The French Bake: Start-Up Venture - Example

Business plan Executive summary The French Bake is a start-up venture that aims at selling coffee and bakery food products. The retail establishment will be setup in the United Kingdom. The business is focused on gaining interest of various local consumers by means of its assorted offerings in terms of coffee and baked food products such as sandwiches, cake and pastries. French Bake is expecting to establish strong market position considering high level of industry experience by its partners and relatively mild competitive environment of the area. The business plan discusses various aspects of the retail establishment process, namely, industry and market environment, consumer and value proposition, marketing and operating strategies, financial and non-financial resources and risk assessment. Table of Contents Business details 5 Description of product/service 5 Mission & vision 5 Aims & objectives 5 Industry and market analysis 5 Industry size, growth and structure 5 Industry & market trends 6 Market segments & reasons for target market(s) selection 6 Buyer behavior across segments 6 Competitor analysis 6 Customer and value proposition 7 Target market segment 7 Why these customers buy from you rather than from competitors 7 The benefits they are looking for 8 Marketing strategy 8 Marketing mix 8 Launch strategy 8 Sales tactics 8 Brand development 9 Competitive reaction 9 Product and market development 9 Growth potential 9 Operational planning 9 Key operating activities 9 Partnerships 9 Business controls 10 IP issues 10 Scalability 10 Management team and company structure 10 Key people, their functions & background 10 Business organizational structure 11 Directors, advisors & other key partners 11 Skills gaps and plans for filling them 11 Resources 11 Premises and facilities 11 Machinery and equipment 11 Staff 11 Financing 12 Founders’ contribution 12 Loan and/or equity finance requirements 12 Gearing/leverage 12 Time scale and exit routes for equity investors 12 Financial projections 13 Income projection 13 Balance sheet projection 14 Cash flow projection 15 Ratio analysis 16 Risk and strategic option 17 Reference list 18 Appendices 19 21 Business details Description of product/service French Bake is expected to offer a wide variety of coffee and espresso based products, all made from high quality Arabian and Colombian coffee beans. Various local grown espresso flavours are expected to be stocked at the store for meeting consumers taste in a tailor-made manner while maintaining every minor detail. Additionally, the cafe bakery will be responsible for catering large variety of sandwiches and pastries. Mission & vision The mission of French Bake is to serve authentic flavours of coffee and fresh, healthy and high quality food products to consumers at an affordable price. The vision of the company is to grow steadily by means of innovation without compromising quality and be a prominent name in the cafe and bakery retail sector. Aims & objectives The company aims at providing high quality products and beverages and personalised services to consumers for gaining loyalty and strong market share. Considering mild competitiveness in the business environment, French Bake will be focussed on building strong brand reputation by means of excellence, innovation and integrity. Industry and market analysis Industry size, growth and structure French bake will be operating in the hot drink and fresh food (deli) industry in the United Kingdom. The deli food industry comprises a lot of food products which will not been included by the firm in its offerings except for salads and sandwiches. The industry was worth £172,286 million in 2013 and in coming five years, it is expected to grow 8.2 percent. The hot drink sector recently witnessed deceleration as the growth has been relatively stagnant between 2009 and 2013. The expected growth in next five years was forecasted to be around 0.8 percent. In the UK, coffee segment comprises 67.3 percent of the total hot drink market (Market line, 2014a; 2014b). Industry & market trends Sandwich and salad segment comprises 11.2 percent of total chilled and deli food market in the UK. Major operators in this sector are Kraft Foods, Tyson Foods, JBS and others. The industry consist of large number of suppliers therefore, cost of production can be optimised by selecting appropriate supplier. The industry is driven by moderately high fixed cost; consequently, exit barrier is high. While market demand for deli and chilled food has increased over the year, consumers are minimising their spending on hot drink purchase. Despite slow growth, coffee segment was determined to be the most lucrative sector in the industry and occupies about 67.3 percent of total market. Major competitors in this sector are Starbucks Nestle and private labels. (Market line, 2014a; 2014b). Market segments & reasons for target market(s) selection French Bake is planning to offer its products and services to individuals belonging to the age group ranging between 18 years and above. From demographic perspective, consumers belonging to middle to high income group will be able to afford its entire product range. The primary reason behind the chosen segment is that the town of the United Kingdom mostly comprises price conscious consumers who prefer visiting reasonably priced cafes on regular basis instead of spending excessively at expensive coffee shops and restaurants. Buyer behavior across segments Consumers are highly price sensitive and exhibit trend of switching as and when price and product quality does not meet their requirements. Cafe and delis are largely driven by individual buyers therefore maintaining their satisfaction level is of utmost importance for organisations operating in this sector. Consumers are also largely driven by word of mouth in this sector and as a result, it is necessary that consumers are not disappointed with respect to price, ambience and food and service quality (Market line, 2014a; 2014b). Competitor analysis French Bake will be operating in two different industries simultaneously. As a result, it will be responsible for competing major operators of both the sectors. The major players are relatively large in size and are in existence for relatively long time. However, these competitors are large multinational chains and are often overpriced. The SWOT analysis of French Bake with respect to its competitor is discussed as follows. Strength: The café cum bakery is small in size and require comparatively less investment as startup cost. The human resources, primarily the owners, have strong knowledge and experience in the industry. Weakness: The café is new in the sector and may face certain difficulty in gathering resources. The other weaknesses can be internal stuff and cost management. Opportunity: Being reasonably priced, the café will be able to welcome consumers from different age and income groups. The level of competition in the United Kingdom is moderately less so scope of growth is high for French Bake. Threat: The café will be facing stiff competition from most of the well-established café chains such as Starbuck and other local eating joints and café bistros (Market line, 2014a; 2014b). For an existing business – market share The major players occupy about 42 percent of the total market share in the hot beverage sector while in the deli and chilled food sector major competitors occupy about 47.5 percent of market share (Market line, 2014a; 2014b). Customer and value proposition Target market segment The market can be predominantly classified in categories such as local residents and tourists. However, the dominant target market will be the local residents so that the company is able to create a strong consumer base that exhibit regular flow of demand as nature of tourists’ demand is seasonal in nature. Why these customers buy from you rather than from competitors It has already been discussed that the level of local competition is very limited and major competitors are large multinational fast food and cafe chains such as Starbuck and McDonald’s. Most of these competitors are expensive with respect to regular purchase. In that context, French Bake is a reasonable choice for local consumers as the product prices will be competitive yet will be developed while keeping in mind the local affordability. The benefits they are looking for Affordability was determined to be the key factor that attracts consumers towards a café or any food retail chain. The café will be serving high quality and healthy food and beverages at an affordable cost and in a comfortable ambience. The aim is to present consumers with high quality services in their comfort zone. Consumers can read, meet friends and have lone time at café while enjoying good food and supporting ambience. Marketing strategy Marketing mix Marketing mix mainly consist of 4Ps, that is, Product, Price, Place and Promotion. The product and services of the café are different variants of coffee, sandwiches and salad and pastries. The products are either processed or semi processed in nature. The sandwiches are available in vegetarian and non-vegetarian variants and initially, the café will be offering only four kinds of pastries. Launch strategy Product launch strategy should be planned very carefully as the future success and demand of the product depends significantly on the launch strategy. Launch strategy often reflect product characteristics. Therefore, the launch strategy of French Bake will be focused on food and beverage tasting. The company will be serving small sandwiches and small size coffee to consumers (one per person) free of cost for tasting purpose. Pre-launch marketing involve promotion by means of advertisements in local newspapers and fliers (Boyd and Goldenberg, 2013). Sales tactics The offerings of the café will be different from that of its competitors; as a result, innovation can be considered as an important sales strategy for the café. Free samples, assorted platter at a reasonable price and discount coupon on bulk purchasing can be considered as useful sales tactics. Brand development For developing strong brand position, it is important to develop consumer loyalty. Word of mouth can be regarded as a suitable technique to develop consumer awareness about the café. The company can also consider professional help for developing brand image of the café. Marketing through agencies often prove helpful in developing brand image. Competitive reaction The market assessment suggest that the company has low competition in the surrounding areas yet the offerings of French Bake will be crafted in such a manner that the café is able to stay ahead of all kind of future competitions. French Bake is expected to be unique and innovative as none of its offerings will be a replica of its competitor’s offerings. Product and market development The café bakery will be taking small steps towards growth and development. It is expected to offer limited products initially and diversify the offerings over the time. The firm will take consumer feedbacks very seriously so those consumer requirements are met effectively in the long run (Boyd and Goldenberg, 2013). Growth potential Considering the low competition in the surrounding areas and healthy offerings of the bakery, it can be expected that the company will experience strong growth in the next five years. It can be expected that the revenue of the café will be around double by the end of the fifth year. Operational planning Key operating activities The major operational activities of the café bakery mainly comprise management of kitchen and services, raw material warehousing, quality checking, feedback assessment, monitoring and security and cash management. Each of these activities bears equal importance for the café and is heavily interdependent. Partnerships The cafe bakery will be run as a limited partnership organisation by two partners, Mr. Austin Peterson and Ms. Jennifer Shaw (Litvak, 2009). Austin and Jennifer have strong management skills and are equal partners to profit in the business. Austin has strong experience in marketing field with moderate knowledge of financial management. On the other hand, Jennifer has graduated as an administration major and has work experience of 15 years in prominent organisations. Business controls The business model of French Bake will be highly divisional in nature where the organisational layout indicates each department will have one manager for supervision and task delegation. The leadership style of the company will always be participative in nature with strong encourage to employees to be creative. IP issues Intellectual property protection is essential when an organisation is involved in creative activities so that its efforts are not replicated by other organisations in the industry. French Bake will exercise IP rights for its various recipes of food and beverages. Scalability Scalability indicates measurement. Putting differently, the operations of the firm should be quantifiable so that relevant costs can be appraised. The management will be preparing operational budget so that each activity is measurable not only qualitatively but also quantitatively. Management team and company structure Key people, their functions & background Austin Peterson and Jennifer Shaw are directors of the cafe and are responsible for making strategic decision related to operations, administration, marketing and finance. Austin has completed MBA in marketing and finance while Jennifer pursued MBA in human resource management and administration. The other key internal members include managers in various operational areas who are expected to have atleast 2-3 years of field experience and strong academic performance. Business organizational structure The organisational structure of French Bake is divisional in nature and task of every department has been coordinated with other departments in order to avoid interest and role conflict. The cafe bakery has not adopted a very tall structure but the structure in not flat as well. It can be agreed that the structure is organic in nature (Ansoff and McDonnell, 1990). Directors, advisors & other key partners Besides the two directors, the company has two external legal advisors and has partnered with a local recruitment agency for recruitment and training requirements. Other key partners of the business are its suppliers and services providers. Skills gaps and plans for filling them Skill gap is apparent in various areas that require greater role of human resources over machines. The skill gap at the cafe is expected to be covered up by means of training and regular appraisal. Team activities can also be used for skill development. Resources Premises and facilities The cafe as a company will be registered at the United Kingdom and it will conduct its operations in Leicester. Depending upon business success, the company may establish more cafes in the surrounding areas. The premises will have automated monitoring system (computer based) and 24 hours security facility. Machinery and equipment Espresso machine, coffee grinder, shakers and blenders, coffee brewer, grilling machine, microwave, refrigerator, computers, water softener, cafe furniture, electrical fittings and fixtures, kitchen equipments and cleaning equipments. Staff French Bake will be started with 20 employees including the managers and the directors and more recruitment will be done as per future requirements. Financing Founders’ contribution Financing is possible by means of equity financing and debt financing and it heavily depends on a corporation, the kind of financing they require. Each of the directors has brought in £50000 into the business as start-up investment (Stickney, et al., 2009). Loan and/or equity finance requirements The company will be borrowing another £100000 as a 15-year loan from a local bank. The company is a private corporation therefore, it is not possible for it to raise equity fund by means of issuance of shares to common public. Gearing/leverage Financial gearing or leverage denotes the extent to which a firm is depended on external sources of financing for maximising its gain. High external debt denotes high gearing while equity financing indicates low gearing. The gearing requirement is dependent on nature of business. French Bake so far exhibits no gearing as equity and debt investments are of same amount (DeFond and Hung, 2003; Stickney, et al., 2009). Time scale and exit routes for equity investors Since the firm is not a public corporation, the time scale and exit route for equity investors cannot be predicted. In general, there are five exit choices that can be exercised by investors in case the company decides to be listed and these are trade sales, repurchase, flotation, secondary purchase and involuntary exit. Depending upon the exercised choice, the time frame for investment exit can range between two years and ten years (Irish Venture Capital Organization, n.d.). Financial projections Income projection Income projection has been done by means of a hypothetical profit and loss statement that consists of data determined through logical deductions for the year end: Assumptions: Sales: £ 80000; office expenses: £ 8000; Water and power charges at cafe: £ 2400; Floor rent: £ 12000; Rent of equipments: £ 5000; cost of Purchased equipments: £ 15000 Salary: £20000; interest paid at 5%; Tax: 15% Table 1: Income statement Particulars Amount (£) Amount (£) Sales 80000 Less: Purchase 15000 Gross Profit 65000 Less: Operating expenses Office expenses 8000 Water and power charges 2400 Floor rent 12000 Rent of equipments 5000 Salary 20000 (47400) Earnings before interest and tax 17600 Less: Interest (5000) Less: Tax (2640) Net Profit 9960 Balance sheet projection Balance sheet projection has been pursued after taking in consideration the following assumptions: Assumptions: Furniture: £ 20000; fittings and fixture: £ 24960; Cash in hand: £ 100000; Trade receivables: £ 25000; Inventories: £ 20000; Trade payable: £ 10000; Capital brought in by partners: £ 100000; Loan: £ 100000; Prepaid expenses: £ 20000. Table 2: Balance sheet Liabilities Amount (£) Assets Amount (£) Long term liabilities Fixed Asset Capital 100000 Furniture 50000 Loan 100000 Fitting and fixture 24960 Net profit 9960 Current Assets Current liabilities Cash in hand 100000 Trade payable 10000 Inventories 20000 Trade receivables 25000 Prepaid expenses 20000 219960 219960 Cash flow projection Cash flow forecast: January-June (in £) Particulars January February March April May June Sales 4000 5200 5000 5300 6000 7000 Purchases 1000 1000 1000 1000 1000 1000 Salary 1666.67 1666.67 1666.67 1666.67 1666.67 1666.67 Rent 3000 3000 Rent of equipment 1000 1000 Office expenses 600 600 600 600 600 600 Other expenses 200 200 200 200 200 200 Total expenditure 6466.67 3466.67 4466.67 6466.67 3466.67 4466.67 Profit/ Loss -2466.67 1733.33 533.33 -1166.67 2533.33 2533.33 Cash flow forecast: July-December (in £) Particulars July August September October November December Sales 8000 8500 7000 7000 8000 9000 Purchases 1000 1000 1000 2000 2000 2000 Salary 1666.67 1666.67 1666.67 1666.67 1666.67 1666.67 Rent 3000 2800 200 Rent of equipment 1500 1500 Office expenses 600 1200 800 200 800 800 Other expenses 200 200 200 200 200 200 Total expenditure 6466.67 4066.67 5166.67 6866.67 4866.67 6166.67 Profit/ Loss 1533.33 4433.33 1833.33 133.33 3133.33 2833.33 Ratio analysis Ratio Analysis Current assets £ 165,000.00 Current liabilities £ 10,000.00 Current ratio 16.5 Debt £ 100,000.00 Equity £ 100,000.00 Debt equity ratio 1 Net profit £ 9,960.00 Sales £ 80,000.00 Net profit margin 12.45% EBIT £ 9,960.00 Capital employed £ 200,000.00 Return on capital employed 5% It was ascertained that the current ratio of the business is fairly high indicating that the company is going to be moderately liquid. Since the organisation is involved in food service industry that requires high working capital, the ratio seems acceptable. French Bake has optimum debt equity ratio but more debt financing may cause it to become a high geared organisation. Net profit was considered as appropriate measure of profitability and it was determined that the company will be performing fairly well in its first year (Garrison, Noreen and Brewer, 2003; Gertler and Kiyotaki, 2010). Risk and strategic option Identified risks: The risks can be physical, financial and operational in nature. Physical risk involves theft and robbery, data loss and theft and fire. Financial risk includes increase in commodity cost, insolvent debtors and decline in working capital. Operational risk comprises breakdown of machinery, destruction of resources such as raw material and utensil and spoilage. Risk monitoring and mitigation: Preventive maintenance can be considered as most appropriate for monitoring risk and its mitigation. The firm will regularly check equipments for preventing operational risk. Financial risk can be reduced by regular monitoring of price movement for commodities and adopting strong credit policy. Physical risk can be minimised by hiring security for the café and by protecting soft data by means of antivirus and data locks (Power, 2004). Critical success factor: The critical success factors for French Bake shall be financial resources, manpower, innovation, consumer loyalty, information technology, knowledge, and skills. Strategic option: Since the locality has limited competition and very few market players except for the big brands, the company should adopt differentiation strategy. It can mould its offerings and add innovative twist in flavours and combinations. Differentiation can be adopted in café décor and ambience as well. It is expected that the changes will attract more and more consumers in the café (Ansoff and McDonnell, 1990). Reference list Ansoff, H. I. and McDonnell, E. J., 1990. Implanting strategic management (Vol. 2). New York: Prentice Hall. Boyd, D. and Goldenberg, J., 2013. Inside the Box: A Proven System of Creativity for Breakthrough Results. London: Profile Books. DeFond, M. L. and Hung, M., 2003. An empirical analysis of analysts’ cash flow forecasts. Journal of Accounting and Economics, 35(1), 73-100. Garrison, R. H., Noreen, E. W. and Brewer, P. C., 2003. Managerial accounting. New York: McGraw-Hill/Irwin. Gertler, M. and Kiyotaki, N., 2010. Financial intermediation and credit policy in business cycle analysis. Handbook of monetary economics, 3(11), pp.547-599. Google Map, 2014. Leicester location. [online] available at: [accessed 21 January 2015]. Intellectual Property Office, 2014. Intellectual property: an overview. [online] Available at: [accessed 22 January 2015]. Irish Venture Capital Organization, no date. Exit options for investors. [online] Available at: [accessed 21 January 2015]. Litvak, K., 2009. Venture capital limited partnership agreements: Understanding compensation arrangements. The University of Chicago Law Review, pp. 161-218. Market line, 2014a. Hot drinks in the United Kingdom. [pdf] Market line. Available at: [accessed 21 January 2015]. Market line, 2014b. Chilled and deli food in the United Kingdom. [pdf] Market line. Available at: [accessed 21 January 2015]. Power, M., 2004. The risk management of everything: Rethinking the politics of uncertainty. United States: Demos. Stickney, C., Weil, R., Schipper, K. and Francis, J., 2009. Financial accounting: an introduction to concepts, methods and uses. UK: Cengage Learning. Appendices Figure 1: Location (Source: Google map, 2014) Figure 2: Layout (Source: Author’s creation) Financial assumptions Certain cost has been considered variable while others have been considered as fixed cost. Rent has been assumed to be paid every three months only exception was October and November. Water and power expenses were considered constant while office expenses were assumed as variable cost. Start-up cost comprises bank loan and investment brought-in by partners. Market research Authentic database such as Market line was considered for conducting market research. IP protection details The United Kingdom Patent and Trademark office database was referred for intellectual property right details (Intellectual Property Office, 2014). Gantt chart: operational information CV: Austin Peterson Read More