, and tourists. In addition, the street also has a number of Universities and colleges around. As such, London Coffee Inc. intends to focus its marketing strategies on reaching out to the university and college students, corporate clients working near the coffee bar, travelers, and teenagers. In addition, the company will also focus on the many tourists that visit the streets throughout the year. Market analysis Year 1 2 3 Potential customers Growth Students 2% 15,000 15,300 15,606 Corporate clients 3% 4,000 4120 4244 Travelers 3% 15,000 15,450 15,914 Teenagers 2% 6,000 6,120 6,242 Others 0% 8,000 8,000 8,000 Segmentation strategy for the target market London Coffee will cater for the needs of a variety of customers with various needs and preferences. The customers are projected to vary according to demographics. However, it is thought that as much as the restaurant being close to many colleges and universities situated along the street, it will also cater for the aged who desire to take a cup of coffee while relaxing in a cool and hospitable environment with their friends and families. A research conducted by the company reveals that the company will benefit hugely from the college students who have considered coffee restaurants as a good place to meeting and studying, since here they can read comfortably without any form of disturbance as they enjoy their drinks. In addition, our coffee bar will act and their most convenient meeting place, as we do not intend to charge them extra fees for meeting. As a management of the company, we strongly believe that giving our customers such treatments will enable the company build a strong loyal clientele base, which in turn, will make the company compete favorably in the industries and realize huge profits in the long-run. Needs of the market Research indicates that most U.K. coffee consumers demand quality that determines whether they will be willing to associate with the coffee bar or not (Manson 2007). In this regard, London Coffee will ensure that customers are provided with quality coffee prepared using the latest technology. Additionally, research has also indicated that factors such as the desire for a unique and more exotic products provides good selling chances for coffee restaurants as noted by Manson (2007). It is in this regard that London Coffee Inc. will ensure that customers are provided with the best coffee with best customer experience in the city. Competition and Consumer Behavior Competitors Liang and Wu (2012, p.1) notes that the coffee bars in the U.K. had experienced about 5.6% growth rate in the year 2005 accounting for 29.1% of the market share. Nevertheless, the growth in coffee shops in the same year was very slow as economic report indicated that coffee bars grew by merely 2%. As at 2005, there were 14,022 coffee bars in the United Kingdom. Nonetheless, a report reveals that a majority of coffee drinkers in the U.K., about 62% only visited that top three coffee chains in the country namely Costa, Starbucks, and Caffee Nero (Manson 2007). A survey also indicated that Costa is currently the leading coffee chain in the U.K. by franchise. The three leading coffee chains, Costa, Starbucks and Caffee Nero also have there presence in London, where London Coffee Shop is to be established (Manson 2007). This implies that they will offer great competition to our company for the market share in the city. Other chains in London that offer coffee include the famous fast food restaurants such as the McDonalds, KFC (Kumar 2005). All this competitors have strong financial position and the fact that they have strong brand image. Despite the stiff competition likely to offer by the many coffee shops in London, the nearest coffee shop is located about a mile from our business premises. This will enable our company to be able to attract a majority of customers along the Oxford Street. Furthermore, research has shown that many customers prefer smaller, autonomous shops to larger ones because smaller shops provides conducive atmosphere for meeting and socializing. Further, our joint being small will provide quality coffee at affordable prices, a factor we consider will give our company due advantage over the competitors such as Costa, Starbucks and Caffee Nero coffee shops. As earlier indicated, we have projected that Costa holds a majority of market share in London at about 30%, Starbursts 25%, and Caffee Nero 15%, while the remaining 30% being shared among other small shops spread in the city. However, London Coffee is preparing to position itself in the industry as a peculiar coffee bar by providing not only quality and tasty coffee to the residents of London city, but also providing a comfortable environment, different from those of other competitors where customers can relax freely in a home-like situation. In addition, apart from providing for the customers body, we will also prepare them psychologically in the mind a factor that will enable us gain competitive advantage over our competitors in the market. Further, to beat our competitors, we will provide our customers will an excellent customer experience that can never be gotten from our competitors. Consumer Behavior A number of factors usually determine the willingness of a customer to return to a particular coffee restaurant namely quality and taste coffee, conducive atmosphere and faster service (Kumar 2005). In this regard, customers will tend to remain loyal top coffee bars that provide tasty coffee at speed and under very pleasant environment. Therefore, in order to attract mainly customers and build loyalty, London Coffee will strive to ensure that these aspects are factored in to ensure that customers get the best-prepared coffee on time and under our comfortable rooms. Research has also indicated that coffee consumption in the U.K. is uniform across income segments (Kumar 2005). In this regard, London Coffee intends to price its coffee competitively to ensure that as much as it aims to make profits, the prices charged are made affordable to every consumer. This will certainly enable the company attract many customers and maintain their loyalty on the company. In addition, London Coffee strongly believes that selling its coffee with excellent customer service under a pleasant environment will help the company a great deal in building a strong loyalty base with the customers. Marketing strategy The marketing strategy of London Coffee will mostly be focused on attracting as many new customers as possible to the restaurant and introducing strategies such as pray that will induce them to buy more and come back frequently. In addition, we strongly believe that in order for the company to become competitive and survive in the long run, we have to ensure that the company builds a strong loyal clientele. As such, the London Coffee will ensure that customers are provided with the best products and services that they cannot get in other competitors to our company such as Costa, Starbucks, and Caffee Nero shops. Sales Strategy The company will have experienced accountants who will handle all the company’s sales transactions as a way of ensuring that all the records are adequately kept to minimize errors. However, since speed of customer service is a very important consideration, the company intends to assign at least two waiters who will be in charge of serving customers at any given time. At the same time, we will a locate one of the employees to be in charge of ordered preparation. There will also be a computer at the point of sales where all the sales data will be relayed for later analysis from our team of experts. The company will also use other means such as adverts in the televisions, and print media to draw the attention of the public and the international clients of the location of our business and the services we intend to provide. We will also organize road shows occasionally to advertise our products and services to the potential clients. Sales Projections Our food costs are estimated at 25% of coffee drinks and 50% of pastries and retail beans. However, we estimate that the figures will keep varying depending on seasons when the schools where the company project to draw most of its customers comes from are closed and the seasonal weather. In this regard, it is expected that the sales turnover will drop slightly during school vacation and summer seasons. Sales Forecast Year 1 2 3 Sales (£) (£) (£) Coffee beverages 250,000 300,000 405,000 Coffee beans 60,000 78,000 86,000 Pastries 120,000 135,000 150,000 Total Sales 430,000 513,000 641,000 Direct Cost of sales Coffee beverages 70,000 81,000 102,000 Coffee beans 24,000 29,000 40,000 Pastries 55,000 60,000 77,000 Sub-total Direct Cost of Sales 149,000 170,000 219,000 Gross Profit 281,000 343,000 422,000 From the above sales focus, it is evident that the company will experience increased gross profit making from its first year of operation all the way to the third year. Financial Plan London Coffee intends to capitalize its marking efforts to the high demand for espresso coffee in London. With the help of the sufficient capital provided by the company’s co-owners, we strongly believe that, with the successful management of the company coupled with the increase in loyal clientele, the company’s net worth will lightly grow by double digits in the next three years. The company will also be able to maintain approximately 60% of gross margin, which it will use to finance its future growth strategies. Projected Cash flow statement Pro forma cash flow Year 1(£) Year 2 (£) Year 3 (£) Cash received Cash from operating activities Cash sales Cash from receivables 430,000 90,000 513,000 93,000 641,000 113,000 Total cash from operating activities 520,100 606,000 754,000 Additional cash received VAT & Sales tax Long-term liabilities 45,000 50,000 52,500 61,000 Subtotal cash received 95,000 52,500 61,000 Expenditures Operating expenditures Cash spending 158,500 142,000 120,000 Subtotal spent on operations 158,000 142,000 120,000 Additional cash spent VAT & Sales tax 40,000 42,000 43,120 Loan term principal payment 10,000 10,000 10,000 Purchase of assets 120,000 Dividends 20,000 25,120 30,000 Subtotal cash spent 190,000 77,120 80,120 Net cash flow 54,123 91,425 101,123 Cash balance 50,000 52,231 50,500 Break-even Analysis For purposes of break-even analysis, the company has assumed a running cost of £50,000 per month to cover for salaries, rent, and electricity expenses. However, the company project to sell at least 10,000 cups of coffee to break even. Nevertheless, the company projects its normal operating capacity at 1000 cups of coffee per day, with an estimated sales turnover of about £90,000 every month. It is also projected that the company will start making profit immediately after reaching the break-even point expected in the third month of its operation. Disclaimer This business plan is a property of London Coffee and is intended to provide investors with an overview of what the company intends to do. Therefore, the information should not be relied on entirely since the figures are just estimates and not actual. References Allegra S. (2011) Britains coffee love affair: by numbers. The telegraph, 3 Mar 2011, http://www.telegraph.co.uk/finance/newsbysector/retailandconsume r/8357456/Britains-coffee-love-affair-by-numbers.html. (Accessed 16 Jan. 2013). Fullen, S.L. (2005), Opening a Restaurant or Other Food Business Starter Kit: How to Prepare a Restaurant business plan & Feasibility study. London: Atlantic Publishing Company. Kumar S. (2005), Branded coffee shops are filtering out the independent operators, Hotels And Restaurants, Vol. 194, No: 4365, pp: 12, 1p, ABI/INFORM Global. (Accessed 16 Jan. 2013). Liang, W., & Wu, R. (2012), Analysis of coffee shop market: A case study of U.K. Southern Taiwan University, Taiwan, Taiwan. Manson E. (2007), UK coffee market set to double over the next 10 years, Caterer and Hotelkeeper, http://www.caterersearch.com/Articles/24/05/2007/313851/UK-coffee-market-set-to-double-over-the-next-10-years.htm. (Accessed 16 Jan. 2013). Shaun W. (2009), Coffee bar market still growing despite recession, 7 May 2009, http://www.foodbev.com/report/uk-coffee-bar-market-still-growing-despite-recessi. (Accessed 16 Jan. 2013) Read More