start & run a coffee bar

START & RUN A COFFEE BARTom Matzen

Marybeth Harrison

Self-Counsel Press(a division of)

International Self-Counsel Press Ltd.USA Canada

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PREFACE ix

INTRODUCTION x1. Coffee worldview x2. The North American coffee market xi 3. Coffee trends xi

PART I: GETTING STARTED 1

1 PREPARING A BUSINESS PLAN 3 1. Why prepare a business plan? 3 2. Your vision of your business 4 3. How should I start out? 5 4. Customer profiles: finding your target market 6 5. What type of coffee bar is best? 7 6. Choosing your products and services 10 7. Risk assessment 12 8. The business plan 13

2 SETTING UP YOUR BUSINESS 16 1. Choosing a name 16 2. Your business structure 18 3. Start-up costs 24 4. Licensing 28

3 INSURANCE 29 1. Obtaining insurance 29 2. Planning your insurance program 30 3. Types of business and personal insurance 31

4 SECURING A SITE FOR YOUR COFFEE BAR 34 1. Where are the best locations? 34 2. Mapping it out 38 3. The site selection criteria checklist 38 4. Evaluating the competition 44 5. Evaluating the financial viability of the site: the pro forma 45 6. Making an offer 51

CONTENTS

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Contents v

7. How to negotiate your lease — strategies that can save you thousands of dollars 51 8. The key consideration in making your final site decision 53

5 DESIGNING YOUR OWN STORE 54 1. Creating your business’s identity 54 2. Your coffee bar’s look 54 3. Your staff’s look 71

6 GETTING TO YOUR OPENING 77 1. How to do cost-effective plans 77 2. How to get permits and licenses 78 3. Putting the job out to tender 78 4. Things to do and buy 80 5. Supplier considerations 85 6. Storing your order 90 7. How and when to open your doors 92

7 BUILDING A WINNING TEAM 96 1. How to find great staff 96 2. Employment standards 97 3. How to interview 98 4. How to make hiring decisions you won’t regret 99 5. Deciding how many people to hire 104 6. How to train your staff 105 7. Station designation 110 8. How to find a great manager 112

8 HOW TO KEEP YOUR COFFEE BAR CLEAN 115 1. Keeping your coffee bar clean 115 2. Cleaning tips 116 3. The importance of dishwashing 117 4. Specific dishwashing instructions 118 5. Keeping your coffee bar well stocked 119

PART II: THE PRODUCT 121

9 ROASTING COFFEE 123 1. Coffee 123 2. Decaffeinating 124 3. Roasting 125 4. The different roasts 128 5. Roast samples 130 6. Coffee flavoring 130

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7. Storing beans 131 8. Cupping 132 9. Selling roasted beans to your customers 133

10 MAKING AND SERVING COFFEE 138 1. Which coffee should you serve? 138 2. Grinding 138 3. Measuring — how much coffee for how much brew? 139 4. Brewing equipment 139 5. The steps to brewing success 143 6. How to serve your coffee 145

11 THE SECRETS OF ESPRESSO SUCCESS 147 1. Essssspresso 147 2. The espresso grinder 148 3. The espresso machine 149 4. Six steps to a terrific espresso 151 5. Crema 152 6. Espresso troubleshooting 152 7. Training tips 153 8. Espresso menu items 153

12 SPECIALTY COFFEES 155 1. What are specialty coffees? 155 2. Foaming versus steaming 155 3. Six steps to steaming milk 155 4. Six steps to foaming milk 157 5. Specialty coffee menu items 158

13 TEA 161 1. The contemplative beverage 161 2. A brief history of tea 161 3. Growing tea 162 4. Types of teas 162 5. Market potential 162 6. Tea “brands” 163 7. Five keys to great tea 163 8. Cupping tea 164 9. Serving tea 168 10. Selling tea to your customers 168 11. Teahouses — to build or not to build 168

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PART III: OPERATIONS 169

14 THE MONEY EXCHANGE STATION 171 1. The money exchange station — where it all happens 171 2. The till: policies and procedures 171 3. Eleven steps to customer service at the counter that will WOW! your customers 173 4. Special requests 179 5. Long lineups 179

15 HOW TO MANAGE A SUCCESSFUL COFFEE BAR BUSINESS 180 1. Business management 180 2. Employee management 181 3. Product management 188 4. Financial management 195 5. Facilities management 203

16 BUILDING SALES 208 1. Sales objectives 208 2. Marketing objectives and strategies 208 3. Getting new customers 209 4. Keeping your customers 218 5. Getting your customers to spend more 221 6. Getting your customers to come back more often 223 7. Marketing plan 226

17 SEVEN CHARACTERISTICS OF A SUCCESSFUL COFFEE BAR OWNER 229 1. You as a great leader 229 2. You as a great manager 230 3. You as a great communicator 230 4. You as a great goal setter 232 5. You as a great problem solver 233 6. You as a great sales builder 234 7. Commitment to customer service 234

18 EXPANDING AND FRANCHISING 237 1. Expanding: when and why 237 2. Franchising 238

AFTERWORD 239

APPENDIXES1 Coffee and the environment 240 2 Coffee organizations and suppliers 242

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SAMPLES1 Business plan outline 15 2 Start-up budget 25 3 Pro forma 46 4 Staff application form 100 5 Interviewer’s form 102 6 Training completion certificate 112 7 Brew record 142 8 Manager’s meeting form 189 9 Inventory order sheet 191

10 Daily prep sheet 194 11 Daily cash sheet 197 12 Weekly summary 198 13 Month-end income and expense statement 199 14 Media thank-you letter 219 15 Marketing calendar (Valentine’s Day) 227 16 Complaint letter response 235

CHECKLISTS1 Site selection criteria 41 2 Coffee bar design and layout 58 3 Pre-opening checklist 82 4 Station completion sign-off 111 5 Opening checklist 1826 Closing checklist 184

TABLES1 Types of coffee bars 11 2 Tea names 165

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1. WHY PREPARE A BUSINESS PLAN?Many entrepreneurs — whether experiencedveterans or first timers — often miss the vitalstep of preparing a business plan whenpreparing to start a business. As a result,many fail in their efforts to achieve wealthand fame through their business. It is criticalthat you take time to prepare a business planso you are clear on where you want to gowith your coffee business and are better pre-pared to deal with the challenges thatinevitably will arise along the way.

Why is preparing a business plan foryour coffee business so important?

(a) Preparing a business plan will helpcrystallize your reasons for gettinginto the coffee business and yourgoals for the business. If you do nothave a strong sense of “why?” and“what?” you will be without focus,

direction, and satisfaction in yourefforts.

(b) Preparing a business plan will helpcrystallize your concept. A clear,concise, well-thought-out conceptwill form the foundation for everydecision you make: everything fromchoosing which color to paint thewalls of your coffee bar to what kindof biscotti to serve with a cup of coffee.

(c) Preparing a business plan will helpcrystallize your vision of the oppor-tunities and the limitations of themarket you are in. Where is themost potential in the coffee indus-try? Who will your competitors be?How will you compete against them?

(d) Preparing a business plan will helpcrystallize your vision of exactly who

1PREPARING A BUSINESS PLAN

A business plan is a road map of where you want to go inyour business, the various routes you will take to get there,the stages along the way, and most importantly, where youwill be when you have arrived at your destination.

— DOUGLAS GRAY & DIANA GRAY

3

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4 Start & run a coffee bar

you will be serving. If you are notclear on who your customers are,you will not be able to meet theirneeds and your business will notsucceed. The knowledge you acquireabout your target market will beinvaluable to you in your conceptand marketing efforts.

(e) Preparing a business plan will helpdetermine what products you willoffer your customers. Once youknow the demographic and psycho-graphic characteristics of your tar-get market, you are in an excellentposition to decide what productswill appeal to it.

(f) Preparing a business plan will helpdetermine what services you willoffer to your customers: Homedelivery service? 24-hour orderingservice? Wholesale service?

(g) Preparing a business plan will forceyou to look at the dollars involved,from initial setup through your firstfew years in business. Budgeting andfinancial planning will be vital toyour success.

(h) Preparing a business plan will forceyou to look at the risks involved inowning your own business. Eightypercent of businesses fail in the firstfive years. This is usually because oflack of planning and preparation,lack of capitalization, and a lack ofmanagement and marketing skills.

(i) Preparing a business plan will helpyou outline the exact steps requiredto get your business up and runningsmoothly and profitably.

(j) Finally, preparing a business planwill hopefully inspire and motivate

you to take action! Knowing whatyou want to do isn’t very usefulunless you actually do it.

2. YOUR VISION OF YOUR BUSINESSTake out a pen and a piece of paper, or sityourself down in front of your computer asyou read through the rest of Part I. Writedown your thoughts and answers to the ques-tions we raise. Taking action now will giveyou a good head start on your business planand will help you formulate what exactly it isthat you want to do and how you are going todo it. Take action now.

Your vision of your business lays thefoundation for your business. Your vision iswhat will give you a sense of direction andgive your life a sense of purpose as you buildyour business.

What is your vision for — (a) Your day-to-day activities? What

will you do on a daily basis? Do yousee yourself serving customers? Doyou see yourself networking withother business owners in your localarea? Do you see yourself being apositive force in your community?

(b) Your lifestyle? Are you early to bed,early to rise? Do you see yourselfworking six days a week? Do youwant annual holidays?

(c) Your time? How do you want tospend your time? Think of leisure,family, work, fitness, and privatetime for yourself.

(d) Your future? Do you plan to ownyour coffee bar long term or sell itdown the road? What do you seeyourself doing a year from now, fiveyears from now, ten years from now?

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Preparing a business plan 5

While you may not address each of theseissues specifically in your business plan (e.g.,your banker may not be interested in whattime you plan on getting up each morning),being clear on these issues now will helpguide you as you build your business.

If your goal is to run the coffee bar as anabsentee owner, hiring a good manager willbe vital to the success of your business. If youplan to work the coffee bar yourself, hiringstaff will be a higher priority. If you are a lateriser, plan on hiring and training staff whocan open the coffee bar. If you have highfamily priorities, keep in mind that you mayneed to spend a considerable amount of timein and on your business, especially in theearly stages. And if you have a clear visionfor your future, it will help you get where youwant to go, whether that is lying on a beachin Hawaii or running a multiple locationfranchise.

Once you know where you want to be,you’ll need to start clarifying the vision youhave for your coffee business. You will needto decide whether you want to start out witha franchise, buy an existing business, or startfrom scratch. Below we have listed some ofthe pros and cons of each.

3. HOW SHOULD I START OUT?3.1 Should I buy a franchise?A franchise can offer you many benefits,including name recognition and clout innegotiating better pricing. Many franchisesalso offer assistance in obtaining financing,site selection, coffee bar design, training, andmarketing. A good franchise will save youmoney, give you a proven system, andincrease your odds of making money.

However, one disadvantage is that theassistance provided by most franchises costs

you in the form of an initial franchise fee aswell as monthly royalties. You may also berestricted in terms of product lines and menuitems and may be required to get writtenapproval for use of names and logos in anyadvertising you do. You may be given a verysmall territory, which limits your ability toexpand.

Franchises don’t always deliver whatthey promise. Many franchisors mark up theproducts they sell to you, thereby defeatingone of the major purposes behind franchis-ing — that is, the chance for franchisees topurchase supplies that were bought in bulkat a lower price than an independent storewould pay.

As well, if the franchise gets a bad nameor bad publicity, you are often stuck alongfor the ride.

3.2 Should I buy an existing business?Buying an existing business can save you thetime, effort, and expertise necessary to find agood site, plan and build the coffee bar, andthen develop a client base. If the businessyou are considering purchasing is profitable,you may find you can start earning a profitimmediately.

Keep in mind, though, that you will endup paying for someone else’s time, effort,and expertise through the purchase price ofthe business. This is where you must weighthe trade-off. Ultimately, you will need todecide which option will net you the bestreturn.

Make sure you thoroughly research anybusiness that you are interested in buying.Find out about the marketing systems beingimplemented. Spend a lot of time in the cof-fee bar — watch traffic patterns, count cus-tomers, look for what is being done well.

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Look for areas you would improve and esti-mate how that would influence sales.

In determining areas you would improve,it may help to think of yourself as a customerin the business. What would you look for? Abetter atmosphere? Better service? Betterproducts? Better marketing? And if thesethings were improved, would it make youwant to come back and bring friends? Howmuch more money would you spend if theseimprovements were made? Keep in mindthat even a 25 percent increase in the averageamount a customer spends can result in thou-sands of extra dollars per year in pure profit.

When considering whether to buy anexisting business, remember that it is diffi-cult to change customers’ perception of abusiness once that perception is ingrained. Ifan existing business has developed a bad rep-utation in the community, you may be fight-ing an uphill battle trying to win customersback.

3.3 Should I start my business fromscratch?

Starting a business from scratch has itsadvantages and disadvantages. One advan-tage is that you have more flexibility thanyou would if you bought a franchise orbought an existing business. You won’t belocked into the location, lease, and contractsthat are already in place. It will also be easi-er for you to incorporate your own coffee bardesign, and introduce your own menu.

On the other hand, starting from scratchmeans you don’t get the benefits or supporta franchise can offer, or those that come witha successful, established business.

One of the most important factors in anybusiness is a marketable location. If the loca-tion of an existing business isn’t suitable, or

the franchisor is not able to find you a goodsite, you’ll end up paying the price for a poorlocation. Finding a good location and begin-ning from scratch can sometimes be the bestoption.

Do as much research as you can toexplore these three alternatives. A good busi-ness consultant will also be able to help youdetermine the best option for your situation.

4. CUSTOMER PROFILES: FINDINGYOUR TARGET MARKET

In the past, the coffee market was floodedwith inferior, blending-type coffees pack-aged in an instant coffee can. As a result,coffee drinkers didn’t have much to comparetheir morning cup of coffee to. Today, how-ever, thanks in part to large-scale marketingcampaigns (like those featuring Juan Valdezand Colombian coffee), coffee lovers havebecome much more sophisticated. As con-sumers become better educated about thecoffee choices they have, they gravitatetoward better taste, flavor, and aroma.

The major consumers of gourmet coffeeare adults with high levels of formal educa-tion, although sophisticated teens are nowgetting in on the cappuccino craze. The morepost-secondary education a person has, themore likely he or she is to consume gourmetcoffee. Seventy percent of bean buyers arewomen.

Surprisingly, there is no correlationbetween income and gourmet coffee drink-ing habits. This is an important point becausemany businesspeople believe that gourmetcoffee is a drink of the “yuppies” and, as aresult, structure their concepts and theirmarketing campaigns in such a way as tomiss out on an entire segment of the market.Small indulgences cross all income streams.

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Knowing your customer profile will helpyou better meet your customers’ needs. Forexample, if your typical customer visits afterdinner for a latte and slice of cheesecake,you will want to ensure that you have a wideselection of appealing desserts. If you arenear a high school and your typical customersconsist of students visiting after school, youwill want to ensure that you have smaller,lower-priced snack items that help fill thatpost-learning need for calories!

But how do you determine your cus-tomer profile? You already know who thetypical coffee customer is. The next step is tofine-tune this knowledge through theresearch you do in the area you plan to openup shop.

Is your location near an office tower? Ifso, your customers will probably be mid-lifeprofessionals looking for a jump start to theirday and a grab-and-go breakfast. Is the coffeebar in a residential area? You will probablysee more parents with children stopping induring the day to purchase beans for homeuse. Are you near a fitness facility? Your cus-tomer profile will be partly made up ofhealth-conscious, possibly weight-consciouspeople looking for an after-workout caffeineboost or a low-fat carbohydrate replacement.

Make sure you spend the time now get-ting to know who your customers are goingto be, and incorporate this information intoyour business plan (whether you plan topresent your business plan to a privateinvestor or financial institution or not.) Themore detailed your customer profile, themore successful you will be. Let’s look at anexample.

Assume you are near a college in anenvironmentally conscious community. You

know that your customer profile will bemade up partly of young students who willwant to relax and also spend time studying inyour coffee bar. Based on your generalknowledge of post-secondary curriculums,you realize that because of the diverse sched-ules of the students, you will likely have aconstant flow throughout the day.

Armed with this information, you will beable to make decisions about your coffeebar’s atmosphere and design elements.Given that your community cares about theenvironment, you may want to display a lineof informative posters about current envi-ronmental topics. You are in a better posi-tion to make decisions about everything inyour coffee bar, from the staff uniform toyour product lines. And, of course, becauseyou know who your target market is, you cancreate and implement effective, sales-build-ing marketing campaigns.

5. WHAT TYPE OF COFFEE BAR ISBEST?

Keeping in mind your knowledge of the typ-ical coffee drinker, you now need to deter-mine which coffee bar concept will best meetyour target market’s needs. Listed below is abrief description of the main types of coffeebars and the strengths and weaknesses ofeach. While a focus will be one of the keys toyour success, it is possible to successfullycombine two or three concepts, if they aredone properly and if your marketing strate-gies take each into account.

5.1 CafésCafés are the European model of coffeebars. They typically focus on liquid coffees(not bean sales) and often serve both lunch

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and dinner items. Sometimes they arelicensed and, in fact, could be consideredrestaurants. As such, they are a concept out-side the scope of this book.

5.2 Coffee barsCoffee bars are typically high-traffic loca-tions that focus on liquid coffees. Productlines often include gourmet and specialtycoffees, and baked goods. These operationscan be very profitable with low risk if donewell.

5.3 CoffeehousesA flashback to the Haight-Ashbury district ofSan Francisco, coffeehouses typically havedim lighting, comfy sofas, and poetry nights.They attract a younger crowd and focus onlong visits and lots of conversation oversteaming hot cups of java.

5.4 Retail coffee shopsRetail coffee shops typically focus on bean,tea, and giftware sales. They may or may notoffer liquid coffee sales and are often foundin mall locations or gift districts.

5.5 Drive thrusDrive thrus can work well on the right site.The most successful locations are those withhigh volume on the going-to-work side of thestreet. Drive thrus focus primarily on liquidcoffees and baked goods.

5.6 CartsThese “mini-stores” focus almost solely onliquid coffees. They can work well in high-traffic areas, but are challenged by difficul-ties in building customer loyalty. Because

they are mobile, there is little, if any, equitycreation as the business grows (unlike thetypes of coffee bars listed above).

5.7 TeahousesThere is a recent fad for teahouses as an off-shoot of the coffee business. Do keep inmind that while tea is a popular drink, it typ-ically represents only 3 percent to 7 percentof the total gourmet beverage market. Thismeans you will need to be five times betterthan the norm to do even 20 percent of whata coffee bar will do.

5.8 Roaster/retailersAs the name suggests, roaster/retailing con-tains two key elements:

(a) On-site roasting of green coffeebeans

(b) Retailing of coffee and coffee prod-ucts

We believe that roaster/retailers are thewave of the future. They offer you a numberof advantages that spell out strong bottom-line profit.

5.8a Lower food cost = ProfitRoasters typically mark up green coffee $2 to$4 per pound. The money you save by roast-ing your own coffee directly converts tolower food cost in your operation.

5.8b Savings = ProfitIf your coffee business goes through 100pounds of roasted coffee per week, you arespending at least an extra $200 per week, or$10,000 per year, because of the mark-upfrom roasters. Think of how many trips toHawaii you could take with that money.

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5.8c Meeting customer needs for freshness = Profit

Today’s consumer wants the best. You’ll beleft behind by your competition if you don’tgive customers the freshness they are demand-ing. Coffee loses about half of its flavor with-in the first 14 days after it is roasted. It istough to meet customer freshness demandsif you’re not doing your own roasting.

5.8d Competitive edge = ProfitIn-store roasting gives you a unique elementthat gives you a huge edge over your competi-tors. How could you compete if the coffee bardown the street offered its customers beansto take home still hot out of the roaster?

5.8e An additional revenue stream = Profit

In-store roasting means you are adding anadditional profit center to your coffee bar:wholesale. Because you aren’t paying some-one else to roast your coffee for you and you are paying only $3 or $4 per pound(including shipping, handling, brokerage,and exchange rates), you can afford to offerdiscounts competitive with other coffeeroasters to wholesale customers.

You can supply wholesale coffee fromyour business to:

• Bars serving coffee• Businesses serving coffee• Cafés and restaurants• Car repair shops serving coffee• Coffee bars• Coffee shops• Corner stores• Gas stations serving coffee• Hairdressers serving coffee

• Hotels and motels• Offices• Supermarkets

5.8f Long-term appeal = Profit down the road

While it is our opinion that in-store roastingwill be with us well into the foreseeablefuture, if we had to predict the next “hot”trend after in-store roasting, we would say“in-home” roasting. Should this trend devel-op in the years to come, roaster/retailers willbe well protected because people will stillneed to buy the green beans. If you havebeen successful at building a solid roasted-bean business, it is simply a matter of trans-forming your roasted-bean customers intogreen-bean customers. (We design all ourcoffee bars to take this into account so thatthis conversion, should it ever be necessaryin future, will be simple and inexpensive.)

Contrary to what many roast masters ofthe world may tell you, today’s technologymakes roasting beans easy. Many roasters,such as the one produced by UniversalCoffee, require as few as five simple steps:checking the roaster temperature (done bythe touch of a button), weighing your beans,setting an automatic timer, comparing roast-ed samples to a color chart to determineroasted level once the timer rings, and thenallowing the beans to cool in a cooling bin.

The real art of roasting is in determiningwhich bean is better at which roast and inblending different beans together to producea roast with the results you want. See chapter9 for more on roasting.

For the remainder of the book, we willrefer to all coffee bar concepts as a “coffeebar” for simplicity’s sake.

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6. CHOOSING YOUR PRODUCTS ANDSERVICES

What products will appeal to your cus-tomers? Will you offer beans for home use?Food and baked goods? Gourmet teas?Coffee-related gift items? Brewing equip-ment? Below are some of the basic productsand services most successful coffee barsoffer.

6.1 Products6.1a Gourmet coffees

Gourmet coffees are the liquid coffees youwill serve on a daily basis. We recommendfeaturing the following “daily roasts”:

• A signature medium-roast houseblend

• A dark roast• At least one flavored coffee• Decaffeinated coffee (if the demand

is high)

6.1b Flavored coffeesFlavored coffees represent up to 40 percentof the liquid coffee market. By offering atleast one flavor a day, you are satisfying theneeds of a large percentage of a market youmight otherwise not capture. Flavored beansales are also a great suggestive sell to fla-vored-coffee lovers.

6.1c Specialty coffeesSpecialty coffees include the espresso-baseddrinks such as cappuccinos, lattes, andmochas.

6.1d Other coffee productsOther coffee products may include itemssuch as coffee-flavored chocolate bars or

espresso-flavored ice cream. A great favoriteamong North American customers is choco-late-covered espresso beans.

6.1e Baked goodsBaked goods include muffins, scones, cakes,biscotti, cookies, and squares. The key hereis to provide a wide enough range of bakedgoods to appeal to your traffic flow while stillmaintaining a clear focus on your productline.

6.1f Coffee-related gift itemsGift items include mugs, coffee plungers,other coffee makers, and espresso equipment.

6.1g Lunches and other foodsThese products include quiches, soups, andsandwiches.

6.1h Whole bean coffee — retail and wholesale

Plan for a huge focus on retail and wholesalebean business. Your bean sales volume canquickly grow to a steady, long-term revenuestream made up of a loyal clientele (espe-cially if you are doing in-store roasting). Werecommend setting a first-stage goal of beingable to pay your rent from wholesale beanvolume alone.

6.1i Gourmet teasThere are a number of beautifully packaged,high-grade teas that can be a nice comple-ment to your coffee selection. Loose teas arevery popular among tea lovers because theyare typically made from higher grade tealeaves. The challenge with loose teas, howev-er, is containment. If you are going to sellloose teas, it is a good idea to carry a line oftea balls (infusers) or, alternatively, sell

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TABLE 1TYPES OF COFFEE BARS

loose tea in gauze tea bags. Gauze tea bagsexpand when steeped in hot water (unlikepaper tea bags), allowing the tea leaves toreach their full flavor. The best source of teawe have found is the Royal Gardens Tea linefrom Thanksgiving Coffees in California.They can be reached at 1-800-462-1999.

6.1j JuicesFreshly squeezed juices and health blendscan be a great addition to your product line

and offer your customers a cool, healthyalternative to coffee.

6.2 ServicesWhat services will appeal to your customers?

6.2a Custom roasting serviceWe recommend you make custom roastingthe heart of your business. Because you willbe roasting in small quantities (assuming youdecide on a roaster/retailing concept), you

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will be able to offer not only fresh roastedcoffee beans but also custom roasted beans.Custom roasting means blending and roast-ing to the individual tastes of a customer. Acustomer may order, for example, a blend ofGuatemalan and Peruvian beans roasted to amedium-dark roast.

Custom roasting also means you candevelop signature blends for your wholesaleaccounts. A large restaurant or hotel maywant to market the coffee you provide themas their own blend. A hotel in Vancouver forexample, may want to call one of its varia-tions the “Vancouver Hotel BreakfastBlend” and promote the coffee in its hotelrooms and on its restaurant menus. With asmall batch roaster you will be able to pro-vide this marketing opportunity to wholesaleaccounts.

A custom roasting service will be a keyselling feature for all the bean business youdo.

6.2b Free home delivery serviceA free home delivery service can be a greatway to launch your whole bean coffee busi-ness. You can easily plan drop-off routesalong your way to and from the coffee bar inearly morning or evening. Five stops a day,five days a week can translate into an addi-tional $15,000 in revenue per year (based ona $12 per pound purchase price).

6.2c 24-hour telephone ordering serviceThis is a service that is simple to implement;it requires only that you purchase and hookup an answering machine. When you areunable to take a call, customers are able toplace their orders on the machine, 24 hoursa day. (For a sample message, see chapter

16.) With this service, you can encourageyour customers to call ahead to place theirorder, making your roasting efforts thatmuch more efficient.

6.2d Wholesale coffee servicesAs we indicated above, wholesale coffee vol-ume can quickly grow to cover major expens-es such as your rent and labor costs. Awholesale coffee service involves giving dis-counts off your retail price for larger coffeeorders and possibly working in conjunctionwith a finance company to provide brewingequipment to your large accounts. Typically,you would offer a 30 percent discount offretail price for orders of five pounds ormore.

6.2e Office coffee servicesCoffee is supplied to thousands of officesacross North America on a daily basis.

7. RISK ASSESSMENTEighty percent of all businesses fail in theirfirst five years. To ensure that you don’tbecome just another statistic, you need toexamine all the risks associated with yourventure.

Spend a few minutes now to brainstormon anything and everything that could gowrong in your business. Ask yourself howyou will overcome these challenges shouldyou encounter them. To help you get started,we’ve included several sets of questions foryou to answer.

(a) Should you own your own business?• Are you prepared to put in the

time and effort necessary tobuild your business?

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• Are you prepared for the sacri-fices you will need to be success-ful?

• Are you prepared to learn theskills you will need?

• Are you prepared to implementthe strategies successful busi-nesses use?

• Building a wholesale businessinvolves knocking on doors andselling your service — are youcomfortable with this?

(b) Are you familiar with the marketyou are choosing to get into?• What are the current trends?• What are the trends of the

future?• How will these influence you and

your concept?• Are you well positioned to meet

these trends?(c) Is your concept suitable?

• How strong is your concept?• How focused is it?• How vulnerable is it to competi-

tion?(d) Are you offering the right products?

• Will your products appeal toyour specific target market?

• Is your product line focused orare you trying to sell all things toall people?

(e) Are you offering the right services?• Will your services appeal to your

target market?

(f) Are you financially set?• Do you have enough start-up

capital to fund your conceptproperly? (We discuss this indetail in chapter 2.)

• Have you considered how nega-tive cash flow will affect you?

As you continue through this book, youwill see that there are many other potentialrisks. They include —

• Poor site• Too high rent• Poorly designed coffee bar• Unaccounted-for cost overruns dur-

ing construction• Poor staff hiring and training prac-

tices• Poor business, product, staff, facili-

ties, and financial management prac-tices

• Inferior quality products• Poor customer service• Failure to market the business• Lack of funds to market the business• Poor marketing strategies• Lack of willingness on the business

owner’s part to build wholesale busi-ness

8. THE BUSINESS PLANOnce you have addressed each of theseissues, you must prepare the actual businessplan. There are a number of resources avail-able to you at this stage. Your community’schamber of commerce or government busi-ness information center can provide you with

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I, , commit to

completing a business plan for my coffee business.

(your signature) (today’s date)


sample business plans. There are also manybooks available at libraries or local book-stores on preparing a business plan. We haveincluded a sample business plan outline thatshould help you get started organizing theinformation we’ve discussed so far (seeSample 1).

If you are using your business plan toobtain financing from a financial institutionor private investor, you will want to ensurethat it is clearly presented, well organized,and professional looking. Make sure thereare no grammatical or spelling errors. It isalso well worth including graphs, photo-graphs, and artist renderings, if possible. Youmay also want to spend the extra dollars andbuy a presentation folder or binder that willhelp convey your professional image.

You will need to put particular emphasison your financial figures. We recommendpreparing four sets of profit and loss projec-tions, called pro formas, that look at worst,best, break-even, and most realistic case sce-narios. Pro formas are discussed in moredetail in chapter 4.

If you are looking for private financing,be sure to include projected return on invest-ment figures for your potential investors.

If you will be using your business plan forinternal use only, you may wish to keep theplan on your computer or in a file, and referto it as needed to help keep you on track. Itdoesn’t need to be as presentable as it wouldbe for a banker or investor, but you still wantit well-organized and complete.

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SAMPLE 1BUSINESS PLAN OUTLINE

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start & run a coffee bar

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