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Summary of the Report

Java Culture is on a mission to become a daily need for coffee shop addicts, a place to imagine about it when attempting to escape the pressures of everyday life, and just a nice place to meet friends or read a book, all in one. In response to the increased demand for high-quality gourmet coffee and exceptional service, Java Culture will make use of its proximity to the University of Oregon campus to build a core group of repeat customers. Java Culture will provide its customers with the greatest coffee in the area, as well as pastries and free books to read while they are there.

The business plans to open a 2,300-square-foot coffee shop near the University of Oregon campus. This site was insured by the owners with a three-year lease with an opportunity to renew. They also contributed $140,000 of the $170,000 in startup capital required. Bank of America will provide the remaining funds via commercial loans.

Sales are predicted to rise from $584,000 in fiscal 2001 to $706,000 in the company’s third year. Java Culture’s net profit will rise from $100,000 to $125,000 during the same time, as the company aspires to maintain a 65 percent gross profit margin and appropriate operational expenditures.

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The Goals

The following are Java Culture’s goals for the first year of operation:

The local food guide named you the “Best New Coffee Bar in the Area.”

Profits are generated during the first month of operations.

Maintain a gross margin of 65 percent.

Success Factors

The following are the keys to success:

  • Customers will enjoy a shop design that is both pleasing to the eye and designed for fast and efficient operations.
  • To guarantee that the best coffee preparation procedures are employed, employees must be trained.
  • Techniques for building a loyal customer base while simultaneously boosting sales of high-margin commodities such as espresso drinks.

Mission

Java Culture will go to great lengths to create a one-of-a-kind setting in which customers can socialize while enjoying the finest brewed coffee or espresso and pastries in town. We shall be in the business of helping our clients relieve everyday stress by giving peace of mind via an inviting atmosphere, convenient location, courteous customer service, and consistently high-quality items. While ensuring a steady return for its investors, Java Culture will reinvest its income to promote employee satisfaction.

Summary of the Business

At its 2,300-square-foot premium cafeteria near the University of Oregon campus, Java Culture, an Oregon limited partnership, provides coffee, other beverages, and snacks. Arthur Garfield and James Polk, who together hold more than 70% of Java Culture, are the company’s principal investors. The first loss for the corporation is estimated to be $ 27,680.

Business Ownership

Java Culture is a Limited Liability Corporation registered in the state of Oregon. Arthur Garfield has a 51 percent stake in the company. His relative James Polk, as well as Megan Flanigan and Todd Barkley, own Java Culture, LLC.

Summary of the Start-Up

The following items are included in the start-up costs:

  • A total of $1,300 was spent on legal expenses and accounting services in order to secure licenses and permits.
  • A total of $ 3,580 was spent on marketing sponsorship for the Java Culture Grand Opening and $ 3,580 on flyer printing (2,000 flyers at $ 0.04 per copy).
  • ABC Espresso Services received a $3,000 consulting fee to assist with the installation of the coffee bar.
  • A total premium of $ 2,400 covers general liability, workers’ compensation, and property damage.
  • Prepaid rental for one month was $ 1.76 per square foot, for a total of $ 4,400.
  • For $ 10,000, you may modify your space.
  • Office supplies ($ 500) and telephone and utility deposits ($ 2,500) are among the other startup expenditures.

The following items are included in the $142,320 start-up assets requirement:

  • Operating capital of $67,123, consisting of $23,900 in employee and owner salary for the first two months and $14,400 in cash reserves for the first three months (about $14,400 each month).
  • The following items are included in the $16,027 start-up inventory:
  • 6,000 dollars worth of coffee beans (12 standard brands and five decaffeinated brands)
  •  $7,900 – coffee filters, baked goods, salads, sandwiches, tea, and other drinks
  • $1,840 for retail goods (paper towels, coffee bags, cleaning materials, and so on).
  • 287 dollars for office supplies
  • $59,170 in equipment:
  • $6,000 for an espresso maker
  • $900 for a coffee maker
  • $200 for a coffee mill
  • $18,000 worth of food service equipment (microwaves, toasters, dishwashers, refrigerators, blenders, etc.)
  • $3,720 (bins, utensil rack, shelves, and food case)
  • Countertop, sink, ice machine, and other counter area equipment – $9,500
  • Plates, glasses, and flatware for the serving area – $3,000
  • $13,750 for retail equipment (cash register, security, ventilation, and signs).
  • $3,600 for office supplies (computer, fax/printer, phone, furniture, and filing cabinets).
  • Expenses not listed above – $500

Owner investments and bank loans are the company’s principal sources of funding. Two major stockholders, Arthur Garfield and James Polk, have donated $70,000 and $30,00 respectively. All other investors have contributed the remaining $40,000, bringing the total investment to $140,000. The remaining $30,000 came from two bank loans: a $10,000 one-year loan and a $20,000 long-term (five-year) loan for start-up expenses and assets. The two loans were secured by Bank of America. As a consequence, a total loss of $27,680 is predicted as a result of the start-up.

The startup assumptions are summarized in the accompanying graph and table.

Locations & Facilities of the Company

The Java Culture café is on the first floor of a business building in Eugene, Oregon, near the junction of West 13th Avenue and Patterson Street. The 2,500-square-meter unoccupied facility, which formerly housed a hair salon, has been leased for one year by the corporation. Java Culture may renew the lease for another three years at a set fee depending on the company’s financial status.

A 200-square-meter rear office and a 2,300-square-meter coffee bar with 15 tables, a kitchen, a storage space, and two restrooms are included in the floor design. The dining area takes up 1,260 square feet (or 55 percent of the total), the manufacturing area takes up 600 square feet (or 26 percent), and the customer service area takes up the remaining 440 square feet (19 percent).

This property is in a business park only a few minutes walk from the University of Oregon campus, on the junction of a major highway that links the busy downtown business park to the burgeoning South Eugene neighborhood. The espresso bar, kitchen, and storage area will only be modestly renovated since the commercial space already has the required water and electrical connections. The cafeteria’s open and clean interior design, combined with contemporary wooden decorations, emphasizes the high quality of the beverages and snacks supplied, as well as adapting to the house’s role as a multifunctional space where people can rest and enjoy a cup of coffee. Passers-by may sip beverages via transparent store windows, and illuminated exterior signage is intended to draw attention.

Products

Java Culture will provide the best coffee drinks in the area to its clients. This is accomplished by using high-quality ingredients and following the preparation instructions for the letter. The store’s design, menu items, and marketing efforts would all be oriented at increasing sales of higher-margin espresso beverages. The cafeteria also offers coffee, tea, and certain soft drinks in addition to espresso beverages. Cakes, mini salads, and sandwiches will be available to Java Culture’s patrons. Gourmet consumers who want to make their own coffee may purchase coffee beans from Java Culture.

Customers may read complimentary books and periodicals in the cafeteria to supplement their food options.

The Product

The espresso-based coffee beverages such as lattes, mocha, and cappuccino are included on the Java Culture coffee bar menu. Whole, skim, or soy milk is available in all espresso-based drinks. Each of these coffee beverages is made using espresso, which is made by pushing hot water under high pressure through ground coffee in an espresso machine. Espresso-based beverages are made by combining espresso shots with foamy milk and/or additional ingredients like chocolate, caramel, and so on. For such drinks, proper brewing processes are critical. A little difference in the volume of coffee in the shot, the size of the coffee particles, the temperature of the milk, and other factors may have a negative impact on the quality of the finished drink.

 Literature for Sales

2,000 flyers will be distributed in the local neighborhood, on the University campus, in malls, and in selected office buildings within two weeks after the inauguration of Java Culture. After that, free postcards promoting Java Culture will be created in order to increase the company’s visibility among clients.

Conclusion of the Market Research

In the United States, coffee consumption has been continuously rising, with gourmet coffee seeing the most significant growth. Coffee drinkers in the Pacific Northwest are some of the pickiest in the country. They want freshly brewed gourmet coffee beverages and demand top-notch service. Because of its open and inviting people and long rainy winter, Eugene, OR has always been a great place for coffee shops. By delivering good coffee in a nice ambiance near to the University of Oregon’s busy campus, Java Culture will seek to build a loyal client base.

Market Segmentation

Java Culture will target college students and professors, as well as workers who work near the cafeteria and finicky teenagers, with its marketing efforts. These are the client segments who are most likely to purchase gourmet coffee goods, according to our study. The closeness to the University of Oregon campus will give access to the target population since gourmet coffee consumption is universal across all economic levels and is mostly based on college education.

The graph and table below show the overall market potential for gourmet coffee consumers in Eugene, Oregon (in terms of number of customers).

Strategy for Targeting Market Segments

Java Culture caters to those who wish to enjoy a wonderful cup of coffee in a relaxing environment. Although our position near the university campus means that the bulk of our clientele is university students and teachers, the age range of our clients is diverse. According to our study, they are picky consumers who want better coffee. Many college students also find coffee shops to be a handy location to study or hang out since they may read or meet their classmates without having to pay a charge. This is a once-in-a-lifetime chance for us to cultivate a devoted consumer base.

Market Demands

Gourmet coffee’s present popularity is definitely inspired by American customers’ overall desire for higher quality. Coffee shops also benefit from traits such as a need for little pleasures as well as a desire for something more unique and distinctive.

Review of the Market

Over the previous decade, coffee consumption has increased at a consistent pace of 2.5 percent in the United States. Gourmet coffee accounted for around 33% (or $ 2.5 billion) of total coffee sales in 1994. The Pacific Northwest’s coffee retail industry is booming. The environment in the area, which has a long rainy season, is ideal for drinking hot soft drinks. At the same time, people go to cafés to get ice beverages during the hot, dry summers. In addition, coffee has become an integral element of life in the Pacific Northwest. Its sophisticated coffee aficionados want robust, well-prepared coffee beverages that they can enjoy in a relaxing setting.

Purchasing Patterns and Competition

Competition

According to Oregon Food Service Statistics, Eugene has 45 snack and non-alcoholic beverage bars (NAICS 722213) with $14.2 million in sales in 1997. (NAICS 72). For example, coffee beverages are served at the majority of Eugene’s limited- and full-service restaurants. Java Culture will face competition from other coffee shops on the University of Oregon’s campus. Among them are Starbucks, Cafe Roma, The UO Bookstore, and other coffee shops. Starbucks will likely be a major competitor, because of its strong financial position and well-established marketing and operating practices. Despite Starbuck’s dominance in the market, many consumers prefer smaller, independent shops that provide a welcoming ambiance and outstanding coffee at reasonable pricing. This form of competitiveness may be seen at Cafe Roma. This quarter, we estimate that Starbucks has a 35 percent market share, Cafe Roma has a 25% market share, The UO Bookstore has a 10% market share, and the rest is split among other businesses. Java Culture will promote itself as a one-of-a-kind coffee shop that not only serves the greatest coffee and pastries, but also provides a warm, friendly, and pleasant atmosphere that is lacking in established enterprises. We’ll pay close attention to the brains and bodies of customers who can help us grow our market share in this fiercely competitive industry.

Buying Habits  

Customers frequent coffee shops for a number of reasons, including excellent coffee, rapid service, and a pleasant ambiance. Despite the fact that, as previously stated, coffee consumption is stable across all income levels, Java Culture will maintain a competitive pricing point for its goods. We are certain that selling coffee while offering outstanding service in a nice setting will help us build a strong client base. 

Summary of the Strategy and its Implementation

The marketing approach for Java Culture will be focused on recruiting new consumers, maintaining current customers, and encouraging customers to spend more and return more often. Building a loyal client base is essential since it not only produces the bulk of revenue but also gives positive references.

 Competitive Advantage

Java Culture will portray itself as a one-of-a-kind coffee shop where clients can enjoy a cup of freshly brewed coffee while also resting in a pleasant environment. Customers will be able to rest from their daily stresses owing to Java Culture’s plush couches and chairs, muted lighting, and calming music, which will set it apart from its rivals.  To create a successful business plan, do a SWOT analysis of your organization. It’s easy with our free instruction and template. Find out how to do a SWOT analysis.

Sales Plan  

Sales transactions are handled by Java Culture baristas. At least two personnel take care of clients to speed up customer service, with one employee preparing the customer’s order and the other handling the sales process. All sales data captured by the computer-assisted point-of-sale terminal is analyzed for marketing purposes.  Java Culture will employ banners and pamphlets to increase its consumer base, as well as customer recommendations and cross-promotion with other local companies. Simultaneously, loyalty programs are in place to encourage consumers to return and spend more money in the cafeteria.

Sales Projection  

Food costs are intended to be 25% for coffee beverages and 50% for retail beans and pastries. Due to its closeness to the university campus, sales will be seasonal, with revenue reducing somewhat during school vacation times.  Our sales prediction for the next three years is shown in the chart and table below. 

Summary of the Management

Arthur Garfield and James Polk share a controlling stake in Java Culture. Mr. Garfield graduated from ZYX University with a Bachelor of Business Administration. He was an independent management consultant for numerous years. He previously owned and sold the ABC travel firm for a profit four years ago. Mr. Garfield has a large network of business connections in Oregon, which he will use to help his new company prosper. Polk earned a bachelor’s degree in psychology from XYZ State University. She worked as a manager at DEF Ristorante, a popular Italian restaurant in Portland, Oregon, for the last five years. Mr. Polk has continuously expanded revenue while maintaining operating expenses below average. 

 The investors, however, will not be involved in the day-to-day management decisions at Java Culture owing to their other commitments. To supervise all parts of the coffee business, a capable manager ($35,000/year) will be hired. Two full-time baristas ($25,000 a year each) will prepare the coffee. Four extra part-time workers will be hired to satisfy the increased staffing needs. Another part-time employee will be hired to help handle the increased sales volume in the second and third years of operation. 

Leadership Group 

Java Culture has appointed a full-time manager to supervise day-to-day operations. The applicant (whose identity has been changed to protect his present employer) has three years of management experience in the ultimate Oregon industry. Managing workers, ordering merchandise, interacting with suppliers, devising a marketing plan, and executing other day-to-day administrative chores are all part of this person’s job description. Our applicant, we feel, has the necessary experience for this post. A profit-sharing agreement for the management may be explored based on the first year’s operational performance. 

Management Team Disparities  

Despite the knowledge of the company’s founders and management in the field, ABC Espresso Services, the consultants who helped establish the Java Culture business model, will be retained. This company has over two decades of expertise in the retail coffee industry and has successfully opened dozens of coffee shops throughout the United States. Consultants’ main responsibilities will include market research, customer satisfaction surveys, and further input into the evaluation of new business opportunities.

Budgeting

The burgeoning demand for high-end gourmet coffee will be tapped by Java Culture. The owners have contributed to the company’s first funding. Because of competent management focused on building and increasing a loyal customer base, the company’s net worth will quadruple in two years. Java Culture will retain a solid 65 percent gross margin, which, when combined with low operating costs, will provide enough money to sustain future development.

Key Hypotheses

Cash Flows Expected

The firm will retain a good cash flow situation, as shown in the chart and table below, allowing timely debt payment and finances for future expansion.

Analysis of Break-Even

Java Culture’s break-even sales volume is roughly $ 31,300 per month, with average monthly fixed expenditures of $ 20,300 and an average margin of 65 percent in fiscal 2001. The firm is anticipated to create that number of sales right away, as will be shown later.

Profit and Loss Estimates

Expected sales of $584,000 in FY2001 translate to $254.00 per square foot, which is within industry norms for this kind of coffee shop. As it establishes itself in the local market, the company’s net profit grows from 17.06 percent in FY2001 to 17.63 percent in FY2003. The table below shows the projected Profit and Loss Statement for the years 2001-2003.

Balance Sheet Projections

Net assets are predicted to rise from about $ 212,000 at the end of fiscal 2001 to around $ 443,000 in fiscal 2003. The balance sheets for this time are summarized in the table below.

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Business Ratios

The company’s financial data are included in the table below. The industry average business metrics for specialty restaurants are shown in the last column (SIC 5812).

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