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http://www.youtube.com/watch?v=6y1e0skfJts
Ray AlwaniVoilen Chu
Kelli DawsonTammy HallJill Johnson
Carmen Yau
OR NOT TO BREW?
TO BREW
AGENDA
THE WORLD OF COFFEEindustry overview
HOW TO SELL YOUR BEANSthe marketing plan
HOW TO MAKE A CUP OF COFFEEoperations and human resource analysis
THE PRICE OF COFFEEfinancial and sensitivity analysis
TO BREW OR NOT TO BREW?summary and recommendations
THE WORLD OF COFFEEAGENDA
Established in 1975
Partners
Charitable work
Royalty Income Fund
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
THE WORLD OF COFFEE
Distribution of Saskatchewan's Employment Growth
Rest of SK
Regina
Saskatoon
LOCATION, LOCATION, LOCATION
• King George condos
THE WORLD OF COFFEE
HOW TO SELL YOUR BEANSTHE WORLD OF 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 COFFEEHOW TO SELL YOUR BEANSTHE 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
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
HOW TO MAKE A CUP OF COFFEE
JOB ROLE
Owner
RESPONSIBILITIES SKILLS & 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
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
HOW TO MAKE A CUP OF COFFEE
HIRING PROCESS
THE HUMAN RESOURCES PLAN
• print ad or on-line
• review resumes
• interview
• selection
HOW TO MAKE A CUP OF COFFEE
TRAINING PROGRAMS
THE HUMAN RESOURCES PLAN
OWNERS3 week training program for new franchise owners
• Process and procedures• Knowledge of products,
finances, and profitability
NEW EMPLOYEESTrained by owners
• 8 hour training day• 3 shifts of shadowing an
experienced Barista
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
HOW TO MAKE A CUP OF COFFEE
HUMAN RESOURCE STRATEGY
THE HUMAN RESOURCES PLAN
• inexperienced employees
• minimum wage
• key traits
HOW TO MAKE A CUP OF COFFEE
MANAGEMENT TEAM
THE HUMAN RESOURCES PLAN
• KEN – experience as a supervisor
• MARY – front-line experience
HOW TO MAKE A CUP OF COFFEE
BUSINESS HOURS
THE OPERATIONS PLAN
Weekdays Saturday Sunday
6am – 9pm 6am – 5pm 6am – 3pm
HOW TO MAKE A CUP OF COFFEE
DAILY ACTIVITIES
THE OPERATIONS PLAN
opening shiftTIMEhalf hour before opening
PERFORMED BYKen/Mary, or Supervisor
TASKSgrind 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
DAILY ACTIVITIES
THE OPERATIONS PLAN
TIMEthroughout the business day
PERFORMED BYowner / supervisor plus one Barista at all times
TASKStake orders, receive cash payments from customers, make customer orders, clean-up, restock inventory when low
day shift
HOW TO MAKE A CUP OF COFFEE
DAILY ACTIVITIES
THE OPERATIONS PLAN
TIMEhalf hour before closing
PERFORMED BYKen/Mary, or Supervisor
TASKSrestock inventory for next morning, clean machine and shop, reconcile cash register, prepare bank deposit
closing shift
HOW TO MAKE A CUP OF COFFEE
WEEKLY ACTIVITIES
• inventory count
• inventory from Second Cup
• order food
• other inventory
THE OPERATIONS PLAN
HOW TO MAKE A CUP OF COFFEE
BI-MONTHLY ACTIVITIES
• updating staff schedules
• payroll
THE OPERATIONS PLAN
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
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
HOW TO MAKE A CUP OF COFFEE
SUPPLIERS & SERVICE PROVIDERS
SECOND CUP PARENT COMPANY
SuppliesCoffee, Espresso Beans, Cups, Lids, Sleeves, Napkins, Second Cup
Merchandise, Syrups
RiskLow. Quality and delivery of products is ensured. Biggest risk is
fluctuating price of coffee beans
Mitigating FactorA fixed price contract to ensure fix price for the year
THE OPERATIONS PLAN
HOW TO MAKE A CUP OF COFFEE
SUPPLIERS & SERVICE PROVIDERS
CHRISTIE’S BAKERY
SuppliesFood and other bakery items
Risk #1: Cannot guarantee quality of foodMitigating Factor: Locally well-known and reputable establishment – known
for consistent high quality of fresh food and baked items
Risk #2: PriceMitigating Factor: Fixed price contract for the year, in return we will order a
minimum quantity from them per day
THE OPERATIONS PLAN
HOW TO MAKE A CUP OF COFFEE
SUPPLIERS & SERVICE PROVIDERS
COSTCO
SuppliesCream, 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
HOW TO MAKE A CUP OF COFFEE
SUPPLIERS & SERVICE PROVIDERS
SASKATOON MAINTENANCE SERVICE EXPERTSMachine maintenance required for coffee and espresso machines
SASKATOON LAW GROUPFranchising of the business and other legal requirements
LOCAL ACCOUNTANTBookkeeping, financial statements, income tax returns
THE OPERATIONS PLAN
HOW TO MAKE A CUP OF COFFEE
Cash: $10,000Accounts Receivable: noneInventory: Average turnover days of 30Accounts Payable: Average turnover days of 30
THE OPERATIONS PLAN
Capital Expenditures: $200,000
WORKING CAPITAL
CAPITAL BUDGET
DOOR
COUNTER
DISPLAY CASE
Washroom Stock Room
Pick Up Counter
FridgeA
A
B
C
C
C
Office
Cash Register
Sink
D
Sitting Counter
X
X
X
X
X
A = Espresso MachinesB = Chiller MachineC = Coffee MachinesD = DishwasherX = Counter ChairsE = Display shelves
HOW TO MAKE A CUP OF COFFEE
BARISTA-PREPARED COFFEE AND DRINKS
Coffee beans 0.50Milk and creamer 0.30 Other (syrup, sugar, honey, etc.) 0.25Cups, lids, sleeves 0.10Total cost per unit 1.15
GROSS MARGIN: 183%
THE OPERATIONS PLAN
COST OF GOODS SOLD
Avg Cost per Unit ($)
HOW TO MAKE A CUP OF COFFEE
OTHER
Pre-packaged coffee and drinks 2.10 7%Average food cost per unit 1.20 25%Merchandise 6.25 12%
THE OPERATIONS PLAN
COST OF GOODS SOLD
Avg Cost per Unit ($)
Gross Margin
HOW TO MAKE A CUP OF COFFEETHE OPERATIONS PLAN
OPERATING EXPENSES
Rent (1,000 sqft x $20 per sqft) $20,000Insurance $4,000Repairs and maintenance $5,000Telephones $1,200Utilities $9,600Accounting $5,000Miscellaneous $5,000
HOW TO MAKE A CUP OF COFFEETHE PRICE OF COFFEE
FINANCIAL STATEMENTS5-year projections
CASH FLOW ANALYSISbusiness feasibility
RISK ANALYSISsignificant risk factors
FINANCING PLANSdebt versus equity
TO BREW OR NOT TO BREW?THE PRICE OF COFFEE
significant risk factorsA 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 factorsA 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 factorsA 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?
goalsTO 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 considerationsCONSIDERATION 1
• X
TO BREW OR NOT TO BREW?
other considerationsCONSIDERATION 1
• X
TO BREW OR NOT TO BREW?
other considerationsCONSIDERATION 1
• X
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