Rose’s Café
Business Plan 2015
Prepared For:
Marvin Painter
Comm 447
April 9th 2015
Prepared By:
Danaka Stromberg
Rose’s Cafe
2015
Table of Contents
Executive Summary ................................................................................................................................................................ 3
1.0 Introduction ....................................................................................................................................................................... 4
1.1 Mission Statement....................................................................................................................................................... 4
1.2 Vision Statement.......................................................................................................................................................... 4
1.3 Goals/Objectives.......................................................................................................................................................... 4
2.0 Operations Plan................................................................................................................................................................. 5
2.1 Site Location .................................................................................................................................................................. 6
2.2 Floor Plan........................................................................................................................................................................ 7
2.2.1 Store Front ............................................................................................................................................................. 7
2.3 The Average Business Day....................................................................................................................................... 8
2.4 The Average Business Week ................................................................................................................................. 10
2.5 The Average Business Month ............................................................................................................................... 10
2.6 The Average Business Year ................................................................................................................................... 10
2.7 Supply Analysis .......................................................................................................................................................... 10
2.8 Capital Budget............................................................................................................................................................. 11
2.9 Cost of Goods Sold ..................................................................................................................................................... 12
2.10 Operating Expenses ............................................................................................................................................... 12
2.11 Working Capital Planning ................................................................................................................................... 13
2.11.1 Cash ...................................................................................................................................................................... 13
2.11.2 Inventories ........................................................................................................................................................ 13
2.11.3 Accounts Receivable and Accounts Payable ....................................................................................... 13
3.0 Human Resources Plan ................................................................................................................................................ 14
3.1 Organizational Structure ........................................................................................................................................ 15
3.2 Job Descriptions ......................................................................................................................................................... 15
3.3 Hours of Operations ................................................................................................................................................. 16
3.4 Scheduling .................................................................................................................................................................... 17
3.5 Employee Wages........................................................................................................................................................ 17
3.6 Employee Benefits .................................................................................................................................................... 18
4.0 Marketing Strategy ........................................................................................................................................................ 19
4.1 Competition ................................................................................................................................................................. 20
4.2 Target Market ............................................................................................................................................................. 21
4.3 Product .......................................................................................................................................................................... 22
4.4 Place ................................................................................................................................................................................ 23
4.5 Pricing Strategy .......................................................................................................................................................... 23
4.6 Promotion Strategy .................................................................................................................................................. 23
4.7 Marketing Expenses ................................................................................................................................................. 24
5.0 Financial Plan................................................................................................................................................................... 25
5.1 Capital Requirement ................................................................................................................................................ 26
5.2 Summary of Projected Income............................................................................................................................. 26
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2015
5.3 Summary of Projected Cash Balances ............................................................................................................... 27
5.4 Break Even ................................................................................................................................................................... 27
5.5 Payback.......................................................................................................................................................................... 28
5.5.1 Owners Compensations ................................................................................................................................. 28
5.6 Critical Factors ........................................................................................................................................................... 28
5.7 Overall Feasibility ..................................................................................................................................................... 29
Summary ................................................................................................................................................................................... 30
Appendices ............................................................................................................................................................................... 31
Appendix 1 Financial Budget ....................................................................................................................................... 31
List of Figures
2.1 Site Location……………………………………………………………………………………………………………………..…...6
2.2 Floor Plan………………………………………………………………………………………………………………………….......7
2.2.1 Store Front……………………………………………………………………………………………………………………........8
3.1 Organizational Structure………………………………………………………………………………………………….…..15
4.1 Competitive Map………………………………………………………………………………………………………………….20
4.1.2 Competitive Analysis Graph……………………………………………………………………………………………….21
5.1 Financing.……………………………………………………………………………………………………………………………26
5.4 Break Even………………………………………………………………………………………………………………….……....27
List of Tables
2.8 Capital Budget……………………………………………………………………………………………………………………..11
2.10 Operating Expenses……………………………………………………………………………………………………….......12
3.3 Hours of Operation………………………………………………………………………………………………………………16
3.4 Weekly Schedule………………………………………………………………………………………………………………….17
3.5 Employee Wages………………………………………………………………………………………………………………….18
4.7 Marketing Expenses……………………………………………………………………………………………………………..24
5.2 Projected Income……………………………………………………………………………………………………………......26
5.3 Projected Cash Balances……………………………………………………………………………………………………….27
5.5.1 Total Owners Compensation…………………………………………………………………………………………......28
5.6.1 Sensitivity Analysis Average Purchase Per Customer…………………………………………......28
5.6.2 Sensitivity Analysis Customers Per Day………………………………………………………………………..29
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2015
Executive Summary
Rose’s Café is a petite café that will satisfy your morning and afternoon cravings, whether
you have a sweet tooth or are just grabbing a bite to eat. It is both a sit down and take out
restaurant fit for all types of consumers. With a love of cooking and baking the owner
Danaka Stromberg has created this business in hope to satisfy the needs of the local citizens
of Saskatoon.
Operations
The store will be located on Broadway Avenue in Saskatoon Saskatchewan; it will be ran
and owned by Danaka Stromberg. The store will seat roughly 50 people and will have a
warm and welcoming atmosphere. The business will be staffed by the manager/owner, a
full time employee as well as a full time baker to provide the best quality service and fresh
products that satisfy our customer’s needs.
Human Resources
The owner will also be the manager, who will be working full time. Additionally there will
be a full time employee in charge of serving customers on a daily basis and a full time baker
whose responsibility is going to be prepping and baking on a daily basis to provide fresh
quality goods. The manager will be getting paid on a salary whereas the full time
employees will be getting paid on an hourly wage. Dividends will be paid out to the owner
as they will be putting in their own equity as well as debt financing to start the business.
Marketing
The marketing strategy for Rose’s Café is to take to social media and post continually both
statuses and photos. As well we will be giving away a coupon with every purchase that will
allow an individual to come back at any time and with the purchase of a regular meal they
are then eligible to choose a dessert for free on the side. With an increase in social media
awareness the idea is to create a lot of word of mouth marketing. We will try to deal with
any problem that may occur right away so that customers have a good experience in our
store and spread positive word of mouth marketing about our store.
Finances
The five year projections that can be seen in the appendix illustrate how Rose’s café will be
operated during this time. There will be a positive net income over the five years however
the dividends will not be paid out until the fourth year of operations. Overall the business is
quite sensitive to two critical factors, and those are customers per day and average
purchase per customer, which tends to be the popular criteria when it comes to small
businesses.
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1.0 Introduction
Rose’s Café is a petite café that will satisfy your morning and afternoon cravings, whether
you have a sweet tooth or are just grabbing a bite to eat. It is both a sit down and take out
restaurant fit for all types of consumers. With a love of cooking and baking the owner
Danaka Stromberg has created this business in hope to satisfy the needs of the local citizens
of Saskatoon.
1.1 Mission Statement
“To create a warm and inviting atmosphere, where individuals can enjoy a home cooked meal
along with freshly baked desserts. Our goal is to make our customers feel like they are at
home eating one of their mother’s home cooked meals. We will strive to maintain an inviting
atmosphere that welcomes all customers and offers a variety of homemade products.”
1.2 Vision Statement
“Our goal is to be a warm and inviting place to sit down and enjoy a homemade meal. We
hope to become the place that consumers will think of when they want to indulge in a
homemade meal in the city of Saskatoon.”
1.3 Goals/Objectives
Short-term:





Obtain a bank loan of $25,000 and provide equity of $15,000 to support start-up
costs and expenses
Develop Rose’s Café’s brand in the Saskatoon market
Create relationships with customers to ensure repeat purchases
Average 70 customers/day in year 1
Break-even by year 2
Medium-term:



Have net positive cash flows by the third year of operations
Sustain operations, while maintaining brand image
Control costs and continue the marketing plan to achieve the targeted sales
Long-term:



Increase and maintain brand awareness with extended quality and excellence
Maximize sales to continually increase financial performance
Have a large customer base and know the regulars on a personal level
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2.0 Operations
Plan
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2.1 Site Location
Rose’s Café will be located in Saskatoon, Saskatchewan. The specific location in the city will
be on Broadway Avenue; a close walk to downtown, as well as it is in the center of
Broadway which has a busy culture of its own in. There are currently several other food
and beverage stores along Broadway, but this location has a large amount of foot traffic as
well as neighbouring residential areas so there is a lot of potential customers close by. The
map below, Figure 2.1, shows the location of Rose’s Café.
Figure 2.1 Site Location
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2.2 Floor Plan
The floor plan for the business was designed to accommodate customers who want to stay
and eat, as well as for those who want to take their meal to go. When you walk into the
store you will see tables and chairs, and a long chest like industrial food cooler next to a
counter. This counter is where you would go to order your food, and the counter would
have the till on it and that would be where you pay. There would also be a second food
display case and that would hold all of the freshly baked goods. In the back the floor plan
shows an industrial sized kitchen, as well as an office for the manager. The store would also
have a washroom available for both staff and public use. The floor plan can be seen in
Figure 2.2.
Figure 2.2 Floor Plan
There would be more tables and chairs than what is visible here; this is merely to visualize
the floor plan.
2.2.1 Store Front
As you walk by the store there will be a window display, its purpose is to give you an idea
of the feel Rose’s Café is trying to portray, seen in Figure 2.2.1. It will consist of a small
picnic table that is set with antiques the color theme would be pink, and there would be a
vase with flowers on the table. There would also be several items from the menu set on the
table and a consultation cake, all of which would be fake but made to seem real.
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Figure 2.2.1 Store Front
2.3 The Average Business Day
Rose’s Café is open Monday through Sunday. We are open Monday through Friday from 8
am until 4pm, Saturday from 8am until 2pm and Sunday and Holidays from 10am until
3pm. The reason why we are open quite early and are closed before supper time is because
Rose’s Café is a place to go for breakfast, and lunch, or during the day for a sweet treat. The
menu consists of products that are served during the day not during the evening and so this
is why the hours of operation are earlier in the day. In the first two years we will be staffed
by the manager, one full time employee as well as one full time baker. In the third year we
can look at hiring a part time employee as sales will hopefully have increased and demand
for workers would increase as well.
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Daily Activities
Opening Shift:
Time: 6am
Performed by: Full Time Baker
Tasks: The baker would arrive to the store and begin to bake the daily baked goods. Their
job would be to portion out the already made recipes and put them in the ovens to bake. All
freshly made products would be made by this person in the morning before we open. Both
breads as well as baked goods. The baker would work from 6 am until 11am or later if
necessary and would be in charge of making sure the baking is fully stocked as well as the
breads for the sandwiches. They would also assist the manager with any tasks if necessary.
Day Shift:
Time: Arrival of staff - 7am and 8am, begins when store opens.
Performed by: The Manager and the Full Time Employee
Tasks: The manager would arrive at 7am and the employee at 8. The manager would get
the cash drawer ready and do any sort of planning for the day ahead. They would mostly
take care of any financial or managerial tasks in this hour alone. They would also get the
coolers ready for the day with assistance from the baker if necessary. The employee would
arrive for 8am, they may be asked to show up 15 minutes early in order to be sure they are
prepared for opening. Tasks from both the manager and the full time employee would
include taking orders and assisting customers, receiving payments from customers, when
necessary making customer orders, maintaining cleanliness and tidiness of the main areas
and washrooms, restocking inventory when low. When possible right before close sweep
and mop and gather garbage.
Closing Shift:
Time: The store closes at 4pm Monday – Friday, 2pm on Saturday and 3pm on Sunday
Performed by: The manager and full time employee
Tasks: Closing the store would involve cleaning up the work area, this would be where
meals are prepared and served. Tables and chairs would also have to be cleaned and the
floor would have to be swept and mopped. The manager would also be in charge of cash
out and financial matters at the end of day. The last person to leave the building which
would be the manager is in charge of locking up the store.
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2.4 The Average Business Week
The average business week at Rose’s Café would involve the manager ordering and
receiving inventory and any other necessary supplies, such as maintenance, office, etc.
Filing of receipts and documents, as well as, other administrative duties will be performed
on a weekly basis. Most of the weekly tasks are done by the manager but the unloading of
inventory and putting inventory away can also be done by the employees.
2.5 The Average Business Month
On average in a month the manager will be responsible for updating the financial books
and doing any necessary accounting entries. Monthly statements will be made in order to
track company sales, profits and expenses. Gross margins, as well as inventory waste will
be looked at to see if there are any necessary changes that need to be made. These records
will make it easier to file a tax return at the end of the year. The staffing schedules will also
be made one month in advance. The employees are responsible for providing availability to
the manager and schedules will be made to accommodate them as appropriately as
possible. Also once every few weeks a staff meeting will be held, to discuss sales, where
improvements can be made and to discuss things that are being done well.
2.6 The Average Business Year
On a yearly basis the manager will print the year end reports in order to start a file of the
businesses records. These records will be used to file income tax returns as well as track
the businesses progress. The manager will use TurboTax to assist them in filing their taxes.
It will also be up to the manager to create financial goals for the next year that they would
like the business to achieve and provide ways they can achieve them. The manager will also
do an evaluation of the employees, based on the results, the employees will be provided a
yearly bonus, and the amount will also depend on the results.
2.7 Supply Analysis
The products that Rose’s Café will use to create their meals will come from Sysco, a local
food supplier. The shipments will come in twice a week, and the products will vary
depending on the meal specials for the days of the week. They will also receive dry goods
from Sysco such as utensils, plates and napkins etc. These shipments however will come in
once a week, or less, once every two weeks. Any special ingredients that are not provided
for the consultation cakes will be purchased at places such as Michaels or Safeway.
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2.8 Capital Budget
The initial capital budget is a total of $30,590; this includes both leasehold improvements
as well as the equipment necessary to start up the business. The equipment will be
purchased from Hendrix, a Canadian company that sells industrialized kitchen ware. Also
we will be purchasing our tables and chairs from Restaurant Furniture Canada, another
Canadian company that provides restaurant supplies. The leasehold improvements
supplies will be purchased at several different stores that specialize in renovation supplies.
The full list of capital costs can be seen in Table 2.8.
Table 2.8 Capital Budget
Description
Estimated Costs
Suppliers
$
$
$
$
5,000
900
100
500
Seventy Seven Signs Ltd.
Hendrix
Home Depot
Various Locations
$
6,500
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,200
2,500
3,500
2,700
850
1,100
4,500
2,450
400
120
1,500
300
1,700
270
Total Equipment Expenses
$
24,090
Total Capital Costs
$
30,590
Leasehold Improvements
Signage
Industrial Sink
Paint
Décor
Total Leasehold Improvement
Expenses
Equipment
Gas Range
Food Prep Table
Reach-In Cooler
Convection Oven
Conveyor Toaster
Grill Press
Reach-In Freezer
Merchandising Cooler
Coffee Machine
Thermal Server
Small Wares
Moving Cart
Tables and Chairs
Stainless Steel Work Table
Stromberg, Danaka
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Hendrix
Restaurant Furniture Canada
Hendrix
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2.9 Cost of Goods Sold
Expected Cost of Goods Sold for year one is $62,370. This projection is based on revenues
of and a profit margin of % for meals and % for baked goods. Refer to the financial budget
located in Appendix 1.
2.10 Operating Expenses
Table 2.10 lists the operating expenses for the first year of the business. Keep in mind that
most of these expenses will increase each year with the increase in inflation.
Advertising (Marketing) – allocated for our marketing budget.
General Supplies – general supplies, such as cleaning supplies, anything we might need.
Insurance – this is paid so that we are covered in the event that something happens.
Lease Expenses – this includes rent and payments to have the building.
Telephone – the telephone bill so we are able to have a phone.
Utilities – general bill that is required when renting or own a building.
Repair and Maintenance – extra cash just in case of repairs that need to be done to the
store.
Wages – employee’s payroll.
Employee Benefits – employees’ compensation.
Misc. Variable Costs % Sales – extra cash in case of miscellaneous occurrence.
Capital Cost Allowance – necessary payment.
Debt Interest – interest on the debt from the bank loan.
Table 2.10
Operating Expenses
Advertising (Marketing)
General Supplies
Insurance
Lease Expenses
Telephone
Utilities
Repair and Maintenance
Wages
Employee Benefits
Misc. Variable Costs % Sales
Capital Cost Allowance
Debt Interest
Total Operating Expenses
Stromberg, Danaka
$ 8,600
$ 1,000
$ 1,700
$ 72,050
$ 1,080
$ 23,925
$ 500
$ 103,450
$ 3,720
$ 1,260
$ 2,637
$ 1,950
$ 221,872
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2.11 Working Capital Planning
2.11.1 Cash
Cash is important as it helps manage the working capital. In the first two years there will be
a shortage of cash due to the expenses the business will incur, after the second year there
will be a positive cash balance. Any excess cash that is incurred will be invested into both
short term and long term investments. Consultation cakes will require a deposit, but the
remainder of the remaining price of the cake will be collected when the cake is to be picked
up.
2.11.2 Inventories
Inventory will be closely monitored. In the event that there is inventory waste it is the
manager’s discretion as to order less the next week, vice versa, if there is a shortage of
inventory it is also the manager’s job to order more of what is lacking. After a while of
being open this process will become a lot easier as you will be able to tell what sells and
what is difficult to sell.
2.11.3 Accounts Receivable and Accounts Payable
There will be no accounts receivable since sales will be done by debit, credit card, or cash.
We will however have accounts payable with our suppliers. The accounts payable will be
roughly 10 days, so we will have time to pay back our suppliers once we have had a chance
to sell the products. As business becomes more successful the need amount of time it takes
to pay back our suppliers should fall.
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3.0 Human
Resources Plan
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3.1 Organizational Structure
Rose’s Café will be owned and managed by one individual and she will be paid on a salary
basis. In addition to the manager in the first year there will be a full time employee as well
as a full time baker. Figure 3.1 shows the organizational structure, this structure has
included the part time staff that Rose’s Café would hire in the event that sales increase, this
would happen around the 5 year mark.
Figure 3.1 Organizational Structure
3.2 Job Descriptions
Manager
A manager will be present for both the opening and closing shifts each day. They will be
responsible for the following:






Ordering and receiving inventory
Administrative/Financial duties
Preparing the store to open each morning
Training employees
Helping customers
Helping wherever needed with prepping food for the next day
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Full Time Employee
The full time employee and part time employees will be scheduled accordingly and will be
required to perform the following duties:






Helping customers (taking orders and payments)
Preparing orders and meals and informing customers when they are ready
Clearing and wiping down tables
Dish duty when necessary
Light cleaning of the facility
Food prep for the next day and any for the current day
Full Time Baker
The baker will come in in the early morning before anyone gets to the store and will begin
baking the necessary desserts and breads for the day to come. They will be provided with a
key to the store because they arrive alone. There duties involve:





Preparing the recipes for the desserts a day ahead
Baking the necessary products for the day
Cleaning their baking area and any dishes they use
Upkeep of the cooking appliances as needed
Help the other staff if necessary during their shift
3.3 Hours of Operations
The hours of operation are year round, we are open every day of the year except national
holidays. Table 3.3 shows the hours of operations for every day of the week.
Table 3.3 Hours of Operation
Operating Hours
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Stromberg, Danaka
10am-3pm
8am-4pm
8am-4pm
8am-4pm
8am-4pm
8am-4pm
8am-2pm
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3.4 Scheduling
The employees at Rose’s Café are responsible for providing the manager with their
availability to work; the manager will then create a schedule to accommodate this
appropriately. Table 3.4 shows the ideal schedule of a work week and it includes the
scheduling of part time employees, but this would be adjusted to where it was just the full
time employees and the manager working. In the first few years the schedule would be
very simple because there wouldn’t be a large demand for staff.
Table 3.4 Weekly Schedule
Owner/Manager Full Time Baker Full Time #1 Part Time #1 Part Time #2
Monday
7am – 5pm
7am - 4pm
Tuesday
7am - 5pm
6am - 11am
8am - 4pm
Wednesday
7am - 5pm
6am - 11am
8am - 4pm
Thursday
7am - 5pm
6am - 11am
8am - 4pm
Friday
7am - 5pm
6am - 2pm
8am - 4pm
Saturday
10am - 3pm
6am - 11am
7:30am - 3pm 7:30am - 3pm
Sunday
Employee Hours
55
28
41
9am - 4pm
9am - 4pm
14.5
14.5
3.5 Employee Wages
Employees are paid on an hourly basis whereas the manager is paid on a salary basis. The
following table reviews the details on how each employee is compensated. The table shows
if we were to have part time employees but the total is different than in the financial budget
because that is strictly for the amount of employees we have. The total would just be
different based on the difference we would pay to the part time employees and their
allocated bonus.
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Table 3.5 Employee Wages
Wage and Benefit Expenses
Part Time Employees (2)
Full Time Baker
Full Time Employee
Owner/Manager
14.5 hours/week * $10.50/hour
Bi-weekly wage * 26 pay periods
28 hours/week * $12.75/hour
Bi-weekly wage * 26 pay periods
41 hours/week * 13.50/hour
Bi-weekly wage * 26 pay periods
Total Wage &Benefit Expense
304.50
$ 7,917
$
714
$ 18,564
$
1,107
$ 29,782
$52,000
$ 52,000
$ 108,263
Yearly Wage Expenses
Yearly Benefit Expenses
$
% of yearly wage = performance bonus
$ 6,814
$ 115,077
The estimates in this table are exactly that estimates, for more specific numbers refer to the
financial budget which can be found in Appendix 1 which will take into consideration how
much staff will be needed in the first few years of business and thus the numbers reflect
this consideration.
3.6 Employee Benefits
The employee benefits would be administered as yearly bonuses dependant on employee
performance and the success of the business. Generally if things were going smoothly then
the manager would get an 8% of total wage bonus, the full time employees would get a 5%
of total wage bonus, and the part time employees would receive a 3% of total wage bonus.
These dollar values would vary depending on how much the employees work and their
performance which would be evaluated by the manager every so often while keeping
records.
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4.0 Marketing
Strategy
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4.1 Competition
Currently there are several other businesses in the Broadway area that are direct
competition with Rose’s Café, such as Broadway Café, Broadway Roastery, and Grandma
Lee’s. There is of course competition all over Saskatoon for the food industry, but
specifically to the Broadway area those are a few competitors. In Figure 4.1 we can see a
perceptual map of the different competitors on Broadway in comparison of their quality
and price. Rose’s as the most desirable business of course.
Figure 4.1
y
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One thing to consider is that any activities or business in the Saskatoon area that a family
or individual can spend their disposable income on can be considered a competitor of
Rose’s Café, but I am focusing centrally on the food industry and more specifically the
surrounding geographical area. To compare the different competitors in another visual way
including one more variable, which is variety, we can refer to Figure 4.1.2
Figure 4.1.2 Competitive Analysis Graph
1 = low
5 = high
6
5
4
3
2
1
0
Quality
Starbucks
Price
Broadway Café
Rose's Café
Variety
Broadway Roastery
The visuals tell us that the competition on Broadway is very strong and there are direct
competitors within a close vicinity of Rose’s Café.
4.2 Target Market
The target market that Rose’s Café is directing its business towards is very large and quite
broad as our business does not restrict its client base. It includes but is not exclusive to
adults aged 18-65, the walking traffic on Broadway Avenue, local business owners in the
Broadway/Downtown area, and welcomes students and business professionals. Rose’s café
is a family friendly environment; it is welcoming and will provide services to any customer
who wishes to indulge in our food.
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4.3 Product
There is a wide variety of products to be consumed at Rose’s Café. Starting with a cup of
coffee in the morning, to soup and a sandwich at lunch and to finish off your meal with a
tasty dessert. All of our items are available all day; they are not restricted to morning or
afternoon. There will be a variety of sandwiches available, each day will be a new sandwich
on special as well as soup. The soups and sandwiches will be hand made in house, including
the bread; the produce will be brought in through weekly shipments from suppliers. The
baked goods will also be made in house and made daily to provide an ultimate freshness to
our products. We will have beverages as well to add to your meal. Lastly we will be
providing the opportunity for customers to purchase and customize our consultation cakes.
Consultation cakes are generally for special events, birthdays, weddings, anniversaries, and
they will be constructed after having a meeting with the customer to understand their
wants and needs and their vision of what this cake should look like. There are really no
boundaries, other than the skill and ability of the baker and decorators themselves, it will
be up to their discretion to agree to accept the plan for the cake or not, and if they can’t
they will try to provide an alternative. The baked goods will consist of a huge variety such
as, cake pops, cookies, cupcakes, pastries, donuts, muffins, cakes, pies, croissants etc. The
soups and sandwiches will be decided on a daily basis and will generally be staple soups,
but some days we will offer specials that are unique to this area, for example an Asian pho
soup. The success or failure of the particular soup recipe will decide whether or not it will
be used again.
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Rose’s Cafe
2015
4.4 Place
Rose’s Café will be located on Broadway Avenue in Saskatoon Saskatchewan. Its location is
near downtown Saskatoon and is located on one of the main drags in Saskatoon, both for
vehicular traffic as well as foot traffic due to all the little stores on the avenue. This location
was strategically decided because the feel of Broadway coincides with the feel that Rose’s
Café is trying to provide, a close to home, familiar restaurant. Broadway has some buildings
that are the originals from when Saskatoon was up and coming, it can be considered a
“character street” because of its look and feel, and that is exactly what Rose’s Café is going
for.
4.5 Pricing Strategy
Rose’s pricing strategy will be a fairly competitive strategy. We are going to price our
products similar to that of our competitors, although some items may be pricier than
others due to the mere fact that they are fresh daily and have a homemade quality you
won’t find in the processed chain stores products on Broadway. We feel that the increase in
price in some items is justifiable because we are going to be providing the best quality
products to our customers.
We would offer our customers a coupon with every purchase in order to receive a free
dessert menu item with their next purchase of a meal. This is free for them and aids in our
promotion strategy which will be discussed next.
4.6 Promotion Strategy
In order to promote our business we will be taking advantage of the free social media
websites available. The specific social media websites that we will be using to promote the
business are Facebook, Instagram, and Twitter, there is also some consideration in using
LinkedIn as it is more business professional.
Rose’s Café will have a website. The website will contain pictures of inside the store, show
some of the behind the scenes in how our products are prepared, as well as up to date news
feed on what is going on, for example, the daily soup, or any of the consultation cakes that
are prepared for customers. It will have the full menu online along with our hours of
Stromberg, Danaka
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Rose’s Cafe
2015
operation and our specific location. We want to make it as easy as possible for consumers
to know where we are, when we are open, and what we offer.
An additional method of marketing we will be using was mentioned before and that is the
coupons. They will be handed out with every purchase, and they can be redeemed the next
time you are in the store, you will receive a dessert item of your choice with the purchase of
a meal. Not only will is entice customers to return to our business, but it will hopefully aid
in the Word-of-Mouth marketing we except to happen when we become more popular.
Word-of-Mouth marketing will be a major tool we will try to use to increase the awareness
of our business. The coupons will be the physical object we hand out to customers, but we
are hoping they will spread good reviews about their experience at our store with their
friends and family.
Another very important aspect to our marketing strategy is the signage out front of the
store. It will be clear and concise and will catch the eye. The window display in the window
of the store is going to be used to hopefully entice customers as they walk by and make
them want to see what is inside. We are trying to create an atmosphere that is welcoming
and reminds you of your past meals made by your mother or your grandmother.
Homemade food is always the best as well it is usually better for you.
4.7 Marketing Expenses
Our marketing expenses can be seen in Table 4.7 which shows just exactly how much we
are planning on spending to complete our marketing strategy.
Table 4.7 Marketing Expenses
Signage
Coupons
Website
Total
Expenses
2015
$
5,000
$
780
$
2,820
2016
$
1,160
$
1,320
2017
$
1,440
$
1,300
2018
$
1,520
$
1,280
2019
$
1,900
$
1,200
$
$
$
$
$
8,600
2,480
2,740
2,800
3,100
As you can see the in the table the expenses for coupons increases as the years go by, this is
because we are hoping that as each year goes by we are increasing in awareness and
popularity and so we will need to be printing more coupons as to make up for in the
increase in customers and meals purchased. The website is initially more expensive than
the rest of the years and this is because of the start-up costs that occur when creating a
website, after that it is just regular maintenance and upkeep. The signage will be purchased
in the first year of operations.
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Rose’s Cafe
2015
5.0 Financial
Plan
Stromberg, Danaka
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Rose’s Cafe
2015
5.1 Capital Requirement
In order to properly finance this business it would take both equity and debt financing.
Figure 5.1 shows that $25,000 will be provided by the owner of the business, as well as a
$25,000 bank loan will have to be negotiated in order to finance the remaining of the
expenses to start up the business.
Figure 5.1 Financing
Financing
$25,000
$ 25,000
Equity
Debt
5.2 Summary of Projected Income
The projected revenues are based on 70 customers per day and the average purchase per
customer at $10.00. It is based on a growth in customers each year, year two being at 15%,
year three at 10%, year 4 at 5% and year 5 at 5%. This is an appropriate forecast of our
revenues as we are in a prime location with a lot of foot traffic enabling us to satisfy our
demand. The following is Table 5.2 which illustrates our projected income.
Table 5.2 Projected Income
Projected Income
Sales
COGS
Gross Profit
Expenses
Net Income
Stromberg, Danaka
$
$
$
$
$
252,000
62,370
189,630
221,872
(32,242)
$ 297,045
$ 73,519
$ 223,526
$ 223,228
$
298
$ 334,918
$ 82,892
$ 252,026
$ 228,661
$ 23,365
$ 360,456
$ 89,213
$ 271,243
$ 236,936
$ 30,962
$ 387,941
$ 96,015
$ 291,925
$ 246,321
$ 39,676
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Rose’s Cafe
2015
5.3 Summary of Projected Cash Balances
The following Table 5.3 illustrates the projected ending cash balances for the first five
years of business. In the first year the business has a negative cash balance which occurs
again in the second except it is a much smaller number which is bearable, it if were any
larger it would be bad. A negative cash balance is not uncommon in the start-up of a small
business; it is likely to be expected.
Table 5.3 Projected Cash Balances
Cash Balances
Net Cash Flow
Cash Bal Beg of Year
Cash Bal End of Year
$
$
$
(4,630)
(4,630)
$
$
$
4,065
(4,630)
(565)
$
$
$
26,156
(565)
25,590
$
$
$
27,356
25,590
52,946
$
$
$
6,690
52,946
59,636
5.4 Break Even
During the financial analysis of this business I conducted a break-even analysis which
would determine when the amount of customers necessary to break-even in profits. As
shown in Figure 5.4 the break even amount of customers is very close to the actual amount
of customers, and in the first year Rose’s Café is in fact under the break-even which reflects
the negative net income in the first year.
Number of Customers per day
Figure 5.4 Break-Even
120
100
82
81
89
93
98
80
60
70
80
80
80
80
4
5
40
Base Case Cust/day
20
Breakeven Cust/day
0
Stromberg, Danaka
1
2
3
Year
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Rose’s Cafe
2015
5.5 Payback
In terms of payback this is in respect to the owner, myself. There are several different ways
to measure whether or not this business is a successful one. In the case of a small business
it is best to use owner’s compensation as it is the most appropriate and accurate measure.
If the business were larger you would use the net payback value and the internal rate of
return to measure the businesses success. Since Rose’s Café is a small business I will be
using the owner’s compensation to demonstrate the success of the business.
5.5.1 Owners Compensations
The following table explicitly outlines what the owner would be receiving as compensation
over the five year period. Dividends begin in the fourth year however they are not very
large.
Table 5.5.1 Owners Compensation
Owners Compensation
Ave. Owners Compensation
Owners Salary
Dividends
Total Owner Compensation
$
$
$
$
2,015
52,000
52,000
$
$
$
$
2,016
53,300
53,300
$
$
$
$
2,017
54,633
54,633
$
$
$
$
2,018
55,998
5,590
61,588
$
$
$
$
2,019
57,398
32,946
90,344
5.6 Critical Factors
The critical variables for Rose’s Café are the number of customers per day as well as the
average amount spent on each purchase per customer. In order to see just how sensitive it
is when one of these two variables changed I conducted a sensitivity analysis on both
criteria. The following tables illustrate what would happen when the criteria change.
Table 5.6.1 Sensitivity Analysis Customers Per Day
Customers/day
60
65
70
75
80
85
Stromberg, Danaka
Average 5
year Profit
$
(18,123)
$
(1,581)
$
12,412
$
25,766
$
38,909
$
51,792
Net Payback
$
$
$
$
$
$
(67,734)
31,873
112,808
194,281
274,699
353,811
Year 5 Owner
Compensation
$
57,398
$
57,398
$
90,344
$
109,964
$
116,699
$
130,434
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Rose’s Cafe
2015
The base case is bolded. As you can see if Rose’s Café was to lose a mere 5 customers it
would put them at an average net loss. Although this average is quite small, we still would
not have enough cash to continue.
Table 5.6.2 Sensitivity Analysis Average Purchase Per Customer
Average Purchase
per customer
9
9.5
10
10.5
11
11.5
12
$
$
$
$
$
$
$
Average
Profit 5 yr
(8,122)
2,794
12,412
21,760
31,108
40,198
49,215
Net Payback
$
$
$
$
$
$
$
(7,590)
56,732
112,808
169,839
226,870
282,610
337,989
Year Owner
Compensation
$
57,398
$
57,398
$
90,344
$
98,843
$
108,458
$
118,073
$
127,687
The base case is bolded. In this sensitivity analysis if the price were to drop 50 cents Rose’s
Café would be operating at positive but small average profit. The reason why I highlighted
this option red was because the cash flows were much too small and negative in the
beginning of the five year term, so there would not be enough cash to properly run the
business.
5.7 Overall Feasibility
After completing my business plan and looking at the projected profits and revenues I
would say that Rose’s Café is not feasible. I would not want to invest this much time and
effort into something that I wouldn’t see returns for until 4 years down the road, and even
then it is a very small return. With a university degree I believe I could make the same
amount if not more at a different job. However, I do really love to cook and bake, so if I
could come up with another plan that was similar but different in that it was more feasible I
would consider opening up a restaurant of sorts. As for Rose’s Café I would not give it a go.
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Rose’s Cafe
2015
Summary
Rose’s Café will provide customers with a welcoming atmosphere, with the ability to enjoy a
homemade meal and dessert. We want to provide individuals with an experience they won’t
forget, one that will remind them of the good ol’ days when they ate moms or grandmas home
cooked meals. Our business plan provides quality information that outlines the opening and
operating of Rose’s Café, however the plan has revealed that the business would not be feasible.
It would be up to the discretion of whomever reviews the plan to decide whether or not they
would want to dedicate this much time and effort in order to see returns later down the road.
Stromberg, Danaka
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Rose’s Cafe
2015
Appendices
Appendix 1 Financial Budget
Please refer to attached financial budget to see full financial projections (excel document).
Stromberg, Danaka
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