Executive Summary
Espresso room coffee bar is determined to become a daily necessity for local coffee addicts, a place to dream of as you try to escape the daily stresses of life and just a comfortable place to meet your friends or to read a book, all in one. With the growing demand for high-quality gourmet coffee and great service, Espresso room will capitalize on its proximity to the Xavier’s college, Mumbai campus to build a core group of repeat customers.
Espresso room will offer its customers the best prepared coffee in the area that will be complimented with pastries, as well as free books that its patrons can read to enjoy their visit. The company will operate a 2,300 square foot coffee bar within a walking distance from the Xavier’s college, Mumbai. The owners have secured this location through a three-year lease with an option for extending. They have also provided 7,560,000. 00 of the required 9,180,000. 00 start-up funds. The remaining capital will be obtained State Bank of India loans. The company is expected to grow sales revenue from ? 1,536,000. 00 in financial year 2014 to 38,124,000. 00 in year three. As Espresso room will strive to maintain a 65% gross profit margin and reasonable operating expenses, it will see net profits grow from 5,400,000. 00 to 6,750,000. 00 during the same period.
Objectives
Espresso room’s objectives for the first year of operations are:
- Become selected as the “Best New Coffee Bar in the area” by the local restaurant guide.
- Turn in profits from the first month of operations.
- Maintain a 65% gross margin. 1. 2
Keys to Success
The keys to success will be:
- Store design that will be both visually attractive to customers, and designed for fast and efficient operations.
- Employee training to insure the best coffee preparation techniques.
- Marketing strategies aimed to build a solid base of loyal customers, as well as maximizing the sales of high margin products, such as espresso drinks.
Mission
Espresso room will make its best effort to create a unique place where customers can socialize with each other in a comfortable and relaxing environment while enjoying the best brewed coffee or espresso and pastries in town.
We will be in the business of helping our customers to relieve their daily stresses by providing piece of mind through great ambience, convenient location, friendly customer service, and products of consistently high quality. Espresso room will invest its profits to increase the employee satisfaction while providing stable return to its shareholders.
Company Summary
Espresso room, an XYZ limited liability company, sells coffee, other beverages and snacks in its 2,300 square feet premium coffee bar located near the Xavier’s college, Mumbai campus.
Espresso room’s major investors are Dishit Sugand and Juhie Sugand who cumulatively own over 70% of the company. The start-up loss of the company is assumed in the amount of ? 1,494,720. 00.
Company Ownership
Espresso room is registered as a Limited Liability Corporation in the state of Maharashtra. Dishit Sugand owns 51% of the company. His sister, Juhie Sugand, as well as Jayesh Sugand and Mohnish Sugand hold minority stakes in Espresso room, LLC
Start-up Summary
The start-up expenses include:
- Legal expenses for obtaining licenses and permits as well as the accounting services totaling 0,200. 00.
- Marketing promotion expenses for the grand opening of Espresso room in the amount of 189,000. 00 and as well as flyer printing (2,000 flyers at 2. 16 per copy) for the total amount of 193,320. 00.
- Consultant’s fees of 162,000. 00 paid to ABC Espresso Services for the help with setting up the coffee bar.
- Insurance coverage at a total premium of 129,600. 00.
- Pre-paid rent expenses for one month at 95. 04 per square feet in the total amount of 237,600. 00.
Premises remodeling in the amount of 540,000. 00. Other start-up expenses including stationery 27,000. 00 and phone and utility deposits 135,000. 00 The required start-up assets of $142,320 include:
Operating capital in the total amount of 3,624,642. 00, which includes employees and owner’s salaries of 1,290,600. 00 for the first two months and cash reserves for the first three months of operation (approximately 777,600. 00 per month).
Start-up inventory of 865,458. 00, which includes:
- Coffee beans – 324,000. 00
- Coffee filters, baked goods, salads, sandwiches, tea, beverages, etc. 426,600. 00
- Retail supplies (napkins, coffee bags, cleaning, etc. ) – 99,360. 00
- Office supplies – 15,498. 00
- Equipment for the total amount of 3,195,180. 00:
- Espresso machine – 324,000. 00
- Coffee maker – 48,600. 00
- Coffee grinder 10,800. 00
- Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc. ) – 972,000. 00
- Storage hardware (bins, utensil rack, shelves, food case) 200,880. 00
- Counter area equipment (counter top, sink, ice machine, etc. ) – 513,000. 0
- Serving area equipment (plates, glasses, flatware) – 162,000. 00
- Store equipment (cash register, security, ventilation, signage) – 742,500. 00
- Office equipment (PC, fax/printer, phone, furniture, file cabinets) – 194,400. 00
Other miscellaneous expenses – 27,000. 00 Funding for the company comes from two major sources–owners’ investments and bank loans. Two major owners, Dishit Sugand and Juhie Sugand, have contributed 3,780,000. 00 and 1,620,000. 00 respectively. All other investors have contributed 2,160,000. 0, which brings the total investments to 7,560,000. 00. The remaining 1,620,000. 00 needed to cover the start-up expenses and assets came from the two bank loans–a one-year loan in the amount of 540,000. 00 and a long-term (five years) loan of 1,080,000. 00. Both loans were secured through the State Bank of India. Thus, total start-up loss is assumed in the amount of 1,494,720. 00
Company Locations and Facilities
Espresso room coffee bar will be located on the ground floor of the commercial building at the corner of Ramchandra building, Opp.
GT Hospital & HDFC Bank, LT Marg The company has secured a one-year lease of the vacant 2,500 square feet premises previously occupied by a cloth shop. The lease contract has an option of renewal for three years at a fixed rate that Espresso room will execute depending on the financial strength of its business. The floor plan will include a 200 square feet back office and a 2,300 square feet coffee bar, which will include a seating area with 15 tables, a kitchen, storage area and two bathrooms. The space in the coffee bar will be approximately distributed the following way–1,260 square feet (i. . , 55% of the total) for the seating area, 600 square feet (26%) for the production area, and the remaining 440 square feet (19%) for the customer service area. This property is located in a commercial area within a walking distance from the Xavier’s college, Mumbai campus on the corner of a major thoroughfare connecting affluent neighborhood with the busy downtown commercial area. The commercially zoned premises have the necessary water and electricity hookups and will require only minor remodeling to accommodate the espresso bar, kitchen and storage area.
The coffee bar’s open and clean interior design with modern wooden decor will convey the quality of the served beverages and snacks, and will be in-line with the establishment’s positioning as an eclectic place where people can relax and enjoy their cup of coffee. The clear window displays, through which passerby will be able to see customers enjoying their beverages, and outside electric signs will be aimed to grab the attention of the customer traffic.
Products
Espresso room will offer its customers the best tasting coffee beverages in the area.
This will be achieved by using high-quality ingredients and strictly following preparation guidelines. The store layout, menu listings and marketing activities will be focused on maximizing the sales of higher margin espresso drinks. Along with the espresso drinks, brewed coffee and teas, as well as some refreshment beverages, will be sold in the coffee bar. Espresso room will also offer its clients pastries, small salads and sandwiches. For the gourmet clientele that prefers to prepare its coffee at home, Espresso room will also be selling coffee beans.
The menu offerings will be supplemented by free books and magazines that customers can read inside the coffee bar.
Product Description
The menu of the Espresso room coffee bar will be built around espresso-based coffee drinks such as lattes, mochas, cappuccinos, etc. Each of the espresso-based drinks will be offered with whole, skimmed, or soy milk. Each of these coffee beverages is based on a ‘shot’ of espresso, which is prepared in the espresso machine by forcing heated water through ground coffee at high pressure.
Such espresso shots are combined with steamed milk and/or other additives like cocoa, caramel, etc. , to prepare the espresso-based beverages. Proper preparation techniques are of paramount importance for such drinks. A minor deviation from the amount of coffee in the shot, the size of the coffee particles, the temperature of milk, etc. , can negatively affect the quality of the prepared drink.
Sales Literature
Two thousand flyers will be distributed in the adjacent neighborhood, on the college campus, at the malls and in the selected office buildings within two weeks prior to the opening Espresso room.
Market Analysis Summary
India’s coffee consumption has shown steady growth, with gourmet coffee having the strongest growth. Coffee drinkers in the Metro cities are among the most demanding ones. They favor well-brewed gourmet coffee drinks and demand great service. Mumbai, with its liberal and outgoing populace, has been a great place for coffee establishments. Espresso room will strive to build a loyal customer base by offering a great tasting coffee in a relaxing environment of its coffee bar located close to the bustling Xavier’s college campus.
Market Segmentation
Espresso room will focus its marketing activities on reaching the students and faculty, people working in offices located close to the coffee bar and on sophisticated teenagers. Our market research shows that these are the customer groups that are most likely to buy gourmet coffee products. Since gourmet coffee consumption is universal across different income categories and mostly depends on the level of higher education, proximity to the Xavier’s college, Mumbai campus will provide access to the targeted customer audience. The chart and table below outline the total market potential (in number of customers) of gourmet coffee drinkers
Target Market Segment Strategy
Espresso room will cater to people who want to get their daily cup of great-tasting coffee in a relaxing atmosphere. Such customers vary in age, although our location close to the college campus means that most of our clientele will be college students and faculty. Our market research shows that these are discerning customers that gravitate towards better tasting coffee. Furthermore, a lot of college students consider coffee bars to be a convenient studying or meeting location, where they can read or meet with peers without the necessity to pay cover charges.
For us, this will provide a unique possibility for building a loyal client base.
Market Needs
General trend toward quality among Mumbai consumers definitely plays an important role in the recent growth in gourmet coffee. Additionally, such factors as desire for small indulgencies, for something more exotic and unique, provide a good selling opportunity for coffee bars.
Industry Analysis
Moreover, India has emerged as one of the favored destinations for coffee shops popularly termed as Cafes.
The coffee chains market in India has witnessed a robust growth so far and is expected to grow rapidly during 2010–16. With the Indian middle class consumer ready to spend more and be a part of global lifestyle and culture, coffee parlors in the country are on an expansion spree. From small-sized coffee parlors to classy coffee lounges leading coffee retailers such as Cafe Coffee Day, Barista, and Costa Coffee have all been fighting hard to lure India’s growing middle class. According to our analysis Coffee Chains market in India will witness phenomenal growth in near future.
The outlook for the cafe outlet market in India seems very promising as the overall consumer spending is increasing in the country. Rising per capita income, increased literacy and rapid urbanization have caused rapid growth and change in demand patterns. The availability of more disposable income is driving consumers to experience high end products. Having said this, the players in the industry need to be more innovative in order to gain a big share of the ever growing coffee consumption market in India.
Competition and Buying Patterns Competition
According to the research carried on by ABC Espresso Services, Espresso room’s direct competitors will be other coffee bars located near the Xavier’s college campus. These include Starbucks, Cafe Roma, Cafe Coffee, and other Food service establishments that offer coffee. Starbucks will definitely be one of the major competitors because of its strong financial position and established marketing and operational practices. However, despite of Starbuck’s entrenched market position, many customers favor smaller, independent establishments that offer cozy atmosphere and good coffee at affordable prices.
Cafe Roma is a good example of such competition. We estimate that Starbucks and Cafe Coffee Day hold approximately 35% market share in that neighborhood, Cafe Roma appeals to 25% of customers, , with the remaining market share split among other establishments. Espresso room will position itself as a unique coffee bar that not only offers the best tasting coffee and pastries but also provides home-like, cozy and comfortable environment, which established corporate establishments lack. We will cater to customers’ bodies and minds, which will help us grow our market share in this competitive market.
Buying Patterns
The major reason for the customers to return to a specific coffee bar is a great tasting coffee, quick service and pleasant atmosphere. Although, as stated before, coffee consumption is uniform across different income segments, Espresso room will price its product offerings competitively. We strongly believe that selling coffee with a great service in a nice setting will help us build a strong base of loyal clientele.
Strategy and Implementation Summary
Espresso room’s marketing strategy will be focused at getting new customers, retaining the existing customers, getting customers to spend more and come back more often.
Establishing a loyal customer base is of a paramount importance since such customer core will not only generate most of the sales but also will provide favorable referrals.
Competitive Edge
Espresso room will position itself as unique coffee bar where its patrons can not only enjoy a cup of perfectly brewed coffee but also spend their time in an ambient environment. Comfortable sofas and chairs, dimmed light and quiet relaxing music will help the customers to relax from the daily stresses and will differentiate Espresso room from incumbent competitors.
Sales Strategy
Espresso room baristas will handle the sales transactions. To speed up the customer service, at least two employees will be servicing clients–while one employee will be preparing the customer’s order, the other one will be taking care of the sales transaction. All sales data logged on the computerized point-of-sale terminal will be later analyzed for marketing purposes.
In order to build up its client base, Espresso room will use banners and fliers, utilize customer referrals and cross-promotions with other businesses in the community. At the same time, customer retention programs will be used to make sure the customers are coming back and spending more at the coffee bar.
Sales Forecast
Food costs are assumed at 25% for coffee beverages and 50% for retail beans and pastries. Proximity to the college campus will dictate certain sales seasonality with revenues slightly decreasing during the school vacation periods The table below outlines our projected sales forecast for the next three years.
Management Summary
Espresso room is majority-owned by Dishit Sugand and Juhie Sugand. Ms. Juhie holds a Bachelor’s Degree in Business Administration from The University of Victoria, New Zealand.
She’s worked for several years as an independent business consultant. Previously, she owned the ABC Travel Agency, which she profitably sold four years ago. Ms. Juhie has extensive business contacts in Mumbai that he will leverage to help his new venture succeed. Mr. Dishit has a Bachelor’s Degree in Hospitality Management from Ecole Hoteliere Lavsa. However, because of the investors’ other commitments they will not be involved into the daily management decisions at Espresso room. A professional manager (? 1,890,000. 00/yr) will be hired who will oversee all the coffee bar operations. Two full-time baristas (? ,350,000. 00 /yr each) will be in charge of coffee preparation. Four more part-time employees will be hired to fulfill the staffing needs. In the second and third year of operation one more part-time employee will be hired to handle the increased sales volume.
Management Team
A full-time manager will be hired to oversee the daily operations at Espresso room. The candidate has had three years of managerial experience. This person’s responsibilities will include managing the staff, ordering inventory, dealing with suppliers, developing a marketing strategy and perform other daily managerial duties.
We believe that our candidate has the right experience for this role. A profit-sharing arrangement for the manager may be considered based on the first year operational results.
Management Team Gaps
Despite the owners’ and manager’s experience in the definitely industry, the company will retain the consulting services of ABC Espresso Services, the consultants who have helped to develop the business idea for Espresso room. This company has over twenty years of experience in the retail coffee industry and has successfully opened dozens of coffee bars across Mumbai.
Consultants will be primarily used for market research, customer satisfaction surveys and to provide additional input into the evaluation of the new business opportunities.
Financial Plan
Espresso room will capitalize on the strong demand for high-quality gourmet coffee. The owners have provided the company with sufficient start-up capital. With successful management aimed at establishing and growing a loyal customer base, the company will see its net worth doubling in two years. Espresso room will maintain a healthy 65% gross margin, which combined with reasonable operating expenses, will provide enough cash to finance further growth.
