Evaluation Of Business Plan For Reuben Hills

Market Analysis

Discuss about the Evaluation of Business Plan for Reuben Hills.

Reuben Hills has been determined to become one of the leading coffee shops situated in the heart of Sydney. A coffee shop is a place where people from different age groups come to distress themselves either to read a book or meet a close friend. The main target audience of Reuben Hills would be the young couples, students from the nearby universities to have a cup of coffee which is prepared from the best of the coffee beans. The coffee bar also compliments its target audience with brownies along with free books which their customers can read and enjoy the visit to the coffee bar (Ford, Bornstein, Pruitt & Siegel, 2007).

The main objective of Reuben Hills is to become one of the best – selling coffee shops in the area. Secondly, to maintain its gross profit by more than 60% and churn profits from the first month operation. The mission of Reuben Hills is to create a unique place where customers can come have a good time with their friends. The management head at Reuben Hills is to distress its customers in regards to friendly customer interaction, great ambience, providing best quality products & convenient location (Young, 2007). It shall be seen that, Reuben Hills will invest its profits in order to increase the satisfaction amongst the employees & have stable return for their shareholder.

Industry analysis: Coffee consumption has shown a rise of approximately 2.5% as compared to last decade. It has been witnessed that, retail of coffee is flourishing in Sydney. The local climate at Sydney helps the customers to have non – alcoholic beverages. Drinking coffee has become a status symbol & part of the lifestyle in Sydney (Smith, 2016).

Reuben Hills has focused mainly on the marketing activities in order to reach out to one of the largest audience’s i.e. college students followed by the faculty members, people working in offices & teenagers (Stutely, 2002). The following chart depicts the market segmentation of Reuben Hills:

(Source: Ingram, 2016)

The main target markets for Reuben Hills are those who want to sip a cup of coffee in a relaxed atmosphere. The segregation amongst customers can be made on the basis of age, occupation, location & their taste and preferences (Quora.com, 2016). Coffee bar has been referred  to as one of the favourite places for college students as they can meet their friends, read a book or study in some a beautiful atmosphere surrounded by the smell of the coffee beans.

Market Segmentation

It has been evaluated that, the current market trends towards the consumers in Sydney also plays an important role in the growth of the coffee industry. Some of the factors which lead to an increase in the opportunity of coffee bars are small indulgencies for something exotic & unique (McKeever, 2012).

The major competitors for Reuben Hills which have been witnessed in Sydney are Starbucks, Reuben Hills, Single origin roasters, Coffee Alchemy, Sample Coffee, Brewtown newton, Gumption and John Smith café. Reuben Hills has made its place in the heart of the customers by the best – selling coffee beverage, cozy home like atmosphere to sit and relax (Lau, 2005). It has attained competitive edge by serving the body and mind of the customers. This will have helped Reuben Hills to grow its market share. One of the main reasons why a customer comes back to a specific coffee shop is because of its tasty coffee, home like atmosphere and prompt customer service. Selling premium and rich coffee has helped Reuben Hills to build a strong clientele base for near future (Morris, Heyer & LaFlamme, n.d.).

Products: Reuben Hills offer its customers with the bestselling coffee beverage in its area. It shall be seen that, high quality coffee beans and products are utilised by the same. The store layout, menu cards & other activities are focused to maximise the sales of the beverage along with coffee other refreshments such as brewed coffee, tea, brownies, sandwiches & salads (Ingram, 2016).  The customers would be given a complimentary free book or a magazine to read it inside the coffee bar.

Product description: The main product offered by any coffee shop is espresso based coffee such as Latte, cappuccinos & mochas. The product will be prepared with either wholesome, soy & skimmed milk (Ghandour, 2014). The coffee beverages are prepared in the espresso machines by forcing hot water at a high pressure. These shots are then mixed with milk to make it the best – selling espresso.

Sales techniques: Approximately 2,500 flyers have been distributed in the neighbourhood areas such as shopping malls, office buildings, etc. before the grand opening of Reuben Hills (Fullen, 2005).

The main focus of any business model is to earn levels of profits, get new customers, retain the existing ones & get more customers who spend more and come back quite often. At Reuben Hills, the competitive edge has been attained by the following ways i.e. comfortable sofas and seating arrangements, dim lighting and relaxing music will help the customers to distress themselves from day to day arrangements (Ford, Bornstein, Pruitt & Siegel, 2007). Another tactic which is used by Reuben Hills is to speed up the customer service

Target Market Segmentation

Sale forecast for Reuben Hills is depicted as follows:

Sales forecast
	Year 1	Year 2	Year 3
Sales
Beverage	300,400	370,440	431,984
Coffee beans	90,600	97,260	100,000
Others (brownies, sandwiches, etc.)	193,000	174,700	174,656
Total Sales	584,000	642,400	706,640
Direct Cost of Sales (DCOS)
Beverage	90,600	97,260	100,000
Coffee beans	44,000	48,200	51,900
Others (brownies, sandwiches, pastries, etc)	69,800	79,380	95,424
Direct cost of sales subtotal	204,400	224,840	247,324

1. Financial Plan

Some of the start-up expenses to be borne by Reuben Hills have been listed as under:

• To attain license & permits along with various accounting services will amount to AUD 1,300
• Promotional expenses for the opening of the Reuben Hills would amount to AUD 3,500 along with printing of the flyers @ AUD 0.04 (Abrams, 2003)
• Fees for the consultant who would help to set the Reuben Hills would be AUD 3,000.
• Other petty expenses such as stationery items & utility deposits

Some of the start-up assets which have been attained by Reuben Hills as follows:

• Operating capital worth AUD 67,123 (inclusive of employee & own salaries)
• Inventory costs such as AUD 16,000 (which includes 12 different types of coffee beans; retail supplies such as cleaning material, paper napkins, trays, serving plates, spoons, glasses & coffee mugs)
• Total amount reserved for equipment to be used at Reuben Hills such as espresso machine, coffee maker, grinder, other service equipment’s such as microwave, refrigerator, dish washer, toaster and other miscellaneous expenses (Abrams, 2003).

There are two main ways from which Reuben Hills will procure its funds i.e. loans from bank & investments from its owners. It shall be seen that, the plan to operate coffee bar in Sydney has been completed within the desired budget. This marks the success of the business plan. It shall also be evaluated that, the coffee bar had started to churn profits from the first month of its operations.

There are certain assumptions which have been made by Reuben Hills which have been depicted as under:

General Assumptions
	1st year	2nd year	3rd year
Current interest rate	9.8%	9.8%	9.8%
Long term interest rate	10%	10%	10%
Tax rate	25%	25%	25%

Based upon the evaluation of Cash Flow for Reuben Hills the following cash position for the same has been witnessed.

(Source: Abrams, 2003)

As we look at the cash flow chart, it is seen that the company has maintained healthy cash flow which will help them to pay off its debt and use the funds in the best possible manner.

Cash Flow (AUD)
	1st year	2nd year	3rd year
Cash sales	584,000	642,000	706,640
Cash from operations	584,000	642,000	706,640
Sales Tax	0	0	0
Borrowings	0	0	0
Cash received	584,000	642,000	706,640
Expenditure
Cash Spent	130,000	153,800	170,144
Bill payments	322,465	378,715	405,945
Spending on operations	452,465	532,515	576,089
Current borrowings	3000	3000	3000
Long term liabilities	0	4885	4761
Purchase long term assets	0	1000	1500
Cash spent	455,465	541,400	585,350
Net cash flow	128,235	101,000	121,290

There are various types of risks when starting a coffee shop some of them have been discussed as under:

• Choice of an unsustainable location: Location plays an important role in success of any business model. The location of the coffee bar shall be in close proximity of its target audience. The coffee bar shall be easily located by the target group in all weather conditions. Renting a property on busy streets might look attractive but the rent for the same will be a major constraint. Therefore, it is not always a good idea to have a business location on such streets (Barrow, Barrow & Brown, 2008).
• Inefficient espresso workstation: A proper space shall be utilised by the baristas to carry out their high demand work in the best possible manner. It is an important task to ensure less movement in that particular area (Morris, Heyer & LaFlamme, n.d.).
• Breakdown and spoilt food: Coffee bars are known for its cooking and use of various equipment’s. The owners of the coffee bars shall be prepared for unexpected fail of the equipment (Daniels, 2002). For example, fire insurance is one of the main insurance which shall be catered to in any restaurant or coffee business. Failing refrigerators can also lead the perishable items to go waste.
• Food poisoning: Legal action can be taken in case a customer suffers from food poisoning from the meal provided by your business. Such types of costs are referred to as hard hitting for the café. Therefore, product liability insurance comes into place for such type of business model (Barrow, Barrow & Brown, 2008). While operating such businesses one should take care of proper hygiene and food handling practices.
• Fire damage: It shall be kept in mind that, in case of restaurant/ café business fire can occur from any of the electrical equipment’s which are used in the business. Fire insurance shall be done by the business owner to cover any type of fire damage during various events such as rain, hail storms, etc (Abrams, 2003).
• Injuries to customer: Injuries to customer in form of illness or damage to customer by spilling or falling due to wet floor are some common instances which occur while operating café businesses. In such cases, public liability has been referred to as a crucial factor in café businesses. Some of the costs which are covered under the same are medical expenses, legal fees and other compensation for damaged property (Cooper, McNeill, Floody & Cooper, 2005).

Recommendations & Conclusion

Some of the recommendations to Reuben Hills have been listed as follows. They are as under:

• Loyalty programs: Loyalty programs are a must for coffee shops. Loyalty program in coffee shops can be as simple as a free cup of coffee for a coffee lover. This will help to enhance the customer experience and he/she will cherish this moment always. Offering a free Wi-Fi connection refers to another example of loyalty program at the coffee shop.
• Promotional advertising: Use of various advertising & promotional activities together will help to enhance the shopping experience in a coffee shop. Free coupons in the local newspaper & magazines shall be used in order to make the presence felt by the target group.
• In house advertising: In house advertising refers to clear & visible store signage, people walking on the road, etc. Selection of the name of the coffee shop also plays an important role in enhancing the coffee experience.

References

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