Gloria Jean’s coffees
Entrepreneurship Business Plan
Instructions:
BUS3ENT Individual Business Plan
Headings
Title page
Executive Summary (Not in the word count)
Table of Contents
Section headings
References
Appendix
Market Feasibility
1. What is the size of the market?
2. What is the growth rate of the industry?
3. Is the market at full capacity?
4. Where are customers getting the product now?
5. Where are the customers?
6. How many would purchase from you?
7. What external factors come to bear? Government, Industry Dynamics
8. What keeps new competition from entering this market? (Barriers to Entry)
Technical Feasibility
Questions to Answer
- What are the options for developing the technology (customer, off the shelf, design yourself, subcontract)?
2. What are the options for producing the product or service?
• In House
• Subcontract
• License
• Joint Venture or Partnership
• Combination
3.What are the options for Sales and Distribution?
• In House
• Whole Sale
• Distributors or Sales Representatives
• License
• Joint Venture or Partnership
• Combination
4.What resources are required for development and are they available to you (skills, raw materials, components, suppliers, facilities & equipment)?
5. What are the laws and regulation relating to the business?
• Industry Standards or Regulations
• Personal Certifications
• Intellectual Property (Patents, trademarks, copyrights)
• Environmental Liability
6. Has the research discovered any moral or ethical issues that you are uncomfortable with?
7. What technological changes are changing or emerging that may affect the business?
Financial Feasibility
1 What are the projected Revenues from the sale of your product or service?
• From the Market Research, what is the projected sales volume in “units sold?” and in “dollars sold”?
• From the Market Research, what is the selling price per unit?
• What is the total expected revenue?
2. What are the financial dynamics and opportunities?
• Costs Structure (per unit basis)
– Price per unit minus
– Variable Costs (Cost of Goods Sold & Controllable Costs) per Unit equal
– Gross Margin per Unit minus
– Fixed Costs per Unit equal
– Net Margin per Unit
3. How much investment is required?
• One Time Assets and Startup Expenses
– Plant & Equipment
– Leasehold Improvements
– Initial Inventories
– Research & Development
– Legal
– Experts
• Operating expenses prior to break even
4. What are the financial risks?
• Payback (Investment required divided by net margin per unit – Date when units calculated above are sold & collected.)
• Risk vs. Reward (Personal feelings of the risks and rewards)
• Opportunity Costs (Can you get a better return somewhere else?)
• Personal Financial Risk (What will you have to give up. Sign over mortgage etc.)
5. What are the possible sources of financing?
• Chances of getting the money?
• What will you have to give up?
6. General Financial Numbers that would indicate attractiveness of Venture
• Gross Margin 20 – 30% plus
• Net Profit Margin – 10 to 15%. Plus
• Return on Investment – 15% plus
• Payback – 3 years or less.
• Break even – 2 years or less
• Note: These numbers must not be looked at in isolation over a one year period. You need to look at the numbers over a 3 year period and as a whole, not just individually. Industry averages can be quite different.
Human Resource Feasibility
Questions:
1. What technical and management experience is required?
2. Who are the owners and what are their roles? (Entrepreneur, Manager, Tech. Expert)
3. What is the ownership structure?
4. What are the manpower requirements?
– How will you find the right employees?
– How will you compensate employees (pay for time, for production, for knowledge, or a combination)?
– How will you motivate employees?
– What training will they need on an ongoing basis?
5.What is the company’s growth strategy?
– How will quality be managed and maintained÷
– How will organizational structures change with growth?
– What career paths will employees have available?
Appendix A
Start-up Expenditures and Expenses Worksheet
Item Total Cost Cash Required
Land __________ __________
Capital Equipment __________ __________
Computer __________ __________
___________ __________ __________
___________ __________ __________
Beginning Inventory __________ __________
Start up Supplies __________ __________
Licenses and Permits __________ __________
Leasehold Improvements __________ __________
Utility hookups & Installation __________ __________
Advertising (Preopening) __________ __________
Insurance __________ __________
Other __________ __________
_______________ __________ __________
Total Estimated One-Time Cash Requirements __________ __________
Start-up Operating Expenses
Estimate No. of Months Total Cash
Item Monthly Expense X Before Break even = Required
Owners Salary __________ __________ __________
Employee’s salary, wages, benefits __________ __________ __________
Rent __________ __________ __________
Promotion expenses __________ __________ __________
Supplies and postage __________ __________ __________
Vehicle Expenses __________ __________ __________
Telephone __________ __________ __________
Travel __________ __________ __________
Interest __________ __________ __________
Maintenance __________ __________ __________
Other __________ __________ __________
____________ __________ __________ __________
Total Cash Required to Cover Operating Expenses _________
Plus: Total One-Time Cash Requirements (Previous Table) __________
Add 10% Safety Factor __________
Total Cash Required for Start-up _________
Solution.
Entrepreneurship Business Plan
Table of contents
Title page 1
1.0 Executive summary 3
1.1 Objectives 3
1.2 Keys to success 4
1.3 Mission 4
1.4 Products` 4
2.0 Market and industry analysis 6
3.0 Technical Feasibility 9
4.0 Financial Feasibility 11
4.1 Projected profit and loss 11
4.2 Start-up capital 12
4.3 Source of funding 13
5.0 Human Resource Feasibility 14
5.1 Management and other employees 14
6.0 References 16
7.0 Appendix 17
1.0 Executive summary
Gloria Jean’s coffees is determined to become the place to be for the urban coffee addicts, a place to look forward to at the end of daily hustles, a comfortable place to meet friends and acquaintances or even to catch a good book and the preferred family escape, all in one package. With the increasing demand for high-quality specialty coffee, Gloria Jean’s coffees will capitalize on its close proximity to major learning to build a core customer base. Customers will enjoy a well-brewed coffee in a cozy environment, complimented with pastries and free books and magazines that patrons can read to enjoy the Gloria Jean’s coffees experience.
The company will operate on a 2,500 square foot coffee bar within walking distance from the University of Sydney. This premise will be secured through a three-year lease agreement, with the option of extension. They have also provided $100,000 of the required $169,740 startup funds, while the rest will be obtained from the Bank of Queensland. The company is expected to grow in revenues from $484,000 in year 1 to $606,640 in year 3. Striving to maintain a 65% gross profit margin, coupled with reasonable operating expenditure, it will see net profits grow from $77,829 to $109,829 over the same period, recording a net margin of >16%
1.1 Objectives
Gloria Jean’s coffees objectives for the first years of operations will be:
- To become the preferred new coffee bar in the area
- To make profits from the initial month of operations
- To maintain a gross profit margin of at least 65% and a net margin of at least 15%
1.2 Keys to success
Gloria Jean’s coffees will bank on the following to ensure success of this venture
- A modern and functional store design that is not only visually attractive and cozy but also ensures fast and efficient services
- Continuing employee training to ensure that they are abreast with the changing needs and demands of the customers
- Quality product offerings and exquisite customer service experience
- Proactive marketing strategies that are aimed at building a strong base of loyal clients and maximizing the sales of high margin products.
1.3 Mission
Gloria Jean’s coffees will do their best to create a unique environment where clients can freely meet and socialize in a relaxing atmosphere while enjoying the best coffee and pastries in town. The company will be committed to ensuring that clients relieve their daily stresses by providing a peaceful environment with great ambiance, location, and quality products. Profits will be reinvested to provide better customer service, employee satisfaction and ensuring stable returns to stakeholders.
1.3 Products
Gloria Jean’s coffees, true to its tradition, will offer customers the best-tasting coffee and espresso in the region. This will be delivered through the use of high-quality ingredients and strict adherence to the time-tested preparation guidelines. The layout of the store, marketing activities and menu listings will have a clear focus on ensuring maximum sales for higher margin drinks. Besides espressos, brewed teas and coffee and some other refreshments will also be sold at the bar. Additionally, on offer will be pastries, sandwiches and small salads, with coffee beans on sale for clients wishing to prepare their coffee from home. All these will be supplemented with free magazines and books that can be enjoyed while inside the store.
2.0 Market and Industry Analysis
The global coffee consumption has shown a strong growth, with specialty coffee recording the strongest growth potential. According to Euromonitor (2016), the last couple of years have presented various opportunities for the global coffee shops with a consistently growing demand for modern coffee experience being the key driver for rapid innovations and increased competition in all categories globally. In 2016 for instance, specialist coffee shops recorded the highest growth in the restaurant category, recording an increase of close to 9.1%, which is greater than the international restaurant business, which recorded a 5.7% and even the fast foods industry recording 5.8%. This growth was noted to be consistent across all regions, even those that are considered emerging world markets and those that have matured. To underscore this growth potential, Western Europe which recorded a 1.5% increase in sales for the industry as a whole, boasted of 10.8% growth in specialist coffee shops, which was partly driven by the growing interest in an international coffee drinking culture
In Australia, the appetite for fine coffee has mostly driven growth in the industry over the last couple of years, which, despite the prevailing uncertainty in the economic environment, helped the industry to maintain steady growth (The Sydney Morning Herald . march 28,2015). Forecasts for revenue growth project an annual compounded rate of 4% over the next 5 years as coffee drinking becomes more entrenched into the Australian’s daily lives. According to IBIS World (2016), total revenues will top $2.5 billion as consumers continuously seek coffee beverages.
According to IBISworld (2016), the customer dynamics in the industry are influenced by factors such as age, income levels, preferences, culture among others. Some of the main client for specialist coffee are the middle aged, students, tourists and the young people, with researchers arguing that the surge in specialty coffee consumption is also directly related to an international coffee drinking culture that is sweeping across the globe.
Currently, the main players, who are expected to exert significant competition due to their largely global presence, include Starbucks, Café Roma, The UO Bookstore, and a host of other food establishments that offer specialty coffee (IBISworld, 2017). It’s estimated that Starbucks, which has approximately 35% of the market share, will be a major competitor due to its strong financial position and establishment sales and marketing channels and operational effectiveness. It’s also established that despite the obvious market advantages by Starbucks, most customers prefer smaller and independent establishments that are likely to offer a cozy launching environment, a good coffee menu at a friendly price, and this is where Gloria Jean’s coffees expects to harvest a significant part of the market. A great and cozy restaurant atmosphere, superior menu, affordable prices and great customer services are what Gloria Jean’s coffees expects to bank on, in the quest to wrestle market share from the established players.
Gloria Jean’s coffees marketing strategy will mostly be focused on gaining new customers and retaining the existing clientele, ensuring higher returns per client as well as return business (http://www.gloriajeanscoffees.com/au). Ensuring customer loyalty will be of paramount importance since it will not only guarantee improved sales but will also generate referrals. To attain this, the business will position itself as a unique coffee bar where customers not only enjoy the taste of a perfectly brewed coffee but will also enjoy their time in an ambient and cozy atmosphere. Having comfortable sofas, relaxing music in dimmed lights will be the trademark for the business, thus differentiating Gloria Jean’s coffees from her competitors.
Due to the fewer government and industry regulations, it’s rather easy to get into the industry and this is evident from the very many players that swarm the industry. The recently recorded growth rate, however, indicates that the market is far from saturation.
3.0 Technical feasibility
The menu of Gloria Jean’s coffees will be built around the espresso-based coffee beverages such as mochas, lattes and cappuccinos etc, and will be offered in whole, soy milk and skimmed varieties. Each of the coffee drinks will be prepared in an espresso machine, by forcing hot water through the ground coffee at very high temperatures. This is then combined with steamed milk and other additives such as caramel or cocoa to arrive at the yummy final products. Proper preparation technology is of key importance in this industry, with a minor deviation in either the ingredients or the method expected to amount to significant negative impacts on the quality of the drinks on offer.
As an established coffee house, with a presence in many countries spread across the world, its strategy has been proven to work in most of these markets, and therefore and off-the-shelf technology, with few modifications for customization would be suitable for the business. With a presence in the US, Australia, Europe and some parts of Asia, Gloria Jean’s coffees boasts of in-house, licensing and joint venture arrangements in producing the most famed coffee in the market. The company expects to produce her coffee in-house, using the latest technology in order to ensure efficiency and effective services to her clients.
Setting up a coffee shop, especially in Australia is ridden with a number of legal and regulatory requirements ranging from premise certification to personal and professional requirements. Gloria Jean’s coffees will ensure that all the necessary regulatory requirements with regard to health, food, and safety requirements are met as stipulated by the law. Employee personal health history and certifications, which are key requirements in this industry, will also be a key consideration in the recruitment process. Respect for intellectual property such as patents and trademarks as well as ensuring compliance with environmental laws, requirements, and regulations would be a key step in ensuring that the business is legal, operationally an environmentally compliant, which would create a free and conducive operating environment.
The comfortable environment would be a key attraction for clients, who would mostly be expected to take their coffee at the premises, with some opting to buy takeaway coffee to take at their homes, cars or offices. This would significantly reduce sales and distribution costs. Other sales and distribution options that would be explored include wholesale, licensing and sales representatives. At Gloria Jean’s coffees, baristas will be involved in handling sales transactions. In order to ensure faster customer service, at least two employees will handle the servicing of clients, with one staff preparing the customer order while another takes a tab of the sales transactions data which will be logged on a computerized point of sale terminal for future analysis for purposes of accounting and marketing.
In building upon the client’s base, Gloria Jean’s coffees will utilize banners and fliers, customer referrals as well as cross-promotions with other businesses in the region. The business will also employ reliable customer retention programs and technology to ensure that clients come back and even spent more time at the facility.
4.0 Financial Feasibility
Gloria Jean’s coffees will capitalize on a strong demand for their high-quality coffee to realize significant profits. Having provided sufficient start-up capital, and with successful management which is aimed at establishing and continuing growth of the customer base, the company expects to see its network double in just a couple of years. It’s expected that the company will maintain a healthy 65% gross profit margin, which, coupled with reasonable and well managed operating expenses would guarantee the business significant cash outlay to further finance growth and future expansion strategies. Below are some of the financial projections for the company for three years.
4.1 Projected profit and loss
The table below indicates the projected profit and loss statements for the three-year period ending 2020.
| Profit and loss for the three year period | |||||||
| Year 1 | Year 2 | Year 3 | |||||
| $ | $ | $ | |||||
| Revenue | 484,000 | 542,400 | 606,640 | ||||
| Direct cost of sales | (168,200) | (188,265) | (208,304) | ||||
| Gross profit margin | 315,800 | – | 354,135 | – | 398,336 | ||
| Gross profit margin | 65% | 65% | 66% | ||||
| Expenses | |||||||
| Payroll | 104,600 | 116,250 | 128,250 | ||||
| Sales and marketing | 25,800 | 27,500 | 31,500 | ||||
| Depreciation | 5,250 | 5,430 | 5,600 | ||||
| Rent | 47,600 | 52,340 | 52,800 | ||||
| Utilities | 9,000 | 9,650 | 10,100 | ||||
| Payroll taxes | 17,350 | 20,870 | 23,000 | ||||
| Total operating expenses | 209,600 | 232,040 | 251,250 | ||||
| Profit before interests and taxes | 106,200 | – | 122,095 | – | 147,086 | ||
| Interest expense | 1,821 | 2,120 | 1,198 | ||||
| Income taxes | 26,550 | – | 30,524 | – | 36,772 | ||
| Net profit | 77,829 | – | 89,451 | – | 109,117 | ||
| Net profit margins | 16% | 16% | 18% |
Revenue is arrived at after including the total customer purchase such as coffee and a snack and multiplying that with the number of clients that visited the premises during the year.
4.2 Start-up capital
Initial startup costs will include Legal and professional fees including licenses, permits and accounting services ,Marketing and promotion costs for the grand opening of Gloria Jean’s coffees, Consultants charges which will be paid to the Espresso Technology services charged for the set-up of the coffee bar at the facility, Insurance charges, including general, life and workers compensation ,Rent expenses ,Remodeling and restructuring of premises and other miscellaneous costs such as stationery, telephone and other utilities . Despite the above costs, initial working capital requirements for items such as employee salaries for the first three months, startup inventory, operating supplies, equipment such as coffee makers, grinders, toasters, dishwashers, microwaves, refrigerators and cutlery, cash registers and point of sale terminal , sinks, plates, glasses and other serving equipment will also be required. Appendix 1 provides a detailed breakdown of the expenses.
4.3 Source of funding
The funding for the business will originate from two main sources, which are owner’s investments and bank loans. Owners of the business will contribute $100,000 while the remainder would be financed through bank loans, which are not secured.
5.0 Human Resource Feasibility
In Australia, Gloria Jean’s coffees is majorly owned by Nabi Saleh and Peter Irvine both prolific businessmen with vast experience in business management, mergers, and acquisitions (http://www.gloriajeanscoffees.com/au). Despite their enviable management experience, they have other commitments and may therefore not be able to involve themselves in all daily operations of the business. This means that a professional manager will be hired at a cost of $34,000/ yr, who will be in charge of the most critical part of the business, overseeing all operations at the coffee bar. Two baristas who will be in charge of coffee preparation will also come on board at a cost of $25000/yr each. Four more employees will also be necessary to handle the remaining staff needs, with the second and third year of operation expecting to demand more workers as a result of the projected increase in business volumes.
5.1 Management and other employees
As noted above, a full-time manager will be necessary to oversee the daily operations at the premises. The candidates will possess 8 years of experience, four of which must have been gained in a managerial or supervisory level. Their main tasks would be the management of staff; inventory and suppliers, development and execution of a workable marketing strategy among other managerial duties. Other employees will be recruited competitively from the hospitality industry in Australia and will be experienced hires. Their compensation will also be competitive compared to industry standards and will be expected to increase steadily through the third year. Based on the first year results, a profit sharing ratio may be considered in order to motivate the manager to achieve even greater success (Burns, 2016). Other employees will be compensated competitively as per the market rate.
The company will also emphasize on continuing training and development which will be done mostly in-house, by staff from other branches of Gloria Jean’s coffees or external consultants. This will ensure that the products and service quality is in line with the changing customer needs.
At the technical level, the managerial gap can only be sealed if we allow ABC espresso services, the consultants who helped set up the premises and equipment to continue operations in areas such as market research, additional input in business decisions as well as customer satisfaction surveys as well as helping in analyzing available and new business opportunities.
The table below details the personnel needs for Gloria Jean’s coffees
| Yea 1 | Year2 | Year 3 | ||||
| Manager | $34,000 | $36,600 | $39,324 | |||
| Baristas | $50,000 | 53,800 | 57,925 | |||
| Employees | $38,200 | $51,800 | $55,700 | |||
| Total people | 7 | 8 | 10 | |||
| Total payroll | $ 122,200 | $ 142,200 | $ 152,949 | |||
6.0 References
Euromonitor International (2016) Cafés/Bars in Australia. Retrieved from:
http://www.euromonitor.com/cafes-bars-in-australia/report
IBIS World (2016) Food and Beverage Services Industry Report: retrieved from: www.bankwest.com.au/…Server?pagename=Foundation/…
http://www.gloriajeanscoffees.com/au
Coffeehouse Business Plan retrieved from: http://www.bplans.com/coffeehouse_business_plan/executive_summary_fc.php
IBIS World (2016) Coffee Shops in Australia: Market Research Report. Available at: https://www.ibisworld.com.au/industry/coffee-shops.html
Burns,D (2016) Growth in the Global Coffee Industry Growth in the Global Coffee Industry. Retrieved from: http://www.ico.org/event_pdfs/burns.pdf
The Sydney Morning Herald (march 28,2015) Booming coffee market moves into consolidation phase. Retrieved from: http://www.smh.com.au/business/retail/booming-coffee-market-moves-into-consolidation-phase-20150317-1m1g1p.html
IBIS World (2016) Cafes and Coffee Shops in Australia: Market Research Report. Available at: https://www.ibisworld.com.au/industry/cafes-and-coffee-shops.html
7.0 Appendix
| Start-up Expenditures and Expenses Worksheet | ||||||
| Item | Cash required | |||||
| $ | ||||||
| Land | – | |||||
| Capital Equipment | 29,383 | |||||
| Computer | 2,500 | |||||
| Beginning Inventory | 16,201 | |||||
| Start-up Supplies | 6,000 | |||||
| Licenses and Permits | 1,290 | |||||
| Leasehold Improvements | 10,000 | |||||
| Utility hookups& Installation | 5,520 | |||||
| Advertising (Preopening) | 3,180 | |||||
| Insurance | 2,450 | |||||
| Total Estimated One-Time Cash Requirements | 76,524 | |||||
| Start-up Operating Expenses | ||||||
| Estimated No. of Months Total Cash | ||||||
| Item Monthly Expense X Before Break even = Required | ||||||
| Owners Salary | 8,750 | |||||
| Employee’s salary, wages, benefits | 22,050 | |||||
| Rent | 13,500 | |||||
| Promotion expenses | 6,520 | |||||
| Supplies and postage | 18,205 | |||||
| Vehicle Expenses | 1,325 | |||||
| Telephone | 650 | |||||
| Travel | 1,125 | |||||
| Interest | 2,597 | |||||
| Maintenance | 1,520 | |||||
| 76,242 | ||||||
| 10 % safety factor | 16,974 | |||||
| Total Cash Required for Start-up | 169,740 |