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Ray Alwani Voilen Chu Kelli Dawson Tammy Hall Jill Johnson Carmen Yau OR NOT TO BREW? TO BREW.

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Presentation on theme: "Ray Alwani Voilen Chu Kelli Dawson Tammy Hall Jill Johnson Carmen Yau OR NOT TO BREW? TO BREW."— Presentation transcript:

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3 Ray Alwani Voilen Chu Kelli Dawson Tammy Hall Jill Johnson Carmen Yau OR NOT TO BREW? TO BREW

4 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

5 THE WORLD OF COFFEE AGENDA Established in 1975 Partners Charitable work Royalty Income Fund

6 SECOND CUP FRANCHISE TERMS THE WORLD OF COFFEE

7 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

8 SASKATOON MARKET 3.5 percent projected real economic growth in Saskatoon in 2008 downtown condominium expansion construction of new office towers THE WORLD OF COFFEE

9 LOCATION, LOCATION, LOCATION King George condos THE WORLD OF COFFEE

10 HOW TO SELL YOUR BEANSTHE WORLD OF COFFEE COMPETITION STRONGFIELD’S COFFEE

11 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

12 HOW TO SELL YOUR BEANS NON-PRICE SENSITIVE COFFEE CONNOISSEURS high disposable income value convenience over price value customization and variety in beverages

13 HOW TO SELL YOUR BEANS PRODUCTS & SERVICES premium blend coffee and blended coffee drinks focus on organic and free-trade coffees

14 HOW TO SELL YOUR BEANS PRODUCTS & SERVICES specialty teas and lattes

15 HOW TO SELL YOUR BEANS PRODUCTS & SERVICES fresh fruit smoothies and desert-style beverages

16 HOW TO SELL YOUR BEANS PRODUCTS & SERVICES friendly and efficient service in a clean and inviting atmosphere

17 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

18 HOW TO MAKE A CUP OF COFFEE 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 SKILLS & REQUIREMENTS $11.00 per hour $0.30 raise every year THE HUMAN RESOURCES PLAN three months barista work experience customer service oriented, friendly communicate well with others accurately communicate orders

19 HOW TO MAKE A CUP OF COFFEE JOB ROLE Owner RESPONSIBILITIESSKILLS & REQUIREMENTS $25,000 each per year $1,250 benefits each per year THE HUMAN RESOURCES PLAN 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

20 HOW TO MAKE A CUP OF COFFEE STAFFING CONSIDERATIONS OVER THE PROJECTION PERIOD THE HUMAN RESOURCES PLAN no seasonality staffing requirements consistent planned sales growth in revenue no supervisor in the first year

21 HOW TO MAKE A CUP OF COFFEE HIRING PROCESS THE HUMAN RESOURCES PLAN print ad or on-line review resumes interview selection

22 HOW TO MAKE A CUP OF COFFEE TRAINING PROGRAMS THE HUMAN RESOURCES PLAN OWNERS 3 week training program for new franchise owners Process and procedures Knowledge of products, finances, and profitability NEW EMPLOYEES Trained by owners 8 hour training day 3 shifts of shadowing an experienced Barista

23 HOW TO MAKE A CUP OF COFFEE EMPLOYEE TURNOVER THE HUMAN RESOURCES PLAN 2 times per year 6 to 8 employees on staff at any given time 12 to 16 workers throughout the year costs

24 HOW TO MAKE A CUP OF COFFEE HUMAN RESOURCE STRATEGY THE HUMAN RESOURCES PLAN inexperienced employees minimum wage key traits

25 HOW TO MAKE A CUP OF COFFEE MANAGEMENT TEAM THE HUMAN RESOURCES PLAN KEN – experience as a supervisor MARY – front-line experience

26 HOW TO MAKE A CUP OF COFFEE BUSINESS HOURS THE OPERATIONS PLAN WeekdaysSaturdaySunday 6am – 9pm6am – 5pm6am – 3pm

27 HOW TO MAKE A CUP OF COFFEE DAILY ACTIVITIES THE OPERATIONS PLAN 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

28 HOW TO MAKE A CUP OF COFFEE DAILY ACTIVITIES THE OPERATIONS PLAN 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 day shift

29 HOW TO MAKE A CUP OF COFFEE DAILY ACTIVITIES THE OPERATIONS PLAN 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 closing shift

30 HOW TO MAKE A CUP OF COFFEE WEEKLY ACTIVITIES inventory count inventory from Second Cup order food other inventory THE OPERATIONS PLAN

31 HOW TO MAKE A CUP OF COFFEE BI-MONTHLY ACTIVITIES updating staff schedules payroll THE OPERATIONS PLAN

32 HOW TO MAKE A CUP OF COFFEE MONTHLY ACTIVITIES pay bills and suppliers prepare month-end statements compare month-end statements to budget identify budget variances analyze significant variances risk analysis THE OPERATIONS PLAN

33 HOW TO MAKE A CUP OF COFFEE 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 THE OPERATIONS PLAN

34 HOW TO MAKE A CUP OF COFFEE 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 THE OPERATIONS PLAN

35 HOW TO MAKE A CUP OF COFFEE 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 THE OPERATIONS PLAN

36 HOW TO MAKE A CUP OF COFFEE 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 THE OPERATIONS PLAN

37 HOW TO MAKE A CUP OF COFFEE 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 THE OPERATIONS PLAN

38 HOW TO MAKE A CUP OF COFFEE Cash:$10,000 Accounts Receivable:none Inventory:Average turnover days of 30 Accounts Payable:Average turnover days of 30 THE OPERATIONS PLAN Capital Expenditures:$200,000 WORKING CAPITAL CAPITAL BUDGET

39 DOORDOOR COUNTER DISPLAY CASEDISPLAY CASE WashroomStock Room Pick Up Counter FridgeA A B C C C Office Cash Register Sink D Sitting CounterSitting Counter X X X X X A = Espresso Machines B = Chiller Machine C = Coffee Machines D = Dishwasher X = Counter Chairs E = Display shelves

40 HOW TO MAKE A CUP OF COFFEE BARISTA-PREPARED COFFEE AND DRINKS Coffee beans0.50 Milk and creamer0.30 Other (syrup, sugar, honey, etc.) 0.25 Cups, lids, sleeves0.10 Total cost per unit1.15 GROSS MARGIN: 183% THE OPERATIONS PLAN COST OF GOODS SOLD Avg Cost per Unit ($)

41 HOW TO MAKE A CUP OF COFFEE OTHER Pre-packaged coffee and drinks2.107% Average food cost per unit1.2025% Merchandise % THE OPERATIONS PLAN COST OF GOODS SOLD Avg Cost per Unit ($) Gross Margin

42 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

43 HOW TO MAKE A CUP OF COFFEE THE PRICE OF COFFEE FINANCIAL STATEMENTS 5-year projections CASH FLOW ANALYSIS business feasibility RISK ANALYSIS significant risk factors FINANCING PLANS debt versus equity

44 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

45 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

46 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?

47 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

48 TO BREW OR NOT TO BREW? other considerations CONSIDERATION 1 X

49 TO BREW OR NOT TO BREW? other considerations CONSIDERATION 1 X

50 TO BREW OR NOT TO BREW? other considerations CONSIDERATION 1 X


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