HALFBUCKS BUSINESS PLAN ANNA BARRISTA

HALFBUCKS
BUSINESS PLAN
HALFBUCKS
ANNA BARRISTA
KEVIN KONA
FRED ROAST
© Copyright Thomas Hellmann, 2005. This is a fictional business plan. It is solely
intended to be used as teaching material.
Table of Contents
1. Executive summary
2. Target Market and Customer Analysis
3. Strategy: Business Model and Competitive Advantages
4. Competitor Analysis
5. Marketing Plan
6. Sales Strategy
7. Staged Roll-out Strategy
8. Financial Projections
Executive Summary
HALFBUCKS is a retailer of premium-quality coffee and related caffeinated
beverages that intends to capitalize on the lack of gourmet coffee products at
lower prices given the saturation of corporate retail behemoths such as
Starbucks. HALFBUCKS offers the coffee drinking population an alternative to
the stuffy atmosphere and price-gouging antics that pervades gourmet coffee
retailing on virtually every urban street corner.
HALFBUCKS offers its customers a simplified menu of premium quality freshly
brewed coffee and standard espresso drinks such as latte, cappuccino, and
regular espresso. In addition, HALFBUCKS will also offer basic soft drinks such
as water, natural juices and more.
The central branding message will be a widely publicized pricing strategy, that
relative to the industry leader Starbucks, HALFBUCKS will always charge half
the price for a regular size coffee.
HALFBUCKS will focus on the following key mass markets:
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Commuters - people traveling to/from work, out shopping, running errands, or
just out for a drive
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Captive Consumers - people who are searching for coffee refreshments in
areas such as office parks, manufacturing facilities, colleges, city centers, and
other areas where refreshment stands are an integral part of the environment
HALFBUCKS will infiltrate the commuter and captive consumer markets by
deploying drive-thru kiosks and limited footprint stores in the most convenient
and easy to get to locations. The drive-thru kiosks are designed to be distinctive
and easily recognizable, handle two-sided traffic, and enable to serve consumer
coffee in less time than required for a visit to the locally owned cafe or one of the
retail chains.
To ensure customer awareness and loyalty HALFBUCKS will pursue highly
targeted low cost advertising and promotion campaigns through drive-time radio
advertising, the launch of the Mobile “HALFBUCKS Coffee” Wagon aimed at
organizing community charitable events, and public relations campaign.
To be known as the new coffee wave from the Pacific Northwest, HALFBUCKS’s
will simultaneously launch five stores in the greater Seattle area. It will then
quickly expand throughout the Pacific Northwest. It will enter California with 12
month, and then rapidly expand eastward throughout North America.
HALFBUCKS’s financial returns are quite promising. HALFBUCKS can
breakeven with less than 400 customers visiting a store in any given day.
EBITDA margins at the unit level exceed 20%. With low start-up costs and
minimal initial capital needs, HALFBUCKS can achieve breakeven free cash flow
inside of one year with a $100,000 per store investment. Within 5 years, the
company will achieve $50 million in sales. At this point the company plans to go
public. Since the company is conceived as the quintessential “anti-Starbucks”
company, it will make a promise to its investors NEVER to sell out to Starbucks.
Target Market and Customer Analysis
Market Analysis
Coffee accounts for the largest sector of the United States hot drinks market,
representing 65.2% of the market in volume terms. Estimated 2003 sales of
coffee and ready-to-drink coffee in the United States were $19 billion, with the
U.S. comprising approximately 20% of the world market.
US Hot Drinks Market Segmentation
(% by Volume 2001)
Tea
32%
Food
Drinks
3%
Coffee
65%
Source: Datamonitor
The $19 billion market is divided between (i) retail (~ $9bn per year), which
includes mostly coffee beans sold in supermarkets, and (ii) foodservice (~$10bn
per year), which includes coffee sold in cafes and other coffee retailers.
In the foodservice segment it is estimated that gourmet (freshly ground) coffee
shops and other specialty shop varieties will show the greatest growth,
particularly among younger consumers. The premium coffee retail market has
proved particularly popular with younger consumers and professionals that are
also more likely to involve themselves in the blossoming cafe culture. However,
despite the increasing growth of specialty shops coffee drinkers, most
consumers, even today, prefer to buy their coffee both traditional and gourmet at
a supermarket or a grocery store and brew their own coffee beverage at home.
% Drinking Their Coffee by Location Purchased
100
80
Traditional Coffee Drinkers
62
Gourmet Coffee Beverage Drinkers
60
40
36
26
11
20
18
6
8
5
5
4
8
10
0
Supermarket
Work
Mass Retail
Specialty Coffee
Shop
Coffee Store
Restaurant
Source: National Coffee Association
In the 1990s’ coffee drinking has become relevant and contemporary. Specialty
coffee houses or bars have spread across the country, making coffee an
important part of socializing. In many communities, coffee bars have become
innovative: some provide personal computers so that customers can surf the
Internet, while others organize community meetings, book and poetry readings,
and even matchmaking services. There are a wide variety of coffee offerings,
from size, flavor, preparation and toppings and plenty of gourmet and specialty
shops to provide them. This social coffee-drinking growth pattern has made it
increasingly difficult for the customer-on-the-go to find a quality, inexpensive and
fast cup of coffee in a no-nonsense atmosphere.
According to the National Coffee Association, which conducts an annual survey
to measure trends in coffee consumption among Americans, the following are the
most recent market statistics:
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52% of the adult population of the U.S. over 18 years of age drinks coffee
every day, representing 107 million daily drinkers
Of these, 29 million American adults drink gourmet coffee beverages
every day, whether specialty coffee, espresso-based beverages (latte,
espresso, café mocha, cappuccino) or frozen and iced coffee beverages
Another 28% of the population, or 57 million adults, drink coffee
occasionally
On a per capita basis, men drink as much coffee as women (1.7 cups per
day each)
Coffee drinkers consume on average 3.3 cups of coffee per day
The average coffee cup size is 9 ounces
35% of coffee drinkers drink their coffee black; while 62% add a
sweetener and/or cream
64% of all coffee is consumed at breakfast; 28% between meals; and 8%
at all other meals
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Women are more excited about coffee varieties currently available and a
higher proportion of women indicated that drinking coffee is a good way to
relax
Women are more price conscious than men
Men appear to more readily attest that coffee helps them “get things done”
Per capita, Americans drink 1.7 nine-ounce cups of coffee per day, or
approximately 4.5 billion ounces of some kind of coffee product per day. While a
significant portion of this is purchased and brewed at home, the fact is that the
coffee market is large.
The lifestyle, demographic, and, most important, economic trends continue to
support the growing need for no nonsense, gourmet and fairly priced retail coffee
shops. From a lifestyle standpoint we believe that many Americans consider
drinking coffee as the top way to gain energy and alertness. To some it is a way
to unwind and relax with friends. Today’s consumers have to choose among the
barrage of undifferentiated coffee shops, coupled with inner city lifestyles that are
growing ever more conducive to fast casual food and drink venues.
We will target the hectic pace of working life, including both commuters and
captive consumers, as our initial point of entry. This market seems highly
conducive to a fresh, fast and cheap service concept. Furthermore, the similarity
between the enormous numbers of undifferentiated coffee shops has created an
opportunity for a leading player to take steps to differentiate itself from the
competition. We will design our stores to meet consumers' growing need for a
quick drinking and meeting venue.
In order to serve coffee and food products at below market prices we will not
offer the sofa format of most coffee bars. According to market research this
format is restrictive because it does not encourage customers to spend enough
money relative to the operating cost structure. Internal research and observation
showed that guests could be sitting in the stores for an hour nursing only one cup
of coffee.
Customer Analysis
The following demographic breakdown represents the mass coffee consumer
market and is based on the survey of the National Coffee Association:
ƒ Ages 20-29: Generally satisfied with the quality of coffee they consume; more
likely to perceive coffee to be a good value; more likely to be satisfied with the
amount of coffee they consume; more likely to attest to the popularity of
coffee; more likely to feel better about drinking coffee; somewhat price
conscience; more likely to drink more coffee in the coming year; and more
accepting of espresso based drinks.
ƒ Ages 30-59: Generally satisfied with the quality of coffee they consume; more
likely to indicate that the amount of coffee they consume is about right for
them; more likely to attest to the popularity of coffee; less price conscience.
ƒ
Age 60+: Less satisfied with the quality of coffee they consume; more likely to
indicate that the amount of coffee they consume is about right for them; more
likely to indicate that coffee is a good way to relax; more concerned about
news/medical reports about caffeine; more price conscience; less excited
about the variety of coffee available; and less interested in espresso based
beverages.
We believe that there is high number of coffee consumers in each segment who
seek convenience and are price conscious. Therefore given our commuter and
captive consumer market focus and the above assessment we will target the
following type of customers:
ƒ Price-conscious Americans
ƒ No-nonsense / No-frills coffee drinkers
ƒ On-the-go and rushed coffee drinkers
ƒ Disgruntled Starbucks customers
ƒ Environmentally aware
Strategy: Business Model and Competitive Advantages
Business Model
At the core of our strategy will be a widely publicized pricing strategy that our
coffee will cost half of what it costs at Starbucks. Individual prices will vary by
location, depending on Starbucks’ local prices. In Seattle, Starbucks currently
sells its tall coffee for approximately $2, and its Grande coffee for $3. We will
therefore sell our small coffee for $1, and our medium coffee for $1.50.
We project almost 50% of sales will come from these $1 and $1.50 purchases,
with the remainder coming from specialty coffee such as latte, cappuccino and
espresso. HALFBUCKS does not plan to add too much variety to the menu so
as to ensure a fast, efficient transaction process for our customers. There will be
no food served, at least at the company’s inception, so as not to distract
employees or customers from the essence of our brand – excellent coffee at a
reasonable price.
Competitive Advantages
The Company intends to compete on the following dimensions:
ƒ Brand. HALFBUCKS will couple premium quality coffee with the perception of
“good-ol’ days” value. Recognizing that today’s coffee drinkers are no longer
just the high-flying executives on the go, but also the cost-conscious, valueoriented busy-bodies of the 21st century. Consumers today are disenchanted
with corporate mongers that take advantage of their entrenched position and
gouge the regular working person. HALFBUCKS will be viewed as the antiStarbucks, a savior to the common man who seeks a delicious cup of
invigorating joe.
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Reduced Price. Based on a leaner cost structure, HALFBUCKS will be able to
price below the industry. Recognizing the significant gross margins enjoyed
by Starbucks, the high operating expenses from Starbucks’ atmospheredriven culture, and the declining coffee bean prices internationally,
HALFBUCKS intends to price substantially lower than the industry leader.
Ultimately, HALFBUCKS will be able to offer lower prices due to its leaner
cost structure, stemming in part from a much smaller store footprint.
Simplified Price Structure. Consistent with its brand image, HALFBUCKS
intends to simplify its pricing scheme. This simplicity in pricing leads to
increased transaction throughput.
Speed/Convenience. By decreasing transaction processing times,
HALFBUCKS will offer consumers an expedited purchasing experience that
will fly in the face of slow, deliberate, exaggerated and unnecessary lines at
Starbucks. In addition, HALFBUCKS will operate kiosk distribution facilities in
certain locations to attract commuting customers seeking high-quality coffee
with little or no wait.
Technology. HALFBUCKS will further differentiate itself from Starbucks by
introducing various dispenser and coffee handling instruments designed to
both improve the customer experience and expedite the purchasing process.
First, HALFBUCKS will put in place its patented sugar and cream dispenser
units (independent, stainless steel). No more struggling with hard-to-tear
sugar packets and annoying cream cuplets. No more messy consoles with
shredded refuse. Second, HALFBUCKS will provide to the customer its
patented hot-handz cup designed to reduce packaging costs while eliminating
concern for accidental finger burns.
Counter-culture. HALFBUCKS will lead a “back-to-basics,” anti-Starbucks
cultural movement that resists the alteration of the English language. Instead
of Tall, Grande and Vente, coffee will be served in small, medium or large
sizes. People are fed up with Starbucks’ pretentious names. As Dave Berry
recently noted:
If Starbucks decided to call its toilets “AquaSwooshies” would we go along
with that? Listen people: you should never have to utter the words
“Grande Supremo” unless you are addressing a tribal warlord who is
holding you captive and threatening to burn you at the stake.
Growth Strategy
Initially, HALFBUCKS will own and manage all of its facilities. In the future,
HALFBUCKS’s management team intends to study the possibility of offering
franchise licenses in order to rapidly gain scale and penetrate various markets to
pursue an aggressive strategy against Starbucks.
Competitor Analysis
Industry Dynamics: Starbucks continues to face little competition
In 2003 the number of specialty coffee outlets shrank by 116 (a 5% decrease
from 2002). Despite this decrease, the overall unit growth actually increased by
5.7%, implying that, while the specialty coffee category continues to grow, most
of the growth is absorbed by Starbucks. The 5.7% increase in unit growth is
higher than other restaurant categories.
In terms of number of store units, Starbucks is 23 times bigger than its next
competitor in the specialty coffee segment. As of December 2003, Starbucks had
5,201 store units, while Caribou Coffee, the second largest competitor in the
category, had 223. The dominance of Starbucks suggests not only market
superiority, but the lack of a high-volume competitor capable of taking market
share across geographic segments. We believe size and capital investments are
significant requirements to develop a recognized brand capable of attracting
customers away from Starbucks on a sustainable basis.
Specialty Coffee Direct Competition (store units)
6,000
5,201
5,000
4,000
3,000
2,000
1,000
223
177
168
153
Carribou
Coffee
Coffee
Beanery
Gloria Jean's
Brew sters
0
Starbucks
When assessing the broader market and considering breakfast food retail chains
that offer quality coffee, Dunkin Donuts presents itself as a viable competitive
presence, with nearly 4,000 units. Other fast food establishments including
McDonald’s and Burger King do not offer specialty coffee.
Starbucks vs. Morning Competitors (store units)
6,000
5,201
5,000
3,996
4,000
3,000
2,000
1,000
461
409
333
270
249
223
199
184
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Finally, we must also consider the influence of independent coffee retailers as a
competitive alternative. In fact, independent specialty coffee chains have a total
market share of 54%, which is a higher portion of market share than other food
categories such as fast food, where independents account for only 33%. This
implies that local coffee shops are prevalent, but also that growth opportunities
may exist for specialty coffee chains to continue to expand their footprint. If we
assume that the market share of chains continues to increase and ultimately
mirrors market share percentages of chains and independents in fast food
categories, then we should expect Starbucks to continue to expand unless
Chain Name
Starbucks
Dunkin Donuts
Daylight Donuts
Einstein Bros
Krispy Kreme
Manhattan Bagel
Bruegger's Bagel
Caribou Coffee
Winchell's
Tim Horton's
Coffee Beanery
Shipley Donut Shops
Gloria Jeans
Honey Dew Donuts
Brewster's Coffee
Seattle's Best
Coffe Bean & Tea Leaf
Tully's Coffee
Noah's New York Bagels
Barnie's Coffee & Tea
Peet's Coffee & Tea
Fall 2000
Fall 2001
Fall 2002
Fall 2003
% Yr/Yr
Change
Absolute
Yr/Yr Change
2,709
3,764
479
423
172
282
336
133
226
108
173
158
234
127
154
89
61
72
106
102
56
3,475
3,803
475
393
201
277
303
176
220
114
183
156
215
129
166
97
71
73
89
100
66
4,242
3,840
480
412
244
275
266
181
207
160
186
164
212
136
170
123
100
107
89
97
64
5,201
3,996
461
409
333
270
249
223
199
184
177
168
168
163
153
123
118
104
87
84
72
22.6%
4.1%
-4.0%
-0.7%
36.5%
-1.8%
-6.4%
23.2%
-3.9%
15.0%
-4.8%
2.4%
-20.8%
19.9%
-10.0%
0.0%
18.0%
-2.8%
-2.2%
-13.4%
12.5%
959
156
-19
-3
89
-5
-17
42
-8
24
-9
4
-44
27
-17
0
18
-3
-2
-13
8
*Italics indicates direct specialy coffee retailer
smaller competitors capture more share. In essence, there may potentially be
further market share expansion opportunities available to specialty coffee chains.
Comparative Analysis
We segment competition for HALFBUCKS Coffee into three major categories: 1)
specialty coffee retailers including Starbucks and other national and regional
chains (as outlined above), 2) food establishments offering specialty or “gourmet”
coffee including breakfast food retailers and donut shops, and 3) food chains
offering basic coffee including McDonalds and Burger King.
Specialty Coffee Retailers
Most specialty coffee retailers that offer specialty coffee as their primary product
are regional. Only Starbucks and Coffee Beanery have a national footprint (in
fact, they’re international). The Coffee Beanery uses a franchising model and is
much more spread out, with a few store locations in various metropolitan areas
all over the country. In contrast, Starbucks stores are highly concentrated in
particular metropolitan areas, often within several blocks of one another. The
Pacific Northwest is home to a number of players, including Starbucks, Seattle’s
Best and Tully’s. Caribou Coffee, the second largest specialty coffee retailer by
store units, is located primarily in the Midwest and has a few locations in the
Southeast.
As illustrated by the comparative analysis below, nearly all of these specialty
coffee retailers provide a diverse list of coffee products, at prices close to one
another. In all cases, the price of a small, 12 ounce regular coffee is at least
$1.35 and specialty drinks can be as much as $4.00.
Starbucks Menu
"Coffees & Espressos"
Brewed Coffee
Cappuccinos
Latte
Café Mocha
Caramel Macchiatto
Café Americanos
White Choc Mocha
Small
$1.35
$2.30
$2.30
$2.50
$2.50
$1.55
$3.00
Medium
$1.55
$2.85
$2.85
$3.05
$3.20
$1.85
$3.55
Large
$1.75
$3.15
$3.15
$3.25
$3.50
$2.05
$3.85
"Frappuccinos"
Coffee
Mocha
Vanilla
Caramel
Java Chip
Small
$2.55
$2.80
$2.80
$3.05
$3.05
Medium
$3.05
$3.30
$3.30
$3.55
$3.55
Large
$3.55
$3.80
$3.80
$4.05
$4.05
"Assorted Cremes"
$2.55
$3.05
$3.55
"Classic Favorites"
Hot Chocolate
Teas
Small
$2.10
$1.15
Medium
$2.35
Large
$2.60
$1.65
"Refreshments"
Iced Tea
Tea Lemonades
Iced Coffee
Small
Medium
Large
Food Establishments Offering Specialty Coffee
A number of breakfast food chains offer specialty drinks as a component of their
morning menu. Dunkin’ Donuts is by far the largest of these (this segment does
not include McDonald’s or Burger King). Dunkin’ Donuts offers a limited variety of
specialty coffees alongside its long list of assorted donut options. These options
include regular coffees and French vanilla and espressos (recently added).
Dunkin’ Donuts adds cream and sugar to their coffees and serves a significant
portion of their customers via drive-thru. Dunkin’ Donuts franchises its stores,
which are located all over the world, but has few, if any, locations on the west
coast. The company claims to sell more than 800 million cups of coffee per day.
Other donut shops and bagel shops make up the balance of established chains
offering specialty coffee. Their focus, however, is in delivering a quality food
product.
Food Chains Offering Basic Coffees
McDonald’s and Burger King offer regular and decaffeinated coffee and tea.
Both chains provide coffee as a complementary item to their breakfast menus.
Neither company has indicated a strategy for offering specialty coffees, nor do
they market their coffees as such.
Aside from the three categories outlined, independent retailers will continue to
comprise a significant portion of the market. In most cases, the primary
competitive features are their localization and community integration.
Geographic
Footprint
Category
Coffee
Options
Food
Offering
Additional
Beverages
Avg Starting
Wages
Approximate
Square Feet
Assorted
Specialty
Limited; may
include
sandwiches,
baked goods,
fruit, yogurt
Juice, water
$9.00
1000
Mix of
table/chair,
sofas,
booths,
outdoor
option
Limited
alternatives
to regular
coffee
Donuts,
bagels,
breakfast
variants
Soda, juice,
water
$8.00
1200
Booths,
table/chair
Regular &
Decaf
Burgers
Soda
$7.00
1200
Booths,
table/chair
Seating
I. Specialty Coffee Retailers
Starbucks
Caribou
Coffee Beanery
Gloria Jean's
Brewster's
Seattle's
Tully's
Barnie's
Peet's
National
Midwest
National
National
NA
Northwest
Northwest
National
West +
II. Food Establishments Offering Specialty Coffee
Dunkin' Donuts
Daylight Donuts
Einstein Bros
Krispy Kreme
Manhattan Bagel
Bruegger's Bagel
Winchell's
Tim Horton's
East/Midwest
NA
Limited States
West
East
Limited States
SW & MW
Canada
III. Food Establishments Offering Basic Coffee
McDonalds
Burger King
Other FF
International
International
Marketing Plan
HALFBUCKS will position its drive-thru kiosks, regular kiosks and stores in
locations with very high visibility and great ease of access. They will be situated
in areas with high commuter traffic and close to office facilities and shopping
facilities in order to catch coffee consumers going to or from work, or while they
are out for lunch or on a shopping outing. HALFBUCKS will implement a low-cost
advertising and promotion campaign that will involve drive-time radio and some
small-scale public awareness campaign. Our main branding feature will be the
drive-thru kiosks, which given our target locations, will be very eye-catching and
should provide the impact of a billboard. Given our simple concept we will also
rely on word of mouth, which has always proven to be the most effective
advertising program a company can implement. In addition, the media will be
more than willing to promote our anti-Starbucks campaign, which could provide
the opportunity for more exposure every time we build our store next to
Starbucks.
Positioning
Our target audience will be frequent coffee consumers seeking fair prices for a
gourmet cup of coffee with fast and high quality customer service. The recent
demographic and economic trends towards fast-paced and cost-conscious
consumer market environment support the growing need for this type of retail
coffee concept. The primary selling proposition is the good value and ease of
purchase of a gourmet coffee on-the-go, which is tasty and fun to drink anytime
and anyplace. The overall product personality is anti-Starbucks, energetic, great
value, no-nonsense experience, and boon to the common man or woman.
The “HALFBUCKS Coffee” key product benefits include simplified and low-cost
prices, fast and convenient service, uniquely tasting coffee you can take
anywhere, and ease of coffee handling (sugar and cream dispenser units, hothandz cup).
Product Name
The “HALFBUCKS COFFEE™” name best represents our product positioning. It
meets our communication objective of no-nonsense coffee, great value, and
convenient service. We have spent considerable amount of time internally, and
with outside consultants and ad agencies to select HALFBUCKS Coffee as our
product name.
Pricing
Low prices with respect to the gourmet coffee market and simple product price
structure are two of HALFBUCKS’s key selling points. Interestingly our major
competition has been moving in the opposite direction, just as the cost of the raw
material has been decreasing. Such price disparity provides a unique opportunity
for the “HALFBUCKS” price coffee concept. Our pricing strategy meets the
financial hurdles of the company. The pricing is also consistent with our brand
image and product positioning.
HALFBUCKS’s staple product is a small or large coffee for half the price than
Starbucks. This should attract large number of price-conscious and on-the-go
consumers. The simplicity in pricing is expected to increase transaction
throughput.
Promotion Strategy
HALFBUCKS’s goal is to gain visibility quickly and to build a strong buzz and
brand awareness, which can be leveraged for further store expansion and to help
us build a strong footprint in the retail coffee market. To do that, HALFBUCKS
Coffee will pursue the following advertising and promotion campaigns:
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Advertising starting on drive time radio - HALFBUCKS will try out different
stations and keep track of results in order to build an effective radio
campaign.
Mobile “HALFBUCKS Coffee” Wagon – this will be a key promotional tool.
Two of our high-spirited founders and great “HALFBUCKS Coffee”
visionaries, Anna Barrista and Fred Roast, will visit college campuses,
factories, corporations, and hospitals in the greater Seattle area, to build the
buzz about our staple coffee products. We will work with the organizations to
promote our visits to their people and donate portion of our proceeds to their
charitable causes. This will give them an opportunity to taste our coffee and
become a regular customer of our facilities. The exposure these units will
provide is hard to measure in dollars. The Mobile Wagon will also be
appearing at community events such as fairs, festivals, and other charitable
events.
Public relations campaign - intended to generate awareness of editors and
product information insertions, reviews, etc. We estimate that our charitable
events and other fundraising activities by the Mobile Wagon will generate a
fair amount of publicity on its own and will, perhaps, minimize--or even
eliminate--the need for a publicist.
Distribution Front Design
HALFBUCKS will use contemporary and chic kiosks for its drive-thru facilities
and storefronts. We will work closely with architects and builders to make our
places distinctive, so that they are both functional and easily recognizable.
Sample Coffee Retail Store Layout
Coffee Server and Prep Area
Table
Table
Entrance
Additive
Station
Bar
Window
Sales Strategy
Several sales strategies will be implemented, including daily specials on highprofit items. We will create a simple loyalty program or hand out free drink
coupons to those who have purchased a certain number of cups or something
comparable. HALFBUCKS will also develop effective sales techniques to
promote higher ticket sales. We will encourage our employees to recognize
returning customers and to foster a sense of community at each kiosk, both
incentives for customers to return.
Sales Forecast
In the first year HALFBUCKS conservatively estimates to have five coffee sales
stations, including three drive-thru kiosks and two retail stores. For simplicity and
conservatism, we have modeled the same unit economics for both drive-thru and
retail locations (although we believe costs of drive-thru kiosks will be significantly
less). Our business is cash-flow positive in the first year. Our five locations will
generate approximately $1,287,563 in revenue in the first year of operation (see
Exhibits).
Sales Programs
ƒ
Corporate Tasting Events - HALFBUCKS plans to host new coffee tasting
events for customers on special occasions. Each time, at the introduction of
new type of coffee, HALFBUCKS will adjust its menu to reflect the changes in
the flavors served.
ƒ
Drink Coupons - At fundraising events for schools and corporate events, we
will be giving away drink coupons as door prizes or awards. This encourages
the person to come in for their free beverage and bring a friend. The drive
thru kiosks will also be distributing coupons for special promotions and new
product introductions.
ƒ
Professional Memberships- HALFBUCKS will be an active participant in
various professional organizations such the National Coffee Association,
Chamber of Commerce, Foodservice Associations, and Specialty Beverage
Associations. These memberships will provide us with exposure and
education but also important contacts and opportunities in the industry and
communities where these organizations serve.
Milestones
The milestone table reflects our break-even year, kiosk rollout, and other key
markers that will help us measure our success in time and accomplishment.
Staged Roll-out Strategy
The fundamental idea behind HALFBUCKS Coffee is that customers would be
willing to trade a less-sophisticated coffee experience for a cheaper cup of
coffee. We believe the best way to capitalize on this concept is to begin our
rollout with drive-up or walk-up kiosks. These freestanding facilities require little
capital investment and minimize operating costs. We would envision launching
these locations initially in high-traffic areas. For instance, Seattle drivers are
constantly commuting and have little desire to park, get out of their car and wait
in line at Starbucks for 10 minutes, especially on rainy days. We believe a farsuperior solution would be for them to opt for our drive through service through
which they can purchase a cup of coffee in very little time and with very little
hassle. Similarly, we could see this concept working in a downtown environment.
The kiosk strategy will allow us to build brand awareness and benefit from viral,
word-of-mouth publicity. While initially choosing our brand for convenience,
consumers will soon recognize that our coffee is similar in quality to that of
Starbucks. They will recognize the value inherent in HALFBUCKS Coffee.
Once this groundswell builds, we will then begin to open more traditional
storefronts. While these will never approximate a large Starbucks store, we
would envision having a stand-up counter where customers could enjoy their
coffee. We are in no way trying to cultivate an environment where customers
lounge for hours and hours, but we do want to offer a limited area where a
customer can sit temporarily. Specifically, we believe the floor plan would
include an order counter, another stand-up counter for customers as well as a
small table.
Coffee Menu
Sale Price
Morning Mix Afternoon Mix
Total Mix
Coffee
$1.00
40%
20%
30%
XL Coffee
$1.50
25%
10%
18%
Latte
$2.00
20%
40%
30%
Cappucino
$2.00
10%
20%
15%
Espresso
$2.00
5%
10%
8%
Total
100%
100%
100%
Weighted Average Price
$1.48
$1.75
Note: Additional $0.50 charge for double espresso shot (not calculated in weighted average)
Sales Projections
Morning Customer Traffic
Customers
Average Sale
Total Sales
5AM
30
$1.48
$44.25
6AM
40
$1.48
$59.00
7AM
60
$1.48
$88.50
8AM
90
$1.48
$132.75
9AM
60
$1.48
$88.50
10AM
40
$1.48
$59.00
11AM
30
$1.48
$44.25
350
$1.48
$516.25
Total Morning
Assumptions
Average Sale Per Morning Customer
$1.48
Total Morning days per week
5
Morning Sales
Total Morning Sales Per Week
$2,581.25
Total Morning Weeks Per Year
52
Total Morning Sales Per Year
$134,225.00
Afternoon Customer Traffic
Customers
Average Sale
Total Sales
12PM
30
$1.75
$52.50
1PM
50
$1.75
$87.50
2PM
50
$1.75
$87.50
3PM
50
$1.75
$87.50
4PM
40
$1.75
$70.00
30
$1.75
$52.50
250
$1.75
$437.50
5PM
Total Afternoon
Assumptions
Average Sale Per Afternoon Customer
$1.75
Total Afternoon days per week
5
Afternoon Sales
Total Afternoon Sales Per Week
$2,187.50
Total Afternoon Weeks Per Year
52
Total Afternoon Sales Per Year
$113,750.00
Total Sales
TOTAL CUSTOMERS PER DAY
600
TOTAL SALES PER DAY
$953.75
TOTAL SALES PER WEEK
$4,768.75
TOTAL SALES PER YEAR
$247,975.00
Days of Operation
Days per week
5
Weeks per year
52
Start-up Costs - One Month Buildout
Construction
Materials
Plumbing/Gas/Water
Electrical
Labor
Total Construction
Kitchen Equipment
Coffee Machine 1
Coffee Machine 2
Coffee Machine 3
Dispensing Machine
Sink
Counter
Refrigerator 1
Freezer 1
Total Kitchen Equipment
Furniture
Tables
Chairs
Barstools
Total Furniture
Systems
POS System
Bookkeeping System
Total Systems
Permits & Licenses
Building Permit (Work Permit)
Certificate of Occupancy
Signage Permit
Operating Permit
Total Permits & Licenses
Professional Fees
Legal - Business Structure
Legal - Investment Contract
Legal - Lease
Total Professional Fees
Other
Initial Coffee Inventory
Menu Board
Rent Deposit
Miscellaneous
Total Other
Total
Start up costs (less prepaid & exp)
Prepaid
Professional fees
Dues liceenses
$15,000.00
$10,000.00 assumes no existing system
$5,000.00 assumes no existing system
$8,000.00 2 men @ $200/day for 1 month
$38,000.00
$2,000.00
$2,000.00
$2,000.00
$5,000.00
$500.00
$500.00
$1,300.00
$1,900.00
$15,200.00
$500.00 1-4 person table @ $300/each; 1-2 person table @ $200/each
$700.00 6 chairs @ $100/each + 1 replacement
$400.00 4 barstools @ $100/each
$1,600.00
$5,000.00
$1,500.00
$6,500.00
$100.00
$100.00
$100.00
$100.00
$400.00
$2,000.00
$2,000.00
$2,000.00
$6,000.00
$500.00
$200.00
$13,500.00 assumes 3 month deposit
$5,000.00
$19,200.00
$86,900.00
$67,000.00
$13,500.00
$6,000.00
$400.00
$86,900.00
Labor Projections
Staffing
Sun
Mon
Tue
Wed
Thu
Fri
Sat
Days/week
Hours/day
Assistant Manager
5AM-12PM 5AM-12PM 5AM-12PM
5AM-12PM 5AM-12PM
7
Manager
7AM-3PM
7AM-2PM
8
5
Assistant Manager
12PM-6PM 12PM-6PM 12PM-6PM
6
5
7AM-2PM
7AM-2PM
Wages
Hourly
Assistant Manager
Manager
Assistant Manager
Total
Daily
Weekly
Annually
$9.00
$63.00
$315.00
$16,380.00
$12.00
$96.00
$480.00
$24,960.00
$9.00
$54.00
$270.00
$14,040.00
$10.00
$213.00
$1,065.00
$55,380.00
7AM-2PM
12PM-6PM 12PM-6PM
5
Unit Economics
Sales
Breakfast Sales
$134,225.00
Lunch Sales
$113,750.00
Tax Effect
($19,838.00)
Total Net Sales
$267,813.00
Cost of Coffee Sales
$53,562.60
20.00%
$214,250.40
80.00%
Assistant Manager
$16,380.00
6.10%
Manager
$24,960.00
9.30%
Assistant Manager
$14,040.00
5.20%
Total Labor Costs
$55,380.00
20.70%
Gross Profit
Labor
Payroll Taxes
$7,199.40
2.7%
$62,579.40
23.40%
$54,000.00
20.20%
$8,034.39
3.00%
Insurance
$2,678.13
1.00%
Utilities
$5,356.26
2.00%
Repairs & Maintenance
$4,017.20
1.50%
Depreciation
$2,330.00
0.90%
Total Labor & Fringe
*
Other Expenses
Rent
Advertising
Miscellaneous
$2,678.13
1.00%
Total Other Expenses
$79,094.11
29.50%
Restaurant Operating Profit
$72,576.90
27.10%
SG&A
$6,695.33
2.50%
EBIT
$65,881.57
24.60%
Add Back: Depreciation
EBITDA
$2,330.00
0.90%
$68,211.57
25.50%
Assumptions and Notes
Coffee Cost of Sales %
Sales Tax Rate
Rent
Retail Location Square Feet
Interest Expense
20.00%
8.00%
$15.00 per square foot
300 average
6.50%
* Based on 6% social security, 1.5% Medicare, 6% unemployment (% of Labor cost)
Sources & Uses of Cash
0
1
2
3
4
5
6
7
8
9
10
11
12
Month 0
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12
Sources of Cash
Capacity utilitzation
0%
50%
60%
70%
80%
90%
100%
100%
100%
100%
100%
100%
100%
Net sales
$
-
$
10,332
$
12,399
$
14,465
$
16,532
$
18,598
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
COGS
$
-
$
2,066
$
2,480
$
2,893
$
3,306
$
3,720
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
43,396
Expenses
$
-
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
146,187
Net revenues
$
-
$
(3,916) $
(610) $
1,043
$
2,696
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
27,396
Bank loan
$
50,000
Equity raised
$
50,000
Surplus Cash
$
-
Total
$ 100,000
(2,263) $
$
13,100
$
8,913
$
6,379
$
5,498
$
6,270
$
8,696
$
12,774
$
16,853
$
20,931
$
25,010
$
29,089
$
33,167
$
9,184
$
6,650
$
5,769
$
6,541
$
8,966
$
13,045
$
17,124
$
21,202
$
25,281
$
29,359
$
33,438
$
37,517
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
216,978
Uses of Cash
Startup Costs
$
86,900
Interest Expense
Taxes
$
271
$
3,250
$
9,589
$
9,589
$
27,657
Total
$
86,900
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
9,859
Net Cash
$
13,100
$
8,913
$
6,379
$
5,498
$
6,270
$
8,696
$
12,774
$
16,853
$
20,931
$
25,010
$
29,089
$
33,167
$
27,657
Corporate Tax Rate
35.00%
Net sales
$
20,665
COGS
$
4,133
Expenses
$
12,182
Net revenue
$
27,396
Financing
$
500,000
Interest
$
(3,250)
Taxes
$
(9,589)
Start-up
$
(434,500)
$
80,057
13
14
15
16
17
18
19
20
21
22
23
24
Month 13
Month 14
Month 15
Month 16
Month 17
Month 18
Month 19
Month 20
Month 21
Month 22
Month 23
Month 24
Sources of Cash
Capacity utilitz
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Net sales
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
20,665
$
COGS
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
4,133
$
247,975
49,595
Expenses
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
12,182
$
146,187
Net revenues $
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
4,349
$
52,193
Bank loan
$
-
Equity raised
$
-
Surplus Cash $
27,657
$
31,736
$
35,815
$
39,893
$
43,972
$
48,050
$
52,129
$
56,208
$
60,286
$
64,365
$
68,443
$
72,522
Total
$
32,007
$
36,085
$
40,164
$
44,243
$
48,321
$
52,400
$
56,478
$
60,557
$
64,636
$
68,714
$
72,793
$
76,871
Uses of Cash
Startup Costs
Interest Expen $
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
3,250
Taxes
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
18,268
$
18,268
Total
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
271
$
18,539
Net Cash
$
31,736
$
35,815
$
39,893
$
43,972
$
48,050
$
52,129
$
56,208
$
60,286
$
64,365
$
68,443
$
72,522
$
58,333
$
58,333
Beg balance
$
80,057
Net revenue
$
52,193
Financing
$
-
Interest
$
(3,250)
Taxes
$
(18,268)
Start-up
$
$
110,733
Yearly sources and uses
Year 1
After year 1
Sources of Cash
$216,978
$43,396
$146,187
$27,396
$247,975
$49,595
$146,187
$52,193
$50,000
$50,000
$127,396
$0
$0
$52,193
Total
$86,900
$3,250
$9,589
$99,739
$0
$3,250
$18,268
$21,518
Net Cash
$27,657
$30,676
Net sales
COGS
Expenses
Net revenues
Bank loan
Equity raised
Total
Uses of Cash
Startup Costs
Interest Expense
Taxes
Cash Flow
1
2
3
4
5
Year 1
Year 2
Year 3
Year 4
Year 5
Number of Newly Developed Restaurants
5
10
20
40
80
Number of Existing Restaurants
0
5
15
35
75
Total Number of Restaurants
5
15
35
75
155
Development Plan
Cash, beginning of year
$
-
$
138,287
Total EBIT from New Restaurants
$
Total EBIT from Existing Restaurants
$
$
68,238
$
81,519
$
136,979
$
273,959
$
-
$
260,967
$
$
534,925
$
1,330,817
261,460
547,917
$
1,095,834
$
2,191,668
782,900
$
1,826,767
$
3,914,501
$
2,922,601
$
6,106,169
Cash flow from operations
Total EBIT (Net Revenues)
$
136,979
Interest
$
(16,250) $
(48,750) $
(113,750) $
(243,750) $
(503,750)
Taxes
$
(47,943) $
(187,224) $
(465,786) $
(1,022,910) $
(2,137,159)
Dues & licenses
$
(2,000) $
(4,000) $
(8,000) $
(16,000) $
(32,000)
Professional fees
$
(30,000) $
(60,000) $
(120,000) $
(240,000) $
(480,000)
$
(67,500) $
(135,000) $
(270,000) $
(540,000) $
(1,080,000)
$
(26,713) $
Rent deposit
99,951
$
353,281
$
859,941
$
1,873,260
4,000,000
Cash from financing activities
Bank loan
$
250,000
$
500,000
$
1,000,000
$
2,000,000
$
Equity raised
$
250,000
$
-
$
-
$
-
$
-
$
500,000
$
500,000
$
1,000,000
$
2,000,000
$
4,000,000
Cash - investing activities
Capital investments
$
Cash, end of year
$
(335,000) $
138,287
$
(670,000) $
68,238
$
(1,340,000) $
(2,680,000) $
81,519
261,460
$
$
(5,360,000)
774,720
Profit Loss
1
2
3
4
5
Year 1
Year 2
Year 3
Year 4
Year 5
Number of Newly Developed Restaurants
5
10
20
40
80
Number of Existing Restaurants
0
5
15
35
75
Total Number of Restaurants
5
15
35
75
155
Development Plan
Cash flow from operations
Total EBIT from New Restaurants
$
136,979
$
273,959
$
547,917
$
1,095,834
$
Total EBIT from Existing Restaurants
$
-
$
260,967
$
782,900
$
1,826,767
$
2,191,668
3,914,501
Total EBIT (Net Revenues)
$
136,979
$
534,925
$
1,330,817
$
2,922,601
$
6,106,169
Interest
$
(16,250) $
(48,750) $
(113,750) $
(243,750) $
(503,750)
Taxes
$
(47,943) $
(187,224) $
(465,786) $
(1,022,910) $
(2,137,159)
Dues & licenses
$
(2,000) $
(4,000) $
(8,000) $
(16,000) $
(32,000)
Professional fees
$
(30,000) $
(60,000) $
(120,000) $
(240,000) $
(480,000)
$
40,787
$
234,951
$
623,281
$
1,399,941
$
2,953,260
Balance Sheet
Year 1
Year 2
Year 3
Year 4
Year 5
ASSETS
Cash
Prepaid expenses & deposits
$
$
138,287
67,500
$
$
68,238
202,500
$
$
81,519
472,500
$
$
261,460
1,012,500
$
$
774,720
2,092,500
Construction
Kitchen Equipment
Furniture
Systems
Others
$
$
$
$
$
$
190,000
76,000
8,000
32,500
28,500
335,000
$
$
$
$
$
$
570,000
228,000
24,000
97,500
85,500
1,005,000
$
$
$
$
$
$
1,330,000
532,000
56,000
227,500
199,500
2,345,000
$
$
$
$
$
$
2,850,000
1,140,000
120,000
487,500
427,500
5,025,000
$
$
$
$
$
$
5,890,000
2,356,000
248,000
1,007,500
883,500
10,385,000
TOTAL ASSETS
$
540,787
$
1,275,738
$
2,899,019
$
6,298,960
$
13,252,220
Bank loan
Due to shareholder
$
$
$
250,000
250,000
500,000
$
$
$
750,000
250,000
1,000,000
$
$
$
1,750,000
250,000
2,000,000
$
$
$
3,750,000
250,000
4,000,000
$
$
$
7,750,000
250,000
8,000,000
Retained earnings, beginning
Net income for the current year
Total Retained Earnings
$
$
$
40,787
40,787
$
$
$
40,787
234,951
275,738
$
$
$
275,738
623,281
899,019
$
$
$
899,019
1,399,941
2,298,960
$
$
$
2,298,960
2,953,260
5,252,220
TOTAL LIABILITIES AND RETAINED EARNINGS
$
540,787
$
1,275,738
$
2,899,019
$
6,298,960
$
13,252,220
LIABILITIES AND RETAINED EARNINGS
`