http://www.youtube.com/watch?v=6y1e0skfJts
TO BREW
OR NOT TO BREW?
Ray Alwani
Voilen Chu
Kelli Dawson
Tammy Hall
Jill Johnson
Carmen Yau
AGENDA
THE WORLD OF COFFEE
industry overview
HOW TO SELL YOUR BEANS
the marketing plan
HOW TO MAKE A CUP OF COFFEE
operations and human resource analysis
THE PRICE OF COFFEE
financial and sensitivity analysis
TO BREW OR NOT TO BREW?
summary and recommendations
THE WORLD OF COFFEE
AGENDA
Established in 1975
Partners
Charitable work
Royalty Income Fund
THE WORLD OF COFFEE
SECOND CUP FRANCHISE TERMS
THE WORLD OF COFFEE
INDUSTRY OVERVIEW
• coffee consumption continues to grow
• wholesale and retail prices on the rise
• increased trend to younger drinkers
• increased media attention to potential health
benefits
THE WORLD OF COFFEE
SASKATOON MARKET
• 3.5 percent projected real economic growth in
Saskatoon in 2008
• downtown condominium expansion
• construction of new office towers
Distribution of Saskatchewan's Employment Growth
Rest of SK
Regina
Saskatoon
THE WORLD OF COFFEE
LOCATION, LOCATION, LOCATION
• King George condos
HOWTHE
TO SELL
WORLD
YOUR
OFBEANS
COFFEE
COMPETITION
STRONGFIELD’S
COFFEE
HOW TO SELL YOUR BEANS
CUSTOMERS
• home drinkers
• price-sensitive drinkers; don’t value specialty
coffee
• non-price sensitive drinkers; coffee
connoisseurs
TARGET MARKET = NON-PRICE SENSITIVE COFFEE
CONNOISSEURS
HOW TO SELL YOUR BEANS
NON-PRICE SENSITIVE COFFEE CONNOISSEURS
• high disposable income
• value convenience over price
• value customization and variety in beverages
HOW TO SELL YOUR BEANS
PRODUCTS & SERVICES
• premium blend coffee and blended
coffee drinks
• focus on organic and free-trade coffees
HOW TO SELL YOUR BEANS
PRODUCTS & SERVICES
• specialty teas and lattes
HOW TO SELL YOUR BEANS
PRODUCTS & SERVICES
• fresh fruit smoothies and desert-style
beverages
HOW TO SELL YOUR BEANS
PRODUCTS & SERVICES
• friendly and efficient service in a clean
and inviting atmosphere
HOW
TO MAKE
A CUP
OF COFFEE
HOW
TO SELL
YOUR
BEANS
THE HUMAN RESOURCES PLAN
JOB ROLE
Barista
RESPONSIBILITIES
• address customer needs
• prepare beverages
• cleaning duties
• follow cash handling procedures
SKILLS & REQUIREMENTS
• no previous work experience
necessary
• customer service oriented, friendly
• communicate well with others
• accurately communicate orders
$9.25 per hour (minimum wage in Saskatoon)
$0.20 raise every year
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
JOB ROLE
Supervisor
RESPONSIBILITIES
• address customer needs
• prepare beverages
• cleaning duties
• follow cash handling
procedures
• opening and closing the store
• reconcile daily cash receipts
and
bank deposit
$11.00 per hour
$0.30 raise every year
SKILLS & REQUIREMENTS
• three months barista work
experience
• customer service oriented, friendly
• communicate well with others
• accurately communicate orders
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
JOB ROLE
Owner
RESPONSIBILITIES
•
•
•
•
•
•
•
•
•
•
address customer needs
prepare beverages
hire and train new employees
manage finances
opening and closing the store
reconcile daily cash receipts and bank
deposit
create and maintain employee work
schedule
ordering and purchasing inventory and
supplies
pay suppliers / franchise fees
compile information for the accountant
SKILLS & REQUIREMENTS
• customer service orientated,
friendly
• communicate well with staff
• accurately communicates orders
• managerial abilities to organize
staff
• knowledge and skills of franchise
regulations
$25,000 each per year
$1,250 benefits each per year
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
STAFFING CONSIDERATIONS OVER THE PROJECTION PERIOD
• no seasonality
• staffing requirements consistent
• planned sales growth in revenue
• no supervisor in the first year
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
HIRING PROCESS
• print ad or on-line
• review resumes
• interview
• selection
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
TRAINING PROGRAMS
OWNERS
NEW EMPLOYEES
3 week training program for new
franchise owners
Trained by owners
• Process and procedures
• Knowledge of products,
finances, and profitability
• 8 hour training day
• 3 shifts of shadowing an
experienced Barista
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
EMPLOYEE TURNOVER
• 2 times per year
• 6 to 8 employees on staff at any given time
• 12 to 16 workers throughout the year
• costs
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
HUMAN RESOURCE STRATEGY
• inexperienced employees
• minimum wage
• key traits
HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN
MANAGEMENT TEAM
• KEN – experience as a supervisor
• MARY – front-line experience
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
BUSINESS HOURS
Weekdays
Saturday
Sunday
6am – 9pm
6am – 5pm
6am – 3pm
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
DAILY ACTIVITIES
opening shift
TIME
half hour before opening
PERFORMED BY
Ken/Mary, or Supervisor
TASKS
grind coffee, start up coffee/espresso machines, receive food/merchandise
delivery, place food in display case, set out milk/cream on tables
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
DAILY ACTIVITIES
day shift
TIME
throughout the business day
PERFORMED BY
owner / supervisor plus one Barista at all times
TASKS
take orders, receive cash payments from customers, make customer orders,
clean-up, restock inventory when low
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
DAILY ACTIVITIES
closing shift
TIME
half hour before closing
PERFORMED BY
Ken/Mary, or Supervisor
TASKS
restock inventory for next morning, clean machine and shop, reconcile cash
register, prepare bank deposit
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
WEEKLY ACTIVITIES
• inventory count
• inventory from Second Cup
• order food
• other inventory
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
BI-MONTHLY ACTIVITIES
• updating staff schedules
• payroll
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
MONTHLY ACTIVITIES
• pay bills and suppliers
• prepare month-end statements
• compare month-end statements to budget
• identify budget variances
• analyze significant variances
• risk analysis
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
SEMI-ANNUAL & ANNUAL ACTIVITIES
SEMI-ANNUAL
• hire and train new employees
ANNUAL
• prepare year-end financial statements
• Compare and analyze financials to budget
• prepare forecast budget
• income taxes
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
SUPPLIERS & SERVICE PROVIDERS
SECOND CUP PARENT COMPANY
Supplies
Coffee, Espresso Beans, Cups, Lids, Sleeves, Napkins, Second Cup
Merchandise, Syrups
Risk
Low. Quality and delivery of products is ensured. Biggest risk is
fluctuating price of coffee beans
Mitigating Factor
A fixed price contract to ensure fix price for the year
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
SUPPLIERS & SERVICE PROVIDERS
CHRISTIE’S BAKERY
Supplies
Food and other bakery items
Risk #1: Cannot guarantee quality of food
Mitigating Factor: Locally well-known and reputable establishment – known
for consistent high quality of fresh food and baked items
Risk #2: Price
Mitigating Factor: Fixed price contract for the year, in return we will order a
minimum quantity from them per day
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
SUPPLIERS & SERVICE PROVIDERS
COSTCO
Supplies
Cream, Milk, Stir-sticks, Sugar, Honey, Syrup, Bottled Drinks
Milk and Cream are Purchased weekly to ensure freshness
Other inventory will be purchased as items are running low
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
SUPPLIERS & SERVICE PROVIDERS
SASKATOON MAINTENANCE SERVICE EXPERTS
Machine maintenance required for coffee and espresso machines
SASKATOON LAW GROUP
Franchising of the business and other legal requirements
LOCAL ACCOUNTANT
Bookkeeping, financial statements, income tax returns
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
WORKING CAPITAL
Cash:
Accounts Receivable:
Inventory:
Accounts Payable:
$10,000
none
Average turnover days of 30
Average turnover days of 30
CAPITAL BUDGET
Capital Expenditures:
$200,000
S
i
t
t
i
n
g
C
o
u
n
t
e
r
Washroom
Stock Room
X
X
X
X
COUNTER
X
Pick Up Counter
A
D
A
I
S
P
L
A
Y
C Cash
A Register
S
E
Fridge
B
C
C
C
Sink
D
D
O
O
R
Office
A = Espresso Machines
B = Chiller Machine
C = Coffee Machines
D = Dishwasher
X = Counter Chairs
E = Display shelves
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
COST OF GOODS SOLD
BARISTA-PREPARED COFFEE AND DRINKS
Avg Cost per
Unit ($)
Coffee beans
Milk and creamer
Other (syrup, sugar, honey, etc.)
Cups, lids, sleeves
Total cost per unit
GROSS MARGIN:
183%
0.50
0.30
0.25
0.10
1.15
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
COST OF GOODS SOLD
OTHER
Pre-packaged coffee and drinks
Average food cost per unit
Merchandise
Avg Cost per
Unit ($)
Gross
Margin
2.10
1.20
6.25
7%
25%
12%
HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN
OPERATING EXPENSES
Rent (1,000 sqft x $20 per sqft)
Insurance
Repairs and maintenance
Telephones
Utilities
Accounting
Miscellaneous
$20,000
$4,000
$5,000
$1,200
$9,600
$5,000
$5,000
HOW TO MAKE
A CUP OF
THE PRICE
OFCOFFEE
COFFEE
FINANCIAL STATEMENTS
5-year projections
CASH FLOW ANALYSIS
business feasibility
RISK ANALYSIS
significant risk factors
FINANCING PLANS
debt versus equity
TO BREW
THE
ORPRICE
NOTOF
TOCOFFEE
BREW?
significant risk factors
A DROP IN SELLING PRICE
• a 5 percent drop in selling price will reduce sustainable
earnings by over 50 percent!
• a reduction of selling prices is not likely
• an increase in sales prices has a significant positive
impact on earnings
TO BREW OR NOT TO BREW?
significant risk factors
A DROP IN SALES QUANTITY
• a 15 percent drop in sales quantity will result in
nominal sustainable earnings
• superior location
• considerable expansion in downtown core – both
residential and business capacity
• growing population
• a 15 percent increase in sales quantity will double
sustainable earnings
TO BREW OR NOT TO BREW?
significant risk factors
A RISE IN LABOUR COSTS
• a 10 percent increase in minimum wage will cut
sustainable earnings in half
• Saskatoon minimum wage is above national average (is
it?)
• What else?
TO BREW OR NOT TO BREW?
goals
TO ACHIEVE A TAKE-HOME SALARY OF $105,000
THROUGH SALARY AND DIVIDENDS
• consistent salary of $50,000 built in to projections
• average dividends of $20,000 over 5-year term
• both are subject to income tax
TO BREW OR NOT TO BREW?
other considerations
CONSIDERATION 1
•X
TO BREW OR NOT TO BREW?
other considerations
CONSIDERATION 1
•X
TO BREW OR NOT TO BREW?
other considerations
CONSIDERATION 1
•X