A

“BUSINESS PLAN ON COFFEE CAFE”

“INSTIUTE OF MANAGEMENT SCIENCE, UNIVERSITY OF LUCKNOW”

SUBMITTED TO:-
DR. RAJ KUMAR SINGH SUBMITTED BY:
SHILPI SINGH
MBA (HR & IR)-IV SEM
ROLL NO.- 11001116054

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 DECLARATION

I, SHILPI SINGH hereby declare that the project entitled “Mid Town Coffee
Cafe, The Coffee Bar” is my original work, done by me except the material
and information gathered from the various coffee cafe. This has not been
previously submitted for any other degree or diploma.

I have done my comprehensive project under the guidance of Mrs.

ARCHANA SINGH, coordinator of MBA HR department IMS ,University of
Lucknow.

SHILPI SINGH

MBA(HR & IR)- IV Sem

IMS ,University of Lucknow

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 ACKNOWLEDGEMENT

The study was conducted by the assistance of several individuals. Their co-
operation and guidance has resulted in the completion of the entire
comprehensive project, without which this task was almost impossible. I
really appreciate their help and hereby thank them.

I would like to give special thanks to the following people:

Firstly, I would like to thank Director Dr. Rajkumar singh and coordinator
Mrs. Archana Raj ma’am for providing me the opportunity to take up this
project and for his valuable guidance, academic and moral support which
made this report a reality.

I also thank my family members and friends whose support and

encouragement has meant a lot to me personally and also for the completion
of the report.

Finally, my acknowledgement goes to all those people who have helped me

in carrying out this project work in an effective manner.

SHILPI SINGH

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 TABLE OF CONTENTS

SL. NO. PARTICULARS PAGE NO.

1 Executive Summary 5
2 Company Summary 7
3 Company Ownership 8
4 Start-up Summary 8
5 Products 12
6 Market Analysis Summary 13
7 Market Segmentation 14
8 SWOT Analysis 16
9 Strategy and Implementation Summary 18
10 Sales Forecast 20
11 Management Summary 21
12 Personnel Plan 23
13 Financial Plan 26
14 Projected Cash Flow 28
15 Projected Profit & Loss Account and Balance sheet 30

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 Executive Summary

Mid Town Coffee Cafe is determined to become a daily necessity for local
coffee addicts, a place to dream of as you try to escape the daily stresses of
life and just a comfortable place to meet your friends or to read a book, all in
one. With the growing demand for high-quality gourmet coffee and great
service, MTCC will capitalize on its proximity to the Kanpur University campus
to build a core group of repeat customers. The Cafe will offer its customers
the best prepared coffee in the area that will be complimented with pastries.

The company will operate a 500 square foot coffee bar within a walking
distance from the Kanpur University campus. The owner has secured this
location on a lease contract with an option to extend up to three years. The
owner have also provided Rs. of the required Rs.539,900 start-up funds.

The company is expected to grow sales revenue from Rs.191,2500 in FY2014-

15 to Rs.2988281 in FY2015-16 . As MTCC will strive to maintain a 37.5%
gross profit margin in FY2014-15 and it will grow to 42.3% in FY2015-16 with
reasonable operating expenses, it will see net profits grow from Rs.166,768
to Rs.486388.875 during the same period.

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1.1 Objectives

Mid Town Coffee Cafe's objectives for the first year of operations are:

 Become selected as the "Best New Coffee Bar in the area" by the local
restaurant guide.

 Turn in profits from the first month of operations.

 Maintain a 37.5% gross margin in first year

1.2 Keys to Success

The keys to success will be:

 Store design that will be both visually attractive to customers, and

designed for fast and efficient operations.

 Employee training to insure the best coffee preparation techniques.

 Marketing strategies aimed to build a solid base of loyal customers, as

well as maximizing the sales of high margin products, such as espresso
drinks.

1.3 Mission
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Mid Town Coffee Cafe will make its best effort to create a unique place
where customers can socialize with each other in a comfortable and relaxing
environment while enjoying the best brewed coffee or espresso and pastries
in town. We will be in the business of helping our customers to relieve their
daily stresses by providing piece of mind through great ambience, convenient
location, friendly customer service, and products of consistently high quality.
Mid Town Coffee Cafe will invest its profits to increase the employee
satisfaction.

2 Company Summary

Mid Town Coffee Cafe, limited liability Company, sells coffee, other
beverages and snacks in its 500 square feet premium coffee bar located near
the Kanpur University campus. 

2.1 Company Ownership

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MTCC is a sole proprietorship firm, and the owner contributes the entire
capital. This gives increased profit margins from the start and as the company
grows, the debt-free philosophy will be maintained. However, recognizing
that in reality not all variables are controllable. The founder owns a shop and
has enough funds to start the business.

2.2 Start-up Summary

The start-up expenses include:

 Legal expenses for obtaining licenses and permits as well as the accounting
services totaling Rs. 2,000.

 Marketing promotion expenses for the grand opening of MTCC in the amount of
Rs.60,000 in the start .

 Insurance (general liability, workers' compensation and property casualty)

coverage at a total premium of Rs.10,000.

 Pre-paid rent expenses for three month at Rs.20 per square feet in the total
amount of Rs.30,000.

 Other start-up expenses including stationery (Rs.500) and phone and utility
deposits (Rs.24, 000).

The required start-up assets of Rs.262, 600 include:

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  Furniture & fitting of the total amount of Rs.160, 000.

 Espresso Machine of Rs. 11,000. Coffee Grinder & maker of Rs. 600 and 1500
Respectively.

 Computer, Air conditioner and Billing Machine of the total amount of Rs.89,500.

The following table summarizes the start-up assumptions.

Particulars Amount (in Rs.)

Start Up Expenses

Legal expenses 2000

Insurance 10000
Stationary 500
Menus 1000
Advertisement 60000
Total start up expenses 73500

Start Up Assets

Furniture & fittings 160000

Espresso machine 11000
Coffee Grinder 600
Coffee maker 1500
Computer 40000
Air conditioner 40000
Billing Machine 9500
Total Start Up Assets 262600
Cash Reserve# 203800
Total start Up Costs A+B+C 539900

#Cash Reserve (in Rs.)

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 Utilizes 8000 3 24000
salaries* 26600 3 79800
Rent 10000 3 30000
supply cost 20000 3 60000
Emergencies 10000 - 10000
Total 203800

Salaries *(in Rs.) per month

Waiters 2 Rs.15 per hour 12 a day 10800

Coffee makers 2 Rs.15 per hour 10800
Accountant 1 5000 5000
Total 26600

2.3 Company Locations and Facilities

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MTCC, coffee bar will be located on the ground floor of the commercial place
near Kanpur University Campus in Kalyanpur. The company has secured a
one-year lease of the vacant 500 square feet.

The lease contract has an option of renewal for three years at a fixed rate
that MTCC will execute depending on the financial strength of its business.

The floor plan will include a 200 square feet back office and a 300 square feet
coffee bar, which will include a seating area with 15 tables, a kitchen, storage
area and two bathrooms. The space in the coffee bar will be approximately
distributed the following way--275 square feet (i.e., 55% of the total) for the
seating area, 130 square feet (26%) for the production area, and the
remaining 95 square feet (19%) for the customer service area.

This property is located in a commercial area within a walking distance from

the Kanpur University campus. The commercially zoned premises have the
necessary water and electricity hookups and will require only minor
remodeling to accommodate the espresso bar, kitchen and storage area. The
coffee bar's open and clean interior design with modern wooden decor will
convey the quality of the served beverages and snacks, and will be in-line
with the establishment's positioning as an eclectic place where people can
relax and enjoy their cup of coffee. The clear window displays, through which
passerby will be able to see customers enjoying their beverages.

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Products

MTCC will offer its customers the best tasting coffee beverages in the area.
This will be achieved by using high-quality ingredients and strictly following
preparation guidelines. The store layout, menu listings and marketing
activities will be focused on maximizing the sales of higher margin espresso
drinks. Along with the espresso drinks, brewed coffee and teas, as well as
some refreshment beverages, will be sold in the coffee bar. MTCC will also
offer its clients cakes and cookie. For the gourmet clientele that prefers to
prepare its coffee at home, MTCC will also be selling coffee powder.

3.1 Product Description

The menu of the MTCC, coffee bar will be built around espresso-based coffee
drinks such as lattes, mochas, cappuccinos, etc. Each of the espresso-based
drinks will be offered with whole, skimmed, or soy milk. Each of these coffee
beverages is based on a 'shot' of espresso, which is prepared in the espresso
machine by forcing heated water through ground coffee at high pressure.
Such espresso shots are combined with steamed milk and/or other additives
like cocoa, caramel, etc., to prepare the espresso-based beverages. Proper

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preparation techniques are of paramount importance for such drinks. A
minor deviation from the amount of coffee in the shot, the size of the coffee
particles, the temperature of milk, etc., can negatively affect the quality of
the prepared drink.

3.2 Sales Literature

Two thousand flyers will be distributed in the adjacent neighborhood, on the

University campus, at the malls and in the selected office buildings within
two weeks prior to the opening of MTCC. Subsequently, pamphlet of MTCC
endorsement will be printed to increase the company visibility among the
patrons.

Market Analysis Summary

Coffee consumption has shown steady growth, with gourmet coffee having
the strongest growth. Coffee drinkers in that area are among the most
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demanding ones. They favor well-brewed gourmet coffee drinks and demand
great service. MTCC will strive to build a loyal customer base by offering a
great tasting coffee in a relaxing environment of its coffee bar located close
to the Kanpur University campus.

4.1 Market Segmentation

MTCC will focus its marketing activities on reaching the University students
and faculty, people working in offices located close to the coffee bar and on
sophisticated teenagers. Our market research shows that these are the
customer groups that are most likely to buy gourmet coffee products. Since
gourmet coffee consumption is universal across different income categories
and mostly depends on the level of higher education, proximity to the
Kanpur University campus will provide access to the targeted customer
audience.

The chart and table below outline the total market potential (in number of
customers) of gourmet coffee drinkers in Kanpur.

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4.2 Target Market Segment Strategy

MTCC will cater to people who want to get their daily cup of great-tasting
coffee in a relaxing atmosphere. Such customers vary in age, although our
location close to the University campus means that most of our clientele will
be college students and faculty. Our market research shows that these are
discerning customers that gravitate towards better tasting coffee.
Furthermore, a lot of college students consider coffee bars to be a
convenient studying or meeting location, where they can read or meet with
peers without the necessity to pay cover charges. For us, this will provide a
unique possibility for building a loyal client base.

4.2.1 Market Needs

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General trend toward quality among consumers definitely plays an
important role in the recent growth in gourmet coffee. Additionally,
such factors as desire for small indulgencies, for something more
exotic and unique, provide a good selling opportunity for coffee
bars.

4.3 SWOT Analysis

Before opening a coffee shop, it is wise to do a SWOT analysis (Strengths,

Weaknesses, Opportunities and Threats). This is a few things that I could
think of: 

Strengths: 
 Its a youth oriented brand, hence huge potential since 40 % population is below
20.

 Strong management

Weaknesses: 
 Small Staff

 Growing Operation without enough space

 Online Presence

 Weak Brand

Opportunities: 

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  Coffee cafe industry is one of the fastest growing industry in India.
 More people like to visit coffee cafe for informal meetings.

Threats:

 Competition with local coffee cafes and cafeteria of university.

4.3.1 Competition and Buying Patterns

Competition

MTCC's direct competitors will be other coffee bars located near the Kanpur
university campus and cafeteria of university. MTCC will position itself as a
unique coffee bar that not only offers the best tasting coffee, cakes and
cookie but also provides home-like, cozy and comfortable environment,
which established corporate establishments lack. We will cater to customers'
bodies and minds, which will help us grow our market share in this
competitive market.

Buying Patterns

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The major reason for the customers to return to a specific coffee bar is a
great tasting coffee, quick service and pleasant atmosphere. Although, as
stated before, coffee consumption is uniform across different income
segments, MTCC will price its product offerings competitively. We strongly
believe that selling coffee with a great service in a nice setting will help us
build a strong base of loyal clientele.

Strategy and Implementation Summary

MTCC's marketing strategy will be focused at getting new customers,

retaining the existing customers, getting customers to spend more and come
back more often. Establishing a loyal customer base is of a paramount
importance since such customer core will not only generate most of the sales
but also will provide favorable referrals.

5.1 Competitive Edge

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MTCC will position itself as unique coffee bar where its patrons can not only
enjoy a cup of perfectly brewed coffee but also spend their time in an
ambient environment. Comfortable sofas and chairs, dimmed light and quiet
relaxing music will help the customers to relax from the daily stresses and
will differentiate MTCC from incumbent competitors.

5.2 Sales Strategy

MTCC baristas will handle the sales transactions. To speed up the customer
service, at least five employees will be servicing clients--while two employee
will be preparing the customer's order, two waiters and the other one will be
taking care of the sales transaction. All sales data logged on the
computerized point-of-sale terminal will be later analyzed for marketing
purposes.

In order to build up its client base, MTCC will use banners and fliers, utilize
customer referrals and cross-promotions with other businesses in the
community. At the same time, customer retention programs will be used to
make sure the customers are coming back and spending more at the coffee
bar.

5.2.1 Sales Forecast

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 Food costs are assumed at 25% for coffee beverages and for retail cookie and
cakes. Proximity to the University campus will dictate certain sales
seasonality with revenues slightly decreasing during the school vacation
periods.

The chart and table below outline our projected sales forecast for the First
years.

FORECASTED SALES

  COFFEE CAKE COOKIE

 

Price per Unit (IN 15 20 25 20 25 40 10 15 20

Rs.)
Forecasted sales (in 50 60 40 40 30 20 30 25 20
Units)
Total sale p/d 750 1200 1000 800 750 800 300 375 400

Days in month 25 25 25 25 25 25 25 25 25

Total sale p/m 18750 30000 25000 20000 18750 20000 7500 9375 10000

No. of months 12 12 12 12 12 12 12 12 12

Total sales for 12 225000 360000 300000 240000 225000 240000 90000 112500 120000
months
SALE (in   1912500
Rs.)

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 COST OF FORCASTED SALES

COFFEE CAKE COOKIE

Cost per Unit (IN Rs.) 8 11 17 13 17 24 6 11 14

Forecasted sales (in 50 60 40 40 30 20 30 25 20

Units)
Total Cost of sale p/d 400 660 680 520 510 480 180 275 280

Days in month 25 25 25 25 25 25 25 25 25

Total Cost p/m 10000 16500 17000 13000 12750 12000 4500 6875 7000

No. of months 12 12 12 12 12 12 12 12 12

Total Cost for 12 120000 198000 204000 156000 153000 144000 54000 82500 84000
months
COST (in Rs.) 1195500

Management Summary

MTCC is owned by the owner holds a Master Degree in Business

Administration from the Department of Business Administration, University
of Lucknow.

However, because of various activities and functions there will be need to

hire some employee who can perform these activities. An Accountant
(Rs.60,000/yr) will be hired who will oversee all the coffee bar operations.
Four other employees (Rs.54,000/yr each) will be in charge of coffee
preparation and serving. These four employees will be hired to fulfill the

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staffing needs on part time basis. In the second and third year of operation,
salary will increase by 10% .

6.1 Management Team

A full-time accountant will be hired to oversee the daily operations at MTCC.

The candidate (who's name is withheld due to his current employment
commitment) has had three years of experience in accounting. This person's
responsibilities will include managing the staff, ordering inventory, dealing
with suppliers, developing a marketing strategy and perform other daily
duties. We believe that our candidate has the right experience for this role.

HUMAN RESOURCE PLANNING

Human resource management (HRM) is the strategic and coherent approach to the
management of an organization’s most valued assets - the people working there who
individually and collectively contributes to the achievement of the objectives of the
business. The terms "human resource management" and "human resources" (HR) have
largely replaced the term "personnel management" as a description of the processes
involved in managing people in organizations. Human Resource management is evolving
ra. As such, HRM techniques, when properly practiced, are expressive of the goals and
operating practices of the enterprise overall. HRM is also seen by many to have a key
role in risk reduction .

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Synonyms such as personnel management are often used in a more restricted sense to
describe activities that are necessary in the recruiting of a workforce, providing its
members with payroll and benefits, and administrating their work-life needs. So if we
move to actual definitions, Torrington and Hall (1987) define personnel management as
being rapidly “a series of activities which: first enable working people and their
employing organizations to agree about the objectives and nature of their working
relationship and, secondly, ensures that the agreement is fulfilled".

While Miller (1987) suggests that HRM relates to:

".......those decisions and actions which concern the management of employees at all
levels in the business and which are related to the implementation of strategies directed
towards creating and sustaining competitive advantage"

. Human resources management comprises several processes. Together they are

supposed to achieve the above mentioned goal. These processes can be performed in an
HR department, but some tasks can also be outsourced or performed by line-managers or
other departments.

• Human Resources Planning (HRP)

• Design of Organization and Job
• Selection and Staffing
• Training and Development
• Organization Development (OD)
• Compensation and Benefits
• Employee Assistance

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  Nature of HRM

Simply put, Human Resource Management (HRM) is a management function that helps
managers to recruit, select, train and develop members for an organization. Obviously,
HRM is concerned with the people's dimension in organizations. Following are few
definitions of HRM:

1. HRM is a series of integrated decisions that form the employment relationship; their
quality contributes to the ability of the organizations and the employees to achieve their
objective.

2. HRM is concerned with the people dimension in management. Since every

organization is made up of people, acquiring their services, developing their skills,
motivating them to higher levels of performance and ensuring that they continue to
maintain their commitment to the organization are essential to achieving organizational
objectives. This is true, regardless of the type of organization- government, business,
education, health, recreation, or social action.

3. HRM is the planning, organizing, directing and controlling of the procurement,

development, compensation, integration, maintenance and separation of human
resources to the end that individual, organizational, and social objectives are
accomplished.

HR ACTIVITES

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 1. RECRUITMENT/SELECTION

2. TRAINING AND DEVELEPMENT

3. PERFORMANCE APPRAISAL

4. RECLOCATION

5. INDUCTION

6. DOMESTIC TRAVEL POLICY

7. SEPARATION

8. EXIT INTERVIEWS

9. ATTENDENCE/AWARD/REWARD

10. CONFIRMATION PROCESS

In Human resource management is a process of bringing people and

organizations together so that the goals of each are met. It is that part of the
management process which is concerned with the management of human
resources in an organization. It tries to secure the best from people by
winning their whole hearted cooperation. In short, it may be defined, as the

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art of procuring, developing and maintaining competent workforce to
achieve the goals of an organization in an efficient and effective manner .

 Human Resource Development

At PBPL the main activities undertaken by HRD department are recruitmen
t, performance appraisal Training and development, welfare activities, pers
onal growth & promotion.

 Performance Appraisal.  

To achieve this objective the company carries out performance appraisal of
its employees so as to assess their weaknesses& strengths& to take measures
accordingly like providing training or giving rewards or incentives

 Recruitment
Recruitment at OPEN AIR RESTAURENT is carried out in close co-ordination with the
department requiring the personnel. It is a process where the qualification and other
skills needed for the job are taken into account & based on this the incumbent is
selected after proper screening & interviewing. He is then inducted & provided training
if needed.

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  Training and Development
Training & development is an important aspect. Coffee shop believes in
training and development of its employees so as to help them taken
higher responsibilities & to prepare to
meet the challenging business environment. Coffee shop believes in
training and development of its employees so as to help them taken
higher responsibilities & to prepare to
meet the challenging business environment.

 HR Techniques Will Adopt By coffee shop

 KAIZENS
 Total Quality Management(TQM)

6.2 Personnel Plan

The table below outlines the personnel needs of MTCC coffee bar.

Personnel Plan Per Year

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 waiters 2 Rs.15 per hour 12 a day 108000

Coffee makers 2 Rs.15 per hour 12 a day 108000

Accountant 1 5000 60000

Total salary (in Rs.) 276000

Financial Plan

MTCC will capitalize on the strong demand for high-quality gourmet coffee.
The owners have provided the company with sufficient start-up capital. With
successful management aimed at establishing and growing a loyal customer
base, the company will see its net worth doubling in two years. MTCC will
maintain a healthy 40% gross margin average, which combined with
reasonable operating expenses, will provide enough cash to finance further
growth.

7.1 Projected Cash Flow

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As the table below present, the company will maintain a healthy cash flow
position, which will allow for timely debt servicing and funds available for
future development.

FORECASTED CASH FLOW (in Rs.)

FY2012-13 FY2012-13 FY2012-13

Operating
Sales 1912500 2390625 2988281.25

COGS -1195500 -1434600 -1721520

Salaries -276000 -303600 -333960
Rent -120000 -132000 -145200
Insurance 0 -10000 -10000
Advertisement -24000 -24000 -24000
Taxes@ 30% -71472 -128299.5 -208452.375

Cash flow from operating activities 225528 358125 545148.875

Financing
Preliminary expenses -73500 0 0
Investing 0 0 0
Cash at beginning 282700 434728 792853.5
Cash at end 434728 792853.5 1338002.375

7.2 Break-even Analysis

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With average monthly fixed costs of Rs.262,700 in FY2012 and an average margin of
37.5%, MTCC's break-even sales volume is around 35027 units. As shown further, the
company is expected to generate such sales volume from the out start.

7.3 Projected Profit and Loss

Annual projected sales of Rs.191, 2500 in FY2012-13.The table below outlines

the projected Profit and Loss Statement for FY2012-13 to 2014-15.

Income statement (in Rs.)

Particulars FY2012-13 FY2013-14 FY2014-15

   
sale revenue 1912500 2390625 2988281.25
less: cost of sale 1195500 1434600 1721520
   
Gross margin 717000 956025 1266761.25
   
Less: Office Expense  
Salaries 276000 303600 333960
Rent 120000 132000 145200
Advertisement 24000 24000 24000
Utilities 0 0 0
Insurance 0 10000 10000
Depreciation furniture* 16000 16000 16000
Preliminary Expenses 24500 24500 24500
Depreciation Espresso* 2260 2260 2260
Depreciation computer& AC * 16000 16000 16000
Total office expense 478760 528360 571920
EBIT 238240 427665 694841.25
Tax Rate@30% 71472 128299.5 208452.375
Net income 166768 299365.5 486388.875

*The rate of Depreciation is taken as 10% in furniture and espresso machine

and for computer and AC it is 20%.

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7.4 Projected Balance Sheet
Balance Sheet (in Rs.)
Particulars FY2012-13 FY2013-14 FY2014-15

Owner's fund 545300 545300 545300

Reserves 0 166768 466133.5
Net Profit 166768 299365.5 486388.875
Liabilities 0 0 0

Total Liabilities and Owner's Fund 712068 1011433.5 1497822.375

Furniture & Fittings 144000 128000 112000

Coffee machine 9900 8800 7700
Computer 32000 24000 16000
Air conditioners 32000 24000 16000
Total depreciation 34260 34260 34260
Net Assets 228340 194080 159820

Other equipments 10440 9280 8120

Preliminary Expenses 49000 24500 0
Cash 434728 792853.5 1338002.375
Total Assets 712068 1011433.5 1497822.375

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