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TO BREW OR NOT TO BREW? Ray Alwani Voilen Chu Kelli Dawson Tammy Hall
Jill Johnson Carmen Yau
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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
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THE WORLD OF COFFEE AGENDA Established in 1975 Partners
Charitable work Royalty Income Fund
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THE WORLD OF COFFEE SECOND CUP FRANCHISE TERMS
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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
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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
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THE WORLD OF COFFEE LOCATION, LOCATION, LOCATION King George condos
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HOW TO SELL YOUR BEANS THE WORLD OF COFFEE STRONGFIELD’S COFFEE
COMPETITION STRONGFIELD’S COFFEE
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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
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HOW TO SELL YOUR BEANS NON-PRICE SENSITIVE COFFEE CONNOISSEURS
high disposable income value convenience over price value customization and variety in beverages
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HOW TO SELL YOUR BEANS PRODUCTS & SERVICES
premium blend coffee and blended coffee drinks focus on organic and free-trade coffees
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HOW TO SELL YOUR BEANS PRODUCTS & SERVICES specialty teas and lattes
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HOW TO SELL YOUR BEANS PRODUCTS & SERVICES
fresh fruit smoothies and desert-style beverages
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HOW TO SELL YOUR BEANS PRODUCTS & SERVICES
friendly and efficient service in a clean and inviting atmosphere
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HOW TO SELL YOUR BEANS HOW TO MAKE A CUP OF COFFEE Barista JOB ROLE
THE HUMAN RESOURCES PLAN JOB ROLE Barista RESPONSIBILITIES SKILLS & REQUIREMENTS address customer needs prepare beverages cleaning duties follow cash handling procedures 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
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HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN JOB ROLE Supervisor RESPONSIBILITIES SKILLS & REQUIREMENTS address customer needs prepare beverages cleaning duties follow cash handling procedures opening and closing the store reconcile daily cash receipts and bank deposit three months barista work experience customer service oriented, friendly communicate well with others accurately communicate orders $11.00 per hour $0.30 raise every year
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HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN JOB ROLE Owner RESPONSIBILITIES SKILLS & REQUIREMENTS 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 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
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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
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HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN HIRING PROCESS print ad or on-line review resumes interview selection
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HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN TRAINING PROGRAMS OWNERS 3 week training program for new franchise owners NEW EMPLOYEES Trained by owners Process and procedures Knowledge of products, finances, and profitability 8 hour training day 3 shifts of shadowing an experienced Barista
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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
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HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN HUMAN RESOURCE STRATEGY inexperienced employees minimum wage key traits
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HOW TO MAKE A CUP OF COFFEE
THE HUMAN RESOURCES PLAN MANAGEMENT TEAM KEN – experience as a supervisor MARY – front-line experience
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HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN BUSINESS HOURS Weekdays Saturday Sunday 6am – 9pm 6am – 5pm 6am – 3pm
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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
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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
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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
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HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN WEEKLY ACTIVITIES inventory count inventory from Second Cup order food other inventory
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HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN BI-MONTHLY ACTIVITIES updating staff schedules payroll
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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
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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
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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
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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
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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
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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
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HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN WORKING CAPITAL Cash: $10,000 Accounts Receivable: none Inventory: Average turnover days of 30 Accounts Payable: Average turnover days of 30 CAPITAL BUDGET Capital Expenditures: $200,000
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A = Espresso Machines B = Chiller Machine C = Coffee Machines
DOOR COUNTER DISPLAY CASE Washroom Stock Room Pick Up Counter Fridge A B C Office Cash Register Sink D Sitting Counter X A = Espresso Machines B = Chiller Machine C = Coffee Machines D = Dishwasher X = Counter Chairs E = Display shelves
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HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN COST OF GOODS SOLD BARISTA-PREPARED COFFEE AND DRINKS Coffee beans Milk and creamer Other (syrup, sugar, honey, etc.) 0.25 Cups, lids, sleeves Total cost per unit GROSS MARGIN: 183% Avg Cost per Unit ($)
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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
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HOW TO MAKE A CUP OF COFFEE
THE OPERATIONS PLAN OPERATING EXPENSES Rent (1,000 sqft x $20 per sqft) $20,000 Insurance $4,000 Repairs and maintenance $5,000 Telephones $1,200 Utilities $9,600 Accounting $5,000 Miscellaneous $5,000
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THE PRICE OF COFFEE HOW TO MAKE A CUP OF COFFEE FINANCIAL STATEMENTS
5-year projections CASH FLOW ANALYSIS business feasibility RISK ANALYSIS significant risk factors FINANCING PLANS debt versus equity
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significant risk factors
TO BREW OR NOT TO BREW? THE PRICE OF COFFEE 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
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significant risk factors
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
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significant risk factors
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?
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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
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TO BREW OR NOT TO BREW? other considerations CONSIDERATION 1 X
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TO BREW OR NOT TO BREW? other considerations CONSIDERATION 1 X
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TO BREW OR NOT TO BREW? other considerations CONSIDERATION 1 X
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