Coffee Shop Business Plan

SAMPLE BUSINESS PLAN FOR ABC COFFEE SHOP LIMITED 2009-11

Business Plan for ABC Coffee Shop Limited

2009 - 2011

Copyright Teneric Limited – all rights reserved.


TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

BUSINESS MISSION 4

COMPANY OWNERSHIP/ LOCATION 4

EXTERNAL ANALYSIS 5

The economy & business environment 5

The market place 5

Target Customers/ market dynamics 6

Competition 7

SWOT ANALYSIS 8

Strengths 8

Weaknesses 8

Opportunities 8

Threats 8

OBJECTIVES 9

Objective 1: To develop coffee shop certified to serve diners 9

Objective 2: Recruit and train staff 9

Objective 3: Develop menus 9

Objective 5 : Marketing plan 10

KEY ACTIONS PLANNED FOR THE NEXT 12 MONTHS 10

SALES AND COST SUMMARY 11

MANAGEMENT TEAM/ HR 12



EXECUTIVE SUMMARY

Summary

ABC Limited is a new company who are planning to open a new coffee shop in the centre of a local village. ABC Limited is founded by three entrepreneurs who have 18 years coffee shop experience between them.

The market and business

The main market sectors ABC will penetrate are couples between the ages of 25 to 55 and business people in the local area and within a radius of 10 miles. We wish to become a recognised national name in the next year but this is our starting point.

ABC will concentrate on bringing as much local produce from the local area into the coffee shop and link the menus to the requirements of the target market.

Core product offerings

The coffee shop will be a “light bite” casual dining establishment offering real Italian coffee and Italian light bites:

Lunchtime menu for business people during the week Full range of in demand coffees Special options each day

Revenues and profitability

Revenues forecasting for the first year of operation are £491,000 with this increasing by 8-9% for the subsequent two years. Net profits are forecast to be 31% before the salaries of the directors and before tax and interest.

Management team

ABC limited is a new company set up and run by Mr Jones, Mrs Smith and Mr Brown who have 18 years experience in the coffee shop business. The premises have been purchased via a mortgage and the owners will invest £60,000 to purchase initial stock and for start-up costs.



BUSINESS MISSION

ABC's mission is to become a leading well known casual dining coffee shop in the local area and be first choice for couples for late breakfasts and afternoon snacks

COMPANY OWNERSHIP/ LOCATION

ABC Limited started trading in 2009 and is jointly owned by Mr Jones, Mrs Smith and Mr Brown and is trading as a limited company.

ABC Limited are based at their premises at :

12 Any StreetAny TownAnyshireAB12 99XYUK

Telephone 01343 445600



EXTERNAL ANALYSIS

The economy & business environment

The UK economy is estimated in our main scenario to show modest average GDP growth of around 1% in 2010, picking up gradually to around 2.5% in 2011.

Consumer spending fell by less than GDP in 2009 due to support from low interest rates, the temporary VAT cut, a recovery in house prices and a lower than expected rise in unemployment. Looking forward, however, we expect consumer spending to lag behind GDP growth in the recovery phase of the cycle as monetary and fiscal policy tighten and earnings growth remains subdued.

Our analysis indicates that the sharp rise in the headline household savings ratio during 2009 was largely driven by special factors, rather than indicating that necessary adjustments in household balance sheets were already well advanced.

Given these considerations, we expect relatively modest real consumer spending growth of only around 0.75% in 2010 and 2% in 2011 in our main scenario.

The main drivers of growth in 2010 are expected to be exports and restocking. We should also see a gradual upturn in business investment growth in 2011.

Bank lending constraints could act as a drag on business investment and employment growth in the medium term. Our analysis suggests that this effect applies particularly to small and medium-sized enterprises that lack other ready sources of funding.

Public spending growth will remain modestly positive in 2010, but will need to be cut back sharply in the medium term to bring under control an unsustainably large budget deficit. We estimate that additional tax rises or real spending cuts of around £20 billion, over and above current plans, will be needed to eliminate the structural current budget deficit by the end of the next Parliament.

This fiscal squeeze will act as a drag on medium-term growth but should help to keep interest rates relatively low. Although inflation has spiked up in the short term, we expect it to fall back towards target over the next year given continued subdued earnings growth.

This should allow the Bank of England to keep base rates low during 2010, although they are projected to rise to around 2.5% by the end of 2011 in our main scenario.

Risks around growth in our main scenario are more balanced than a year ago, but are still somewhat weighted to the downside. We therefore recommend that businesses should stress test their plans and valuations against an alternative ‘double dip’ scenario. But an upside scenario where growth rebounds rapidly to above trend rates can also not be ruled out.

Source: PWC Economic report



External Research

UK Coffee shop market still growing despite recession

According to Allegra, there are around 11,000 coffee outlets in the UK, of which 4,158 (at the end of 2009) are branded (e.g. Starbucks, Costa, Caffe Nero). The branded coffee shops have a turnover of £1.63 billion. Revenues in the segment rose by 6.2% in 2009, compared with 12.6% growth in 2008. The net number of new outlets rose by 258 in 2009, a 6.6% increase. So you can see that volume growth (as measured by new outlets) was a key driver in the small rise in market sales.

Like-for-like sales (a comparable way of measuring sales for outlets that were open in both 2008 and 2009) were broadly static. But that statistic hides a disparity between the best-performing chains (where LFL revenues grow by between 1-2%) and the rest, where LFL sales declined.

Might we have expected coffee market revenues to have declined during 2009? After all, GDP fell by almost 5% in 2009, partly due to much weaker consumer (and retail) spending? The answer is that UK consumers did not abandon their coffee treats in 2009. They continued to visit almost as frequently as in 2008, but preferred to “trade down” to lower-price items or take advantage of greater price promotions.

Some commentators in the media have found the resilience of the coffee shop market to be a surprise during the recession. Surely, they argue, a trip to Starbucks or Costa Coffee is a discretionary spend (perhaps even a luxury) that cash-strapped consumers can do without?

However, Allegra’s detailed research into customer attitudes reveals a significant change in customer behaviour in recent years. Cafe or coffee shop culture is now so entrenched in the UK that consumers are reluctant to cut back on what many now consider to be a necessity, or day-to-day staple. The daily coffee fix is something that customers are unlikely to give up, even if some of them have become more price-conscious.

Allegra found that the average spend by a visitor to a branded coffee shop fell slightly in 2009, from £3.59 in 2008 to £3.50. Partly this was due to a reduction in the proportion of customers who bought food with their coffee. It also reflected greater price competition in the market. For example, Starbucks lowered its UK prices below the £2 level for the first time in its history in 2009.

Source: http://tutor2u.net/blog/index.php/business-studies/comments/branded-coffee-shops-prove-resilient-to-the-uk-recession/

LONDON - Coffee chains are getting tough in the fight for custom, but is it the right strategy?

Over the past few months there have been clear signs that the breakneck speed of growth of the coffee shop market may be about to drop.

This flattening out can largely be put down to the recession and saturation in urban locations. Data analyst Allegra Strategies claims the coffee market will cope reasonably well with the current recession. However, it also predicts that outlet openings will slow from its current level of 12.6% annual growth to 7.7% over 2009. The downturn looks set to effect another change in the sector. Traditionally, it has shunned advertising, but to sustain profits and footfall in the current market, more aggressive tactics are coming to the fore.


http://tutor2u.net/blog/index.php/business-studies/comments/branded-coffee-shops-prove-resilient-to-the-uk-recession/


A decade ago, there were only about 500 branded coffee outlets in the entire country. By the end of 2008, this number had rocketed to about 3700. As well as the big three chains - Starbucks, Costa Coffee and Caffe Nero - a host of others have appeared on the high street, including Caffe Ritazza, BB's and Coffee Republic. According to Allegra, the average number of coffees sold per week at branded outlets has tripled from about 3m in 2000 to 9.1m in 2008.

Jim Slater, marketing director at Costa, points to a 2.2% growth in its like-for-like annual sales as evidence that the sector is still performing well. Costa plans to open 100 further outlets in 2009, and Slater says the current campaign is designed to persuade customers to 'walk that extra 50 yards past Starbucks to a Costa'.

Source: Mar 2009 http://www.brandrepublic.com/InDepth/Analysis/891049/Coffee-marketing-gets-dirty/

The coffee and sandwich shop market continues to grow, due principally to the major operators of branded chains continually opening new outlets. However, the rise in the number of branded outlets and the revenues of such outlets is at the gradual expense of the many small independents and minor multiples, particularly as the major players extend their reach beyond London and the South East into popular historic, university, holiday and other towns. The groups are also operating concessions within other retailers' outlets (such as department stores, bookshops and garden centres), at travel-related locations (e.g. railway stations and airports) and at leisure parks (such as Chessington World of Adventures). This expansion has thus far offset the threat of saturation in London. Growth for the branded operators is assisted by the fact that outlets outside London are likely to reach profitability more quickly than those in the original high-rental prime Central London locations.

The gradual increase in the proportion of working women within the population has also assisted the growth in the market, with many women preferring to use sandwich or coffee shops rather than having longer and more expensive meals in restaurants or visiting more male-dominated public houses (pubs).

In recent years, growth in the number of outlets for the leading operators of branded coffee shops has been in the region of 15% per annum. However, competition from coffee shops located within grocery multiples, department stores, Marks & Spencer and petrol forecourt shops continues to rise.

The leading operators of branded sandwich shops have gained market share over recent years, but still are estimated to account for only around 5% to 10% of the total number of outlets principally selling sandwiches and other bread-based snacks in the UK. The growth rate in terms of the number of outlets among the major branded operators is predicted to slow in 2007, due in part to the demise of Benjys.

Despite strong competition from each other and from other retailers, the leading branded coffee shop operators are predicted to grow at 12% in the immediate future in terms of outlet numbers. However, this rate is forecast to slow to 7.9% by 2011. The growth of the leading branded sandwich shop operators in terms of outlet numbers is initially predicted to be 6.5%, before falling to 5.4% by 2011.These growth rates are estimated to be higher than the rise in the total number of all coffee and sandwich shops, leading to the branded outlets gaining market share.

Source: reportlinker



Consumers spent £13.25bn on sit-down meals in restaurants in 2005, a market growth of 19% since 2001. Although this figure excludes any spending on alcoholic drinks to accompany meals, it represents around a third of the total consumer catering market (which also includes takeaway food and canteens).

Choice is characteristically broad in the UK, owing to the willingness of the British to adapt to new styles of eating and drinking from all over the world. Portuguese chicken, Japanese sushi and Spanish tapas have joined the more traditional curry houses and French or Italian restaurants found in most British towns. However, the most traditional British venue — the local pub or hotel — still has the highest sector share of formal, sit-down restaurant meals (excluding fast food such as burgers and fried chicken), while other distinct concepts include pizza, curry and roadside restaurants.

Ownership of most restaurants is still fragmented across individuals and families, and there is growing consumer distaste for the more obvious `chains'. However, the market does boast some successful multiples, led by the US-based fast-food giants (McDonald's, Burger King and Yum! Brands — owner of Pizza Hut and KFC), and some outstanding UK groups, including Whitbread Group (Brewers Fayre pub-restaurants), The Restaurant Group (Frankie & Benny's), Gondola Group (Pizza Express) and Nando's. Private equity has been heavily invested in restaurant groups in this decade.

The latest consumer research for Key Note shows that Pizza Hut is the most widely used non-fast-food restaurant chain (by 32% of adults), but most of the branded chains have been losing customers. In July 2006, the international owner of Pizza Hut, Yum! Brands Inc, announced it is buying back the 50% share in the UK business held by Whitbread.

The market will continue to grow even if the economy slows down later in the decade. This is because eating out has become a major element in the lifestyles of younger generations, and the older `baby boomer' generation has been brought up with an expectation of eating out regularly. Problems and challenges for restaurants in the future will include the demand for healthier eating, labour shortages and a torrent of red tape from both UK and EU governments.

Source: Key Note

NB: There is more research data available at www.marketresearch.com

There seems to be saturation for larger brands all offering a similar concept.

Ours will be different and fills a gap in the local economy.

The market place

Research shows that there are 25,000 couples aged between 25 and 55 earning over £45,000 per year between them in the catchment area we are targeting.

We are also targeting passing trade, as the village is a tourist hot spot in the summer months. Copyright Teneric Limited – all rights reserved.

http://www.marketresearch.com/


Target Customers/ market dynamics

Customer group 1

End customer is Passing tourist trade

End customer need A quick stop to have a bite to eat and perfect coffee Excellent service and value for money

Products targeted to this group Selection of lunchtime and afternoon menus

Customer group 2

End customer is couples between the ages of 25 to 55

End customer need Excellent food and coffee Quick place to relax whilst shopping and catching up on the news A place for late breakfast and afternoon snacks

Products targeted to this group Selection of lunchtime and afternoon menus Special weekend menus



COMPETITION

Competitor summary

There are many coffee shops in existence today.

We aim to flourish on reputation and the use of local produce to produce authentic Italian cuisine.

In the immediate area there is no coffee shop that is catering for a casual dining ambience and food quality as ours.

In the next village there is an established outlet but there is a need for a new and exciting venture.



SWOT ANALYSIS

Our strengths and weaknesses are shown relative to our competitors. Strengths are shown if they are better than the competitors. Weaknesses are weaker than the competition.

Strengths

1. 3 coffee shop professionals with 18 years experience2. Excellent location for presence of the actual establishment3. Local links with suppliers4. Start-up funds of £37,000 in additional to the building

Weaknesses

1. No presence2. No credibility with target audience

Opportunities

1. To be the first casual dining café in the village2. The vast catchment area and target audience

Threats

1. More similar coffee shops open due to our success



OBJECTIVES

Objective 1: To develop coffee shop certified to serve diners

We will need to fit out the kitchens and dining area according to our design for our light bite coffee shop.

We will need to fit out the kitchen and receive health and safety certificates as well as the correct licensing certificates and all of these are in hand.

The dining area caters for 36 people but there is a high demand for take-outs.

The location is already purchased and has been used as an existing coffee shop.

The total fitting is estimated to cost £20,000 as we will use contractors who we know and will charge much less and produce an excellent results.

Operations:

The coffee shop will be open from 8am to 6pm 7 days per week

Objective 2: Recruit and train staff

We will recruit 4 waiting staff locally to work shifts as well as a manager

We will recruit three weeks before opening so there is enough time for training everyone and finalising the menus.

Objective 3: Develop menus

We want to develop at least 4 weeks in advance so that we know what food we need to order to receive to make up on a daily basis and to develop relationships with our suppliers.

We will develop standard menu with daily specials.



Objective 4: Launch the venue

The opening is all too important for every coffee shop.

We will have the launch event on September 15 th in during the day.

We will invite local press and owners of the local shops. We will offer free coffees when you purchase a take out meal and run a competition with the local newspapers for free coffee for a year

Objective 5 : Marketing plan

In addition to the opening, we need to ensure we build a presence fast. We will therefore put into place a comprehensive marketing plan to commence 2 weeks before launch. This will develop interest and communicate that we will be open for business:

Local/ free press – Teaser adverts 2 weeks before opening moving to stronger advertising closer to launch and including the newspaper competitions to be the first to eat in our coffee shop.

Location – Large board advertising the impending opening

Local magazines – There are three local glossy magazines we will take advertising and have the editor write a feature about the new coffee shop.

Tourist Board – Ensure we are listed in everything that the tourist board communicates in our area.

We have allowed £10,000 for the opening, competitions and initial marketing plan

Key actions planned for the next 12 months

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Develop coffee shopRecruit/ train staffDevelop menusMarketing planLaunch night



Strategies Cost Responsible Completion date

1. Develop coffee shop2. Recruit/ train staff3. Develop/ print menus4. Marketing plan/ launch night

£20,000£ 5,000£ 2,000£10,000

Mr JonesMr BrownMr JonesMr Smith

AugSepSepSep

Management Team/ HR

Mr smith is CEO and PR spokesperson/ media developer

Mr Brown is operations officer

Mrs Jones is Marketing Officer

Full financial statements



Year 1 sales summary

Month 0 month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 TotalRevenues

Days open in month 26 26 26 26 26 26 26 26 26 26 26 26

Morning and lunch

Diners 250 250 250 250 250 250 250 250 250 250 250 250Food price per diner 3 3 3 3 3 3 3 3 3 3 3 3Drink price per diner 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

Total lunch time 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 29,250 351,000

Afternoon

Diners 100 100 100 100 100 100 100 100 100 100 100 100Food price per diner 3 3 3 3 3 3 3 3 3 3 3 3Drink price per diner 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

Total afternoon 11,700 11,700 11,700 11,700 11,700 11,700 11,700 11,700 11,700 11,700 11,700 11,700 140,400

Total revenues 40,950 40,950 40,950 40,950 40,950 40,950 40,950 40,950 40,950 40,950 40,950 40,950 491,400



Year 1 cost and profit summary

Month 0 month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 Total

Costs incurred

Direct costFood/ drink 45% of sale 18,428 18,428 18,428 18,428 18,428 18,428 18,428 18,428 18,428 18,428 18,428 18,428 221,130 20% Credit card fees 3% 246 246 246 246 246 246 246 246 246 246 246 246 2,948 Start-up costs 37,000 -

- Staff 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 66,000

- -

Rates/ elect etc 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250 27,000 Insurance 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 15,000 Marketing 417 417 417 417 417 417 417 417 417 417 417 417 5,000 Accountancy/ legal 146 146 146 146 146 146 146 146 146 146 146 146 1,750

Total costs 37,000 28,236 28,236 28,236 28,236 28,236 28,236 28,236 28,236 28,236 28,236 28,236 28,236 338,828

Net profit - 37,000 12,714 12,714 12,714 12,714 12,714 12,714 12,714 12,714 12,714 12,714 12,714 12,714 152,572 Amortisation 625 625 625 625 625 625 625 625 625 625 625 625 7,500 Tax 2,543 2,543 2,543 2,543 2,543 2,543 2,543 2,543 2,543 2,543 2,543 2,543 30,514 Dividends 0 0 0 0 0 0 0 0 0 -

Net profit after tax - 37,000 9,546 9,546 9,546 9,546 9,546 9,546 9,546 9,546 9,546 9,546 9,546 9,546 114,557



Year 1 cashflow

Month 0 month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 TotalCashflow

Opening balance - 3,000 5,441 7,882 18,513 19,144 19,775 25,406 26,037 26,668 32,299 32,930 43,561 - -

Directors loans 60,000 - - 60,000 Mortgage replayments - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 2,083 - 25,000 Loan repayments - - - - 10,000 - 10,000 - 5,000 - 10,000 - 10,000 - 5,000 - 10,000 - - - 60,000 20% credit card income + 8 wks - - 8,190 8,190 8,190 8,190 8,190 8,190 8,190 8,190 8,190 8,190 81,900 80% cash receipts 32,760 32,760 32,760 32,760 32,760 32,760 32,760 32,760 32,760 32,760 32,760 32,760 393,120 Stock purchase - 20,000 - 20,000 Costs - instant - 37,000 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 28,236 - 375,828

Tax - next year

Dividends instant - - - - - - - - - - -

Closing balance 3,000 5,441 7,882 18,513 19,144 19,775 25,406 26,037 26,668 32,299 32,930 43,561 54,192 54,192



Year 1 Balance Sheet

Month 0 month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12Balance sheet

Building 250000 250000 250000 250000 250000 250000 250000 250000 250000 250000 250000 250000 250000Cuml amortisation 625 1250 1875 2500 3125 3750 4375 5000 5625 6250 6875 7500Net fixed assets 250000 249375 248750 248125 247500 246875 246250 245625 245000 244375 243750 243125 242500

Cash 3,000 5,441 7,882 18,513 19,144 19,775 25,406 26,037 26,668 32,299 32,930 43,561 54,192 Stock 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Debtors 8,190 16,380 16,380 16,380 16,380 16,380 16,380 16,380 16,380 16,380 16,380 16,380 Current assets 23,000 33,631 44,262 54,893 55,524 56,155 61,786 62,417 63,048 68,679 69,310 79,941 90,572

Total assets 273,000 283,006 293,012 303,018 303,024 303,030 308,036 308,042 308,048 313,054 313,060 323,066 333,072

Mortgage -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 -250,000 Less repayments 2,083 4,167 6,250 8,333 10,417 12,500 14,583 16,667 18,750 20,833 22,917 25,000 Long term liabilities -250,000 -247,917 -245,833 -243,750 -241,667 -239,583 -237,500 -235,417 -233,333 -231,250 -229,167 -227,083 -225,000

Tax creditor - 2,543 - 5,086 - 7,629 - 10,171 - 12,714 - 15,257 - 17,800 - 20,343 - 22,886 - 25,429 - 27,971 - 30,514

Total liabilities -250,000 -250,460 -250,919 -251,379 -251,838 -252,298 -252,757 -253,217 -253,676 -254,136 -254,595 -255,055 -255,514

Assets - liabilities 23,000 32,546 42,093 51,639 51,186 50,732 55,279 54,825 54,372 58,918 58,464 68,011 77,557

Shareholders funds

P&L account - 37,000 - 27,454 - 17,907 - 8,361 1,186 10,732 20,279 29,825 39,372 48,918 58,464 68,011 77,557 Directors loans 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 repayments - - - - - 10,000 - 20,000 - 25,000 - 35,000 - 45,000 - 50,000 - 60,000 - 60,000 - 60,000 net loan 60,000 60,000 60,000 60,000 50,000 40,000 35,000 25,000 15,000 10,000 - - -

Total 23,000 32,546 42,093 51,639 51,186 50,732 55,279 54,825 54,372 58,918 58,464 68,011 77,557


Coffee Shop Business Plan

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