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On
Coffee Shop
For
Shrirampur
By
Prerna Jani
ACKKNOWLEDGEMENT
I acknowledge my sincere thanks to the co-operation extended
by the college and all those who helped me in preparing and
presenting the report.
I take this opportunity of expressing my profound gratitude to
my guide Dr. Girish Kudale of N.M.D. college, Gondia whose
continuous support has been a constant source of motivation for
me.
I would like to express my deep sence of gratitude to our
executive director Prof. Girish Kudale for allowing me to carry
out this project work in this prestigious institution.
Prerna Jani
Table of Contents
Executive Summary
Business Opportunity
Product/Service Offering
Marketing Plan
Financial Plas Opportunity
Business Opportunity
Vision and Mission
Goals and Objectives
Nature of the Business
Market Analysis
Situational & SWOT Analysis
Table 1: SWOT analysis and strategy development
Industry Analysis
Competitor Analysis
Analysis of competitors
Analysis of competitors products and services
Elements of Success
Target Market
Competitive Advantage and Unique Selling Proposition
Marketing Plan
Marketing Objectives
Marketing Mix
Table 4: Value Propositions
5.3
Action Plan
5.4
Operations
Business Premises and Location
Plant and Equipment Requirements
3
Financial Plan
Start-Up Budget
Break-Even Analysis
Financial Analysis
Executive Summary
Business Opportunity
Hotel Harayali have entered into negotiations to purchase a caf business, called Malgudi
Swaad, because of its great location in the Shrirampur Shopping Centre with the highest
number of passing shoppers which is supported by a large and growing local population.
There are a limited number of cafs within the centre and with both Gauris and Lalithas
experience with having successfully operated and owned a number of cafes in Shrirampur
and overseas they will be able to increase their market share from 35% to 40% in 12 months.
The competitive advantages of the business are:
location
quality of food and service
knowledge and experience of the industry
available financial resources
Product/Service Offering
The main activity of the company is the operation of the Swaad Malgudi. Business activities
include purchasing, storing, preparing, selling and serving our products to our valued
customer. We expect to serve over 6,000 customers (dine in and take away) per month.
The Cafe is open from 8:00am to 5:00pm Monday to Saturday and from 8:00am until midday
on Sunday. The cafe comfortably seats 36 persons.
The mission of the business is to satisfy customers needs and wants for high quality coffee,
delicious nutritious meals and excellent service. Our main point of differentiation from other
cafes and coffee shops in the Centre is that one of the business owners is an National level
trained chef who will be able to produce fresh, light and healthy meals each day as well as
develop new menu items to meet the changing needs and tastes of people who care about
what they eat. The high quality coffee will target staff and shoppers in the Shopping Centre
who enjoy good coffee that simply offers good value for money at highly competitive prices
Marketing Plan
The objectives of the company are to:
maintain market share through the change of ownership then grow market share to
40%, and
generate a before tax net margin of 20%.
The business will achieve these objectives by:
retaining two key staff members of Malgudi Swaad to maintain continuity of customer
relationships during the changeover
upgrading signage to be more visually appealing
maintaining the existing price levels and controlling costs
undertaking more aggressive marketing and promotion.
Page 1
Financial Plan
Our projected performance is summarised below:
Turnover: Year 1 Rs.536,650
Year 2 Rs.580,000
Gross margin Rs.378,690 (71%)
Net profit (before tax) of Rs.109,869 in the first year, growing to Rs.131,175 in the second
year of operation.
The business is cash flow positive from the first month of operation
Break-Even is estimated at a monthly sales level of Rs.30,869
Return on Total Assets: 37.3%
Return on Equity: 51.2%
The purchase price of the business is Rs.170,000. Total start-up cost has been calculated at
Rs.2,09,810 and is to be funded by way of a Rs.104,905 bank loan and equity injection of
Rs.104,905. It is proposed that the loan be paid back over a two year period from cash flow.
Page 2
Business Opportunity
Business Opportunity
Purchase of an established Malgudi Swaad within the Hotel Harayalithat is part of a large,
well developed master planned community which is still growing, incorporating a regional
shopping centre, residential, retail and commercial development.
The business is ideally located for a cafe, being situated on the main marketl with a high
passing trade due to its close proximity and a number of well known retail fashion clothing
chains. There are a limited number of cafes within the centre and Malgudi Swaad has the
best location, with the highest number of passing shop.
Primary customers are shoppers and staff within the Shopping Centre who take a break from
their shopping or work and enjoy fine coffee or other beverages as well as for people wanting
a light, quick and healthy meal that provide a good alternative to the fast food options. The
success of the business is based on its excellent location, quality of management and staff,
great value for money coffee and meals and superior service.
Page 3
Page 4
Market Analysis
Industry Analysis
The market is a competitive market with franchised operators starting to emerge in the coffee
shop segment (also offering light meals), which will over time increase concentration in this
segment. While the level of competition is increasing, the shopping centre in which Malgudi
Swaad will be located has capped the number of cafs and coffee shops within the complex.
To this extent, there will be limited competition and it is anticipated that all cafs and coffee
shops within the complex will be quite profitable.
Key points about the caf and restaurant industry:
Greater concentration in higher than average household income areas
Sensitive to changes in real household disposable incomes
Trend towards singles, families and business people meeting and eating out
Growth with households increasing purchasing frequency and the amount spent in
each transaction in this area
The current general trend is for cafes and restaurants to concentrate on offering value for
money with an emphasis on family restaurants, as well as franchised opportunities. The
industry will continue to benefit from higher incomes and time constraints on some
households as well as lifestyle changes. This will include more dining out or take away food
consumption.
There are three key success factors in the caf industry that are essential for the business to
do well in order to be competitive. These factors are based on the positioning of the business
as well as its place and physical appearance:
Competitor Analysis
Our main competitors is Club Caf which they have strong brand recognition, with high
product quality and well-documented processes for how the business should be run which
comes from being a national franchise business. However, they have the operating
boundaries of the franchisor that doesnt give them the flexibility to change menu items so
easily. This flexibility is something Malgudi Swaad can take advantage of with having a chef
who can develop new menu items to meet the changing preferences of customer.
Our competitors have no history of discounting and whilst the number of cafs within the
centre is capped, pricing should remain very stable. The following tables outline an analysis of
the cafs competitors, their products and targeted customers.
Page 5
Size
National
franchise 20% market
share
Sales Mix
(Product/ Service)
Coffee, wine and
beers and other
beverages, light
meals, cakes and
desserts; liquor
licence
Years in
Business
2 years - since
the centre was
opened
Reputation Rating
(1-10)
8 - Franchise chain
has a sound
reputation
Malgudi Swaad will need to maintain current marketing activities and a high level of service
and product quality to ensure its competitiveness. It needs to have a clear market position to
target and promote the quality and value for money of products and services.
Page 6
Elements of Success
Target Market
There is substantial population growth in the area as residential development continues and
commercial development commences. The master planned community attracts a high socioeconomic demographic with high employment and higher than average per capita income.
Malgudi Swaad customers are the passing shoppers and shopping centre staff of all ages
who enjoy a fine coffee (dine-in, or take away) and a healthy, value-for-money meal. The
majority of the general public consulted in the shopping centre were families and young
singles. The cafe will make it particularly easy for a young family to enjoy a meal by providing
a range of childrens meals and activities. Our take away beverages will also appeal to this
group and the segments made up largely of singles between the ages of 18 40 who shop or
work within the shopping centre precinct. They tend to have moderate incomes with high
discretionary spending.
The majority of customers who purchase coffee from Malgudi Swaad are social drinkers,
followed by customers who want their daily fix or a pick me up. They are wanting a
convenient, friendly and relaxing environment to recharge their batteries or socialise over a
fine coffee, choice of beverages and quality fresh, light and healthy meals that provide an
alternative to fast food options. The market need being satisfied is based on convenience,
quality and value for the coffee drinkers as well the health conscious consumer who is
concerned about what they eat.
Page 7
Marketing Plan
Marketing Objectives
There are three key marketing objectives:
To achieve sales of Rs.536,650 for the first year and Rs.580,000 for the second year.
To achieve estimated 40% market share next 12 months.
To position the business as a convenient place to eat light and healthy meals
To be reviewed in 6 months.
Marketing Mix
PRODUCT
Healthy and light meals are the key point of differentiation for the business because the Caf
has the capabilities and flexibility to develop new menu lines to meet the changing needs and
tastes of customers, whereas the two franchise businesses in the centre must conform to the
requirements of the franchisor. While the other products, in particularly fine coffee, are not
unique they do offer excellent value for money that fill the price points between the high and
low ends of the other coffee and caf businesses in the centre.
The caf will provide the relaxed and friendly environment that our customers seek when
searching for a dine in meals, beverages and cakes and dessertsthat offers excellent value
for money, but do recognise that this is not unique as shown in table 4 below:
Benefits
Relax and take a break
Enjoyment & social connector
Refresh and relax
Health & well being
Importance
(1 to 10)
8
7
4
8
Unique?
Y/N
No
No
No
Yes
Cafe environment
Fine coffee
Beverages
Fresh & light meals
Cakes & desserts
No
PRICE
We propose to offer high quality food and service at a price comparative to our major
competitors we will meet the market on price to retain market share if we need to. Our
clientele have a medium to high disposable income and seek high quality products and good
service, pricing will reflect the value of our products and services.
The shopping centre has a captive market and given the limited number of cafs in the
centre, prices have not been discounted in the market. There is no intention to discount to buy
Page 8
market share as Malgudi Swaad currently holds the largest market share of approximately
35% and we intend to take it to 40%, whilst maintaining existing margins.
Page 9
Action Plan
In conjunction with Hotel Harayali Management we will be undertaking a range of promotions
when we take over the cafe promoting the new ownership of the caf. These promotions will
include offers of discounted meals and coffee, but they will only run for two weeks. We
estimate that this will be sufficient time to allow a smooth transition to ourselves as new
owners.
Word of mouth advertising is very important and the best advertising we will be providing is
the quality of our products and service. In this area will be training the staff in customer
service skills
When the proposed commercial development goes ahead, the businesses located there are
potential customers for a catering business. The marketing plan will be revisited at this time.
100,000
80,000
60,000
40,000
20,000
0
Sales Budget
QTR 1
QTR 2
QTR 3
QTR 4
132,950
147,100
117,400
139,200
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Page 11
Contract
or Agt
Yes/No
Current Status
Yes
Franchise
No
Shop Lease
Yes
Yes
Advertising Contracts
No
Intellectual Property
No
Distribution Rights
No
Purchase/Supply Contracts
No
Service Contracts
No
Loan Documentation
Yes
No
No
Informal agreements
Page 12
Risk Management
Table Risk assessment
Likelihood
Impact
Priority
Preventative Action
Fire loss
of
property/life
Change in
suppliers
terms
Food
poisoning
VL
VH
Supplier
unable to
supply
Major
dispute with
centre
owner
Loss of key
person
VL
Risk
Description
Contingency
Plans
Immediate
access to
personal
resources to
rebuild shop
and business
quickly whilst
waiting for
insurance
payments
Utilise
alternative
suppliers or
increase
working
capital (from
personal cash
reserves)
Develop a
complaint
handling
process.
Investigate
source of food
poisoning and
remediate
Purchase from
alternative
suppliers or
use suitable
substitute
products
Engage
lawyer for
advice
Short term
contract for
suitable
replacement
(until
permanent
staff can do
the job). Call
up insurance
policy
Page 13
Insurances
Table Listing of insurance policies
Type of
Insurance
Business
Package
Insurer and
Policy #
QBE
Annual
Premium
Rs. 1,400
Indemnity
Insurance
QBE
Rs. 500
Key Person
Insurance
AMP
Rs. 500
Workers
Compensation
WorkCover
Rs. 200
Commencement
Date
Insurances will be
arranged upon
execution of the
contract.
Insurances will be
arranged upon
execution of the
contract.
Insurances will be
arranged upon
execution of the
contract.
Insurances will be
arranged upon
execution of the
contract.
Expiry Date
The business package will include public liability, fire, theft, burglary and business interruption
insurance. The above is based on quotes obtained from our Insurance Broker. Insurances will
be finalised once the contract has been signed.
Brendan and Margaret have life insurance and income protection policies already in place.
Page 14
Organisational Chart
Owners/Managers
Team Leader 1
Team Leader 2
Team 1
Team 1
Staff at Malgudi Swaad will be organised into two teams. Team 1 will be headed by Gauri
will be responsible for customer service and administration. Lalithas will head Team 2 which
will be responsible for the food preparation and the kitchen.
Page 15
Position
Knowledge/Experience
Staff Member 1
Customer Service
Staff Member 2
Staff M
Customer Service
Customer
Page 16
Permanent
Part Time
Casual Staff
2
2
1
1
Contractors
Job Descriptions
Under review.
Employment Conditions
As per Hospitality Award.
Page 17
Page 18
Operations
Business Premises and Location
At present the only facility we will be using is the caf. It is ideally located within the shopping
centre to attract passing customers and is also relatively close to our main suppliers i.e.
bakery. The caf is fully fitted out and is fit for purpose.
There is no need for a separate operating location at this point in time. There is an opportunity
to roast coffee beans and manufacture the cafs own blends at a later date. If this occurs, it
may be necessary to acquire operating premises to implement the idea.
Number required
Small commercial
kitchen
Replace as necessary
36 chairs
10 tables
Replace as necessary
Signs
72 settings of
crockery and cutlery
1 of each
Replace within 6
months as part of
promotional strategy
Replace as necessary
Under warranty
Page 19
Stock or Inventory
All stock at this stage will be stored on site at the caf. Fresh produce such as vegetables
are purchased in vacuum sealed bags or cartons and meat in vacuum sealed packs. These
will be stored in a small commercial refrigerator. Other items such as coffee beans, canned
and packaged products will be kept in the storage cupboards.
Other perishables including cakes and cheese cakes will be kept in refrigerated display
cabinets and will be stored for a maximum of three days.
On average, we expect to turn stock over once per week.
Stock will be controlled using our stock control system, which is a module of the accounting
software package.
Page 20
Financial Plan
Tables attached:
Sales Forecast
Start-up Budget
Annual Profit Budget
Profit and Loss Statement (2 years projected)
Annual Cash Flow Budget
Balance Sheet (2 years projected)
Break-Even Analysis
Financial Analysis
Start-Up Budget
The start-up budget is estimated at Rs. 209,810 broken up into one off costs of Rs.187,300
and monthly expenses in advance of Rs. 22,510. Included in the one off costs is goodwill
valued at Rs.120,000 and plant and equipment of Rs. 50,000.
Page 21
Break-Even Analysis
The Break-Even point has been calculated at 4138 transactions at an average selling price of
Rs.7.46. This equates to a contribution margin of Rs.6.38 per transaction and a Break-even
sales point of Rs.30,869 per month. The projected level of sales for each month is well above
the Break-even level (approximately 30% above).
Break-Even Chart
Break -Even
$ Monthly Sales
60,000
50,000
40,000
30,000
20,000
10,000
0
1,655
2,483
3,310
4,138
4,966
5,793
6,621
Financial Analysis
The Return on Owners Equity calculated on the projected end of year financial performance
and position indicates a return on investment of 51.2%. Return on Total Assets is calculated
at 37.3%. Gross Profit Margin over the period is estimated at 71% with the Net profit Margin
estimated at 20.5%.
Page 22
The Current Ratio and the Quick Ratio (Acid Test) are both very high reflecting the fact that
the business has a very strong and positive cash flow. This is due to sales being
predominantly cash, whilst purchases are bought on largely on 30 day terms. Liquidity is
sound.
The business also enjoys a sound financial position with the Debt to Equity ratio calculated at
37.2% and Debt to Total Assets at 27.1%.
Assumptions
Average sale price Rs.7.46 per transaction
Average cost Rs.2.20 per transaction
Sales transactions range from 5900 per month to 7500 in peak period
Historical gross profit margin of 70% will hold.
Seasonal fluctuations Christmas and New Year are peak periods of sales activity (build up
from November, the after New Year slow to February)
The business operates on a cash basis for reporting and paying tax.
PAYG (withholding) is remitted monthly on the Instalment Activity Sheet (IAS), with GST
remitted quarterly in arrears on the Business Activity Statement (BAS).
Page 23
Page 24
Opportunity
Threat
Influence
(1-10)
ECONOMIC:
Yes
Yes
Yes
Yes
Yes
Geographic distribution
Yes
Level of education
Yes
TECHNOLOGY:
Innovations in the manufacturing
process
Technological developments (substitute
products)
SOCIAL/CULTURAL
Corporate social responsibility
Environmentally friendly green
products
Standard of living
Percentage of work to leisure time
Yes
Yes
Yes
Yes
POLITICAL/LEGAL:
Regulatory environment and legislation
Compliance with standards and codes
ENVIRONMENTAL
Climate Change & Carbon Trading
Eco-efficient manufacturing
PHYSICAL FACTORS:
Climatic conditions
Water restrictions
Yes
Infrastructure - transport,
communications and services
Yes
8
Page 25
Internal Environment
Strength
Weakness
Factor
(1-10)
Yes
STRATEGY
Competitive advantage - able to
differentiate
Key drivers of the business are known
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
STRUCTURE
Business structure maximise wealth
and minimise risk (e.g. sole trader,
company, partnership, trust)
Yes
Yes
Yes for
current level
of demand
Yes
Yes limited
capacity for
expansion
SYSTEMS
Information and management systems
(e.g. CRM)
Yes
Yes
Yes
Yes
Page 26
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
10
Yes
Yes
10
Yes
Yes
SHARE VALUES
FINANCES
OTHER FACTORS:
Nil
Rating: 1 = Low, 10 = High
Page 27