Coffee Shop Business Plan Project

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Business Plan Project Jessica Speicher, Kelly Tasky, Joe Becker Bus 339 4/30/2012 1 Title Executive Summary Our company is The BREWster, a coffee shop located in the new Offutt School of Business. Our business is centered on the aspect of being funded by Concordia College but being student run, allowing current students to use their classroom knowledge in an actual work environment, allowing them to gain valuable work experience and jumpstarting their ability to become responsibly engaged in the world (BREW). The target market for our coffee shop will be the students of Concordia College, more specifically business students and residents of east complex due to the amount of contact these students will have with the location of the coffee shop. Based on the hours of operation we laid out that we would need to hire 1 full-time employee and 22 part-time student employees in The Brewsters vertical organization structure. We will have 4 student managers over-seeing the coffee shop and 3 specialized student managers in marketing, accounting, and nutrition and dietetics along with 15 regular student workers. The Brewster will be similar to its four main competitors on campus for price and products offered, however, The Brewster will distinguish itself by being the coffee vendor that is open latest, has the best atmosphere, and offers the most promotions to its customers. The Brewster will be run by Concordia College students; and being that 2 Title Concordia students are our largest demographic, The Brewster will be the best in the business for being able to understand what their customers desire. Our variety of promotions includes daily deals, re-usable mugs, Brewster bucks, punch cards, social media, and ads through c-news and the Concordian. With the assistance in funding though the Offutt School of Business for the first three years of our business we will be able to purchase equipment and provide the necessary foundations to create a successful business that will serve as both beneficial to student learning and profitable for the school. 3 Title Table of Contents Executive Summary ........................................................ 1 Table of Contents ........................................................... 3 Company Description ..................................................... 4 Industry Analysis ............................................................. 5 Market Analysis .............................................................. 7 Marketing Plan ............................................................. 10 Management Team & Company Structure .................. 16 Product (or service) Design & Development Plan & Operations Plan 19 Financial Projections ..................................................... 21 Sources ......................................................................... 26 4 Title Company Description Concordia College has adopted a focus to have students become responsibly engaged in the world (BREW). This aspect of the curriculum was vital when planning the new Offutt School of Business, so it was decided that a small student-run business would be at the heart of the building giving students the opportunity to apply the skills they learn in class. As the plans were discussed further, a coffee shop became the definitive idea not only for the educational facet, but to add to the social and community feel of the new building. When deciding on a name for this future coffee shop we thought it was important to include the aspect of BREW in the title because not only did it sum up the reasoning behind the purpose of the coffee shop, but who wouldn’t love to wake up to a cup of BREW every morning? (no pun intended) After discussing several options with staff, family, and friends we had a unanimous vote to name the Offutt School of Business student-run coffee shop, The BREWster. We also, found it crucial to include the intention in the mission statement. Our mission for The BREWster is to provide a friendly, comfortable atmosphere where the customers can receive quality food, drinks and service at a reasonable price while stimulating a learning environment. The BREWster will target Business staff and students along with students that live in East complex surrounding the Offutt School of Business. This is a prime location as there 5 Title is a need on this side of campus. Since the grant cafeteria left East complex, students have had to travel other places to get beverages or snacks. This coffee shop will provide a convenience for this target market that has not been available for several years. The coffee shop will provide coffee, tea, hot chocolate, apple cider, smoothies, sandwiches, chips, yogurt and other miscellaneous breakfast items. Industry Analysis Our coffee shop is categorized as a snack and nonalcoholic beverage bar under the NAICS system using the number 722213. According to the 2007 NAICS definition, “this US industry comprises establishments primarily engaged in (1) preparing and/or serving a specialty snack, such as ice cream, frozen yogurt, cookies, or popcorn or (2) serving nonalcoholic beverages, such as coffee, juices, or sodas for consumption on or near the premises” (2007 NAICS Definition). In the surveys done in 2007 there were 50,491 establishments in this industry, a growth of 14,455 since 2002 or approximately forty percent. Employment also increased by 57% in this five year span and sales almost doubled finishing with a total of $24,254,000 in 2007 (Industry Snapshot). 6 Title There are many financial ratios that businesses use, but there are five main ratios that are significant for the snack and nonalcoholic beverage bars. The first is the current ratio. The current ratio is determined by dividing the business’ current assets by the current liabilities. This shows if your company has the ability to pay off any current obligations (short term loans, accounts payable, tax expenses), the higher the ratio the more likely you are. Conversely, if a current ratio is high the business could have too much cash on hand. The next ratio is the return on equity, net income divided by total equity. This ratio shows the amount of profit a company is making from the money invested by shareholders. Another ratio is return on assets which indicates how “efficient management is at using assets to generate earnings”; this is done by dividing net income by total assets. The last ratio important to our industry shows a company’s efficiency of managing their assets in relation to their sales. This is simply calculated by dividing total assets from total sales (Coffee Shops). This industry has changed dramatically throughout the years and companies continue to identify and follow new trends in order to increase competitiveness and profits. One significant trend in the last fifty years is an increase in coffee consumption in both young (18-24) and old (60-plus) age groups. Coffee is no longer just seen as a morning drink while the parents read the newspaper, but instead has developed its own culture throughout the different age groups. This coffee culture has changed the design of coffee shops today. Unlike other food industries the focus of coffee shops today is not only to deliver your drink but to offer a place for you to relax, socialize, or even a place to work. Not only is the atmosphere of the coffee shop changing but the menus as well. Since the 1990s there has been an upward trend in the consumption of specialty 7 Title coffees along with the development of more food items that are offered. The increase in coffee consumption has also generated awareness trends. Since 2002 more people have been observing the ecological and economic issues surrounding coffee as well as a growing concern about the health effects of coffee and the benefits that they will receive. “Sixty-one percent of coffee drinkers said that coffee improves their focus and forty-six percent listed the health benefits of drinking coffee as one of the reasons they drink coffee.” (Coffee Shops) Market Analysis There are several segments we can form for within our coffee shop market: 1. Students 2. Professors 3. Visitors The target market for our coffee shop will be the students of Concordia College. With over 2000 students on campus they would have the largest impact on the success of our business, so it is most important to target and satisfy their needs and wants. Also 18-24 year olds are the largest segment of consumers that drink coffee for an energy boost (average of 43%) as well as, to help them concentrate (26%). Although all students are important with the location and flow of traffic, business students and residents of east will have a higher target on our companies marketing profile. 8 Title 9 Title We would have three major competitors on the college campus; Dining Services, Coffee Stop, and the Korn Krib. Off campus we would also have some competitors with local coffee shops or similar business in Moorhead. These include Starbucks, McDonalds, Atomic Coffee, and Moxie Java. Company Drinks Average Price per Unit Target Market Logo Coffee Stop Brewed Coffee Latte 1.99 3.99 18-24 college students Starbucks Iced Latte Caramel Mac. 4.55 4.25 18-45 upper class adults McDonalds Mocha Brewed Coffee 2.90 1.75 18-45 middle class adults Atomic Coffee Latte Iced Latte 3.95 3.60 18-45 middle class adults Moxie Java Latte Mocha 3.75 2.70 18-45 middle class adults 10 Title Marketing Plan Positioning strategy The Brewster will be similar to its four main competitors on campus for price and products offered, however, The Brewster will distinguish itself by being the coffee vendor that is open latest, has the best atmosphere, and offers the most promotions to its customers. The Brewster will be run by Concordia College students; and being that Concordia students are our largest demographic, The Brewster will be the best in the business for being able to understand what their customers desire. Points of Differentiation from competition The Brewster has four main competitors and three secondary competitors. Our four main competitors are from other coffee vendors located in various outlets on Concordia’s campus. The three secondary competitors are located just near Concordia campus in south Moorhead. What distinguishes The Brewster from its competition is having the most convenient hours of operation for its clients, having the best atmosphere, and offering the most and best promotions on campus. The Brewster will be of most convenience to students living in Hallet and Erickson dormitories and students and faculty who attend classes in the Offutt School of Business. In addition to its prime location, The Brewster offers its guests an environment ideal for studying and meeting with group members. The shop is designed to be a relaxing atmosphere with 11 Title small and large tables to study alone or with groups. Every table will be close to an outlet so students can spend many hours at The Brewster. Unlike any other coffee shop, The Brewster has a “Daily Deals” promotion offering 50% off of the muffin featured for the day. In addition to the Daily Deals promotion, The Brewster wanted to reward its customers for their outstanding achievements and contributions on campus. The Brewster will pass out “Brewster Bucks” to all faculty members on the Concordia College Campus. The Brewster Bucks are to be handed out to students rewarding them for their hard work or good deeds done in the classroom. Pricing Strategy Our products will meet the market value of our competition on campus; however, we plan to have many promotional events throughout the year. Distribution Strategy For proper distribution of our products, we plan to have more workers on at times when we are most busy and less at times when we are not. In the mornings before the shop opens we will have our full time staff member, one student manager, and three student employees. The reason for having the most employees on in the mornings is so that they can prepare sandwiches for the day, stock the coolers, start the coffee brewers and do any other preparation needed to ensure a smooth work day. Late at night is when there will be the fewest number of workers due to relatively little traffic at the shop. There will be one student manager on staff as well as one student worker. The student manager will take inventory, stock as much as he or she can for the morning staff, and close the shop. 12 Title To support our flat organization business model, our full time staff member, student managers, and student workers will collaborate and do very similar tasks throughout the workday. There will, however, be certain tasks that can only be done by the full time worker, the student-marketing consultant, the student accountant and the four student managers. PROMOTIONAL STRATEGIES “Daily Deals” The Brewster will offer 50% off the muffin featured for the day. The goal of this promotion is to drive sales. If customers are coming for the daily muffin deals, they will hopefully form habits for coming on certain days of the week or at least persuaded to purchase a beverage when they purchase their muffin. “Re-usable Coffee Mugs” The Brewster will off its customer’s re-usable coffee mugs. If a customer uses its re- usable coffee mug that The Brewster distributes they will receive 10% off of their 13 Title beverage. The goal of this promotion is to support environmentally friendly practices, save money on one time use cups, and increase awareness of The Brewsters from advertising the brand name on the coffee mugs. “Brewster Bucks” Brewster Bucks save a student one dollar towards their next purchase. The Brewster student-marketing associate will be in charge of distributing “Brewster Bucks” and “Brewster Buck Stamps” to all faculty members on the Concordia College Campus. The Brewster Bucks are to be handed out to students rewarding them for their hard work or good deeds done in the classroom (i.e. getting a good grade on a test, participating, or helping others). To ensure copyright, teachers will have a Brewster Bucks stamp that needs to be present on the back of every coupon to get the promotion. Furthermore, there will be numbers on the back of every coupon and employees will track these. This promotion will not only drive sales and awareness of The Brewster, but also develop a positive brand attitude with its customers and make students feel good. 14 Title “Social Media” Send out promotional events via The Brewster’s various social media outlets to effectively reach our target market. The Student Marketing associate will be in charge of updating all of The Brewster’s online accounts. The Brewster will have a Facebook page that will keep students updated on current promotions and events. Facebook “likes”, followers, and reposts will be a great way to measure brand attitude and awareness. The Brewster’s Facebook page will have a direct link to its website. The Brewster will also have a Twitter account that allows students to keep up with daily promotions. Measuring the amount of “re-tweets” and followers will be another great way to measure brand attitude and awareness. Lastly, The Brewster will have a Foursquare account that will allow its customers to “Check In” when they are in the shop. There will be rewards for those who “check in” most often. 15 Title “C-News” The C-News is sent via e-mail to every Concordia College Student and faculty member. We would include the “Daily Deals” and any other promotional events for that week in every C-News e-mail. This is a great way to effectively reach out target audience. “Punch Card” Every customer will receive “The Brewsters’ punch card” upon check out. After the customer has accumulated 10 punches in their card they will receive a free drink or product. The goal of this promotion is to establish brand loyalty, if we reward out customers each time they come they will think of coming to The Brewster before any other coffee vendor. “The Concordian” Purchase an advertising spot in The Concordian News Paper for the grand opening of The Brewster. 16 Title Management Team & Company Structure The management team and workers can make or break a company. It is crucial to have informed, welcoming and well-trained employees that are willing to cater to the customer’s needs. We decided based on the hours of operation we laid out that we would need to hire 1 full-time employee and 22 part-time student employees. These student employees will be hired as part of the Concordia college work-study program. We will have 4 student managers over-seeing the coffee shop and 3 specialized student managers in marketing, accounting, and nutrition and dietetics along with 15 regular student workers. The business will have a vertical management structure. The full-time manager will be there to supervise the student managers and workers and oversee the coffee shop as a whole. They will be in charge of hiring the student employees, scheduling hours, training staff, and placing food orders. Some of the student manager positions will overlap or help with some of the full-time management position roles, so that students have the opportunity to learn new concepts and gain experience. This position offers employment for nine months out of the year during the time that classes are in session, but the employee will be given the option to disperse checks throughout the entire year if desired. The position pays $40,000 salary and includes benefits. The benefits are offered through the college and will be offered in addition to the salary pay, summing up to about 30% additionally to the salary. The student managers will report to the full-time manager and be in charge of overseeing the work of student employees. They will work like a regular student worker, 17 Title but will have additional roles such as opening and closing the coffee shop, taking inventory, and supervising other student workers. Along, with overseeing other students comes the responsibility of doing student work evaluations, reporting disciplinary actions, and maintaining the integrity of the business. These students will be paid a dollar more than regular student employees and will make $9.25/hour with a ten cent increase for every semester of 60+ hours worked. We also decided that having 3 specialized student workers was necessary, so that students could have the opportunity to apply some of the knowledge they learn in the classroom. The three specialized management positions offered include a nutrition and dietetics manager, a marketing manager, and an accounting manager. The nutrition and dietetics manager will be in charge of food safety training, food nutrition labels, helping the full-time employee with ordering and menu planning, along with regular student manager roles while working. Most of the students on this side of campus are athletes and the current food trends are leading towards healthy options and so we found that our target market would enjoy having access to the nutrition information of the products served. Also, it can be used as a marketing tool for our products and we could offer healthy nutrition tips to our customers. Anytime, products are sold that are going to be consumed it is important to look at the safety of the food to maintain the integrity and protect the customers, so this position will work on providing training to staff and therefore to qualify for the position they must be ServSafe certified. We estimated that they would work about 7 hours a week. The marketing manager will work on advertising, coupons, weekly deals, and social media such as Facebook and twitter. They will work about 5 hours per week along with the nutrition manager in marketing the 18 Title product and will report to the full-time manager with new ideas and promotions. Lastly, the accounting manager will work about 12 hours per week on bookwork and financial documents. They will report to the full-time manager and provide ideas of how to better the company with the results. All of these employees will be paid the same as the regular student managers and will work scheduled hours as planned by the full-time manager. All student managers will be hired by the full-time manager and must meet certain criteria to qualify. To be considered for the student manager positions students must be a junior or senior, have a 3.0 GPA or above, be enrolled full-time, and have served in leadership roles. For the specialized positions students must be a major in the perspective field. We expect our employees to work hard, be dedicated, and provide quality products and service to our customers. To fulfill all of the coffee shop hours we will hire 15 part-time student employees. The will be paid $8.25/hour and will be able to work as many hours as they would like. They will also be hired by the full-time staff member and will be required to attend staff training. They do not however have to be a business or nutrition major to work in the coffee shop. To be fair to all students on campus and allow anyone to gain work experience the student worker positions will be open to any students. They will be in charge of stocking shelves, making beverages, serving customers and cleaning. They will report to student managers with any questions and will have set hours each week. 19 Title The BREWster Company Structure Product (or service) Design & Development Plan & Operations Plan Development Cost The cost to build The Brewster is being funded by Concordia College. Operations flow Customers will enter The Brewster, proceed to the counter to order at the cash register, then pick up their order at the left end of the counter, and exit the coffee shop. 20 Title Inventory & Quality control Inventory will be checked on a weekly basis by one of the four student managers. The reason that the student managers will be checking inventory is because that is one of their main priorities to do at night before closing the shop. There will be a log sheet on how many of each product is in stock so that there will always be enough inventory on hand. The inventory log sheet will be left for the full time staff member to look over and make orders during the morning shift. We will base our inventory data on the projected number of customers The Brewster sees per day. All inventories in store will be dated and organized from oldest to newest date. This will insure that every product is being used so no inventory goes to waste. The best two ways to measure quality are to adequately train employees and send out surveys to customers. Each team member will go through 16 hours of employee training and is required to pass a test on making The Brewster’s specialty brews and sandwiches before employment starts. In case of bad memory, there will be cheater cards at every brewing and sandwich station to assure a quality product. In addition to employee training, The Brewster will have a comments and suggestions box placed outside of the coffee shop for customers to write any problems or concerns they have about the coffee shop. All submissions are to be anonymous. The Brewster will also send out a “rate your service” e-mail to its current customers, however, customers can choose whether or not they would like the e-mails. 21 Title Location The Brewster will be located on the main floor of the Offutt School of Business that is located between Hallet and Erickson dormitories and next to the skyway. This location will be superb for our business because it is located close to many of our target customers. Also, being located just off of 8 th street in Moorhead, we not only would have the possibility of having students and facility members, but outside customers that aren’t apart of Concordia College. With Jake Christiansen Stadium only a short distance away we also expect to see other customers that would be attending many of the fall and spring events hosted at the stadium. Equipment Equipment for The Brewster includes an espresso machine, coffee bean grinder, a double tank coffee brewer with four additional canisters, and two blenders. The equipment will be purchased through the funds administered from Concordia College and will be depreciated over fifteen years using a straight line method. Financial Projections Products and Marginal Revenues: Beverages Cost of Goods Sold Selling Price Marginal Revenue Brewed Coffee 1.05 1.99 .94 Tea 0.27 1.10 .83 Lattes 2.04 3.39 1.35 22 Title Hot Cocoa .26 3.39 3.13 Apple Cider .30 1.70 1.40 Frappuccino 2.40 3.99 1.59 Iced Coffee 2.40 3.99 1.59 Smoothies 2.40 3.99 1.59 Food Cost of Goods Sold Selling Price Marginal Revenue Muffins 1.07 1.79 .72 Cookies .36 .60 .24 Breads 1.07 1.79 .72 Bagels 1.19 1.99 .80 Rolls 1.19 1.99 .80 Fruit .30/..45 .50/.75 .20/.30 Candy .62 1.29 .67 Chips .65 .99 .34 23 Title Granola Bars .53 .89 .36 Sandwiches 2.09 3.49 1.40 Yogurt 1.19 1.99 .80 Oatmeal Packets .36 .75 .39 Pop tarts .71 1.09 .38 Nutrigrain bars .50 .99 .49 Cereal cups .97 1.69 .72 Chex Mix 1.98 3.69 1.71 Financial Assumptions Revenues: To determine our monthly sales projections I used the fact that there are approximately 460 residents living in the east complex, either Hallet or Erickson, and 600 business majors. Taking into account that there are most likely some crossover between these two categories, the number used for students coming into the contact with the coffee 24 Title shop will be 900. Out of these 900 students it is estimated that 40% will make a purchase of an average of $4.75. This equals to be 360 purchases a day, totaling $1,710 a day or $51,300 a month. Consumer discounts were calculated by assuming that through our promotions half of our customers would have one dollar off their purchase. As the year goes on, fewer promotions would be available, decreasing this value. Costs of goods sold were calculated using a forty percent markup. Salaries and Wages: Position Hours * Wage Total Expense (Weekly) Full Time Manager Salary $40,000 $833.33 Student Manager 40*9.25 $370.00 Accounting 12*9.25 $111.00 Marketing 5*9.25 $46.25 Nutrition 7*9.25 $64.75 Student Workers 63*8.25 $519.75 Depreciation Expense: Calculated using the straight line method over fifteen years. Supplies Expense: The monthly expense of supplies for The BREWster was designed using the previously calculated number of 360 purchases a day, 10,800 a month. To cover the amount of drinks we will most likely sell we estimated that we would need to purchase 8000 cups a month; 4000 of the twelve ounce size and 2000 each of the eight and sixteen ounce sizes. We would then need the lids for the purchased cups along with 25 Title coffee sleeves. Other supply expenses include the coffee grounds, teas, syrups, filters, and creamers. Office, accounting and legal, and advertising expenses were determined by assumptions based on similar business, average licensing fees for Minnesota, and the extent we would like to advertise our new business. At the start of the year we plan to have more promotions and then slowly lower the amount until the start of the next school year. The amount for the utilities expense was formulated for us by the college rates. 26 Title Sources "Coffee Shops." Center for Economic Vitality. Western Washington University, July 2009. Web. 13 Apr 2012. . "Industry Snapshot." US Census Bureau. N.p., 2007. Web. 13 Apr 2012. . Grant Center coffee survey shop results (2012). [Analysis of electronic & print responses]. Unpublished data analysis. United States. Census Bureau. 2007 NAICS Definition. Web. .