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Rose’s CaféBusiness Plan 2015

Prepared For: Marvin Painter

Comm 447April 9th 2015

Prepared By:Danaka Stromberg

Rose’s Cafe 2015

Table of Content

sExecutive Summary...................................................................................................................................................................3

1.0 Introduction...........................................................................................................................................................................4

1.1 Mission Statement..........................................................................................................................................................41.2 Vision Statement.............................................................................................................................................................41.3 Goals/Objectives.............................................................................................................................................................4

2.0 Operations Plan....................................................................................................................................................................5

2.1 Site Location..................................................................................................................................................................... 62.2 Floor Plan...........................................................................................................................................................................7

2.2.1 Store Front................................................................................................................................................................7

2.3 The Average Business Day.........................................................................................................................................82.4 The Average Business Week...................................................................................................................................102.5 The Average Business Month.................................................................................................................................102.6 The Average Business Year.....................................................................................................................................102.7 Supply Analysis.............................................................................................................................................................102.8 Capital Budget............................................................................................................................................................... 112.9 Cost of Goods Sold.......................................................................................................................................................122.10 Operating Expenses.................................................................................................................................................122.11 Working Capital Planning.....................................................................................................................................13

2.11.1 Cash........................................................................................................................................................................ 13

2.11.2 Inventories..........................................................................................................................................................13

2.11.3 Accounts Receivable and Accounts Payable.........................................................................................13

3.0 Human Resources Plan.................................................................................................................................................. 14

3.1 Organizational Structure..........................................................................................................................................153.2 Job Descriptions...........................................................................................................................................................153.3 Hours of Operations................................................................................................................................................... 163.4 Scheduling.......................................................................................................................................................................173.5 Employee Wages..........................................................................................................................................................173.6 Employee Benefits.......................................................................................................................................................18

4.0 Marketing Strategy.......................................................................................................................................................... 19

4.1 Competition....................................................................................................................................................................204.2 Target Market................................................................................................................................................................214.3 Product.............................................................................................................................................................................224.4 Place.................................................................................................................................................................................. 234.5 Pricing Strategy............................................................................................................................................................234.6 Promotion Strategy.....................................................................................................................................................234.7 Marketing Expenses...................................................................................................................................................24

Stromberg, Danaka Page 1

Rose’s Cafe 2015

5.0 Financial Plan..................................................................................................................................................................... 25

5.1 Capital Requirement.................................................................................................................................................. 265.2 Summary of Projected Income...............................................................................................................................265.3 Summary of Projected Cash Balances.................................................................................................................275.4 Break Even......................................................................................................................................................................275.5 Payback............................................................................................................................................................................ 28

5.5.1 Owners Compensations...................................................................................................................................28

5.6 Critical Factors..............................................................................................................................................................285.7 Overall Feasibility........................................................................................................................................................29

Summary...................................................................................................................................................................................... 30

Appendices.................................................................................................................................................................................. 31

Appendix 1 Financial Budget.........................................................................................................................................31

List of Figures2.1 Site Location……………………………………………………………………………………………………………………..…...62.2 Floor Plan………………………………………………………………………………………………………………………….......72.2.1 Store Front……………………………………………………………………………………………………………………........83.1 Organizational Structure………………………………………………………………………………………………….…..154.1 Competitive Map………………………………………………………………………………………………………………….204.1.2 Competitive Analysis Graph……………………………………………………………………………………………….215.1 Financing.……………………………………………………………………………………………………………………………265.4 Break Even………………………………………………………………………………………………………………….……....27

List of Tables2.8 Capital Budget……………………………………………………………………………………………………………………..112.10 Operating Expenses……………………………………………………………………………………………………….......123.3 Hours of Operation………………………………………………………………………………………………………………163.4 Weekly Schedule………………………………………………………………………………………………………………….173.5 Employee Wages………………………………………………………………………………………………………………….184.7 Marketing Expenses……………………………………………………………………………………………………………..245.2 Projected Income……………………………………………………………………………………………………………......265.3 Projected Cash Balances……………………………………………………………………………………………………….275.5.1 Total Owners Compensation…………………………………………………………………………………………......285.6.1 Sensitivity Analysis Average Purchase Per Customer…………………………………………......285.6.2 Sensitivity Analysis Customers Per Day………………………………………………………………………..29


Rose’s Cafe 2015

Executive Summary

Rose’s Café is a petite café that will satisfy your morning and afternoon cravings, whether you have a sweet tooth or are just grabbing a bite to eat. It is both a sit down and take out restaurant fit for all types of consumers. With a love of cooking and baking the owner Danaka Stromberg has created this business in hope to satisfy the needs of the local citizens of Saskatoon.

OperationsThe store will be located on Broadway Avenue in Saskatoon Saskatchewan; it will be ran and owned by Danaka Stromberg. The store will seat roughly 50 people and will have a warm and welcoming atmosphere. The business will be staffed by the manager/owner, a full time employee as well as a full time baker to provide the best quality service and fresh products that satisfy our customer’s needs.

Human ResourcesThe owner will also be the manager, who will be working full time. Additionally there will be a full time employee in charge of serving customers on a daily basis and a full time baker whose responsibility is going to be prepping and baking on a daily basis to provide fresh quality goods. The manager will be getting paid on a salary whereas the full time employees will be getting paid on an hourly wage. Dividends will be paid out to the owner as they will be putting in their own equity as well as debt financing to start the business.

MarketingThe marketing strategy for Rose’s Café is to take to social media and post continually both statuses and photos. As well we will be giving away a coupon with every purchase that will allow an individual to come back at any time and with the purchase of a regular meal they are then eligible to choose a dessert for free on the side. With an increase in social media awareness the idea is to create a lot of word of mouth marketing. We will try to deal with any problem that may occur right away so that customers have a good experience in our store and spread positive word of mouth marketing about our store.

FinancesThe five year projections that can be seen in the appendix illustrate how Rose’s café will be operated during this time. There will be a positive net income over the five years however the dividends will not be paid out until the fourth year of operations. Overall the business is quite sensitive to two critical factors, and those are customers per day and average purchase per customer, which tends to be the popular criteria when it comes to small businesses.


Rose’s Cafe 2015

1.0 Introduction

Rose’s Café is a petite café that will satisfy your morning and afternoon cravings, whether you have a sweet tooth or are just grabbing a bite to eat. It is both a sit down and take out restaurant fit for all types of consumers. With a love of cooking and baking the owner Danaka Stromberg has created this business in hope to satisfy the needs of the local citizens of Saskatoon.

1.1 Mission Statement

“To create a warm and inviting atmosphere, where individuals can enjoy a home cooked meal along with freshly baked desserts. Our goal is to make our customers feel like they are at

home eating one of their mother’s home cooked meals. We will strive to maintain an inviting atmosphere that welcomes all customers and offers a variety of homemade products.”

1.2 Vision Statement

“Our goal is to be a warm and inviting place to sit down and enjoy a homemade meal. We hope to become the place that consumers will think of when they want to indulge in a

homemade meal in the city of Saskatoon.”

1.3 Goals/Objectives

Short-term:

Obtain a bank loan of $25,000 and provide equity of $15,000 to support start-up costs and expenses

Develop Rose’s Café’s brand in the Saskatoon market Create relationships with customers to ensure repeat purchases Average 70 customers/day in year 1 Break-even by year 2

Medium-term:

Have net positive cash flows by the third year of operations Sustain operations, while maintaining brand image Control costs and continue the marketing plan to achieve the targeted sales

Long-term:

Increase and maintain brand awareness with extended quality and excellence Maximize sales to continually increase financial performance


Rose’s Cafe 2015

Have a large customer base and know the regulars on a personal level


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2.0 Operations Plan


Rose’s Cafe 2015

2.1 Site Location

Rose’s Café will be located in Saskatoon, Saskatchewan. The specific location in the city will be on Broadway Avenue; a close walk to downtown, as well as it is in the center of Broadway which has a busy culture of its own in. There are currently several other food and beverage stores along Broadway, but this location has a large amount of foot traffic as well as neighbouring residential areas so there is a lot of potential customers close by. The map below, Figure 2.1, shows the location of Rose’s Café.

Figure 2.1 Site Location


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2.2 Floor Plan

The floor plan for the business was designed to accommodate customers who want to stay and eat, as well as for those who want to take their meal to go. When you walk into the store you will see tables and chairs, and a long chest like industrial food cooler next to a counter. This counter is where you would go to order your food, and the counter would have the till on it and that would be where you pay. There would also be a second food display case and that would hold all of the freshly baked goods. In the back the floor plan shows an industrial sized kitchen, as well as an office for the manager. The store would also have a washroom available for both staff and public use. The floor plan can be seen in Figure 2.2.

Figure 2.2 Floor Plan

There would be more tables and chairs than what is visible here; this is merely to visualize the floor plan.

2.2.1 Store Front

As you walk by the store there will be a window display, its purpose is to give you an idea of the feel Rose’s Café is trying to portray, seen in Figure 2.2.1. It will consist of a small picnic table that is set with antiques the color theme would be pink, and there would be a vase with flowers on the table. There would also be several items from the menu set on the table and a consultation cake, all of which would be fake but made to seem real.


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Figure 2.2.1 Store Front

2.3 The Average Business Day

Rose’s Café is open Monday through Sunday. We are open Monday through Friday from 8 am until 4pm, Saturday from 8am until 2pm and Sunday and Holidays from 10am until 3pm. The reason why we are open quite early and are closed before supper time is because Rose’s Café is a place to go for breakfast, and lunch, or during the day for a sweet treat. The menu consists of products that are served during the day not during the evening and so this is why the hours of operation are earlier in the day. In the first two years we will be staffed by the manager, one full time employee as well as one full time baker. In the third year we can look at hiring a part time employee as sales will hopefully have increased and demand for workers would increase as well.

Daily Activities


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Opening Shift:

Time: 6am Performed by: Full Time BakerTasks: The baker would arrive to the store and begin to bake the daily baked goods. Their job would be to portion out the already made recipes and put them in the ovens to bake. All freshly made products would be made by this person in the morning before we open. Both breads as well as baked goods. The baker would work from 6 am until 11am or later if necessary and would be in charge of making sure the baking is fully stocked as well as the breads for the sandwiches. They would also assist the manager with any tasks if necessary.

Day Shift:

Time: Arrival of staff - 7am and 8am, begins when store opens. Performed by: The Manager and the Full Time EmployeeTasks: The manager would arrive at 7am and the employee at 8. The manager would get the cash drawer ready and do any sort of planning for the day ahead. They would mostly take care of any financial or managerial tasks in this hour alone. They would also get the coolers ready for the day with assistance from the baker if necessary. The employee would arrive for 8am, they may be asked to show up 15 minutes early in order to be sure they are prepared for opening. Tasks from both the manager and the full time employee would include taking orders and assisting customers, receiving payments from customers, when necessary making customer orders, maintaining cleanliness and tidiness of the main areas and washrooms, restocking inventory when low. When possible right before close sweep and mop and gather garbage.

Closing Shift:

Time: The store closes at 4pm Monday – Friday, 2pm on Saturday and 3pm on SundayPerformed by: The manager and full time employeeTasks: Closing the store would involve cleaning up the work area, this would be where meals are prepared and served. Tables and chairs would also have to be cleaned and the floor would have to be swept and mopped. The manager would also be in charge of cash out and financial matters at the end of day. The last person to leave the building which would be the manager is in charge of locking up the store.

2.4 The Average Business Week

The average business week at Rose’s Café would involve the manager ordering and receiving inventory and any other necessary supplies, such as maintenance, office, etc.


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Filing of receipts and documents, as well as, other administrative duties will be performed on a weekly basis. Most of the weekly tasks are done by the manager but the unloading of inventory and putting inventory away can also be done by the employees.

2.5 The Average Business Month

On average in a month the manager will be responsible for updating the financial books and doing any necessary accounting entries. Monthly statements will be made in order to track company sales, profits and expenses. Gross margins, as well as inventory waste will be looked at to see if there are any necessary changes that need to be made. These records will make it easier to file a tax return at the end of the year. The staffing schedules will also be made one month in advance. The employees are responsible for providing availability to the manager and schedules will be made to accommodate them as appropriately as possible. Also once every few weeks a staff meeting will be held, to discuss sales, where improvements can be made and to discuss things that are being done well.

2.6 The Average Business Year

On a yearly basis the manager will print the year end reports in order to start a file of the businesses records. These records will be used to file income tax returns as well as track the businesses progress. The manager will use TurboTax to assist them in filing their taxes. It will also be up to the manager to create financial goals for the next year that they would like the business to achieve and provide ways they can achieve them. The manager will also do an evaluation of the employees, based on the results, the employees will be provided a yearly bonus, and the amount will also depend on the results.

2.7 Supply Analysis

The products that Rose’s Café will use to create their meals will come from Sysco, a local food supplier. The shipments will come in twice a week, and the products will vary depending on the meal specials for the days of the week. They will also receive dry goods from Sysco such as utensils, plates and napkins etc. These shipments however will come in once a week, or less, once every two weeks. Any special ingredients that are not provided for the consultation cakes will be purchased at places such as Michaels or Safeway.

2.8 Capital Budget

The initial capital budget is a total of $30,590; this includes both leasehold improvements as well as the equipment necessary to start up the business. The equipment will be purchased from Hendrix, a Canadian company that sells industrialized kitchen ware. Also we will be purchasing our tables and chairs from Restaurant Furniture Canada, another Canadian company that provides restaurant supplies. The leasehold improvements


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supplies will be purchased at several different stores that specialize in renovation supplies. The full list of capital costs can be seen in Table 2.8.

Table 2.8 Capital Budget

Description Estimated Costs Suppliers

Leasehold ImprovementsSignage $ 5,000 Seventy Seven Signs Ltd.Industrial Sink $ 900 HendrixPaint $ 100 Home DepotDécor $ 500 Various LocationsTotal Leasehold ImprovementExpenses

$ 6,500

EquipmentGas Range $ 2,200 HendrixFood Prep Table $ 2,500 HendrixReach-In Cooler $ 3,500 HendrixConvection Oven $ 2,700 HendrixConveyor Toaster $ 850 HendrixGrill Press $ 1,100 HendrixReach-In Freezer $ 4,500 HendrixMerchandising Cooler $ 2,450 HendrixCoffee Machine $ 400 HendrixThermal Server $ 120 HendrixSmall Wares $ 1,500 HendrixMoving Cart $ 300 HendrixTables and Chairs $ 1,700 Restaurant Furniture CanadaStainless Steel Work Table $ 270 Hendrix

Total Equipment Expenses $ 24,090

Total Capital Costs $ 30,590

2.9 Cost of Goods Sold

Expected Cost of Goods Sold for year one is $62,370. This projection is based on revenues of and a profit margin of % for meals and % for baked goods. Refer to the financial budget located in Appendix 1.

2.10 Operating Expenses

Table 2.10 lists the operating expenses for the first year of the business. Keep in mind that most of these expenses will increase each year with the increase in inflation.


Rose’s Cafe 2015

Advertising (Marketing) – allocated for our marketing budget.General Supplies – general supplies, such as cleaning supplies, anything we might need.Insurance – this is paid so that we are covered in the event that something happens.Lease Expenses – this includes rent and payments to have the building.Telephone – the telephone bill so we are able to have a phone.Utilities – general bill that is required when renting or own a building.Repair and Maintenance – extra cash just in case of repairs that need to be done to the store.Wages – employee’s payroll. Employee Benefits – employees’ compensation.Misc. Variable Costs % Sales – extra cash in case of miscellaneous occurrence.Capital Cost Allowance – necessary payment.Debt Interest – interest on the debt from the bank loan.

Table 2.10Operating Expenses

Advertising (Marketing) $ 8,600General Supplies $ 1,000

Insurance $ 1,700Lease Expenses $ 72,050

Telephone $ 1,080Utilities $ 23,925

Repair and Maintenance $ 500Wages $ 103,450

Employee Benefits $ 3,720Misc. Variable Costs % Sales $ 1,260

Capital Cost Allowance $ 2,637Debt Interest $ 1,950

Total Operating Expenses $ 221,872

2.11 Working Capital Planning

2.11.1 Cash

Cash is important as it helps manage the working capital. In the first two years there will be a shortage of cash due to the expenses the business will incur, after the second year there will be a positive cash balance. Any excess cash that is incurred will be invested into both short term and long term investments. Consultation cakes will require a deposit, but the remainder of the remaining price of the cake will be collected when the cake is to be picked up.


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2.11.2 Inventories

Inventory will be closely monitored. In the event that there is inventory waste it is the manager’s discretion as to order less the next week, vice versa, if there is a shortage of inventory it is also the manager’s job to order more of what is lacking. After a while of being open this process will become a lot easier as you will be able to tell what sells and what is difficult to sell.

2.11.3 Accounts Receivable and Accounts Payable

There will be no accounts receivable since sales will be done by debit, credit card, or cash. We will however have accounts payable with our suppliers. The accounts payable will be roughly 10 days, so we will have time to pay back our suppliers once we have had a chance to sell the products. As business becomes more successful the need amount of time it takes to pay back our suppliers should fall.


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3.0 Human Resources Plan


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3.1 Organizational Structure

Rose’s Café will be owned and managed by one individual and she will be paid on a salary basis. In addition to the manager in the first year there will be a full time employee as well as a full time baker. Figure 3.1 shows the organizational structure, this structure has included the part time staff that Rose’s Café would hire in the event that sales increase, this would happen around the 5 year mark.

Figure 3.1 Organizational Structure

3.2 Job Descriptions

Manager

A manager will be present for both the opening and closing shifts each day. They will be responsible for the following:

Ordering and receiving inventory Administrative/Financial duties Preparing the store to open each morning Training employees Helping customers Helping wherever needed with prepping food for the next day


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Full Time Employee

The full time employee and part time employees will be scheduled accordingly and will be required to perform the following duties:

Helping customers (taking orders and payments) Preparing orders and meals and informing customers when they are ready Clearing and wiping down tables Dish duty when necessary Light cleaning of the facility Food prep for the next day and any for the current day

Full Time Baker

The baker will come in in the early morning before anyone gets to the store and will begin baking the necessary desserts and breads for the day to come. They will be provided with a key to the store because they arrive alone. There duties involve:

Preparing the recipes for the desserts a day ahead Baking the necessary products for the day Cleaning their baking area and any dishes they use Upkeep of the cooking appliances as needed Help the other staff if necessary during their shift

3.3 Hours of Operations

The hours of operation are year round, we are open every day of the year except national holidays. Table 3.3 shows the hours of operations for every day of the week.

Table 3.3 Hours of Operation

Operating HoursSunday 10am-3pmMonday 8am-4pmTuesday 8am-4pm

Wednesday 8am-4pmThursday 8am-4pm

Friday 8am-4pmSaturday 8am-2pm


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3.4 Scheduling

The employees at Rose’s Café are responsible for providing the manager with their availability to work; the manager will then create a schedule to accommodate this appropriately. Table 3.4 shows the ideal schedule of a work week and it includes the scheduling of part time employees, but this would be adjusted to where it was just the full time employees and the manager working. In the first few years the schedule would be very simple because there wouldn’t be a large demand for staff.

Table 3.4 Weekly Schedule

Owner/Manager Full Time Baker Full Time #1 Part Time #1 Part Time #2

Monday 7am – 5pm 7am - 4pm

Tuesday 7am - 5pm 6am - 11am 8am - 4pm

Wednesday 7am - 5pm 6am - 11am 8am - 4pm

Thursday 7am - 5pm 6am - 11am 8am - 4pm

Friday 7am - 5pm 6am - 2pm 8am - 4pm

Saturday 10am - 3pm 6am - 11am 7:30am - 3pm 7:30am - 3pm

Sunday 9am - 4pm 9am - 4pm

Employee Hours

55 28 41 14.5 14.5

3.5 Employee Wages

Employees are paid on an hourly basis whereas the manager is paid on a salary basis. The following table reviews the details on how each employee is compensated. The table shows if we were to have part time employees but the total is different than in the financial budget because that is strictly for the amount of employees we have. The total would just be different based on the difference we would pay to the part time employees and their allocated bonus.

Wage and Benefit Expenses

Part Time Employees (2) 14.5 hours/week * $10.50/hour $ 304.50


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Bi-weekly wage * 26 pay periods $ 7,917

Full Time Baker 28 hours/week * $12.75/hour $ 714Bi-weekly wage * 26 pay periods $ 18,564

Full Time Employee 41 hours/week * 13.50/hour $ 1,107Bi-weekly wage * 26 pay periods $ 29,782

Owner/Manager $52,000$ 52,000

Yearly Wage Expenses $ 108,263

Yearly Benefit Expenses % of yearly wage = performance bonus $ 6,814

Total Wage &Benefit Expense $ 115,077

Table 3.5 Employee Wages

The estimates in this table are exactly that estimates, for more specific numbers refer to the financial budget which can be found in Appendix 1 which will take into consideration how much staff will be needed in the first few years of business and thus the numbers reflect this consideration.

3.6 Employee Benefits

The employee benefits would be administered as yearly bonuses dependant on employee performance and the success of the business. Generally if things were going smoothly then the manager would get an 8% of total wage bonus, the full time employees would get a 5% of total wage bonus, and the part time employees would receive a 3% of total wage bonus. These dollar values would vary depending on how much the employees work and their performance which would be evaluated by the manager every so often while keeping records.


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4.0 Marketing Strategy


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4.1 Competition

Currently there are several other businesses in the Broadway area that are direct competition with Rose’s Café, such as Broadway Café, Broadway Roastery, and Grandma Lee’s. There is of course competition all over Saskatoon for the food industry, but specifically to the Broadway area those are a few competitors. In Figure 4.1 we can see a perceptual map of the different competitors on Broadway in comparison of their quality and price. Rose’s as the most desirable business of course.

Figure 4.1


y

Rose’s Cafe 2015

One thing to consider is that any activities or business in the Saskatoon area that a family or individual can spend their disposable income on can be considered a competitor of Rose’s Café, but I am focusing centrally on the food industry and more specifically the surrounding geographical area. To compare the different competitors in another visual way including one more variable, which is variety, we can refer to Figure 4.1.2

Figure 4.1.2 Competitive Analysis Graph

Quality Price Variety0

1

2

3

4

5

6

1 = low 5 = high

Starbucks Broadway Café Rose's Café Broadway Roastery

The visuals tell us that the competition on Broadway is very strong and there are direct competitors within a close vicinity of Rose’s Café.

4.2 Target Market

The target market that Rose’s Café is directing its business towards is very large and quite broad as our business does not restrict its client base. It includes but is not exclusive to adults aged 18-65, the walking traffic on Broadway Avenue, local business owners in the Broadway/Downtown area, and welcomes students and business professionals. Rose’s café is a family friendly environment; it is welcoming and will provide services to any customer who wishes to indulge in our food.

4.3 Product


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There is a wide variety of products to be consumed at Rose’s Café. Starting with a cup of coffee in the morning, to soup and a sandwich at lunch and to finish off your meal with a tasty dessert. All of our items are available all day; they are not restricted to morning or afternoon. There will be a variety of sandwiches available, each day will be a new sandwich on special as well as soup. The soups and sandwiches will be hand made in house, including the bread; the produce will be brought in through weekly shipments from suppliers. The baked goods will also be made in house and made daily to provide an ultimate freshness to our products. We will have beverages as well to add to your meal. Lastly we will be providing the opportunity for customers to purchase and customize our consultation cakes. Consultation cakes are generally for special events, birthdays, weddings, anniversaries, and they will be constructed after having a meeting with the customer to understand their wants and needs and their vision of what this cake should look like. There are really no boundaries, other than the skill and ability of the baker and decorators themselves, it will be up to their discretion to agree to accept the plan for the cake or not, and if they can’t they will try to provide an alternative. The baked goods will consist of a huge variety such as, cake pops, cookies, cupcakes, pastries, donuts, muffins, cakes, pies, croissants etc. The soups and sandwiches will be decided on a daily basis and will generally be staple soups, but some days we will offer specials that are unique to this area, for example an Asian pho soup. The success or failure of the particular soup recipe will decide whether or not it will be used again.


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4.4 Place

Rose’s Café will be located on Broadway Avenue in Saskatoon Saskatchewan. Its location is near downtown Saskatoon and is located on one of the main drags in Saskatoon, both for vehicular traffic as well as foot traffic due to all the little stores on the avenue. This location was strategically decided because the feel of Broadway coincides with the feel that Rose’s Café is trying to provide, a close to home, familiar restaurant. Broadway has some buildings that are the originals from when Saskatoon was up and coming, it can be considered a “character street” because of its look and feel, and that is exactly what Rose’s Café is going for.

4.5 Pricing Strategy

Rose’s pricing strategy will be a fairly competitive strategy. We are going to price our products similar to that of our competitors, although some items may be pricier than others due to the mere fact that they are fresh daily and have a homemade quality you won’t find in the processed chain stores products on Broadway. We feel that the increase in price in some items is justifiable because we are going to be providing the best quality products to our customers.

We would offer our customers a coupon with every purchase in order to receive a free dessert menu item with their next purchase of a meal. This is free for them and aids in our promotion strategy which will be discussed next.

4.6 Promotion Strategy

In order to promote our business we will be taking advantage of the free social media websites available. The specific social media websites that we will be using to promote the business are Facebook, Instagram, and Twitter, there is also some consideration in using LinkedIn as it is more business professional.

Rose’s Café will have a website. The website will contain pictures of inside the store, show some of the behind the scenes in how our products are prepared, as well as up to date news feed on what is going on, for example, the daily soup, or any of the consultation cakes that are prepared for customers. It will have the full menu online along with our hours of operation and our specific location. We want to make it as easy as possible for consumers to know where we are, when we are open, and what we offer.

An additional method of marketing we will be using was mentioned before and that is the coupons. They will be handed out with every purchase, and they can be redeemed the next time you are in the store, you will receive a dessert item of your choice with the purchase of


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a meal. Not only will is entice customers to return to our business, but it will hopefully aid in the Word-of-Mouth marketing we except to happen when we become more popular.

Word-of-Mouth marketing will be a major tool we will try to use to increase the awareness of our business. The coupons will be the physical object we hand out to customers, but we are hoping they will spread good reviews about their experience at our store with their friends and family.

Another very important aspect to our marketing strategy is the signage out front of the store. It will be clear and concise and will catch the eye. The window display in the window of the store is going to be used to hopefully entice customers as they walk by and make them want to see what is inside. We are trying to create an atmosphere that is welcoming and reminds you of your past meals made by your mother or your grandmother. Homemade food is always the best as well it is usually better for you.

4.7 Marketing Expenses

Our marketing expenses can be seen in Table 4.7 which shows just exactly how much we are planning on spending to complete our marketing strategy.

Table 4.7 Marketing Expenses

2015 2016 2017 2018 2019Signage $ 5,000 - - - -

Coupons $ 780 $ 1,160 $ 1,440 $ 1,520 $ 1,900

Website $ 2,820 $ 1,320 $ 1,300 $ 1,280 $ 1,200

Total Expenses

$ 8,600 $ 2,480 $ 2,740 $ 2,800 $ 3,100

As you can see the in the table the expenses for coupons increases as the years go by, this is because we are hoping that as each year goes by we are increasing in awareness and popularity and so we will need to be printing more coupons as to make up for in the increase in customers and meals purchased. The website is initially more expensive than the rest of the years and this is because of the start-up costs that occur when creating a website, after that it is just regular maintenance and upkeep. The signage will be purchased in the first year of operations.


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5.0 Financial Plan


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5.1 Capital Requirement

In order to properly finance this business it would take both equity and debt financing. Figure 5.1 shows that $25,000 will be provided by the owner of the business, as well as a $25,000 bank loan will have to be negotiated in order to finance the remaining of the expenses to start up the business.

Figure 5.1 Financing

25,00025,000

Financing

Equity Debt

$$

5.2 Summary of Projected Income

The projected revenues are based on 70 customers per day and the average purchase per customer at $10.00. It is based on a growth in customers each year, year two being at 15%, year three at 10%, year 4 at 5% and year 5 at 5%. This is an appropriate forecast of our revenues as we are in a prime location with a lot of foot traffic enabling us to satisfy our demand. The following is Table 5.2 which illustrates our projected income.

Table 5.2 Projected Income

Projected IncomeSales $ 252,000 $ 297,045 $ 334,918 $ 360,456 $ 387,941COGS $ 62,370 $ 73,519 $ 82,892 $ 89,213 $ 96,015Gross Profit $ 189,630 $ 223,526 $ 252,026 $ 271,243 $ 291,925Expenses $ 221,872 $ 223,228 $ 228,661 $ 236,936 $ 246,321Net Income $ (32,242) $ 298 $ 23,365 $ 30,962 $ 39,676


Rose’s Cafe 2015

5.3 Summary of Projected Cash Balances

The following Table 5.3 illustrates the projected ending cash balances for the first five years of business. In the first year the business has a negative cash balance which occurs again in the second except it is a much smaller number which is bearable, it if were any larger it would be bad. A negative cash balance is not uncommon in the start-up of a small business; it is likely to be expected.

Table 5.3 Projected Cash Balances

Cash BalancesNet Cash Flow $ (4,630) $ 4,065 $ 26,156 $ 27,356 $ 6,690 Cash Bal Beg of Year $ - $ (4,630) $ (565) $ 25,590 $ 52,946 Cash Bal End of Year $ (4,630) $ (565) $ 25,590 $ 52,946 $ 59,636

5.4 Break Even

During the financial analysis of this business I conducted a break-even analysis which would determine when the amount of customers necessary to break-even in profits. As shown in Figure 5.4 the break even amount of customers is very close to the actual amount of customers, and in the first year Rose’s Café is in fact under the break-even which reflects the negative net income in the first year.

Figure 5.4 Break-Even

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81 89 9398

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Rose’s Cafe 2015

5.5 Payback

In terms of payback this is in respect to the owner, myself. There are several different ways to measure whether or not this business is a successful one. In the case of a small business it is best to use owner’s compensation as it is the most appropriate and accurate measure. If the business were larger you would use the net payback value and the internal rate of return to measure the businesses success. Since Rose’s Café is a small business I will be using the owner’s compensation to demonstrate the success of the business.

5.5.1 Owners Compensations

The following table explicitly outlines what the owner would be receiving as compensation over the five year period. Dividends begin in the fourth year however they are not very large.

Table 5.5.1 Owners Compensation

Owners CompensationAve. Owners Compensation $ 2,015 $ 2,016 $ 2,017 $ 2,018 $ 2,019

Owners Salary $ 52,000 $ 53,300 $ 54,633 $ 55,998 $ 57,398Dividends $ - $ - $ - $ 5,590 $ 32,946

Total Owner Compensation $ 52,000 $ 53,300 $ 54,633 $ 61,588 $ 90,344

5.6 Critical Factors

The critical variables for Rose’s Café are the number of customers per day as well as the average amount spent on each purchase per customer. In order to see just how sensitive it is when one of these two variables changed I conducted a sensitivity analysis on both criteria. The following tables illustrate what would happen when the criteria change.

Table 5.6.1 Sensitivity Analysis Customers Per Day

Customers/dayAverage 5 year Profit

Net PaybackYear 5 Owner Compensation

60 $ (18,123) $ (67,734) $ 57,39865 $ (1,581) $ 31,873 $ 57,39870 $ 12,412 $ 112,808 $ 90,34475 $ 25,766 $ 194,281 $ 109,96480 $ 38,909 $ 274,699 $ 116,69985 $ 51,792 $ 353,811 $ 130,434


Rose’s Cafe 2015

The base case is bolded. As you can see if Rose’s Café was to lose a mere 5 customers it would put them at an average net loss. Although this average is quite small, we still would not have enough cash to continue.

Table 5.6.2 Sensitivity Analysis Average Purchase Per Customer

Average Purchase per customer

Average Profit 5 yr

Net PaybackYear Owner

Compensation9 $ (8,122) $ (7,590) $ 57,398

9.5 $ 2,794 $ 56,732 $ 57,39810 $ 12,412 $ 112,808 $ 90,344

10.5 $ 21,760 $ 169,839 $ 98,84311 $ 31,108 $ 226,870 $ 108,458

11.5 $ 40,198 $ 282,610 $ 118,07312 $ 49,215 $ 337,989 $ 127,687

The base case is bolded. In this sensitivity analysis if the price were to drop 50 cents Rose’s Café would be operating at positive but small average profit. The reason why I highlighted this option red was because the cash flows were much too small and negative in the beginning of the five year term, so there would not be enough cash to properly run the business.

5.7 Overall Feasibility

After completing my business plan and looking at the projected profits and revenues I would say that Rose’s Café is not feasible. I would not want to invest this much time and effort into something that I wouldn’t see returns for until 4 years down the road, and even then it is a very small return. With a university degree I believe I could make the same amount if not more at a different job. However, I do really love to cook and bake, so if I could come up with another plan that was similar but different in that it was more feasible I would consider opening up a restaurant of sorts. As for Rose’s Café I would not give it a go.


Rose’s Cafe 2015

Summary

Rose’s Café will provide customers with a welcoming atmosphere, with the ability to enjoy a homemade meal and dessert. We want to provide individuals with an experience they won’t forget, one that will remind them of the good ol’ days when they ate moms or grandmas home cooked meals. Our business plan provides quality information that outlines the opening and operating of Rose’s Café, however the plan has revealed that the business would not be feasible. It would be up to the discretion of whomever reviews the plan to decide whether or not they would want to dedicate this much time and effort in order to see returns later down the road.


Rose’s Cafe 2015

Appendices

Appendix 1 Financial BudgetPlease refer to attached financial budget to see full financial projections (excel document).


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