Http://. Ray Alwani Voilen Chu Kelli Dawson Tammy Hall Jill Johnson Carmen Yau OR NOT TO BREW? TO...

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Ray AlwaniVoilen Chu

Kelli DawsonTammy HallJill Johnson

Carmen Yau

OR NOT TO BREW?

TO BREW

AGENDA

THE WORLD OF COFFEEindustry overview

HOW TO SELL YOUR BEANSthe marketing plan

HOW TO MAKE A CUP OF COFFEEoperations and human resource analysis

THE PRICE OF COFFEEfinancial and sensitivity analysis

TO BREW OR NOT TO BREW?summary and recommendations

THE WORLD OF COFFEEAGENDA

Established in 1975

Partners

Charitable work

Royalty Income Fund

http://www.cthrc.ca/eng/images/fairmont07.jpg

SECOND CUP FRANCHISE TERMS

THE WORLD OF COFFEE

INDUSTRY OVERVIEW

• coffee consumption continues to grow

• wholesale and retail prices on the rise

• increased trend to younger drinkers

• increased media attention to potential health benefits

THE WORLD OF COFFEE

SASKATOON MARKET

• 3.5 percent projected real economic growth in Saskatoon in 2008

• downtown condominium expansion• construction of new office towers

THE WORLD OF COFFEE

Distribution of Saskatchewan's Employment Growth

Rest of SK

Regina

Saskatoon

LOCATION, LOCATION, LOCATION

• King George condos

THE WORLD OF COFFEE

HOW TO SELL YOUR BEANSTHE WORLD OF COFFEE

COMPETITION

STRONGFIELD’S COFFEE

HOW TO SELL YOUR BEANS

CUSTOMERS

• home drinkers• price-sensitive drinkers; don’t value specialty

coffee• non-price sensitive drinkers; coffee

connoisseurs

TARGET MARKET = NON-PRICE SENSITIVE COFFEE CONNOISSEURS


NON-PRICE SENSITIVE COFFEE CONNOISSEURS

• high disposable income• value convenience over price• value customization and variety in beverages


PRODUCTS & SERVICES

• premium blend coffee and blended coffee drinks

• focus on organic and free-trade coffees


PRODUCTS & SERVICES

• specialty teas and lattes


PRODUCTS & SERVICES

• fresh fruit smoothies and desert-style beverages


PRODUCTS & SERVICES

• friendly and efficient service in a clean and inviting atmosphere

HOW TO MAKE A CUP OF COFFEEHOW TO SELL YOUR BEANSTHE HUMAN RESOURCES PLAN

JOB ROLE

Barista

RESPONSIBILITIES

• address customer needs• prepare beverages • cleaning duties• follow cash handling procedures

SKILLS & REQUIREMENTS

• no previous work experience necessary• customer service oriented, friendly• communicate well with others• accurately communicate orders

$9.25 per hour (minimum wage in Saskatoon)$0.20 raise every year

HOW TO MAKE A CUP OF COFFEE

JOB ROLE

Supervisor

RESPONSIBILITIES

• address customer needs• prepare beverages • cleaning duties• follow cash handling procedures• opening and closing the store• reconcile daily cash receipts and bank deposit

SKILLS & REQUIREMENTS

$11.00 per hour$0.30 raise every year

THE HUMAN RESOURCES PLAN

• three months barista work experience • customer service oriented, friendly• communicate well with others• accurately communicate orders


JOB ROLE

Owner

RESPONSIBILITIES SKILLS & REQUIREMENTS

$25,000 each per year$1,250 benefits each per year


• address customer needs• prepare beverages• hire and train new employees• manage finances• opening and closing the store• reconcile daily cash receipts and bank

deposit• create and maintain employee work

schedule• ordering and purchasing inventory and

supplies• pay suppliers / franchise fees• compile information for the accountant

• customer service orientated, friendly

• communicate well with staff • accurately communicates orders• managerial abilities to organize

staff • knowledge and skills of franchise

regulations


STAFFING CONSIDERATIONS OVER THE PROJECTION PERIOD


• no seasonality

• staffing requirements consistent

• planned sales growth in revenue

• no supervisor in the first year


HIRING PROCESS


• print ad or on-line

• review resumes

• interview

• selection


TRAINING PROGRAMS


OWNERS3 week training program for new franchise owners

• Process and procedures• Knowledge of products,

finances, and profitability

NEW EMPLOYEESTrained by owners

• 8 hour training day• 3 shifts of shadowing an

experienced Barista


EMPLOYEE TURNOVER


• 2 times per year

• 6 to 8 employees on staff at any given time

• 12 to 16 workers throughout the year

• costs


HUMAN RESOURCE STRATEGY


• inexperienced employees

• minimum wage

• key traits


MANAGEMENT TEAM


• KEN – experience as a supervisor

• MARY – front-line experience


BUSINESS HOURS

THE OPERATIONS PLAN

Weekdays Saturday Sunday

6am – 9pm 6am – 5pm 6am – 3pm


DAILY ACTIVITIES

THE OPERATIONS PLAN

opening shiftTIMEhalf hour before opening

PERFORMED BYKen/Mary, or Supervisor

TASKSgrind coffee, start up coffee/espresso machines, receive food/merchandise delivery, place food in display case, set out milk/cream on tables


DAILY ACTIVITIES

THE OPERATIONS PLAN

TIMEthroughout the business day

PERFORMED BYowner / supervisor plus one Barista at all times

TASKStake orders, receive cash payments from customers, make customer orders, clean-up, restock inventory when low

day shift


DAILY ACTIVITIES

THE OPERATIONS PLAN

TIMEhalf hour before closing

PERFORMED BYKen/Mary, or Supervisor

TASKSrestock inventory for next morning, clean machine and shop, reconcile cash register, prepare bank deposit

closing shift


WEEKLY ACTIVITIES

• inventory count

• inventory from Second Cup

• order food

• other inventory

THE OPERATIONS PLAN


BI-MONTHLY ACTIVITIES

• updating staff schedules

• payroll

THE OPERATIONS PLAN


MONTHLY ACTIVITIES

• pay bills and suppliers

• prepare month-end statements

• compare month-end statements to budget

• identify budget variances

• analyze significant variances

• risk analysis

THE OPERATIONS PLAN


SEMI-ANNUAL & ANNUAL ACTIVITIES

SEMI-ANNUAL• hire and train new employees

ANNUAL• prepare year-end financial statements• Compare and analyze financials to budget• prepare forecast budget• income taxes

THE OPERATIONS PLAN


SUPPLIERS & SERVICE PROVIDERS

SECOND CUP PARENT COMPANY

SuppliesCoffee, Espresso Beans, Cups, Lids, Sleeves, Napkins, Second Cup

Merchandise, Syrups

RiskLow. Quality and delivery of products is ensured. Biggest risk is

fluctuating price of coffee beans

Mitigating FactorA fixed price contract to ensure fix price for the year

THE OPERATIONS PLAN



CHRISTIE’S BAKERY

SuppliesFood and other bakery items

Risk #1: Cannot guarantee quality of foodMitigating Factor: Locally well-known and reputable establishment – known

for consistent high quality of fresh food and baked items

Risk #2: PriceMitigating Factor: Fixed price contract for the year, in return we will order a

minimum quantity from them per day

THE OPERATIONS PLAN



COSTCO

SuppliesCream, Milk, Stir-sticks, Sugar, Honey, Syrup, Bottled Drinks

Milk and Cream are Purchased weekly to ensure freshness

Other inventory will be purchased as items are running low

THE OPERATIONS PLAN



SASKATOON MAINTENANCE SERVICE EXPERTSMachine maintenance required for coffee and espresso machines

SASKATOON LAW GROUPFranchising of the business and other legal requirements

LOCAL ACCOUNTANTBookkeeping, financial statements, income tax returns

THE OPERATIONS PLAN


Cash: $10,000Accounts Receivable: noneInventory: Average turnover days of 30Accounts Payable: Average turnover days of 30

THE OPERATIONS PLAN

Capital Expenditures: $200,000

WORKING CAPITAL

CAPITAL BUDGET

DOOR

COUNTER

DISPLAY CASE

Washroom Stock Room

Pick Up Counter

FridgeA

A

B

C

C

C

Office

Cash Register

Sink

D

Sitting Counter

X

X

X

X

X

A = Espresso MachinesB = Chiller MachineC = Coffee MachinesD = DishwasherX = Counter ChairsE = Display shelves


BARISTA-PREPARED COFFEE AND DRINKS

Coffee beans 0.50Milk and creamer 0.30 Other (syrup, sugar, honey, etc.) 0.25Cups, lids, sleeves 0.10Total cost per unit 1.15

GROSS MARGIN: 183%

THE OPERATIONS PLAN

COST OF GOODS SOLD

Avg Cost per Unit ($)


OTHER

Pre-packaged coffee and drinks 2.10 7%Average food cost per unit 1.20 25%Merchandise 6.25 12%

THE OPERATIONS PLAN

COST OF GOODS SOLD

Avg Cost per Unit ($)

Gross Margin

HOW TO MAKE A CUP OF COFFEETHE OPERATIONS PLAN

OPERATING EXPENSES

Rent (1,000 sqft x $20 per sqft) $20,000Insurance $4,000Repairs and maintenance $5,000Telephones $1,200Utilities $9,600Accounting $5,000Miscellaneous $5,000

HOW TO MAKE A CUP OF COFFEETHE PRICE OF COFFEE

FINANCIAL STATEMENTS5-year projections

CASH FLOW ANALYSISbusiness feasibility

RISK ANALYSISsignificant risk factors

FINANCING PLANSdebt versus equity

TO BREW OR NOT TO BREW?THE PRICE OF COFFEE

significant risk factorsA DROP IN SELLING PRICE

• a 5 percent drop in selling price will reduce sustainable earnings by over 50 percent!

• a reduction of selling prices is not likely• an increase in sales prices has a significant positive

impact on earnings

TO BREW OR NOT TO BREW?

significant risk factorsA DROP IN SALES QUANTITY

• a 15 percent drop in sales quantity will result in nominal sustainable earnings

• superior location• considerable expansion in downtown core – both

residential and business capacity• growing population• a 15 percent increase in sales quantity will double

sustainable earnings


significant risk factorsA RISE IN LABOUR COSTS

• a 10 percent increase in minimum wage will cut sustainable earnings in half

• Saskatoon minimum wage is above national average (is it?)

• What else?


goalsTO ACHIEVE A TAKE-HOME SALARY OF $105,000 THROUGH SALARY AND DIVIDENDS

• consistent salary of $50,000 built in to projections• average dividends of $20,000 over 5-year term• both are subject to income tax


other considerationsCONSIDERATION 1

• X

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