Brain Coffee Co.
COFFEE HOUSE & DRIVE-IN ESPRESSO FRANCHISE,
AND COFFEE ROASTING COMPANY
PRE-START-UP BUSINESS PLAN
DECEMBER 2003
28119 BOBWHITE
PATRICK A. FELD
CIRCLE, UNIT #110, SAUGUS, CA 91350
CONFIDENTIAL
BRAIN COFFEE CO. BUSINESS PLAN
HTTP://WWW.PATRICKFELD.NET/BRAINCOFFEE/
661/373-5449 • 661/263-1997
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BRAIN COFFEE CO. BUSINESS PLAN
Brain Coffee Co.
PRE-START-UP BUSINESS PLAN
DECEMBER 2003
Copy #______ of ______
PATRICK A. FELD
28119 BOBWHITE CIRCLE, UNIT #110, SAUGUS, CA 91350
PATRICK@PATRICKFELD.NET
HTTP://WWW.PATRICKFELD.NET/BRAINCOFFEE/
661/373-5449 • 661/263-1997
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BRAIN COFFEE CO. BUSINESS PLAN
This document contains confidential and proprietary information belonging exclusively to Patrick A. Feld. This is a preliminary
business plan. It does not imply an offering of Securities.
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BRAIN COFFEE CO. BUSINESS PLAN
BRAIN COFFEE CO. BUSINESS PLAN TABLE OF CONTENTS
---------------------------------------------1.0 Executive Summary
1.1 Objectives
1.2 Mission
1.3 Company principles
1.4 Keys to Success
1.5 Risks
2.0 Company Summary
2.1 Company Ownership
2.2 Management Team
2.3 Pre-Start-Up Summary
2.31 Pre-Start-Up Requirements (Six Months)
2.32 Pre-Start-Up Funding
2.4 Preliminary Start-up Summary
2.5 Company Locations and Facilities
2.51 Retail Coffee House
2.52 Drive-Thru Units
2.53 Corporate Office
2.54 Expansion Plan
3.0 Products, Services & Support
3.1 Product Description
3.11 Product Menu Description
3.12 Coffee Roasting Description
3.13 Brainiac Frequent Shopper Program Description
3.14 Other Product Description
3.2 Service Description
3.21 Coffee House Format Service Description
3.22 Espresso Drive-Thru Format Service Description
3.3 Coffee Catering and Coffee Vendor Service Description
3.4 Internet Site Service Description
3.5 Suppliers & vendors
3.6 Technology
3.61 Oracle’s NetSuite Web-Based ERP Solution
3.62 Coffee Shop Manager
3.7 EMPLOYEE TRAINING
3.8 Future Services
3.81 Wholesale Coffee Sales
3.82 Franchising
4.0 Market Analysis & Industry Overview
4.1 Five Point Analysis of Specialty Coffee Sector
4.11 High Rivalry
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4.12 Low Barrier to Entry
4.13 High Substitute Product
4.14 Low Supplier Power
4.15 High Buyer Power
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4.2 Driving Force of Specialty Coffee Sector
4.21 Economic Conditions
4.22 Natural Phenomenon
4.23 Demographic Changes
4.24 Lifestyle Changes
4.25 Globalization
4.3 Defining the Market & Marketing Area
4.4 Market Segmentation
4.41 Primary Market - Younger Baby Boomer Segment (Age 38-54)
4.42 Secondary Market - Older Echo Boomer Segment (Age 16-24)
4.43 Secondary Market Generation X Segment (Age 24-37)
4.5 Market Needs
4.6 Competition and Consumer Buying Patterns
5.0 Company Strategies
5.01 Management Strategy
5.02 Customer Service & Loyalty Strategy
5.03 Positioning, Marketing, Advertising, Promotional
& Internet Communications Strategy
5.04 Local Social Hub Strategy
5.05 Expansion & Top Location Strategy
5.06 Product Development Strategy
5.07 Joint Venture Strategy
5.08 Franchise / Licensing Strategy
5.09 Reduce Construction & Store Opening Cost Strategy
5.1 Competitive Edge & Niche Market
5.2 Brand Positioning
5.3 Marketing Strategy Pyramid
5.31 Attract Existing Specialty Coffee Customers
5.32 Legitimize Brain Espresso Drive-Ins
5.33 Promote Brainiac Frequent Shopper Program (FSP)
5.331 FSP Promotion
5.332 FSP Registration
5.333 FSP Execution
5.34 Project Local and Community-Oriented Company Image
5.35 Retain Customers Using FSP Methodology
5.4 Marketing, Advertising and Promotional Communications
5.5 Pricing Strategy
5.6 Sales Strategy
5.7 Product Sales Mix
5.8 Preliminary Sales Forecast
6.0 Start-Up Summary
6.1 Preliminary Milestones
6.2 Preliminary Management Summary
7.0 Preliminary Financial Plan
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8.0 Supplements Attached
9.0 Contact Information
1.0 EXECUTIVE SUMMARY
The seeds for a specialty coffee revolution were planted in the 1980s when the founders of Starbucks
tested a new coffee bar concept in downtown Seattle. Since then, America's love affair with specialty
coffee has exploded into a $7+ billion annual industry with growth which shows no sign of slowing
down. Starbucks 2002 North American sales were $2.8 billion, with 2003 projections for $3.4 billion in
sales.
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Brain Coffee Co. is a start-up company that will leverage the success of Starbucks by taking
advantage of their weaknesses to acquire market share on a local and regional basis. The vision of
Brain Coffee Co. is to become a formative specialty coffee retailer known for its quality and
innovation. Within 5 years, Brain will have formulated a successful franchise, and grown to have 36
company owned stores, and 36 franchised stores. Based on the funding outlined in this plan, initial
sales projections have Brain Coffee Co. producing $1,820,250 in year one, $5,543,875 in year two,
$14,422,813 in year three, $24,266,331 in year four, and $37,407,463 of sales in year five of operations.
Additionally, by year five of Brain Coffee operations, financial projections estimate total owners’
liabilities and equity to be $15,606,385.
This proposal is designed to immediately raise $50,000 - $90,000 to fund pre-start-up costs, perfect the
business plan, and assist in raising the estimated $3 million in actual start-up and expansion costs.
One of Brain Coffee's goals is to realize 10% of Starbucks' sales within our planned areas of operation.
Based on Starbucks’ and other competitors’ weaknesses and the market’s needs, the primary
opportunities for Brain Coffee Co. to achieve sales and overall company goals are:
• Drive-Thru Convenience - To offer a combination of Brain Coffee Houses and satellite
Brain Coffee Drive-Thru units to provide accessibility and visibility to customers that
Starbucks and other coffee retailers do not provide.
• Distinctive Taste - To distinguish the taste of Brain Coffee products, and to educate the
consumer on the key differences of Brain Coffee quality versus competitors’ quality.
• The Local Guys - To be the non-corporate, local, community- based operation with the
homegrown staffing that Starbucks is not.
• Aggressive Advertising - To
use bold advertising,
Brain Coffee marketing and promotional
Co. CEO, communications to
Patrick Feld, differentiate the Brain Coffee
plans for brand from other nonhigh sales advertised and non-promoted
growth. brands.
• Frequent Shopper Program To implement a dynamic and
rewarding Frequent Shopper
Program (FSP) that Starbucks
and other competitors are not
offering.
At the very core of the Brain
Coffee concept, you will find
convenient drive-thru units
(known to the customer as
“Espresso Drive-Ins”), that are
actually “Small Format Retail”
units. Executed correctly, these
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drive-thru units will capture a wealth of busy Los Angeles commuter business. And compared to
typical store-front retail solutions, a smaller footprint will mean a lower capital investment, a lower
rent, lower utilities and maintenance, and lower labor costs. Of course these features can help shorten
store opening time-frames and lower overall expansion costs.
Brain Coffee’s primary retail products and services will be:
• Drink Service - Hot & cold coffee, espresso, tea and fruit drinks
• Food Service - Assorted fresh bakery and fruit items
• Whole Bean & Ground Coffee - Freshly roasted whole and ground Brain coffee beans
• Home Goods - Home coffee and espresso equipment and assorted home goods
• FSP Products - Offered through Brainiac Frequent Shopper Cards
• Gift Products - Pre-Paid Brain Coffee Co. Gift Cards
• Branded Goods - Brain Apparel such as t-shirts, caps, mugs, etc.
• Online Products - BrainCoffee.com selected products and merchandise
Brain Coffee Co. company-wide strategies include:
• Management Strategy - To maximize key human resources
• Customer Service & Loyalty Strategy - To attract and retain most profitable customers
• Marketing, Advertising & Promotional Communications Strategy - To quickly build
brand awareness and attract customers
• Local Social Hub Strategy - To project an authentic community image
• Expansion & Top Location Strategy - To propel company growth
• Product Development Strategy - To diversify profits horizontally and vertically
• Joint Venture Strategy - To fuel expansion efforts
• Franchise / Licensing Strategy - To fund expansion efforts
• Reduce Construction & Store Opening Cost Strategy - To reserve cash
Brain Coffee Co. is soon to be a privately held California Limited Liability Corporation (LLC). Patrick
Feld, the founder of Brain Coffee, will be the majority owner, with minority stock positions going to
private investors. The company will be headed by Patrick A. Feld, a 43 year old seasoned veteran of
sales and marketing. Patrick has a wide range of experience to include being a business owner and
having executive positions with fiscal accountability. As Brain Coffee Co. CEO, Patrick will oversee
all operations, but will focus on sales volume, sales profitability, marketing, advertising, promotion
and CRM.
At this pre-start-up stage of the business, Brain Coffee Co. is seeking $50,000 - $90,000 to complete the
business plan and to raise the estimated $3 million in actual start-up and early expansion costs. The
$50,000 - $90,000 required funding is expected to cover all pre-start-up expenses for at least six
months. It is proposed that the pre-start-up funding be handled as a standard loan, with all principal
and interest repaid within six months of the date of loan issue. The interest rate for the loan is to be
negotiated.
In addition to the pre-start-up phase of financing, this proposal also pertains to the projected start-up
and start-up expansion phases of required financing.
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Currently, projected financing needed for Brain Coffee Co. is:
Phase One/Pre-Start-Up - Obtain $50,000 - $90,000 capital for executive's time and hard expenses to
begin to negotiate with partners, suppliers, property managers, zoning boards, and to gather the
detailed cost information needed to draft a final business plan. Additionally, pre-start-up costs will
pay for legal fees, accounting fees, consultant fees, office space, computers, and general business
expenses required to raise start-up funding.
Phase Two/Start-Up - Obtain $2,000,000 capital for:
• Launching a total of 18 Brain Coffee stores (2 coffee house units and 16 drive-thru units)
to include:
- Drive-Thru Unit Buildings
- Building/Leasehold Improvements
- Roasting Machinery & Equipment
- Store Furniture & Equipment
- Advertising and Promotions
• Operations and management to include sales and marketing, production expenses, research
and development, consulting and general administrative costs.
Phase Three/Start-Up Early Expansion - Obtain $1,000,000 capital for:
• Launching an additional 18 Brain Coffee stores (2 coffee house units and 16 drive-thru units)
to include items listed above. Bring total number of stores to 36 (4 coffee house units and
32 drive-thru units)
• Ongoing operations and management expenses
• Franchise program development, franchise offering and franchise marketing
• Expanded corporate, roasting, production and distribution facilities
The financing will allow Brain Coffee Co. to successfully launch, expand and maintain operations
through year two. Successful operation in year one and year two will provide Brain Coffee with sales,
cash flow, and a customer base for the company to be self sufficient in year three of operations.
With Brain Coffee’s short-term goal to raise $3 million in financing, the exit strategy for the provider
of the pre-start-up funding loan of $50,000 - $90,000 will be realized with a handsome return of
principal and interest upon securing of start-up funds.
For the investors that finance Brain Coffee’s start-up and early expansion funding of $3 million,
preliminary projections show that profits from third, fourth and fifth year operations will pay
dividends totaling $15 million until the company goes public before its sixth year. Dividend
payments should provide these investors with an estimated 5:1 return on investment, with the Initial
Public Offering (IPO) giving investors an attractive and profitable option for finally exiting the
concern.
1.1 OBJECTIVES
Brain Coffee's objectives for the first three years of operation include:
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• The creation of a smart, local, hip and fun concept that will differentiate Brain Coffee from
other Southern California coffee house and/or drive-thru offerings.
• Educating the market on excellent coffee and espresso based drinks -- Demonstrating the
difference between quality (Brain Coffee) and Starbucks.
• The launch of the Brain Coffee brand through marketing, advertising, promotion
and accessibility.
• Effectively penetrating Starbuck's sales by 10% in our areas of sales and operations.
• The refinement of a profitable mix of hot drinks, cold drinks, food items and sales-driven
marketing products.
• The birth of a work culture that captures the energy of youth while building accountability
and performance.
• The execution of a Customer Relationship Program to boost customer loyalty utilizing a
frequent shopper card.
• The development of a coffee house and drive-thru model environments that can be
cost-effectively reproduced.
• Establishing Brain Coffee roasting facilities to supply coffee house and drive-thru units with
the freshest possible coffee.
• Begin to grow wholesale coffee distribution through supermarket, convenience store and
franchise/licensing sales channels.
• Launching and growing a Brain Coffee franchise business by year 3 of operations.
• Operating up to 36 company-owned stores, and servicing up to 36 franchised/licensed
stores by year 5 of operations.
• Finally, it is the objective of Brain Coffee Co. to make an Initial Public Offering (IPO)
within 4 - 6 years.
1.2 MISSION
As the popularity of specialty coffee and espresso drinks continues to grow at an exponential rate,
convenient access to quality drinks and service are becoming a necessity of life. Brain Coffee Co.
provides communities with a refreshing alternative to the corporate coffee store model by offering an
easy, friendly and contemporary concept that gives customers the highest quality coffee experience at
competitive prices. People of all ages and backgrounds will come to enjoy the smart, local, fun,
educational, and innovative environment that Brain Coffee provides.
1.3 Company Principles
The following six guiding principles will help Brain Coffee Co. measure the appropriateness of our
decisions:
• Provide a great work environment and treat each other with respect and dignity.
• Embrace change as an essential element in the way we do business.
• Apply the highest standards of excellence to the purchasing, roasting and fresh delivery
of our coffee.
• Develop enthusiastically satisfied customers all of the time.
• Contribute positively to our local communities.
• Recognize that profitability is essential to our future success.
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1.4 KEYS TO SUCCESS
The keys to the success for Brain Coffee are:
• Effectively penetrating Starbucks sales by 10% in our areas of sales and operations.
• Differentiating and distinguishing the taste of Brain Coffee products, and educating the
consumer on key differences that comprise quality.
• The creation of a smart, local, hip and fun concept that will differentiate Brain Coffee from
other coffee house and/or drive-thru offerings.
• Hiring the most attractive, most energetic, and popular young employees (ages 18 - 24) in a
given marketing area.
• The brand establishment of Brain Coffee as a community hub for fine coffee drinks,
socialization and entertainment.
• The creation of an environment that won't intimidate the new coffee drinker. Brain Coffee
will position itself as an easy going, educational resource for individuals wishing to learn
and experience excellent coffee and espresso drinks.
• The deployment of a cost-effective ERP and POP system
• Developing relationships with roasted coffee suppliers until Brain Coffee roasting facilities
are operational.
• Creating partnerships with supermarket chains, convenience store chains, and commercial
property development firms for securing the best, properly zoned locations for coffee house
and drive-thru units.
• Opening at least six drive-thru units for every one coffee house in a given marketing area.
• Effectively leveraging all advertising and promotional costs to benefit the greatest number of
Brain Coffee units.
• Dialing in a formula for operations and profitability that promotes and manages
high growth.
1.5 RISKS
The risks involved with starting
Brain Coffee are:
• Will Brain Coffee be able to raise the required start-up capital needed to launch the business
to early profitability?
• Will there be a demand for the products and services offered by Brain Coffee in
Southern California?
• Will the popularity of specialty coffee and espresso drinks continue to grow?
• Will Brain Coffee be able to compete with Starbucks?
• Will zoning laws and/or the cost of commercial lease locations inhibit
Brain Coffee's growth?
2.0 COMPANY SUMMARY
Brain Coffee, soon to be located in a marketing area of Southern California, will offer the community
easy access to fine coffee and espresso drinks using a combination of coffee houses and drive-thru
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service units. Brain Coffee will provide a menu of hot drinks and cold drinks using the finest coffee,
tea, dairy, flavoring and fruit ingredients. Additionally, Brain Coffee will offer some exceptional
bakery and food products. Brain Coffee will excel at providing exceptional, knowledgeable, energetic,
and fast service to every customer.
Brain Coffee will appeal to individuals of all ages and backgrounds. However, the primary target
market will be working and commuting male and female Baby Boomers ages 38 to 54. A secondary
market will be young adult Echo Boomers ages 16 to 24 with disposable income of greater than $50
per week. Our upbeat and off-center brand positioning, and the attractive and knowledgeable staff
that Brain Coffee provides, will appeal to a coffee loving audience that does not associate themselves
with the machine of corporate coffee houses. This hip aspect of Brain Coffee will also attract younger
and less experienced coffee drinkers of the community who are rapidly gaining interest in specialty
drink products. The clusters of drive-thru units that surround a central coffee house location will
create a substantial brand presence and provide business people and commuters with convenient
access to their morning coffee drinks.
After successfully launching and establishing several profitable company-owned coffee houses and
drive-thru units, Brain Coffee will focus on business expansion by aggressively adding new retail
units, increasing roasting production, wholesale distribution, and finally, by franchising the Brain
Coffee concept.
2.1 COMPANY OWNERSHI P
Brain Coffee is soon to be a privately held California Limited Liability Corporation (LLC). Patrick
Feld, the founder of Brain Coffee, will be the majority owner, with minority stock positions going to
private investors.
2.2 MANAGEMENT TEAM
Once start-up financing is secured, Brain Coffee Co. will have a savvy team of sales, marketing,
operational and personnel executives to assure the success of the business. At the pre-start-up stage,
the company will be steered by Patrick A. Feld (CEO, Saugus, CA); Elizabeth Feld (Administrative
Assistant and Legal Liaison, Saugus, CA); a yet to be named key management person as V.P. of
Operations; Dane and Travis Boersma (Consultants/Board of Directors, and owners Dutch Bros.
Coffee, Grants Pass, OR); and Salvatore Mellelo (Consultant/Board of Directors, and owner Mellelo
Coffee, Medford, OR).
Patrick A. Feld, CEO and President / Saugus, CA - Brain Coffee will be headed by Patrick A. Feld, a
43 year old seasoned veteran of sales and marketing. Patrick has a wide range of experience to
include being a business owner and having executive positions with fiscal accountability. As Brain
Coffee Co. CEO and President, Patrick will oversee all operations, but will focus on sales volume,
sales profitability, marketing, advertising, promotion and CRM. NOTE: Patrick Feld is responsible for
authoring this document and preparing all the original artwork included in the contents. (For more
information on Patrick Feld, please see attached resume.)
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Elizabeth Feld, Administrative Assistant and Legal Liaison / Saugus, CA - Brain Coffee’s
Administrative person will be Elizabeth Feld, a top-notch legal/executive secretary with almost 20
years of experience working for top attorneys and business executives. Elizabeth possesses excellent
communication skills, strong organizational skills, and excels at various legal filing processes. Her
assistance will be invaluable, and her expertise of legal proceedings and legal communications will be
a great advantage for Brain Coffee during the start-up and licensing/franchising stages. Elizabeth
will be responsible for receiving all corporate office phone calls, scheduling of appointments,
supplier/vendor relations, company document management, accounting entries, expense, A/R and
A/P management, and acting liaison/paralegal for all legal work.
NOTE: It is important to note that in addition to the successful people and consultants mentioned
above, Patrick Feld and Brain Coffee have relationships with many coffee house managers, coffee
roasting experts, and coffee service personnel whom have expressed an interest in joining the
organization upon funding.
2.3 PRE-START-UP SUMMARY
Brain Coffee's pre-start-up costs will primarily cover the company executive's time and hard
expenses to begin to negotiate with partners, suppliers, property managers, zoning boards, and to
gather the detailed cost information needed to draft a final business plan. Additionally, pre-start-up
costs will pay for legal fees, accounting fees, consultant fees, office space, computers, and general
business expenses required to raise start-up funding.
The primary areas that need to be further researched and analyzed are:
• Marketing & Site Selection
- Analyze Santa Clarita market and other Los Angeles markets offering best
opportunities
- Review market studies and traffic studies against coffee house and drive-thru
unit site availabilities
- Make market area selection and analyze marketing area media availability
and costs
- Final selection of sites based on market and preliminary cost estimates
• Location, Property and Bureaucracy
- Based on selected marketing areas, contact strip mall developers regarding
space/lease opportunities.
- Also target supermarket chains, convenience store chains, large hardware chains, etc.
for partnership space/lease opportunities.
- Determine property lease costs
- Contact local bureaucracies such as building department, health department,
department of transportation, business licensing bureau, sign commission, fire
marshal, and utility commission. Gather basic information about codes, zoning, and
requirements and restrictions that might be applicable. Determine plan submission
requirements for permit issuance.
• Buildings and Operations
- Finalize drive-thru unit design, layout, manufacturer and turnkey costs
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- Determine coffee house design, layout, general contractor and leasehold
improvement costs
- Select ERP and POP system software and hardware
- Decide on in-house roasting capacity
- Capital equipment analysis
• Suppliers and Vendors
- Decide on primary and secondary wholesale coffee roasting suppliers
- Decide on primary and secondary wholesale dairy product suppliers
- Negotiate with coffee brewing and espresso equipment vendors
- Select bakery goods supplier
- Select paper goods supplier
In short, $50,000 - $90,000 is needed to complete the business plan and to raise the estimated $3
million in start-up costs. The $50,000 - $90,000 required funding is expected to cover all pre-start-up
expenses for three to six months.
2.31 PRE-START-UP REQUIREMENTS
(Three to Six Month Range of Financing Needed)
Two Full-Time Salaries
$ 24,000
- $ 48,000
Incorporation, Legal & Accounting
$ 5,000
- $ 10,000
Stationary, Business Cards, etc.
$ 500
- $ 1,000
Printing & Presentations Materials
$ 500
- $ 1,000
Secondary Research & Consulting Fees
$ 5,000
- $ 10,000
Repayment of Short-Term Debt
$ 7,000
- $ 7,500
Presentation/Meeting Rooms & Hotels
$ 1,000
- $ 2,000
Apple PowerBook G4 17" Laptop Computer
$ 3,000
- $ 3,500
hp Color LaserJet Printer
$ 500
- $ 1,000
Computer Software
$ 1,500
- $ 2,000
DSL/ISP Hosting & Cell Line
$ 500
- $ 1,000
Travel & Entertainment
$ 1,000
- $ 2,000
Miscellaneous Expenses
$ 500
- $ 1,000
======================================================
Total Pre-Start-Up Expense Range
$ 50,000
- $90,000
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2.32 Pre-Start-Up Funding
Brain Coffee Co. requires $50,000 - $90,000 in pre-start-up funding, or seed money. Brain Coffee
proposes to handle this funding as a standard loan with all principal and interest repaid within six
months of the date of issue. The interest rate for the loan is to be negotiated. Access to loan funds, or
withdrawal of funds against a line of credit will follow a schedule of:
$25,000
$12,500
$12,500
$15,000
$12,500
$12,500
- December 2004
- January 2004
- February 2004
- March 2004 (if needed)
- April 2004 (if needed)
- May 2004 (if needed)
Brain Coffee executives will agree to provide monthly progress updates to lender upon request.
2.4 PRELIMINARY START-UP SUMMARY
This proposal pertains to obtaining Pre-Start-Up funding of $50,000 - $90,000. However, preliminary
Start-Up and Start-Up Expansion funding of $3 million will be used in years one and two for:
Estimated Year One & Year Two Start-up Requirements
Drive-Thru Unit Buildings
$1,440,000
Building/Leasehold Improvements
$480,000
Roasting Machinery & Equipment
$60,000
Store Furniture & Equipment
$240,000
Fixed Cost & Operating Expenses (detailed below)
$780,000
=====================================================
Total Year One & Year Two Start-up Expenses
$3,000,000
Fixed Cost of Goods & Services Expense - To include Store Operation Salaries, Store Lease Expense,
Production Equipment Lease, Small Tools / Supplies, Packaging Supplies, and Other Production
Expenses.
Sales & Marketing Operating Expense - To include Sales/Marketing Salaries, Advertising, Frequent
Shopper Program, Direct Marketing, Promotions & Events, Point-Of-Sale Materials, Customer
Giveaways, and FSP Miscel Costs.
Research & Development Operating Expense (Relating to site selection, store development and new
product development) - To include Consulting, R & D Expenses, R & D Materials, and R & D Salaries.
General & Administrative Operating Expense - Includes Accounting, Admin. Salaries, Bad Debts,
Depreciation, Equipment Rental/Small Purchases, Insurance, Legal Fees, Licenses and Permits,
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Office Expenses, Office Rental, Taxes (non-Income Taxes), Telephone, Cell Phones & Internet Access
and Utilities.
(For complete financial details, refer to preliminary Brain Coffee Co. integrated financial
spreadsheets attached.)
2.5 COMPANY LOCATION S AND FACILITIES
A final marketing area for the first seven Brain Coffee retail units has yet to be selected. Currently,
Brain Coffee has plans to enter a specified market area in Southern California. One area under
consideration is Santa Clarita, CA with a population of approximately 150,000.
With Start-Up Funding in place by June of 2004, Brain Coffee will initially launch operations in Santa
Clarita, and initial market penetration will be accomplished with nine units open by November of
2004 featuring:
• One (1) 1,600 - 2,000 sq. ft. Brain Coffee house including a 600 sq. ft. roasting area
• Eight (8) 160-240 sq. ft. Brain Coffee drive-thru units
• All stores will be in close proximity to main commuter routes
• All stores will experience high traffic, high visibility and easy traffic access
• Plus a small 800 - 1,000 sq. ft. corporate office
Start-up and start-up expansion funding, plus income from operations, will increase the number of
company owned units to:
• 18 total (2 coffee house stores and
16 drive-thru units) by the end of year 2
• 27 total (3 coffee house stores and
24 drive-thru units) by the end of year 3
• 36 total (4 coffee house stores and
16 drive-thru units) by the end of year 5
• Plus, a main corporate office with
expanded roasting capabilities, warehouse
and
distribution facilities by the end of
year 3.
Heavy automobile traffic for Brain Coffee's
drive-thru locations will be critical.
Management will select locations at which
we can reasonably expect to capture at least
200 cars per day. At this rate, our espresso
drive-thru units should be able to achieve a
level of sales that will produce a profit.
Additionally, we will locate on the A.M.
inbound commute side of the street, and we
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will try to locate near a college, high school, business park or hospital.
Both the coffee house locations and the drive-thru locations will be situated on developed properties
such as parking lots of malls, strip malls, grocery or other large retail stores, gas stations and
convenience stores.
2.51 Retail Coffee House
Brain Coffee Co. coffee house units will be traditional retail coffee shops similar to most Starbucks
formats. These retail store units will range in size from 1,000 to 1,400 square feet (plus roasting area of
approx. 600 sq. ft.) and will be located in office buildings, downtown and suburban retail centers,
airport terminals, university campus areas, or busy neighborhood shopping areas convenient to
pedestrian foot traffic. Only a select few may be located in suburban malls.
Brain Coffee Co. coffee house store will evoke an authentic coffee experience that also conveys the
artistry of espresso making, a place to think and imagine, a spot where people can gather and talk
over a great cup of coffee, a comforting refuge that provided a sense of community, a third place for
people to congregate beyond work or the home, a place that welcomes people and rewards them for
coming, and a layout that can accommodate both fast service and quiet moments.
The basic costs (excluding marketing/advertising costs and working capital) for opening a Brain
Espresso Coffee House will be:
Equipment, POS system and Furniture
$90,000 -- $120,000
Signage and POP Fixtures
$14,000 -- $22,000
Professional Fees
$5,000
-- $10,000
Leasehold Improvements
$90,000 -- $120,000
Roasting Equipment
$8,000
-- $12,000
Opening Inventory
$4,000
-- $6,000
Miscellaneous Costs
$4,000
-- $10,000
=======================================================
Total
$215,000 --$300,000
2.52 Drive-Thru Units
The Los Angeles metropolitan area has one of the most mobile commuting work forces in the world.
Los Angeles commuters place a high emphasis on convenience, and use drive-thru fast food facilities
more than the majority of large metro areas in the U.S. Major fast food corporations have revealed
that some of their Los Angeles area locations transact as much as 75 percent of their business from a
drive-thru window. It only makes sense that the world’s most popular beverage would eventually be
sold in this fashion. Brain Coffee’s Espresso Drive-Ins will leverage this consumer need better than
any competitor in its marketing areas.
Studies have found that the best sites for drive-thrus are easily accessible lots with a minimum of
13,000 cars per day traffic count. This sounds like a lot, but most urban areas have counts of 25,000 or
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more cars per day. Additionally, the studies have shown that you can expect at least 3 to 4% of the
traffic to stop in your drive-thru with an average sale of $1.50. If these averages hold up, and Brain
Espresso Drive-Ins are located in an accessible location with a traffic count of 20,000 per day, it will
yield as much as $1,200 per day in sales. Or, as much as $425,000 per year per location. Some busy
drive-thru units in the Pacific Northwest average $2,400 per day, or $850,000 per year in sales.
Brain Coffee Co. drive-thru units, known to the customer as an ‘Espresso Drive-In,’ will actually be
‘Small Format Retail’ units. Compared to typical store-front retail solutions, a smaller footprint means
a lower capital investment, a lower rent, lower utilities and maintenance, and lower labor costs.
Brain Coffee Co. plans to work with Millennium Venture Group, Inc. (MVG) and Kullman Industries
to design, engineer and manufacture modular solutions that will allow Brain Espresso Drive-In units
to be located on the outskirts of almost any existing retail property.
Initial designs will average between 160 and 240 square feet, and will cost anywhere from $80,000 to
$120,000 fully equipped and installed. The units are shipped by truck and arrive on the site about 90
percent completed. Upon arrival, they are mounted onto a foundation that allows for the installation
of utilities. The units will be designed with the specific state regulations in mind.
The basic idea behind Brain’s modular design and centralized manufacturing process, is that dozens
and even hundreds of retail units can be developed very quickly and cost effectively.
The basic costs (excluding marketing/advertising costs and working capital) for opening a Brain
Espresso Drive-In will be:
Modular Unit, POS system and Equipment
$50,000 -- $75,000
Signage and POP Fixtures
$10,000 -- $15,000
Professional Fees
$5,000
-- $8,000
Property and Leasehold Improvements
$10,000 -- $15,000
Opening Inventory
$2,000
-- $3,000
Miscellaneous Costs
$3,000
-- $4,000
=======================================================
Total
$80,000 -- $120,000
2.53 Corporate Office
In the pre-start-up and start-up phases of operation, Brain Coffee Co. will have a small 800 - 1,000 sq.
ft. corporate office to provide for two executives and one administrative person.
2.54 Expansion Plan
As Brain Coffee’s first 9 locations begin to show success and profitability, the company will begin to
expand into neighboring marketing areas with new locations. Again, Brain Coffee will look to
develop a central coffee house store with 6 - 8 satellite drive-thru units nearby.
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Early in Brain Coffee’s third year of operations, the company projects to have at least 3 coffee house
stores and as many as 24 drive-thru units located in three marketing areas of Los Angeles.
Brain Coffee Co. plans to have notable success in identifying top retailing sites for its stores. The
company will put together the best real estate team in the local coffee-bar industry and put in place a
sophisticated system that enables Brain to identify not only the most attractive individual city blocks
but also the best exact store locations.
To better reduce average store-opening costs, which could run as high as $120,000 for drive-thru
units, and $300,000 for coffee house stores (excluding marketing/advertising costs and working
capital), the company will centralize buying, develop standard contracts and fixed fees for certain
items, and consolidate work under those contractors who display good cost-control practices.
Additionally, Brain Coffee will refine modular drive-thru designs and develop modular designs for
coffee house display cases to cut store-opening costs significantly and reduce store development
time.
3.0 PRODUCTS, SERVICES & SUPPORT
It will be a key factor that Brain Coffee is good at differentiating and distinguishing the taste of its
chief coffee drink products, and educating the consumer on key differences that comprise quality.
Brain Coffee Co. will offer customers a choice of regular or decaffeinated coffee beverages, a special
"coffee of the day," and a broad selection of Italian-style espresso drinks. In addition, customers can
choose from a wide selection of fresh-roasted whole-bean coffees (which can be ground on the
premises and carried home in distinctive packages), a selection of fresh pastries and other food items,
sodas, juices, teas, and coffee-related hardware and equipment.
The company will provide these high-end specialty coffee and espresso products using a combination
of coffee house service formats and drive-thru service formats. Brain Coffee house concept will
provide customers with a unique and innovative environment for enjoying the finest coffee, specialty
beverages, and bakery items. The drive-thru units will provide customers with the ultimate
convenience of getting an excellent hot or cold beverage with the convenience of not having to leave
their car.
3.1 PRODUCT DESCRIPTION
• Drink Service - Hot & cold coffee, espresso, tea and fruit drinks (see description below)
• Food Service - Assorted fresh bakery and fruit items
• Retail Coffee - Freshly roasted whole and ground Brain coffee beans(see description below)
• Home Goods - Home coffee and espresso equipment and assorted home goods
• FSP Product - Brainiac Frequent Shopper Card (see description below)
• Gift Product - Pre-Paid Brain Coffee Co. Gift Cards
• Branded Goods - Brain Apparel such as t-shirts, caps, mugs, etc.
• Online Products - BrainCoffee.com selected products and merchandise (see below)
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3.11 Product Menu Description
The mainstay of Brain’s product menu will be fresh, deep-roasted coffees brewed to exacting
standards and prepared by skilled baristas. Brain’s espresso drinks are crafted by hand, using only
freshly-pulled espresso shots poured within 10 seconds. Brain Coffee will feature a different selection
of fresh-roasted coffees each day, and all of the drip coffee will be brewed fresh every 30 minutes.
Brain Coffee Co. and Brain Espresso Drive-Ins will offer espresso, coffee, fruit, soda and tea drinks
per the following preliminary menu:
Espresso Drinks
Espresso: Freshly ground and pulled, a straight shot of Brain’s richest, freshest espresso.
Caffè con Panna: A shot of rich espresso with a topping of delicious whipped cream.
Caffè Macchiato: A shot of rich espresso marked with a dollop of foam.
Caffè Americano: Freshly-pulled espresso shots and hot water.
Caffè Latte: Our rich espresso topped with steamed milk and a layer of foam.
Cappuccino: Our rich espresso poured with steamed milk and marbled to absolute perfection.
Caffè Mocha: Rich espresso blended with Brain’s Dutch Cocoa, steamed milk, and a topping
of whipped cream.
White Chocolate Mocha: Rich espresso mixed with indulgent white chocolate, steamed milk,
and a topping of whipped cream.
Latte Macchiato: A short ("ristretto") shot of rich espresso poured into freshly steamed milk.
Iced Blended Coffees
Caffè Freddo: Our Freddo ("freeze" in Italian) is a blended coffee drink with freshly-pulled
espresso, milk, ice, and a hint of sweetener.
Mocha Freddo: We take our classic Caffè Freddo and add Brain’s Dutch Cocoa for a slightly
sweeter taste.
The Swirl: This deluxe specialty drink combines our fresh espresso, caramel, and dark
chocolate swirled together with ice and milk, and topped with whipped cream.
Iced Blended Teas
Chai Freddo: Brain’s Masala Chai is blended with milk and ice for a sweet, spicy, and
creamy treat.
Caramel Chai Freddo: Our Chai Freddo is layered with caramel and topped with whipped
cream and a caramel swirl.
Chocolate Chai Freddo: Our Chai Freddo is blended with Brain’s Dutch Cocoa and topped
with whipped cream. Exotic and delicious.
Iced Coffee Classics
Iced Coffee: Our freshly-brewed, intensely flavorful coffee over ice.
Iced Latte or Iced Cappuccino: Our freshly-pulled espresso and foam poured with cold
milk over ice.
Iced Mocha: Rich espresso and Brain’s Dutch Cocoa are pulled and poured with cold
milk over ice.
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Iced Tea Classics
Iced Tea: Brain’s Summer House Iced Tea. A deliciously smooth blend.
Iced Chai Latte: Brain's Masala Chai poured with cold milk and foam over ice.
Jasmine Lime Iced Cooler*: Jasmine scented green tea is mixed with refreshing limeade and
served over ice.
Hibiscus Breeze Iced Cooler*: Known for a red color, this herbal blend of hibiscus flowers,
chamomile, and cinnamon is brewed with lemonade over ice.
Loose-leaf Teas (available at coffee houses only) - Tea by the Pot: We prepare an individual pot of tea
for you by first carefully measuring the leaf, then brewing it with filtered water at the correct
temperature for the tea you've chosen.
Tea Bags - Tea by the Cup: For tea on the go we offer a select line of proprietary teas in tea bags.
Freshness and proper water temperature are strictly adhered to, so the flavor of the tea is maximized.
Chai - Masala Chai Latte: Our Masala Chai is made with Brain’s own blend of teas and spices, lightly
sweetened, and served with freshly-steamed milk.
3.12 Coffee Roasting Description
Brain Coffee will offer a wide selection of fresh-roasted whole-bean coffees (which can be ground on
the store premises and carried home in distinctive packages). Additionally, the freshly-roasted coffees
will be packaged for sale at drive-thru stores, and for supplying Brain Coffee’s specialty wholesale
sales accounts.
Brain Coffee Co. will consider the roasting of its coffee beans to be an art form. Each batch will be
roasted in a powerful gas oven for 12 to 15 minutes. Highly trained and experienced roasting
personnel will monitor the process, using both smell and hearing, to judge when the beans are
perfectly done because coffee beans make a popping sound when ready. Brain's standards will be so
exacting that roasters will test the color of the beans in a blood-cell analyzer and discard the entire
batch if the quality is not on target.
On a daily basis, Brain Coffee’s chief roaster will check coffee samples from the roasting process,
sniffing the aromas, tasting sample cups, and recording his observations in a logbook.
Initially, Brain Coffee may have roasted beans supplied from a supplier that meets quality standards.
But this will only be temporary until Brain’s roasting facilities are in place and producing the quality,
quantity and freshness of product needed to supply service formats.
3.13 Brainiac Frequent Shopper Program Description
It is planned that Brain Coffee Co. will implement a Frequent Shopper Program (FSP) using the
‘Brainiac Card’ (bar coded frequent shopper card).
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The main purpose of the FSP is to gather data on the customer base, analyze the data as part of
category management, implement it as part of the marketing program and reward, retain and build
brand loyalty with customers. It will be critical to continue to send added-value offers to best
customers.
It is anticipated that Brain’s customers will be divided into heavy-user, moderate-user, and light-user
segments. Consequently, the 80/20 principle (Praedo’s Law) holds that a big percentage of revenues
(roughly 80%) will come from a relative small, loyal percentage (around 20%) of total customers. By
using a FSP, Brain expects to retain many of these customers by offering incentives and rewards.
Additionally, the FSP databases allow Brain to determine the effectiveness of promotions and to
selectively mail promotions instead of mass mailing to the entire customer base. This customer
purchasing data provides information about a store's customers and can be used to develop
proprietary marketing analysis which can distinguish trends within the customer base.
3.14 Other Product Description
As mentioned above, Brain Coffee Co. will carry coffee-related hardware and equipment for sale to
the consumer, and a variety of branded apparel such as shirts, caps, sweatshirts, jackets, mugs, and
other merchandise.
3.2 SERVICE DESCRIPT ION
Brain Coffee Co. wants to develop enthusiastically satisfied customers all of the time. This is achieved
through great products, but sustained with a service-oriented superior workforce. A good worker
means good service. Brain Coffee will always serve customers quickly and treat them with the
respect and courtesy that will build brand loyalty.
In addition to fast, accurate and friendly service, Brain will aim to provide customers with highly
enthusiastic, educated advice on coffee, drinks and drink preparation.
The main venue for providing Brain Coffee services will be retail coffee houses and drive-thru units.
3.21 Coffee House Format Service Description
Brain Coffee Co. will provide its coffee house customers with exceptional, fast and knowledgeable
service in an upscale, amenity-filled environment. Brain will serve up good coffee, specialty drinks,
bakery goods, and a comfortable and well-kept store. Some of the coffee house services available to
Brain Coffee Co. customers are listed below:
• Exceptional, personalized service
• All drinks prepared accurately within 5 minutes, or free
• Free refills on selected ‘coffee of the day’ (available between 6AM-10AM, M-F)
• Daily sampling of drinks and bakery items
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• Coffee educational programs
• Small stage for music artists and other performing arts
• Daily newspapers from around the world
• Digital jukebox for selecting music
• Six to eight public DSL Internet connections
• One public computer with DSL Internet connection
Hours of operation for coffee house stores will be 6:00 AM - 11:00 PM, seven days a week.
3.22 Espresso Drive-Thru Format Service Description
Convenience is obviously a key reason that Brain Espresso Drive-In business will succeed in offering
customers a great coffee drinking service. But Brain Coffee Co. will also provide customers with
exceptional, fast and knowledgeable service in an upscale, amenity-filled drive-thru environment.
Brain will serve up good coffee, specialty drinks, bakery goods, and a convenient and modern drivethru format. Some of the Brain Espresso Drive-In services available to customers are listed below:
• Well designed, easy to read menu boards
• Automated two -way communication ordering
• Personalized attendant ordering and post-ordering service (peak hours)
• Duel ordering bays and a walk-up ordering window
• Exceptional, personalized service
• All drinks prepared accurately within 5 minutes, or free
• Outdoor sound system for music
Hours of operation for all drive-thru units will be 6:00 AM - 11:00 PM, seven days a week.
3.3 COFFEE CATERING AND COFFEE VENDOR SE RVICE DESCRIPTION
As business increases and the demand for Brain coffee products rises, Brain will offer coffee catering
services within its marketing areas. Catering services will be marketed to businesses, social event
organizers, promotional event organizers, and catering companies who wish to serve the best coffee
drinks.
3.4 INTERNET SITE S ERVICE DESCRIPTION
Given the target market of young adults and adults age 16 - 54, the Internet should prove to be a
successful tool for providing customers with access to information, service and products. A majority
of Brain customers will have Internet access, and will be very Web-savvy. Initially, the Brain Coffee
Co. Internet site will offer information about the company, its products, its services, and its news /
events.
In its second phase, Brain’s Web site (www.braincoffee.com) will plan to offer:
• E-commerce capabilities for selling exclusive Brain products such as:
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- Special Brain Coffee blended coffees
- Branded apparel
- Brain Coffee Gift Cards
• Online filing of customer service issues
• CRM capabilities for providing
customer specific services via
Brainiac Card data
• Customer registration to win
giveaways and sweepstakes
• Employee Intranet
• Vendor / Supplier Intranet, and
eventually,
• Franchisee Intranet
The Brain Internet / Intranet site will be a powerful tool for sharing information and facilitating a
number of communications and transactions. To maximize efficiency, it is planned that the site and
its contents be integrated with Brain’s ERP system (see Technology section below).
3.5 SUPPLIERS & VENDORS
At this time, suppliers and vendors for Brain Coffee Co. have not been finalized. However, there are a
wealth of eager, dependable and reasonable suppliers of roasted coffee, paper products, roasting
equipment, dairy products that can meet Brain’s needs. Additionally, some of these supplier may be
willing to provide consulting and/or financial assistance during the start-up phase.
3.6 TECHNOLOGY
Regarding customer service, as mentioned above, Brain Coffee Houses will feature high-speed DSL
Internet access, and the company will provide a database-driven public Internet site.
The final decision on an Enterprise Resource Package (ERP), or software needed to manage the
business, has yet to be made. However, Brain is looking at an Internet-based solution such as Oracle’s
NetSuite, integrated with a Point-of-Sale package such as the industry-specific Coffee Shop Manager
software and hardware components.
3.61 Oracle’s NetSuite Web-Based ERP Solution
NetSuite is the only mid-market application offering that combines customer-facing CRM and Web
capabilities with back-office ERP capabilities in a single powerful application, allowing users to unite
disparate departments with one system. NetSuite automates all key business processes -- from lead
generation to sale orders, from product shipment to customer service -- across your entire company
and through trading partners. Since all corporate data is held in a single Web-based system,
executives access one real-time view of all key business metrics, enabling better, faster decisions in an
increasingly competitive landscape.
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As a Web-based, hosted solution, NetSuite significantly reduces total cost of ownership. There is no
software to install, no hardware to purchase and maintain, and no upgrades requiring complex reimplementation over time. NetSuite's team of IT professionals manages maintenance, support, and
upgrades at a world-class data center. As a result, Brain Coffee can focus on running its business,
while NetSuite runs its software.
3.62 Coffee Shop Manager
More cost effective than a large scale generic restaurant software, runs on a Pentium 100 or higher
PC, requires little hard drive space, and uses industry standard touch screen and cash drawer
attachments. Pole display and receipt printer are also available.
3.7 EMPLOYEE TRAININ G
Accommodating fast growth plans will mean putting in systems to recruit, hire, and train baristas
and store managers. Brain Coffee executives will use some simple guidelines in screening candidates
for new positions to include people that are passionate about coffee, and who enjoy what
they're doing and for whom work is an extension of themselves.
Every partner/barista hired for a retail job in a Brain Coffee store will receive at least 24 hours
training in the first two to four weeks. The training will include classes on coffee history, drink
preparation, coffee knowledge (four hours), customer service (four hours), and retail skills, plus a
four-hour workshop called "Brewing the Perfect Cup." Baristas will be trained in using the cash
register, weighing beans, opening the bag properly, capturing the beans without spilling them on the
floor, holding the bag in a way that keeps air from being trapped inside, and affixing labels on the
package exactly one-half inch over the Brain Coffee logo.
Beverage preparation will occupy even more training time, involving such activities as grinding the
beans, steaming milk, learning to pull perfect (18 to 23 second) shots of espresso, memorizing the
recipes of all the different drinks, practicing making the different drinks, and learning how to make
drinks to customer specifications. There were sessions on how to clean the milk wand on the espresso
machine, explain the Italian drink names to customers, sell a $500 home espresso machine, make eye
contact with customers, and take personal responsibility for the cleanliness of the coffee bins.
Everyone will be drilled in the Brain Skills, three guidelines for on-the-job interpersonal relations:
(1) maintain and enhance self-esteem,
(2) listen and acknowledge, and
(3) ask for help.
And there will be rules to be memorized: milk must be steamed to at least 150 degrees Fahrenheit but
never more than 170 degrees; every espresso shot not pulled within 23 seconds must be tossed;
customers who order one pound of beans must be given exactly that -- not .995 pounds or 1.1
pounds; never let coffee sit in the pot more than 20 minutes; always compensate dissatisfied
customers with a Brain Coffee coupon that entitles them to a free drink.
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Additionally, management trainees attended classes for 8 to 12 weeks. Their training will be much
deeper, covering not only the information imparted to baristas but also the details of store operations,
practices and procedures as set forth in the company's operating manual, information systems, and
the basics of managing people. Brain Coffee's trainers will be store managers and district managers
with on-site experience. One of the major objectives will be to ingrain the company's values,
principles, and culture, and to impart knowledge about coffee and passion about Brain Coffee.
When a Brain Coffee opens stores in a new market, it will undertake a major recruiting effort. Eight to
10 weeks before opening, the company will place ads to hire baristas and begin training. Brain Coffee
will send a team of experienced managers and baristas from existing stores to the area to lead the
store-opening effort and to conduct one-on-one training following the company's formal classes and
basic orientation sessions.
3.8 FUTURE SERVICES
Brain Coffee Co. plans to add future services to include the development of a specialty wholesale
sales and marketing effort, and franchising and/or licensing programs.
3.81 Wholesale Coffee Sales
As Brain Coffee retail store operations stabilize, and coffee roasting grows, Brain will have a specialty
wholesale sales group or broker group to market coffee products to restaurants, airlines, hotels,
universities, hospitals, business offices, country clubs, and select retailers.
In addition, Brain will make arrangements to supply exclusive coffee blends to key grocery or
convenience store accounts and possibly a key bookstore account,. Also, Brain Coffee specialty
wholesale sales group will negotiate coffee service at the same key accounts.
3.82 Franchising
Within a year, Brain Coffee Co. will begin to develop plans to license or franchise the successful Brain
concept. There are benefits to licensing, but franchising has proven to be the best short-term solution
to aiding a company in growth and funding.
Licensing agreements will allow for greater control of the brand and the operation of each licensed
store. Brain Coffee will receive a license fee and a royalty on sales at these locations and supplied the
coffee for resale in the licensed locations. All licensed stores will have to follow Brain Coffee's
detailed operating procedures, and all managers and employees who work in these stores will
receive the same training given to Brain Coffee managers and store employees. Licensed
arrangements will likely cost Brain development monies and management expenses in return for
greater control.
However, to a prospective franchisee, franchising substantially reduces business risk. Government
statistics show that less than 20% of independent small business owners ever succeed, while over 90%
of all franchise businesses successfully remain in operation. Being part of a franchise system allows
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business owners to bypass many of the initial hurdles associated with starting a business, and
provides them with ready access to accepted brand names and trademarks, a proven operating
system, on-going support, purchasing power, extensive training programs, and a track record of
success. Franchising allows the franchisee to be in business on his or her own, but not alone. Brain
Coffee plans to be a franchise company that truly provides the organization, experience, and support
for attaining the entrepreneurial formula for success.
Again, franchising has proven to be the best short-term solution to aiding a company in growth and
funding with the sacrifice of some control. However, to ramp up its franchise operations, Brain plans
to initially recruit franchisees that are:
• Company managers who wish to own and operate their own business -- Solid performing
managers may be offered financial assistance from Brain to open franchise stores.
• Company employees, parents of employees and relatives of employees
• Brain customers
Although franchising individual coffee house or drive thru locations will be considered, it is likely
that Brain Coffee will want to offer franchisees marketing areas to open a minimum of one coffee
house location with 6-8 drive-thru locations. Under a franchise agreement of this nature, franchisees
must have a minimum net worth of $1,000,000 and a minimum of $350,000 in liquid assets to qualify.
Brain Coffee Co. franchising fee for a marketing area are planned for $50,000 - $125,000 (depending
on the marketing area), with ongoing royalty fees of 6 - 7 percent and a renewable 15 year agreement
term. Additionally, Brain Coffee will generate income from the sale of product and supplies to each
franchisee.
4.0 MARKET ANALYSIS & INDUSTRY OVERVIEW
Brain Coffee Co. will be classified in the specialty coffee sector which is in the retail restaurant
industry. The specialty coffee industry is undergoing its most rapid growth in history. America’s love
affair with specialty coffee has exploded into a $7 billion industry whose growth shows no sign of
slowing down. The growth is being driven by an emerging coffee culture. The National Coffee
Association reports that in 2001 there were 142 million Americans, or 62% of the population, drinking
specialty coffees as compared with 2000 which showed that 121 million Americans, or 53% of the
population consumed these types of beverages -- an increase of 21 million in just one year. Once
coffee drinkers have tried specialty coffee, there is no going back because the simple fact is that
specialty coffee tastes better.
The market is experiencing a coffee-drinking public that recognizes, appreciates, and demands
specialty coffee. This all adds up to an increased popularity of the specialty coffee retailer and the
products they offer. With high quality specialty and espresso-based coffee drinks, a commitment to
uncompromising quality, and a team of professionals committed to operational excellence, Brain
Coffee Co. is well positioned to take advantage of this booming coffee culture.
Other notable facts about coffee market size, growth and coffee consumer demand trends are:
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• US is the largest coffee consuming nation with 26% of world’s coffee imports
• Retail Coffee Sales total 9.2 billion dollars annually
• 23% was specialty coffee
• By the cup, coffee sales are projected at 8.7 billion dollars
• 38% will be specialty coffee
• 50% of Americans drink coffee
• Coffee houses cause strongest increase in coffee consumption
• Mergers allow commercial coffee to enter specialty markets and vice versa
What follows is an objective analysis of the specialty coffee industry sector, detailing the five forces
and driving forces that impact the sector.
4.1 FIVE POINT ANALY SIS OF SPECIALTY COF FEE SECTOR
4.11 High Rivalry
The degree of competition is high. The number of coffee houses in USA was only 500 in 1992, but is
expected to reach 18,000 units by 2004. Moreover, there are many other restaurants which serve
coffee also. Therefore, there are so many competitors in this industry. Another thing is that the
consumers can switch brands easily. The cost of switch is low. The customers can change and choose
any brands in the market.
4.12 Low Barrier to Entry
It is easy for the new entrepreneurs such as Brain Coffee Co. to join this specialty coffee market. The
start up cost is low. The new entrants just need to invest as little as $150,000 for a 600 to 1,000-squarefoot coffee house, or as little as $40,000 for a drive-thru unit. Moreover, to run this kind of business, it
does not need to specialize in high technology and specialized know-how. Normally, the customers
have low brand preferences and loyalty. If there is a better coffee house, they can shift from the old
brand immediately. Therefore, the barrier to entry is low.
4.13 High Substitute Product
The degree of substitute products is very high. The customers can choose and consume other
beverages instead. There are many other restaurants that sell not only food but also coffee and
beverages. Moreover, people can make coffee and beverages at their home. The beverages that sell in
the retail shop and supermarket are substitute products as well.
4.14 Low Supplier Power
The degree of supplier power is low. Coffee grows in more than 50 countries; for example, Brazil,
Columbia, Jamaica, Central America, India and Indonesia. The coffee house can buy coffee anywhere
around the world because the coffee is similar. Therefore, if the coffee houses do not satisfy with the
quality or price of coffee bean, they can change to the better one. The cost to switch is not high. In
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addition, the trend of world coffee production is high. In the year 1996, the world production was
103,371. In 1998, the world production was 106,875. However, in some years the world production is
a little bit lower because of the natural phenomenon.
4.15 High Buyer Power
The customers have high power to bargain with the coffee houses. Since there are many coffee
businesses and substitute products, the customers can choose the right one for them. If they feel
uncomfortable, they will go out to other coffee services or products. The cost of shifting is low. As
mentioned before, around half of USA population consumes coffee. However, the substitute products
and coffee services are high also.
In conclusion, from the analysis, this industry is challenging. As mentioned before, the competition is
very high. The barriers to entry are low. The opportunities to own business appeal to many people.
However, the risks in this industry are great. In the first year of operation, one half of all new coffee
concepts fail. The customers have high power. The number of substitute product is large. One thing
that seems to be good for this industry is that there are many suppliers. The firms can select the
suitable one. Therefore, to run business in this industry, the management must be focused on
survival and growth.
4.2 DRIVING FORCE OF SPECIALTY COFFEE SECTOR
There are many factors that influence this industry as the following:
4.21 Economic Conditions
The economy is the main factor that affects the industry. When the economy is great, people tend to
spend more because they can earn more. Therefore, the trend of eating/drinking out is high if the
economy is expected to be good. In contrast, if the economy is down, people tend to save money and
spend on the necessary goods. They rarely go out for dinner or drinks they can make at home.
4.22 Natural Phenomenon
Natural phenomenon is the one factor that influences the industry. Weather changes affect the coffee
crop. The dry weather and hurricanes will reduce the production of coffee crop. This causes the high
price of coffee bean. Then the consumers have to spend more for higher price.
4.23 Demographic Changes
The demographic changes can influence the industry also. As mentioned before, the baby boom
generation prefers to go out for a meal and drinks. There are more working women who prefer
picking up coffee on the go and eating out. There are more one person households because the rate
of divorce is high and more individuals marrying later in life. This results in more dinning and
drinking outside the home. The people who are more than 60 years old stop drinking coffee because
they think about their health. The people who are 21 - 59 years old like to drink coffee.
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4.24 Lifestyle Changes
The change of life style can change the characteristic of industry. Within the recent years, the
American people consider on the health more than in the past. The health conscious can reduce the
sale of coffee and coffee drinks. The caffeine is addictive and causes diseases. In the future, if the
relevant association can discover that coffee is a big cause of death and appeal people to not drink
coffee, the sales of coffee will be down.
4.25 Globalization
Globalization increases the opportunity for this industry. The expansion can generate higher sales
and profit. In addition, to penetrate the international market, the product innovation and new
distribution channels are the crucial strategies. The acquisition, joint venture and dual branding
strategies are used to cut down the competition.
4.3 DEFINING THE MAR KET & MARKETING AREA
Starbucks Coffee is the market leader because they have created a demand for specialty coffee,
expanded quickly, and obtained the largest market share. Brain Coffee Co. will take advantage of
Starbucks’ public information to help define each marketing area Brain hopes to penetrate.
In Santa Clarita, CA, Starbucks currently has 20 retail units (including 4 new stores) producing
approximately $13.2 million in annual sales. Given that Starbucks commands about a 60 percent
market share, that would make the total Santa Clarita market at approximately $22 million in annual
sales.
Within 18 months of launch, Brain Coffee Co. plans to penetrate the total market share for specialty
coffee in the Santa Clarita by six percent, and to penetrate Starbucks’ market share by 10 percent. This
penetration will produce approximately $1.32 million in annual sales by July of 2005. However, based
on the high economic growth of the area, the growth of the specialty coffee market, and the capacity
of each Brain unit, annual sales could easily reach $2 million by July 2005.
4.4 MARKET SEGMENTAT ION
Brain Coffee views the aging Baby Boomer market as too big and influential to ignore. Currently at
their peak earning years, Baby Boomer households account for 63% of the 8.3 million households
with incomes of $100,000 or more. Because of their absolute numbers, this generation is virtually
guaranteed to have a major impact on Brain’s sales. Baby Boomers account for about 113 million
people born between 1946 and 1965.
Rivaling the Baby Boomers in population size with over 60 million, Echo Boomers (people born
between 1979 and 1994) have not only demographic muscle but also considerable consumer clout that
Brain will hope to capture. Changing household patterns and the presence of two working parents
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are giving Echo Boomers more say in family purchasing decisions. On the receiving end of the
benefits of the longest bull market in U.S. history, Echo Boomers have more money to spend than had
any of the previous generations at their age.
Rounding out Brain’s market is Generation X , which accounts for about 57 million people born
between 1965 to the late 1970s. Generation X was the first large group to experience day-care and the
effects of widespread parental divorce, and they have more egalitarian views of gender roles than the
general population. This group reacts strongly to peer influences, and has tended to delay marriage
and careers, accept cultural diversity, and value the quality of personal life over work life.
Finally, Brain Coffee Co. will not ignore segmenting the market by ethnic group. America's racial and
ethnic makeup is changing dramatically, especially in Southern California. By 2050, nearly half of the
population will belong to nonwhite minority groups. The largest and fastest-growing racial/ethnic
groups are African-Americans, Hispanics, and Asian Americans. Spending by these groups is rising
faster than for the general population, and although Brain has no short-term plans to market
specifically to these segments, it will be careful not to over-generalize communications to these ethnic
groups.
4.41 Primary Market - Younger Baby Boomer Segment (Age 38-54)
The Baby Boomers will likely be Brain’s most loyal customers, visiting a store 15 to 20 times a month
and spending $50+ monthly.
Generalized characteristics of this customer are:
• Slightly more males to females
• Working and commuting
• Time crunched and time valued
• Values convenience over price
• Business meeting and social meeting coffee drinkers
• Discriminating pallet for coffee
• Desires to stay hip and not get old
4.42 Secondary Market - Older Echo Boomer Segment (Age 16-24)
Generalized characteristics of this customer are:
• Equal male to female ratio
• Schooling, working and commuting
• Time enabled
• Values practicality and reasonable price over image
• Social meeting and cultural event coffee drinkers
• Less discriminating pallet for coffee
• Desires to avoid corporate America
4.43 Secondary Market Generation X Segment (Age 24-37)
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Generalized characteristics of this customer are:
• Equal male to female ratio
• Working and commuting
• Values personal time
• Business meeting, social meeting and cultural event coffee drinkers
• Less discriminating pallet for coffee
• Desires to cluster with own
4.5 MARKET NEEDS
Factors such as current trends, addiction, and historical sales data ensure that the high demand for
specialty coffee will remain constant over the next five years. The rapid growth of the specialty coffee
market has created needs and demands by consumers.
Given the cynical attitude toward the dividing and conquering Starbucks and the sheer number of
consumers and commuters, preliminary research indicates the target market desires the following:
• A dependable brand that offers the speed and convenience of several drive-thrus
• A smarter, hipper, higher quality alternative to the corporate coffee store
• Enthusiastic and knowledgeable coffee drink service
• A service that will point out the difference between average coffee and excellent coffee
• A brand that recognizes and rewards customer loyalty
4.6 COMPETITION AND CONSUMER BUYING PATT ERNS
By 2004, there could be an estimated 18,000 specialty coffee outlets in the United States. And
Starbucks' success has prompted a number of ambitious rivals to scale up their expansion plans.
Observers believe there is room in the category for two or three national players, maybe more.
However, Starbucks' closest competitor, Second Cup, a Canadian franchisor with stores primarily in
Canada, was less than one-third its size; Second Cup owns Gloria Jeans, a franchisor of specialty
coffees, with stores located primarily in malls throughout the United States. And no other rival had
as many stores as Starbucks, but there were at least 20 small local and regional chains that aspired to
grow into rivals. Most notably New World Coffee, Coffee People, Coffee Station, Java Centrale, and
Caribou Coffee.
Observers expected many of the local and regional chains to merge in efforts to get bigger and better
position themselves as an alternative to Starbucks, but this has not developed.
In Santa Clarita Valley of Southern California, Starbucks is the dominating competition with up to 20
stores and more in the planning stages. Looking at the list of Santa Clarita specialty coffee
competitors, we see:
• 20 Starbucks retail stores -- total company-owned or licensed (including two drive-thrus)
• 4 Newhall Coffee Roasting Co. locations (one coffee house and three drive-thru units)
• 1 Brain's Coffee & Tea coffee house
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• 4 to 6 other single location coffee retailers or kiosks
In addition, numerous restaurants have picked up on the growing popularity of specialty coffees and
have installed machines to serve espresso, cappuccino, latte, and other coffee drinks to their
customers.
5.0 COMPANY STRATEGIES
The following are Brain Coffee Co. company-wide strategies to be used to accomplish overall
company objectives and goals. These are core strategies, and in future versions of this plan, and
ongoing business plans, Brain Coffee will expand on methods and programs for effective strategy
implementation.
5.01 Management Strategy
Since people will make or break a service business, Brain Coffee Co. will make employee and
management concerns a top priority. It will offer health care benefits for part time employees as
same as full time employees. Moreover, profit sharing will be used to attract the workers to put effort
on their jobs.
The strategy will be to create the feeling that the employees are the partners. Brain will thoroughly
train its employees in order to maintain product and service quality. In addition, the management
will empower the employees to implement their jobs.
5.02 Customer Service & Loyalty Strategy
Brain Coffee Co. provides customer satisfaction at almost any cost. Employees will be trained to
realize that the customer is the king. Additionally, employees will be challenged to remember regular
customers’ drink preferences. The employees will just say, ‘yes.’ Brain will expand the outlets and
stores in order to reach to as many customers as possible.
In addition to on-site customer service, the customer service and loyalty strategy of using the Brainiac
Card (FSP) as the core to building customer loyalty and retaining best customers. The Brainiac Card
(FSP) will be used in unique and exciting ways to reward customers for patronizing Brain Coffee.
5.03 Positioning, Marketing, Advertising, Promotional & Internet Communications Strategy
Unlike Starbucks using little advertising, and relying on word of mouth to expand its reputation.,
Brain Coffee will use marketing, advertising, promotional communications to quickly and effectively
tell the market that its coffee service has the highest quality and the greatest convenience.
Brain Coffee’s communications strategy will be to aggressively speak to prospective customers using
outdoor, radio, print, point-of-purchase, direct mail, and Internet-based tools to secure a place in the
consumers mind for high quality and convenient coffee service.
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It is important to note that marketing/advertising/promotional costs for entering a market area will
be high to realize market penetration. Likewise, Frequent Shopper Program (FSP) costs will be high
during the same period. However, as Brain achieves market share, the advertising costs will be
reduced and spending shifted to FSP marketing efforts to maximize marketing spending on Brains
best and most profitable customers.
5.04 Local Social Hub Strategy
The local social hub strategy focuses on building a social environment for Brain Coffee customers. A
social environment that features popular local young adults as employees and provides
entertainment will serve to attract customers to the coffee house and drive-thru units.
Once on location at Brain Coffee stores, customers will be charmed by its employees’ enthusiasm and
will make plans to bring friends, co-workers, business associates and family members to enjoy the
coffee and service.
5.05 Expansion & Top Location Strategy
The expansion strategy will include local, regional and national expansion. Brain will be committed
to securing top locations so as to be situated in high traffic areas in order to get high volume of
customers. Initially, expansion will be funded through start-up monies and then profit from existing
stores. Then, regional and national expansion will be accomplished through joint ventures,
franchising coupled with owned stores in key marketing areas.
5.06 Product Development Strategy
Brain Coffee must research and develop appropriate products for customers on an ongoing basis. At
first , Brain will focus on particular beans and blends of beans that will serve the market’s needs and
differentiate Brain from competitors. Then, Brain will streamline its menu of drinks and bakery items,
creating brand signature products that have the greatest appeal. Next, Brain will look at coffeeoriented home goods, apparel, Internet products and direct mail merchandise as the customer base
grows.
5.07 Joint Venture Strategy
Brain Coffee’s strategy for Joint ventures could prove to solve many expansion issues by securing
partnerships with:
• Independent grocery store, convenience store, hardware store, automotive service chains
and regional colleges, hospitals and amusement/event venue for drive-thru site
locations, store licensing/franchising opportunities and wholesale distribution
• Retail strip mall real estate developers for drive-thru site locations
• Record label for co-marketing opportunities
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5.08 Franchise / Licensing Strategy
As mentioned in section 3.92 of this plan, Brain Coffee will begin to develop plans to license or
franchise the successful concept. There are benefits to licensing, but franchising has proven to be the
best short-term solution to aiding a company in growth and funding.
5.09 Reduce Construction & Store Opening Cost Strategy
Projecting initially high store opening costs, Brain Coffee will focus on reducing store construction
and opening costs using better planning, greater vendor efficiencies, smarter purchasing and greater
modular solutions.
5.1 COMPETITIVE EDGE & NICHE MARKET
Based on the market’s needs, Brain Coffee Co. plans to enter the Santa Clarita, CA marketing area
with a combination of coffee house and high-end drive-thru units. This will make the Brain Coffee
brand the most convenient and accessible specialty coffee service in the area.
The Los Angeles metropolitan area has one of the most mobile commuting work forces in the world.
Los Angeles commuters place a high emphasis on convenience, and use drive-thru fast food facilities
more than the majority of large metro areas in the U.S. Brain Coffee’s Espresso Drive-Ins will
leverage this consumer need better than any competitor in its marketing areas.
Summarizing its competitive edges, Brain differentiates itself from the corporate-coffee cafes by
providing its customers with:
• Greater brand convenience and accessibility within its marketing areas because
of drive-thru locations
• Local, community- based operations and staffing
• Better quality coffee and espresso drinks than Starbucks
• Demonstrating and educating on better quality drinks
• Bold advertising, marketing and promotional communications
• High-end technology that offers a sophisticated and rewarding FSP
And with these competitive features, Brain Coffee will effectively position itself as a niche player
between the corporate machine of Starbucks and the host of smaller, less sophisticated ‘mom and
pop’ coffee house and drive-thru concepts.
5.2 BRAND POSITIONIN G
Based on Brain Coffee’s competitive advantages and niche in the market, and crafted to appeal to the
target market and their needs and desires, a brand positioning statement is as follows:
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Brain Coffee Co. Coffee Houses and Espresso Drive-Ins are for busy, sophisticated commuters
that have discerning tastes for excellent coffee drinks. Brain’s smart in-store and drive-thru
concepts, and its fine coffee and espresso drinks, are served quickly by knowledgeable baristas
in a hip and upbeat environment. Unlike our most aggressive competitor, Brain Coffee Co.
provides a local appeal, high-end drive-thru units and a rewarding FSP to serve its customers.
When customers think about Brain Coffee Co., the concept will be positioned in the
consumer’s mind as a refreshing, clever, convenient, drive-thru alternative to the corporate
offering of specialty coffee.
A shorter less formal version of Brain Coffee’s positioning is:
Brain Coffee Co. Coffee Houses and Espresso Drive-Ins are for sophisticated, busy people that
want the best coffee drinks, served quickly by hip and knowledgeable people at really
convenient places. Unlike Starbucks, Brain offers a local appeal with value-added features,
making it a smarter choice.
Potential positioning taglines to be used in marketing, advertising and promotional communications
may be:
Get a Brain.
Better.. Faster. Smarter.
If you only had a Brain.
Better, faster and less obtuse.
Please refer to section 5.6 of this plan (Marketing, Advertising and Promotional Communications) to
see examples of messages that will support the above stated brand positioning effort.
5.3 MARKETING STRATE GY PYRAMID
The Brain Coffee marketing strategy pyramid emphasizes the practical importance of building a solid
marketing plan structure. Most marketing plans are developed from the top-level strategy first.
Brain’s strategy focuses on specific markets, market needs, and product or service offerings. The
tactics follow and set the marketing message and the way it should be transmitted. Then, specific
programs provide the implementation. The top-level Brain Coffee marketing strategies are:
1. Attract existing specialty coffee customers
(Starbucks, Brain's, and ‘mom and pop’ concepts)
2. Legitimize Brain Espresso Drive-In drive-thru specialty coffee concept
3. Promote Brainiac frequent shopper program (FSP)
4. Project local and community-oriented company image
5. Retain customers using FSP methodology
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The following subtopics provide an overview of Brain Coffee’s five key marketing strategies. Please
refer to section 5.6 of this plan (Marketing, Advertising and Promotional Communications) to see
examples of messages that will support the strategies and methodologies outlined below.
5.31 Attract Existing Specialty Coffee Customers
To launch a viable start-up business, Brain Coffee must attract existing specialty coffee customers
(Starbucks, Brain's, and ‘mom and pop’ concepts). The majority of these customers are Brain’s
primary target market of younger Baby Boomer working commuters, age 38-54.
This segment will generate Brain Coffee’s most loyal customers, because they visit a store 15 to 20
times a month and spending $50+ monthly. Again, generalized characteristics of this customer are
slightly more males to females, working and commuting lifestyle, time crunched and time valued,
prefers convenience over price, are business meeting and social meeting coffee drinkers, are
discriminating pallet for coffee, and desires to stay hip and not get old.
Brain Coffee’s strategy is to attract these customers using the following marketing methodologies:
• Outdoor advertising
• Radio advertising
• Mass direct mail
• Highly visible signage and locations
5.32 Legitimize Brain Espresso Drive-Ins
Brain Coffee’s market wants convenience, but they want to be reassured that a drive-thru specialty
coffee concept also offers the same quality product they would receive in a coffee house. So, to
legitimize Brain’s Espresso Drive-Ins, a message will be crafted using the following marketing
methodologies:
• Outdoor advertising
• Radio advertising
• Mass direct mail
• Highly visible signage and locations
5.33 Promote Brainiac Frequent Shopper Program (FSP)
At the core of Brain Coffee’s future marketing efforts, you will find the Brainiac Card Frequent
Shopper Program (FSP). Brain’s FSP is described in Section 3.13 above, but to realize this strategy
Brain must promote, register customers, and execute usage of the card. Brain will accomplish this
using the following methodologies:
5.331 FSP Promotion - Obviously, Brain Coffee must promote the benefits of the FSP to
customers such as free drinks, sweepstakes point accumulation. automatic entry to win
giveaways, etc. This will be accomplished by crafting messages for:
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• Outdoor advertising
• Radio advertising
• Mass direct mail
• Point-of-Purchase signage and flyers
• On-site staff promotion
5.332 FSP Registration - As customers learn of the benefits of the FSP, they will be prompted
to register to acquire a Brainiac Card. The registration process must be quick and simple, yet
gather enough information so that Brain can effectively market to customers. Although a final
application has not been decided on, it would likely feature the following:
• Bar coded application with bar coded card
• Required customer information for customer name, sex, birth date, address,
e-mail (with opt-in), and phone number.
• Optional information for customer preferences
this
5.333 FSP Execution - Executing the FSP on the store level will be critical to this effort. Brain
Coffee staff must promote the FSP, register (or sign-up) new customers, and request that every
ordering customer scan their Brainiac Card every time they visit a Brain. To accomplish
day-to-day execution, and to speed-up this routine, Brain Coffee will:
• Provide ongoing training and incentives to staff
• Install automated technologies and processes
• Point-of-Purchase scanning hardware and signage
5.34 Project Local and Community-Oriented Company Image
Brain Coffee’s fourth strategy is to project a local and community-oriented image to customers using
the following marketing methodologies:
• Recruiting and hiring local, young, popular, good looking, and outgoing men/women
• Promoting local music talent and local musical events
• Sponsoring two or three of the most important local non-profit annual events
• Point-of-Purchase event sponsorship signage and flyers
5.35 Retain Customers Using FSP Methodology
Brain Coffee’s fifth strategy, based on our FSP initiative, will be to use the customer purchasing data
to retain best customers using Customer Specific Offers (CSOs) and the following marketing
methodologies:
• Highly targeted direct mail promoting Customer Specific Offers (CSOs)
• Highly targeted and opt-in e-mail broadcasts promoting CSOs
• Internet site content making customers aware of CSOs
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• Point-of-Purchase signage and flyers promoting CSOs
• On-site staff promotion promoting CSOs
5.4 MARKETING, ADVER TISING AND PROMOTION AL COMMUNICATIONS
Based on Brain Coffee’s brand positioning statement outlined in section 5.2 of this plan, the
marketing, advertising and promotional communications will appeal to the target market’s needs
and desires.
Brain Coffee will develop compelling communications that speak to the target market with a brazen,
off-center and bold voice that will inspire brand awareness and market reactions. What follows are a
number of initial creative solutions for Brain’s entry into a given marketing area.
Please see next page for a small sampling of the proposed advertising and marketing efforts for Brain
Coffee Co. For more examples, please go to http://www.patrickfeld.net/braincoffee/
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Examples of Brain Coffee Advertising & Marketing Communications (above)
For more examples, please go to http://www.patrickfeld.net/braincoffee/
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Brain Coffee Radio Commercial
“That is Brilliant” :60
=========================================================================
SFX: Quirky, Monty Python-like, British music under throughout.
Brain Coffee Dude (with happy, surfer attitude): Welcome to Brain Espresso Drive-In, what can I get for you today?
Englishman (with unassuming, heavy English accent): Say, what is this? What do you have here?
Brain Coffee Dude: We are purveyors of the finest coffee and espresso drinks...
Englishman: You mean to tell me I can drive my car right up to this window and receive an excellent cup of joe?
Brain Dude: Absolutely!
Englishman: Why, that is brilliant! Just brilliant! Did you think this up?
Brain Dude: Actually sir, I didn’t...
Englishman: Say, what is this? Is this what I ordered just now? How did you do that?
Brain Dude: Well, we brew our coffee every 20 minutes, and I just pulled a perfect 23 second shot...
Englishman: Oh, that is extraordinary!
Brain Dude: Thank you! Our espresso beans are the finest...
Englishman: Say, this tastes incredibly fresh! How do you do that? Is the coffee actually grown in there?
Brain Dude: Sir, we don’t grow the coffee here. This is a single origin crop from Central America...
Englishman: Young man, what is this thing around my cup?
Brain Dude: It’s a cardboard jacket so your hand won’t get burned...
Englishman: Now that is quite clever! Quite clever indeed!
Anncr: When you need a brain, try Brain Espresso Drive-Ins. Now opening throughout Santa Clarita.
SFX: Car horns beginning to honk.
Englishman: Now what? Do I simply drive away? Who would have thought...
Brain Dude: Yes sir... Enjoy your day, sir... (yelling) See ya, bro!
SFX: Ronny Montrose like guitar riff zinger!
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Anncr: Get a Brain. Brain Espresso Drive-In.
========= End Radio Spot ========
5.5 PRICING STRATEGY
Brain Coffee’s pricing strategy for coffee house stores and drive-thru stores will be fairly simple.
Brain will set prices according to Starbucks’ pricing in the given marketing area. Brain Coffee will not
compete on price, but will offer FSP customers discounts and incentives.
Regardless of the products or services Brain Coffee sells to the market, its pricing will always follow
the market leader’s (Starbucks) pricing. Franchising and licensing fees will also be set to the market
leader’s pricing. The only exception may be in the introductory period of Brain Coffee’s specialty
wholesale sales. Where wholesale and suggested retail pricing be set low to help build sales and
market acceptance.
5.6 SALES STRATEGY
As a retail establishment, Brain Coffee Co. will employ people to handle sales transactions. Service
employees will be trained to suggestively sell additional products above and beyond a customer’s
drink order to increase average sales per customer. At the store level, Brain Coffee’s priority will be to
service customers, but servicing customers also means selling them what products and services are
best to meet customers’ needs.
Computer literacy will be a requirement for Brain Coffee Co. employees. If an employee does not
possess basic computer skills when they are hired, they will be trained by store managers. Brain
Coffee’s commitment to friendly, helpful service is one of the key factors that will distinguish Brain
Coffee Co. from competitors.
5.7 PRODUCT SALES MI X
Starbucks’ retail sales mix is roughly 61 percent coffee beverages, 15 percent whole-bean coffees, 16
percent food items, and 8 percent coffee-related products and equipment.
By year 3 of operations, Brain Coffee’s company-wide product mix projects to be 62 percent coffee
beverages, 12 percent whole-bean coffees, 11 percent food items, 2 percent coffee-related products
and equipment, and 13 percent coming from wholesale income and franchising/licensing/royalty
fees.
Brain Coffee’s product mix in each store will vary, depending on the format (coffee house or drivethru) size and location of each outlet. Coffee house stores will carry a greater variety of whole coffee
beans, gourmet food items, teas, coffee mugs, coffee grinders, coffee-making equipment, filters,
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storage containers, and other accessories. Smaller drive-thru stores will typically sell a full line of
coffee beverages, a limited selection of whole-bean coffees, and a few hardware items.
5.8 PRELIMINARY SALE S FORECAST
A preliminary sales forecast data is presented in the table on the following page. For complete
financial details, refer to preliminary Brain Coffee Co. integrated financial spreadsheets attached.
Preliminary Sales Forecast Table
Sales/Percent
Year 1
Year 2
Year 3
Year 4
Year 5
Drink Service
$1,350,000/74.17% $4,050,000/73.05% $10,125,000/70.20% $15,187,500/62.59% $19,743,750/52.78%
Food Service
$156,000 /8.57% $507,000 /9.15%
$1,394,250 / 9.67% $2,439,938 /10.05% $3,415,913 /9.13%
Retail Coffee
$174,000 /9.56% $565,500 /10.20% $1,555,125 /10.78% $2,721,469 /11.21% $3,810,057/10.19%
Wholesale Coffee $20,000 /1.10%
$70,000 /1.26%
$245,000 /1.70%
$796,250 /3.28%
$2,388,750/6.39%
Catering Service $5,750 /0.32%
$17,250 /0.31%
$43,125 /0.30%
$64,688 /0.27%
$84,094 /0.22%
Home Goods
$27,000 /1.48%
$81,000 /1.46%
$202,500 /1.40%
$303,750 /1.25%
$394,875/1.06%
Franchise Income $75,000 /4.12%
$225,000 /4.06% $787,500 /5.46%
$2,559,375 /10.55% $7,038,281/18.82%
Online Goods
$12,500/0.69%
$28,125 /0.51%
$70,313 /0.49%
$193,361 /0.80%
$531,743 /1.42%
========================================================================================
Total Sales
$1,820,250
$5,543,875
$14,422,813
$24,266,331
$37,407,463
6.0 START-UP SUMMARY
Preliminary Start-Up and Start-Up Expansion funding of $3 million will be used in years one and two
for:
Estimated Year One & Year Two Start-up Requirements
Drive-Thru Unit Buildings
$1,440,000
Building/Leasehold Improvements
$480,000
Roasting Machinery & Equipment
$60,000
Store Furniture & Equipment
$240,000
Fixed Cost & Operating Expenses (detailed below)
$780,000
======================================================
Total Year One & Year Two Start-up Expenses
$3,000,000
Fixed Cost of Goods & Services Expense - To include Store Operation Salaries, Store Lease Expense,
Production Equipment Lease, Small Tools / Supplies, Packaging Supplies, and Other Production
Expenses.
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Sales & Marketing Operating Expense - To include Sales/Marketing Salaries, Advertising, Frequent
Shopper Program, Direct Marketing, Promotions & Events, Point-Of-Sale Materials, Customer
Giveaways, and FSP Miscel Costs.
Research & Development Operating Expense (relating to site selection, store development and new
product development) - To include Consulting, R & D Expenses, R & D Materials, and R & D Salaries.
General & Administrative Operating Expense - Includes Accounting, Admin. Salaries, Bad Debts,
Depreciation, Equipment Rental/Small Purchases, Insurance, Legal Fees, Licenses and Permits,
Office Expenses, Office Rental, Taxes (non-Income Taxes), Telephone, Cell Phones & Internet Access
and Utilities.
(For complete financial details, refer to preliminary Brain Coffee Co. integrated financial
spreadsheets attached.)
6.1 PRELIMINARY MILE STONES
The Brain Coffee management team has established some basic milestones to keep the business plan
priorities in place. Responsibility for implementation will mainly fall on the shoulders of Patrick Feld.
This milestones table below will apply to both Pre-Start-Up and Start-up phases. Milestones will be
updated as the year progresses, and new milestones will be added as the first year of operations
commences.
Milestones
Start Date
Final Start-Up Business Plan
12/1/2003
Hire Operations V.P. & Consultants
12/1/2003
Secure Start-up Funding
12/1/2003
Site Bureaucracy Studies
12/1/2003
Site Viability Study & Selection
12/1/2003
Drive-Thru Proposals & Designs
12/1/2003
Store Design Proposals & Designs
12/1/2003
ERP/POS System Proposals
12/1/2003
Key Vendor Proposals & Selection
12/1/2003
Revised Year 1 Plan
2/1/2003
Revised Personnel Plan
2/1/2003
Revised Marketing & Advertising Plan 2/1/2003
Finalize Construction Contracts
3/1/2003
Staffing, Training & Store Openings
5/1/2003
End Date
2/1/2003
1/1/2003
3/1/2003
2/1/2003
2/1/2003
2/1/2003
2/1/2003
2/1/2003
3/1/2003
4/1/2003
4/1/2003
4/1/2003
4/1/2003
9/1/2003
Manager
Patrick Feld
Patrick Feld
Patrick Feld
Operations V.P.
Patrick Feld
Operations V.P.
Patrick Feld
Patrick Feld
Patrick Feld
Patrick Feld
Operations V.P.
Patrick Feld
Patrick Feld
Operations V.P.
6.2 PRELIMINARY MANA GEMENT SUMMARY
Brain Coffee Co. will be partially owned and wholly operated by Mr. Patrick Feld. The company,
starting small in nature, will require a simple organizational structure. Implementation of this
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organizational form calls for the owner, Mr. Feld, to make all of the major management decisions in
addition to monitoring all other business activities.
Feld will hire three executives to assist in the management of operations, roasting production, and
research and development regarding site selection and store development.
7.0 PRELIMINARY FINANCIAL PLAN
important note: What follows is a preliminary financial plan for Brain Coffee Co. based on accurate
but limited information that has not been audited or reviewed by an accountant. Brain Coffee Co. has
made every due diligence effort to project realistic assumptions, costs, sales, expenses and ratios to
provide for the most accurate plan possible at this time. Upon securing pre-start-up funding, Brain
will revise this financial plan based on more concrete data, and have an accountant review the plan
for greater accuracy.
Preliminary Sales: Retail store front coffee house sales are based on Brain's Coffee & Tea store sales
for their first three quarters of operation in Valencia, CA Promenade Center. Based on Brain's average
daily sales of $1,700 (900 drinks at an average of $1.90 each) and weekly sales of $12,000 per week -Brain Coffee’s coffee house sales are projected at only $10,640 per week ($1,520 per day w/ 800 drinks
at $1.90 each), making the annual coffee house sales projections at over $550,000.
Drive-thru unit sales are based on easily accessible lots with a minimum of 20,000 cars per day traffic
count, and capturing 3.5% of the traffic (or 700 drinks) with an average sale of $1.75. Making Brain’s
Espresso Drive-In projections per unit at $1,225 daily, about $8,575 weekly, and more than $445,000 in
sales annually per unit.
Considering most of year one will have stores opening and operating at well under sales capacity,
Brain Coffee projects each nine store cluster (1 coffee house and 8 drive-thrus) to sell:
Opening Year One = $1,750,000 at less than 50% capacity ($195,000 per store average)
Year Two = $4,000,000 at nearly full capacity ($444,444 per store average)
Preliminary Cost of Goods Sold (COGS): The cost of goods sold for coffee-related products was
determined by the "retail profit analysis" obtained from a retail specialty coffee association. The
COGS product for coffee drink service and food service is projected at 25%, while the COGS labor for
coffee drink service and food service is 30%.
Preliminary Store Costs: The basic costs (excluding marketing/advertising costs, legal fees, inventory
and working capital) for opening a Brain Espresso Coffee House will be:
Equipment, POS system and Furniture
Signage and POP Fixtures
Leasehold Improvements
Roasting Equipment
$90,000
$14,000
$90,000
$8,000
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-- $120,000
-- $22,000
-- $120,000
-- $12,000
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BRAIN COFFEE CO. BUSINESS PLAN
=========================================================
Total
$212,000 --$274,000
The basic costs (excluding marketing/advertising costs and working capital) for opening a Brain
Espresso Drive-In will be:
Modular Unit, POS system and Equipment
$50,000 -- $75,000
Signage and POP Fixtures
$10,000 -- $15,000
Property and Leasehold Improvements
$10,000 -- $15,000
=========================================================
Total
$60,000 -- $105,000
Preliminary Salaries Expense: The founder of Brain Coffee Co., Patrick Feld, will receive a salary of
$70,000 in year one, $85,000 in year two, and $100,000 in year three. The Vice President of Operations
and the Vice President of production will each receive salaries of $60,000 in year one, $70,000 in year
two, and $80,000 in year three. The company Administrative Executive, Elizabeth Feld, will receive a
salary of $40,000 in year one, $50,000 in year two, and $60,000 in year three. Vice President of R&D
will be a part-time position (possibly a consulting position) being paid the equivalent of $24,000 in
year one, $32,000 in year two, and $36,000 in year three.
Preliminary Payroll Expense: The cost of labor is factored into the COGS, but Brain Coffee intends to
hire at least six full-time employees per location at $8.00/hour and a full-time store manager per
location at $12.00/hour. The total cost of employing seven people at these rates for the first year is
$2,400/week.
Preliminary Rent Expense: Brain Coffee Co. will plan on leasing a 2,000 square foot retail store front
space for the coffee house at approximately $14/sq. foot per year, or $2,333 per month (excluding
lease-hold improvements). The lease for drive-thru units will vary more per location, but Brain will
budget about $1,000 per month for each location. Total lease costs will run about $10,500 per month
for nine locations through the first year of business.
Preliminary Marketing & Advertising Expense: Brain Coffee plans to be very aggressive on
marketing and advertising, budgeting $30,000 per month for the first year. Excluding sales and
marketing salaries, the marketing and advertising budget will run 20% of sales in years one and two,
then reducing to 11% in year three, 5% in year four, and down to less than 4% in year five.
Further information on the assumptions, income, cash flow, gross profit analysis, break-even
analysis, balance sheets and ratio analysis for Brain Coffee Co. financial projections can be found in
the Brain Coffee Co. Integrated Financials attached.
8.0 SUPPLEMENTS ATTA CHED
8.1 Preliminary Brain Coffee Co. Integrated Financials
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Attached Excel Spreadsheet to include:
• Budget Assumptions (Year 1 by month)
• Income Statement Annual Growth Assumptions (Years 2 - 5)
• Balance Sheet Assumptions (Beginning Balances)
• Cash Flow Assumptions (Year 1 by month)
• Cash Flow Assumptions (Years 2 - 5)
• Break-Even Analysis Assumptions
• Gross Profit Analysis Product/Service (Year 1 by month)
• Budget (Year 1 by month)
• Income Statement (Year 1 by month)
• Balance Sheet (Year 1 by month)
• Cash Flows (Statement of Changes in Financial Position: Year 1 by month)
• Income Statement (Years 1 - 5)
• Balance Sheet (Years 1 - 5)
• Cash Flows (Statement of Changes in Financial Position: Years 1 - 5)
• Ratio Analysis (Years 1 - 5)
• Break-Even Analysis (Year 1 by month)
8.2 Patrick A. Feld Resume
Attached Word Resume
9.0 BRAIN COFFEE CO. CONTACT INFORMATION
Patrick A. Feld
28119 Bobwhite Circle, Unit #110
Saugus, CA 91350
661/373-5449 or 661/263-1997
Email: patrick@patrickfeld.net
URL: http://www.patrickfeld.net/braincoffee/
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This document contains confidential and proprietary information belonging exclusively to Patrick A. Feld. This
is a preliminary business plan. It does not imply an offering of Securities.
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