Opportunity
Problem
Not only do people living near the University of Oregon want coffee, tea, pastries or snacks, they also need a place to relax, have a group discussion or just sit and read. That is available now near the University of Oregon campus, but too crowded too often, and not the right combination of factors for everybody.
Solution
Java Culture coffee bar is a local necessity. It’s a place you can dream about as you seek to escape daily stress and a place where you can meet friends or read a book.
Market
Java Culture will concentrate its marketing efforts on University students and faculty. These are the customers most likely to purchase gourmet coffee products, according to market research. Because gourmet coffee consumption is common across all income groups and greatly depends on education level, it will be easy to get to the right customer audience by being near the University of Oregon campus.
Concurrence
Java Culture’s direct competitors will be other coffee bars located near the University of Oregon campus. These include Starbucks, Cafe Roma, The UO Bookstore, and other Food service establishments that offer coffee.
Why Us?
Coffee, pastries, extra options, etc. Great atmosphere, good wireless and desk space. Good pastries.
Expectations
Forecast
Our sales forecast shows that we expect to grow in the following chart. We are committed to maintaining a industry-standard 60% gross profits margin and reasonable operating costs and producing reasonable profits the second, third and fourth years.
Financial Highlights by Year
Financing Needed
To cover start-up costs and assets, as well as deficient spending during the first months, the owners will invest $140,000.
Start-up costs of $27,000 include:
- Legal costs for obtaining licenses, permits, and accounting services total $1,300
- Marketing promotion expenses to celebrate the grand opening Java Culture were $3.500. Flyer printing (2,000 copies @ $0.04 per page) was also part of the $3.580 total.
- ABC Espresso Services paid $3,000 to consultants for their assistance with setting up the coffee shop.
- A total premium of $2,000.
- Pre-paid rent expenses per month for a total of $4,400 at $1.76 per sq.
- Remodeling premises for $10,000
- Other expenses include stationery (500 USD) and phone/utility deposits (2500 USD).
These expenses will not be incurred until launch so they appear in our financial projections at negative retained earnings ($27,680) at the end each month. That number shows up in the balance sheet.
The necessary start-up assets, which are $143,000
- Cash in the bank in the total amount of $67,000, which includes enough to cover employees and owner’s salaries of $23,900 for the first two months and cash reserves for the first three months of operation (approximately $14,400 per month).
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Initial inventory of $16,000 which includes:
- Coffee beans (12 brands, five decaffeinated) #8211 $6,000
- Coffee filters, baked goods, salads, sandwiches, tea, beverages, etc. – $7,900
- Retail supplies (napkins, coffee bags, cleaning, etc.) – $1,840
- Supplies for office –: $287
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Equipment to purchase for $60,000
- Espresso machine – $6,000
- Coffee maker $900
- Coffee grinder –: $200
- Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc.) – $18,000
- Storage hardware (bins, utensil rack, shelves, food case) – $3,720
- Counter area equipment (counter top, sink, ice machine, etc.) – $9,500
- Equipment for serving (plates, glasses and flatware): #8211; $3,000
- Store equipment (cash registers and security systems, signage, ventilation, etc.) #8211; $13,750
- Office equipment (PC, fax/printer, phone, furniture, file cabinets) – $3,600
- Other miscellaneous expenses – $500
Two main sources of financing for the company include bank loans and investments made by owners. Arthur Garfield, James Polk and $25,000 each have been the major shareholders. All other investors contributed $40,000 which brings the total invested to $140,000. The remaining $30,000 was borrowed from two banks: a $10,000 short-term loan and a $20,000.00 long-term loan. Both loans were secured via the Bank of America. Thus, total start-up loss is assumed in the amount of $27,000.
The balance sheet shows the amounts in the month preceding opening. Paid in Capital appears as the $140,000 invested. The $27,000 expenses show up as negative retained earnings. Assets and liabilities are both there. These are all based on financial standards.