Business Plan for a Coffee House - Assignment Example

Business Plan Abstract In the following business plan provided here, I would like to venture into the business of starting a coffee shop in San Diego, California as a limited liability company. The main objective of my plan is to provide employment, generate profits as well as serve the needs of the community at the same time by providing an array of products ranging from exclusive coffees and beverages to European deserts. I also wish to include perks like free wireless internet in order to attract customers and the plan provided here depicts an outlay of my financial, economics as well as technical feasibility. Keywords: business plan, objectives, financial feasibility, economic feasibility, executive summary. DRAFT PROPOSAL The main purpose of my business plan is to start a coffee house venture as I feel that this is a very viable option. In California today, there are a large number of coffee houses that run because of a demand created by people to have a place where they can sit, relax and enjoy beverages and eatables. Most people are willing to pay a certain amount of money as they would rather meet their friends and family at such locations and enjoy a nice morning, afternoon or evening with them. The sales for coffee have kept on increasing over the last decade despite a time of financial downturn. This is because this is a beverage that has a lasting demand among the community. Therefore, the main purpose of my business plan is to provide people with a place to enjoy their beverages in, coupled with European style food so that they are attracted by the quality and creativity that I have attempted to bring about with the help of my plan. (Weitzman, H. 2006) Other than this, the purpose is also to provide employment, generate profits as well as bring about fair trade where the farmers who I import my coffee from will be guaranteed at least $1.26 per pound which is twice the going rate for coffee. (Weber, Jeremey 2007) (Weitzman, H. 2006) My products will include a number of meals and beverages as well as desserts, mostly European ones so that people find some amount of differentiation and this is what helps to set my venture apart from the already established coffee houses in the country. I wish to provide the age bracket of 14-28 years a place, with free wireless internet so that they are able to come, relax and enjoy good food and coffee, and at the same time, get their work done, meet their friends and just have a bit of change away from home. I feel I will be able to carry out this project very well since I have excellent interpersonal skills and also a very dynamic personality. I am aware that there are many competitors in this industry such as Starbucks. If I follow the same strategy as those competitors, my business will fail. Therefore, in this business I would like to focus on quality rather than quantity and keep the business small at the beginning and eventually expand the business in the future. (2009, Fortune Magazine) Expansion and diversification is what will keep the spirit of my firm alive. In the future, I plan to move on to supplying my products not only to those who visit the coffee house but also to others with the help of stationed trailers in different parts of the city, and/or expanding the unit of my coffee house in order to create a chain of such businesses. I will be able to generate a large amount of employment as well with the help of the core team that I do employ, apart from which I will also be hiring a small group of people to do my research and development. Slowly and gradually, the coffee house is also likely to attract older people as they can also sit and work and enjoy a different kind of meal or desserts that are not really found elsewhere. Therefore, I aim to bring about product differentiation within my venture in order to attract more customers. It is also very essential that while beginning a venture one must think about how to market it. It is given that a ready market is already available, which includes the buyers of the product and thus the entrepreneur needs to think of ways of making the product reach the potential customers. This brings us to the advertisement and publicity in terms of the marketing mix that the venture will be popularized by. I am only making use of word of mouth and internet mediums in the beginning, and later will move on to making use of the print media. In the future, I do hope that my venture is therefore successful and I am able to with all that I have planned; carry out a business of a coffee shop while keeping all the barriers in mind and trying to overcome them at the same time. This will hopefully bring me at par with the leading coffee business in the world today and put me on the top. This draft is thus, a kind of a blueprint or route map to guide me along the path of the venture I have decided to create. Purpose of the plan To generate profits, employment and provide the community with a coffee house that serves European delicacies as well as coffees and beverages. Introduction to market opportunity There is a great amount of introduction to market opportunity in this line because of the need for a place for today’s youth to relax and work in, while enjoying beverages and meals that they would not get elsewhere. The company My company is a limited liability company called ‘Euro-Bean’. MARKET Industry overview The history of the industry The coffee industry has been in existence for a very long time indeed and a large number of famous coffee makers and coffee houses have established themselves all over the world, for example, Starbucks, Caribou Coffee etc. Size of the industry Very large Industry evolution From the need for serving people coffee outside their homes The trend – Where the industry is expected to be in 5-10 years In the next five to ten years, the coffee industry is expected to meet a further increase in terms of its sales and growth revenue. This is because simply put, most people have begun preferring coffee these days than tea, and there has also been a resultant increase of the number of teens consuming coffee. (Seudieu 2008) The key players in the industry The key players in the coffee industry are companies like Starbucks, Caribou Coffee, Tim Horton’s, Coffee Bean and Tea Leaf. They together constitute approximately more than 50% of the total market share of coffee houses alone. (Gim. J, 2006) Barriers to entering the market One of the main barriers to entering the coffee market is that there will be a great amount of threat faced by these already established coffee houses to the new coffee entrepreneur. It takes some amount of time to stabilize and have people understand the difference between the new coffee-house that I wish to begin as compared to the already established ones like Starbucks.(Kimes, 2009) COMPETITION STRENGTHS AND WEAKNESSES PRODUCT AND INDUSTRY LIFE CYCLE A product or industry life cycle grows from an introduction and growth stage to a state where it reaches maturity and then maybe begins to decline if its marginal utility decreases. This entire cycle helps the entrepreneur to visualize and locate the kind of profits and downturns that his business is most likely to face. (Anderson and Zeithaml, 2011) How does the position in the Product Life Cycle affect this business plan? With regard to the business plan provided here, it is obvious that the plan will go through and face a rollercoaster of turns both upward and downward. The product being sold is coffee, other beverages as well as European styles deserts. At first, when the product is introduced in the market, it needs to be accepted by the people, and since in San Diego, there is no other competitor in terms of a coffee house that provides these specialties, the product will be accepted as there is a need for European deserts. Different beverages will help to set the coffee house apart from others and all this will help the product life cycle to take an upward turn towards siphoning of profits. At the stage of maturity, the entrepreneur must begin to bring in more diversification and expansion in order to survive within the market because after reaching this, it is obvious that the product has been well liked and accepted by the community, otherwise, the product will face a sharp decline in the market as the need for something new always arises for people. TARGET MARKET The target market refers to the market population or the kind of people that this venture is aimed at. It is the particular group chosen by the entrepreneur after much research that will help the venture to move towards success and help it generate profits. What is the unsatisfied need that creates the business opportunity? I feel that the basic need that creates this opportunity is the need for people to have a place to relax, enjoy world class food and beverages. Thus, I will be providing them with a place like home, with wireless free internet so that they can also do their work here. This will help to attract more customers. Also, customers crave for different kinds of deserts and thus, I will be providing them with European style deserts and food. Major characteristics of the target market (what does the customer look like?) The main customers belong to the bracket of 14-28 years old as this is a place mainly for young people to hang out in, do their work, meet their friends and enjoy good food and beverages. Apart from this, another side customer bracket that this business plan also looks at includes the occasional customers that are a little older, beyond the age of 30. What is the demand of this target market? The demand for the target market (customers aged 13-28) is to have a place away from home but as comfortable where they can do their work, meet their friends or just hang out and spend some time at, while enjoying differentiated deserts, beverages and coffees. What are total sales to this market in geographic area? Total sales expected in this market in the geographic area is about 20% What are total sales expected in 5 years? In 10 years? Total sales expected in the next 5-10 years should grow to at least a 45% with the expected amount of increase in capital, funds and future plans. What percentage of this demand does this business expect to capture? Through my business, I hope to capture at least 20% of the total demand created by the target market in the next 10 years, if not more. Product or Service Research and Development I hope to carry out some more research and development with a view to try and expand and diversify the kind of products that I supply to people. ENVIRONMENTAL SCAN This refers to a close examination of the environment with a view to understand it better and try and gauge the opportunities that persist within. Significant factors in the macro-environment In the macro environment, with regard to the coffee industry and my business venture, the significant factors include the aggregate demand for the product as well as the change in consumer tastes and the different wants for the European meals. Nature of the competition Nature of the competition is very dynamic and may have adverse effects if not adopted properly. Clear statement of the opportunities and threats Threats faced by the organization include threats from other established coffee houses. The opportunities lie in the fact that my coffee house is delving into the production of European products which are not sold by any other coffee house in the city. COMPANY DESCRIPTION (PROPOSED NEW ORGANIZATION) Type of Business and Legal Structure, e.g., LLC, sole proprietorship The business will be of LLC nature; Limited Liability Company. It will have two investors, bringing in a sum of $20,000 each as per the startup capital. Mission and Objectives Following are the main missions and objectives of this business: To generate sales and profits and help the business venture to grow and develop further. To provide at least $1.26 per pound as per the regulated free trade to the coffee farmers and thus help to reduce poverty. To provide customers with an easy environment where they can relax and enjoy the taste of world class foods and beverages, not to forget different kinds of coffees. To provide employment for a large number of people in the community. (Dicorpo, Tony) Distinctive Core Competencies The core competencies in this venture that are critical for the business to achieve competitive advantage are the inclusion of different kinds of products that are being served. Since these products are exclusive to my venture alone (in the city) it helps to add competition to other coffee houses that do not serve it. The use of internet for advertising also helps to reach out to a larger number of people all over the world and spread the news about the venture, and this also provides an added advantage apart from the actual supply of products. MANAGEMENT AND OWNERSHIP Board of directors and Rationale for Members The main directors of the company will be I and a partner as we will be the main investors too. Management staff structure The management and staff structure of the coffee house aims to be as follows: 1. A unit manager to look after the operations of the coffee house 2. Four employees behind the counter, mainly the chefs and coffee makers 3. One cashier Key managers There will be a single unit manager or key manager for each unit of the coffee house. The plan is to increase the sales of the coffee house by increasing the number of units and establishing the brand as a chain in the future. Thus, the number of key managers will increase on the basis of the number of units in the future. Future Additions to the Current Management Team The current management team consists of about 5-6 people in total in the future, I aim to increase the units of the coffee house by creating a chain of them across the state and then the country. On the basis of the increment, there will be additions to the management team and we hope to increase the same by increasing the level of employment at least three fold in the next five years. MARKETING ACTIVITIES Overall Marketing Strategy The main marketing strategies that will be used in order to further the business in my firm mainly include bringing about product differentiation in order to set the coffee house apart from other coffee houses. (Dicorpo, Tony 2008) Specific marketing mix Marketing mix consists of four categories: (Perreault, William D., Jr., and E. Jerome McCarthy 1993) a. Promotion Mix – Promotion mix refers to the advertisement and publicity that will be provided to my business enterprise. In this case, I wish to spread news about the coffee house through word of mouth more than advertising in print, and maybe begin a website or a blog. Facebook can also be used as a medium for advertising and letting people know about the coffee house, its logo and brand and what are the various products available there. b. Distribution Mix - This refers to the kind of distribution channels that the finished products will travel through in order to reach the customer. In the case of this coffee house, a distribution channel is not required for the finished products; however, in the future, if we plan to begin a process of delivering the foods to people’s homes or bring about a chain of units of the coffee house, then the goods will have to be distributed through a direct method. c. Place Mix – Place mix means the place from where the customer will be able to acquire the product and in this case it will be the coffee house. However, in the future, a plan can also be made to begin trailers of the deserts and beverages so that they can be sold elsewhere and not just at the coffee house, therefore, the place mix will then vary from the different areas those trailers will be stationed at. d. Price Mix – this indicates the cost of the products with regard to the cost of raw materials and process of production of the final product. After bringing about calculations regarding the per-unit cost of each product available at the coffee house, we can estimate the actual price mix. This also includes the cost of utilities and staff that come under the process of production. Strengths and weaknesses in ability to satisfy target market needs (Colloqy Grog Shop 2011) Strengths I have a number of friends within the age bracket of the target market, and thus have spoken to them regarding what they would personally like in a coffee house which would keep them coming back for more. Thus such inputs have helped me design the interior of the coffee house, install free internet, and also, when business begins to boom, I will put across discounts and other perks for the customers. I have excellent interpersonal skills which will help me interact with not only my staff but also the customers. Weaknesses I have not been able to interact with any existing entrepreneurs in the same field and thus will have a little bit of difficulty in establishing myself. Initially, I am not planning to go ahead with print advertisements and that might cause a little bit of a problem for people to find out about my coffee house. PRODUCTS AND SERVICES Detailed Product/Service Description European style desserts Beignets Cold beverages Warm beverages Meals Free internet facility Copyrights, Patents, and Intellectual Property Rights The logo, brand and name of the coffee house will be patented so as to keep it distinguished and not let any upcoming enterprises engage in copyright infringement. Research and Development Activities A small group of people will be hired in order to delve more into European style food, conduct researches and surveys regarding the needs and wants of people with regard to the products served, in order to carry out research and development. RISK MANAGEMENT Loss Control A small amount of provision will be kept in order to manage any risks that might crop up during the course of the business. This will help to suffice for any amount of inventory, raw materials, finished products or even property that faces damages. (Forsyth, James. 2009) Retention of Personnel Having a group of staff that is trusted and also good potential and quality is very important for any enterprise. Thus, in order to go about retention of personnel, a small team is what I will hire to start the unit. These people will be employed after a thorough process of screening and will be made to look after their personal responsibilities well. The company will also provide them with certain perks in order to motivate them and make them understand the results of being loyal to the firm and providing it with their hundred percent. (2010) Insurance I will take full responsibility of ensuring that the enterprise is insured, with the help of the startup capital, in terms of its inventory, equipment as well as property so that during a time of crisis, decisions can be made to handle the situation well. OPERATIONS Production and Service Delivery Procedures The main production will either take place in manufacturing unit with all the required equipments, not very far from the coffee house, or inside the coffee house kitchen if there is enough space to accommodate the same. Therefore, the service and products will be delivered directly to the customers on a personal basis so that they can also give their opinions and suggestions for any kind of room for improvement. (Beaney, Tracey 2008) Supply Chain The supply chain of my coffee house exists between the manufacturing unit of the food products and the final unit or the coffee house itself. The food products that are to be transported from the manufacturing unit will be done so, and then the products will be supplied to the customers through the unit itself. In the long run, trailers will be begun which will be stationed at different points in the city from where customers can also purchase the food and beverages. FINANCIAL ANALYSIS Funds required and their uses Capital Specific fund for purchasing assets and making provisions Current funding requirements Capital (Seed) Funding requirements over the next three years To be decided with accordance to the total costs Use of funds Purchase of assets like equipment, and making provisions for liabilities. FINANCIAL STATEMENTS FOR FIRST 3 YEARS (MONTHLY FIRST YEAR AND ANNUALLY FOR YEARS 2 &3) Income statements Balance sheets Cash flow statements Determine capital requirements References Baker, Steven, 2008, Essentials to know before opening a coffee shop business. Retrieved from http://ezinearticles.com/?Essentials-to-Know-Before-Opening-a-Coffee-Business&id=1219028 Beaney, Tracey 2008. How To Set Up a Coffee Shop operation. Retrieved from http://ezinearticles.com/?How-to-Set-Up-a-Franchised-Coffee-Shop-Operation&id=1437292 Coffee Shop Essentials. 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The Coffee Value Chain. Retrieved from http://www.ers.usda.gov/publications/err38/err38b.pdf Weitzman, H. (2006) “The Bitter Cost of ‘Fair Trade’ Coffee.” Financial Times (8 September). Weber, Jeremey (2007) “Fair Trade Coffee Enthusiasts Should Confront Reality” Retrieved from http://www.cato.org/pubs/journal/cj27n1/cj27n1-9.pdf Zeithaml (2006). Product Life Cycle – Industry Maturity Stages. Retrieved from http://www.valuebasedmanagement.net/methods_product_life_cycle.html 2010. How to ensure Employee Retention. Retrieved from http://www.ehow.com/how_2048588_ensure-employee-retention.html 2010, Finding Your USP. Retrieved from http://www.articlesbase.com/management-articles/coffee-shop-business-plan-finding-your-usp-1876573.html 2010, How to write a coffee shop business plan. Retrieved from http://www.articlesbase.com/business-articles/how-to-write-a-coffee-shop-business-plan-3637222.html 2009, Fortune Magazine. Andrew Hetzel is a Skeptical. Retrieved from http://www.coffeestrategies.com/2009/02/13/fortune-magazine-andrew-hetzel-is-skeptical Read More