Java Coffee House: A Unique Concept In Coffee Shops

Vision

The current business plan is based on the development of coffee shop that will be located in the Perth. The cafe will comprise of 1700 square feet area under a newly constructed premises on rent with lease facilities that will be extendable up to five years (Brinckmann et al., 2015). Java Coffee House is named for the brown liquid coffee and stands out from the corporate shops based on their fast food concept.  

Vision, Mission and goals

Vision:

1. The vision of the “Java Coffee House” is to design a model of business which is franchise ready
2. The vision of the company is to increase their revenue by 10% in the second year of its operations or by 20% in the third year
3. The vision of “Java Coffee House” is to attain a desirable profit margin to continue its operations
4. To be cafe of choice for the customers by provide them with coffee of premium quality   

Mission:

The mission of Java Coffee house is to make its best effort in creating a unique place for their customers so that they can meet people under a comfortable and soothing environment and simultaneously enjoying the best-brewed coffee or espresso in the town. Java Coffee house will put maximum amount of effort in relieving their customer’s daily stress by providing with the ambience that will offer them peace of mind, friendly customer’s service and product of constant high quality (McKeever, 2016). Java will invest their profits in order to increase the strength of the employees satisfaction along with stable return to its owners.

Goals: 

Product and services: 

“Java Coffee Shop” will be primarily offering gourmet roasted coffee with several varieties such as Mocha, Carmelicious, White Mocha, Candy Latte, Brewed Coffee and Ice Cold Coffee. In addition to this, as a complementary the coffee will be hosting a smooth line with wild berry, strawberry, mango and peach (Schaper et al., 2014). To round out the straightforward menu there will be pastries that will be provided by “Java Coffee Shop” obtained from the outside supplier. These pastries will be freshly made and delivered regularly however, the offerings of pastries may differ due to seasonal changes but the primary line of complementary will include cookies, scones and rolls.

Business Organisation and Finance structure: 

The financial structure of “Java Coffee Shop” will consists of owners contribution of $50,000 and $25,000 will be obtained as a bank loan. The company will be 100% owned by the owners in the form of partnership forms of business. The structure of the cafe house will consist of 40 seating capacity (Weil et al., 2014). The site will comprise of 1600 square feet of leased space comprising of dining room, rest room and storage room in the back. In order to use the area as a restaurant, the store front will be appropriately plumbed and wired.

Mission

SWOT Analysis: 

Strengths	Weaknesses
a. Having the facility of large size ambience “Java Coffee House” will be the unique concept of coffee shop and it will be different from other coffee shop b. The business partners possess the first hand experience in commencing and organising a new business c. Another strength of coffee shop is the variety in their menu which will help in attracting the customers	a. The budget for the owners of coffee shop is restricted for the first year and it will be difficult in competing against the larger coffee shop that are already established b. Another weakness for the coffee shop is that it will not receive any form of backing from established sourced of franchise
Opportunities	Threats
a. Due to its unique blend of flavours and ambience the coffee house will provide better customers experience b. Java coffee shop will have the opportunity to target youth and customers in the age group of 40+ years c. The domestic coffee house market consist of more than $65 million so there is ample of opportunity for Java Coffee House to expand their base in the industry	a. Potential competitors such as Starbucks possess threat as they are well-established firms b. There are some coffee shops that are at the verge of getting sold and should another independent purchaser purchases those coffee shops, it can lead to significant amount of threat in to the business

Table 1: Table representing SWOT Analysis

Source (As Created by Author)

Premises, Plant and Equipment: 

The premises will be taken in rent under the five-year lease availability, which can be extended. A custom coffee bar is required to be build. The equipment for the coffee house will consist of two commercial coffee machines with pots and urns. The equipment will also consist of commercial blender, commercial brewer, loading coffee bins and barista syrups. Cold drinks dispenser, equipment for frothing, a refrigerator, microwave and utensils will sum up the plant, premises and equipment.

Information system and telecommunication: 

Java Coffee House will have a straightforward website, which will help in identifying the menu, which will be served by the company. Along with this, the information system will also have a calendar that will provide the details of sponsorship and events. On the communication side, the coffee house will provide links to their social media platform such as Facebook and Twitter.

Intellectual property, Licence and membership: 

Intellectual Property: “Java Coffee House” will protect its brand name by obtaining intellectual property copyright (Schaper et al., 2014). The intellectual property will help the company in covering their brand name so that it can act as source of product or services which is extremely valuable to the company.

Licence and Membership:

The Java Coffee House will be formed under the partnership of business with limited liability up to the value of capital contributed by the partners.

Goals and Milestone 

Immediate goals:

1. Ensuring that the customers in the community get the feeling of their home while making their visit in the cafe
2. Educating consumers concerning the range of flavour offered by the cafe house
3. Hiring employees and training them to offer better service to the customers visiting the cafe

Short-term goals:

1. Conducting aggressive advertising of organic and flavoured coffee beverages
2. Increasing the loyalty of the patrons visiting the coffee house
3. The coffee house has the intention of forming a partnership with other businesses with the intention of marketing and creating community vibe

Long-term goals:  

1. The long term goals of the Java Coffee House is to create a franchise that is ready for business
2. Having a goal of opening a second location

Marketing: 

The marketing strategy of Java Coffee House is to attract new customers, retaining the existing set of customers, enabling the customers to spend more by trying new flavours and inducing them to come back again. The coffee house will attract regular customers by providing them with the facilities of free Wi-Fi. Furthermore, even though the demographic group of customers could easily drive downtown but they prefer to unwind and relax in calm environment (Baker, 2014). To boost their marketing strategy the Java coffee house will be offering outstanding gourmet coffees and blends. This will be served by the enthusiastic and knowledgeable baristas under a warm and relaxed environment.  

Sales strategy: 

Java Coffee will be using the below stated methods of increasing their sales revenue which are as follows

1. The menus will emphasis on the most profitable products. The sales strategy is so designed that it will attract the intentions of the customers towards most profitable products
2. As warranted, Java Coffee House will increase its prices so that it can bolster their brand image. Prices form one of the communication tool to perceive the value of the product hence, if it set very low the consumers may assume that the beverages are of inferior quality
3. It is worth mentioning that excessive flavour inventory blocks the capital and valuable storage space. Therefore, the cafe will use 4 to 6 varieties along the sugar free products
4. An audit sales and inventory reports will be prepared to assess the ingredients waste arising out of incompetent preparation, returned drinks and consumption (Mobin & Dehghani, 2014).
5. The employees and sales team will be provided with customer service training in order influence the customer ordering process

Customer management and retention: 

Establishing a loyal set of customers is vital for every business as each customer will not only provide Java Coffee House with the guarantee of generating more number of sales but will also provide them with favourable referrals (Hollensen, 2015). To manage and retain their customers Java Coffee House will deliver the right message through right channel so that it can generate demand, which can be transformed into qualified leads. The coffee house will also employ sales team will encourage them to be active in their social channels. Furthermore, the coffee house will build relationships with the customers through sequence of letters, events and follow ups to define its services in points. To manage their customers Java Coffee House will acknowledge their feedback by keeping them informed of their post purchase doubts.

Goals

Pricing: 

Java Coffee Shop will be making the use of Contribution margin strategy of pricing. The cafe will be making the use of coupons and discounts since they are most valuable form of attracting customer demographic of regular coffee consumers (Solomon, 2014). Furthermore, the contribution margin pricing strategy will help in maximising the profit that will be derived from each product depending upon the price and variable cost.

Suitable business strategy: 

The suitable business strategy includes Promotion and Advertising strategy which is stated below;

Online advertising: Java Coffee House will be advertising constantly on the popular social media platforms such as Facebook and Twitter.

Web Site: The coffee house will create a simple web site to offer information concerning business, menus and links to the company existence on social media platforms.

Radio Advertising: During the initial six months of its operations and at the time of busy holiday shopping season the business will promote its product on local radio stations.

The Industry: 

The Australian coffee consumption industry has represented a steady growth over the years and gourmet coffee has the strongest growth in the market. Coffee drinkers in the Western Australia regions are considered to be most demanding customer base. According to the industry analysis it is understood that the customers favour well-brewed gourmet coffee drinks and demands of being served well (Porter & Heppelmann, 2014). The Australian coffee market comprises of approximately 20,000 stores having a combined annual revenue of around $15 billion. The major coffee house consist of international coffee, Sam coffee club and Starbucks. The coffee industry of Australia is concentrated with top fifty companies that occupy more than 60% of the market sales. Coffee shops can be considered as special eatery industry that also comprises of retail outlets that specializes on products such as donuts, yogurt and ice creams as well.

 

Figure 1: Figure illustrating industry analysis

Source (Porter & Heppelmann, 2014)

Target market:

Java Coffee House will be targeting primarily three groups of people that are living in the residing areas of direct market. The target set of customers generally prefer unique venues and usually avoid big chain (Ingram, 2014). Thus, they prefer their local neighbourhood and will extend a supporting hand unless the business warrants.

Java Coffee House will be catering to the needs of the people who aspires to get their regular cup of great tasting in a soothing environment. These customers usually vary in age group however, the business location close to the university campus states that most of clients will be collage students and faculty (Tzeng, 2016). This will provide the company with unique possibility of building a loyal base of clients.

Strengths

Market competition: 

Company Name	Size	Sales Mix (Product/ Service)	Strength	Weakness
Barista  Cafe	2,300 square feet café area	Provides a mixed range of espresso and special drinks	Smaller and Cozier atmosphere	The coffee shop does not have variety of other coffee brands
Raw coffee Bar	2000 square feet café area	The café provides breakfast items such as sandwiches with regular coffee	The café offers the facility of Wi-Fi	The ambience is old and not suitable for regular coffee drinkers
Star Coffee Club	4,300 square feet café bar	Offers the facilities of Music on weekends with light breakfast and espresso	It has musicians that performs on the stage and pulls crowed on weekends	Service is delayed and generally pulls crowed on weekends and normal business days have less visitors
Burnley Espresso	1200 square feet area under the retail shopping centre	Generally provides kitchen food and additional pastries for breakfast	It possess specialization in roasted products	Due to its small size it has less guest entertaining capacity

Influences of five forces:   

The five forces model for Java Coffee house is stated below

Threat of new entrant: Moderate

The threat of new coffee business entering the business is considered as moderate. The degree of saturation is moderately considered as high. New entrants may come into this industry however, their possibilities of being successful is relatively low to moderate (Dobbs, 2014).

Threat of substitute: Moderate to High

The number of substitute product for Java Coffee House is relatively high. Ranging from juices to tea and alcoholic along with non-alcoholic beverages there are possibilities of several substitutes in the market. Providing premium quality coffee and brand loyalty will help in reducing the threat to a certain extent.

Bargaining powers of buyers: Moderate to low

The bargaining power of the customers is considered as moderate to low. The size of individual purchase is medium hence single purchasers or consumers do not hold much influence (Dobbs, 2014).

Bargaining power of supplier: low to moderate

Suppliers can put forth low to moderate pressure on the Java Coffee Shop. The business in the forthcoming year will look to purchase materials from the farmers in order to lower the bargaining powers of the suppliers.

Competitive rivalry: Moderate to High

The degree of competition in the industry is moderate to high as there is prevalent monopolistic competition in the industry with large number of business competing to gain share in the market. However, with the premium quality products Java Coffee House will be able to provide competitive edge to its competitors.

Set-up Cost:

Start-up Requirements
Start-up Expenses
Fixed Costs	Particulars	Amount ($)
	Premises (RENT & RATES)	$1,000
	Salaries	$2,500
	Interest on loan 8%	$2,500
	Accountant Fees	$3,000
	Payroll Tax	$600
	Retainer contracts	$5,000
	Sales and Marketing	$1,350
	Postage & Telephone	$350
	Broachers	$100
	Logo Designs	$250
	Market survey	$500
	Preliminary  expenses	$650
	Lease payments	$1,000
	Total Fixed Costs	$18,800
Average Monthly Costs
	Rent	$83
	Lease payments	$83
	Interest on loan 3%	$208
	Postage & Telephone	$29
	Salaries / Wages	$208
	Total Average Monthly Costs	$613
	x Number of Months:	12
	Total Monthly Costs	$7,350
Total Startup Expenses	$26,150
Start-up Assets
Owner Funding
	Owners Fund	$50,000
	Total Owner Funding	$50,000
Loans
	Bank Loan	$25,000
	Other
	Total Loans	$25,000
	Total Start up Funds	$75,000
Assets
	Equipments	$15,000
	Coffee Machines	$25,000
	Utensils	$5,000
	Total Fixed Assets	$45,000
Total Start-up Assets		$1,20,000

Profit and Loss Forecast

(4) PROFIT AND LOSS FORECAST
	Preop
Year	0	1	2	3	4	5
Revenue	0	1,00,000	1,05,000	1,15,500	1,27,050	1,39,755
Cost of sales	0	60,000	57,750	63,525	69,878	76,865
Gross profit	0	40,000	47,250	51,975	57,173	62,890
Gross Margin		82,990	83,038	90,913	1,01,257	1,10,677
Expenses/overheads
Premises (rent, rates)		1,000	1,000	1,000	1,000	1,000
Wages and salaries		2,500	3,000	3,500	4,000	4,500
General expenses		250	250	250	250	250
Accountant Fees		3,000	3,500	3,750	4,000	4,250
Payroll Tax		600	650	750	850	900
Utilities		5,000	5,000	5,000	7,500	7,500
Sales and Marketing		1,350	1,400	1,450	1,500	1,600
Postage & Telephone		350	375	400	425	450
Preliminary  expenses		650	700	750	800	900
Lease Payments		1,000	1,000	1,000	1,200	1,200
Total expenses/overheads		15,700	15,875	16,850	20,325	21,350
Profit before tax		24,300	31,375	35,125	36,848	41,540
Tax @ 30%		7,290	9,413	10,538	11,054	12,462
Before tax net margin		24%	30%	30%	29%	30%
Profit after tax		17,010	21,963	24,588	25,793	29,078
Transfer to reserves		24,300	31,375	35,125	36,848	41,540

Cash flow Forecast

(2) CASHFLOW FORECAST
	Preop
Year	0	1	2	3	4	5
CASH INFLOWS
Cash from Sales		1,00,000	1,05,000	1,15,500	1,27,050	1,39,755
Directors loans	25,000	25,000	25,000	25,000	25,000	25,000
Capital Employed	1,25,000	50,000	60,000	75,000	80,000	1,00,000
Other cash inflows
TOTAL CASH INFLOW	1,50,000	1,75,000	1,90,000	2,15,500	2,32,050	2,64,755
CASH OUTFLOWS
Payments for materials		60,000	57,750	63,525	69,878	76,865
operating expenses (         )	0
Premises (rent, rates)	0	1,000	1,000	1,000	1,000	1,000
Salaries	0	2,500	3,000	3,500	4,000	4,500
General expenses	0	250	250	250	250	250
Interest and bank charges payable	0	2,500	2,500	2,500	2,500	2,500
Lease payments	0	1,000	1,000	1,000	1,200	5000
Corporation Tax		7,290	9,413	10,538	11,054	12,462
Market survey costs	0	500	525	550	600	700
Other preliminary expenses	0	650	700	750	800	900
capital expenditure
Plant and other capital expenditure	0	5,000	5,500	6,500	7,000	7,500
financing repayments
Loan repayments			2,500	2,500	2,500	2,500
TOTAL CASH OUTFLOWS	0	80,690	84,138	92,613	1,00,782	1,14,177
Cash flow summary
NET CASHFLOW FOR PERIOD	1,50,000	94,310	1,05,863	1,22,888	1,31,268	1,50,578
OPENING CASH BALANCE	0	1,50,000	2,44,310	3,50,173	4,73,060	6,04,328
CLOSING CASH BALANCE	1,50,000	2,44,310	3,50,173	4,73,060	6,04,328	7,54,906

 Balance Sheet Forecast

Balance Sheet
Assets	FY-1	FY-2	FY-3	FY-4	FY-5
Current Assets
Cash	$20,850	$33,800	$37,840	$22,917	$32,233
Accounts receivable	$1,00,000	$1,05,000	$1,15,500	$1,27,050	$1,39,755
Total current assets	$1,20,850	$1,38,800	$1,53,340	$1,49,967	$1,71,988
Fixed (Long-Term) Assets
Equipments	$15,000	$15,000	$15,000	$17,500	$20,000
Coffee Machines	$25,000	$25,000	$25,000	$30,000	$30,000
Utensils	$5,000	$5,500	$6,500	$7,000	$7,500
(Less accumulated depreciation)	$7,500	$6,300	$5,340	$4,572	$3,958
Total fixed assets	$37,500	$39,200	$41,160	$49,928	$53,542
Total Assets	$1,58,350	$1,78,000	$1,94,500	$1,99,895	$2,25,530
Liabilities and Owner’s Equity
Current Liabilities
Accounts payable	$5,000	$7,500	$6,000	$7,250	$8,000
Accrued Rent	$1,000	$1,000	$1,000	$1,000	$1,000
Income taxes payable	$7,290	$9,413	$10,538	$11,054	$12,462
Accrued salaries and wages	$2,500	$3,000	$3,500	$4,000	$4,500
General Expenses	$250	$250	$250	$250	$250
Lease Payment	$1,000	$1,000	$1,000	$1,200	$1,200
Current portion of long-term debt	$25,000	$22,500	$20,000	$17,500	$15,000
Total current liabilities	$42,040	$44,663	$42,288	$42,254	$42,412
Long-Term Liabilities
Long-term debt	$25,000	$22,500	$20,000	$17,500	$15,000
Less: Loan Repayment		$2,500	$2,500	$2,500	$2,500
Total long-term liabilities	$25,000	$20,000	$17,500	$15,000	$12,500
Owner’s Equity
Owner’s investment	$50,000	$60,000	$75,000	$80,000	$1,00,000
Net Profits	$17,010	$21,963	$24,588	$25,793	$29,078
Reserve and Surplus	$24,300	$31,375	$35,125	$36,848	$41,540
Total owner’s equity	$91,310	$1,13,338	$1,34,713	$1,42,641	$1,70,618
Total Liabilities and Owner’s Equity	$1,58,350	$1,78,000	$1,94,500	$1,99,895	$2,25,530

 Breakeven Analysis:

Revenue	Contribution	Fixed Cost	Profit
100000	50000	18020	31980
105000	52500	18020	34480
45050	22525	18020	4505
54060	27030	18020	9010

 

Figure 2: Figure representing Break-Even Analysis

(Source: As Created by Author)

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