Business Plan for Café Art

This business plan outlines the proposal for opening a medium sized coffee shop, Café Art, in Northampton. The plan focuses on targeting university students and street shoppers between the ages of 16-30. The goal is to provide a unique and creative atmosphere with a focus on safety, hygiene, and cleanliness. The plan also includes strategies for product differentiation and cost leadership, as well as plans for market expansion.

BUSINESS PLAN
Executive summary

In the proposed plan, it is decided to open a medium sized coffee shop, “Café Art” in the
Northampton which will target University students and street shoppers between the age category
of 16-30 years. The idea of maintaining proper safety, hygiene and cleanliness to provide
intriguing atmosphere to the guests will be definitely prove as a creative and unique business
idea which will not only bring good return to the entrepreneur but also provide an opportunity to
the public who wants to enjoy really a great taste. Product differentiation and cost leadership are
the two strategies which will enable business to grow. However, over the period, market
expansion through introducing more items in the menu and opening more outlets will facilitate
good growth.

Table of Contents
BUSINESS DETAILS.....................................................................................................................1
Vision...........................................................................................................................................2
Mission.........................................................................................................................................2
Business objectives......................................................................................................................2
Growth strategy............................................................................................................................3
Industry and market analysis........................................................................................................3
Current and projected demand analysis using both primary and secondary research..................5
Internal Analysis: SWOT.............................................................................................................9
Business model: Canvas.............................................................................................................10
Competitive analysis: Porter’s 5 forces.....................................................................................10
Customers and value preposition...............................................................................................13
Unique Selling Preposition (USP)..........................................................................................13
Value preposition...................................................................................................................13
Market strategy..........................................................................................................................13
Management team & company structure...................................................................................15
Structure.................................................................................................................................15
Management...........................................................................................................................15
Resources...................................................................................................................................15
Financing....................................................................................................................................16
Demand projections...................................................................................................................16
Profitability statement................................................................................................................17
Cash flow statement...................................................................................................................18
Calculation of pay-back period..................................................................................................18
Break-even point........................................................................................................................19
Risk and strategic options..........................................................................................................20
REFERENCES..............................................................................................................................21
Appendix: Questionnaire...........................................................................................................23

Survey results.............................................................................................................................24
SWOT analysis..........................................................................................................................26
Porter’s 5 forces.........................................................................................................................27
STP Approach:...........................................................................................................................28
Demand projection.....................................................................................................................28
Profit and loss account...............................................................................................................29
Cash flow statements.................................................................................................................31

BUSINESS DETAILS
The coffee industry in UK is considered as one of the fastest growing market in the
Europe. In 2016, the industry reported total 22,845 outlets in the coffee market which is growing
at 6%. The industry contributed £8.9 billion in the economic growth at a growth of 12% in total
turnover which was earlier reported to £7.2 billion with 18,832 outlets.
(Source: UK Coffee Shop Market, 2015)
According to the Project Café’s report, UK coffee chain sector contributed 6.9% to the
GDP with a projected turnover of £3.7 billion at an impressive growth @ 11.2%. There are
number of well-established coffee houses such as Coasta Coffee (2121 outlets), Caffe Nero (650)
and Starbucks (898) who are leading the industry. The leading coffee houses are delivering
exceptional quality of services to the people with having a good proportion of consumer base
which makes the competition level really tough, especially for the new entrepreneur to build a
position in the industry. In order to set up a new establishment, it is necessary to bring
uniqueness & innovative offerings for the society so that more and more audience can be
attracted.
1

Despite the crowded marketplace & fierce competition, in the booming industry, various
small & medium sized coffee providers i.e. Joe & the Juice, Coffee#1, Taylor St, Baristas and
others who have gained momentum sales ahead of the industry leaders. Therefore, it is decided
to open a medium sized street coffee shop, named “Café Art” in the Northampton with 3 flavors
i.e. Coffee Frappuccino, Caramel and Mocha. The particular place is chosen because in
Northampton is a place where people wants to taste new varieties to satisfy themselves. Besides
this, Northampton University & number of tourist places i.e. Express Lift Tower, Holy,
Sepulchre, All Saint’s Church, Northampton Guildhall, Central Library and others are the
destinations where number of people come and see the beauty. People are giving high preference
to healthy diet therefore; “Café Art” will provide highly hygienic goods at competitive charges to
satisfy the target audiences.
Vision
“To gain a well-known position in the British coffee industry by serving consumers with
the great-quality and hygienic products along with maintaining an intriguing atmosphere”
Mission
“To offer a great place to the customers for enjoying interesting and delicious taste of
coffee, drinks and snacks with friendly environment”
Business objectives
 To establish well presence in the coffee sector by providing a place to the consumer
where they can enjoy great taste
 To deliver tastier, healthier and hygienic products for satisfying consumers desire
 To keep an eclectic, friendly and excellent atmosphere for the people
 To combine with great variety, entertainment, ambiance and superior staff
 To hire experienced chef and staff and empower active participation through training
 To earn at least 10% return per annum on the total annual turnover
 To give full value to ethnicity and integrity for customer satisfaction
2

Growth strategy
In the starting period, it will focus only on the selected coffee flavors and focus on
quality, consumer services, cost leadership and product differentiation to gain a good position in
the market (Wentzensen and Wacholder, 2013). Once it gained a good audience base, “Café Art”
expand their business through opening more branches at other places and introducing coffee in
new flavors also to generate consumer traffic and expand their market size by expanding their
scale base from medium sized coffee house to a large coffee chain
Industry and market analysis
(Source: Eastern, 2016)
3

UK Coffee industry shows an impressive growth over a decade due to change in
consumer lifestyle, food taste, high availability of disposable income and others. Above graph
reflects that Europe is a market with 37.43% market share in instant coffee and expected to reach
to 15.40bn USD by the end of year 2020 and projected to grow @6% CAGR during 2016-2020
(Eastern, 2016).
(Source: UK Food Service Market, 2016)
In UK, there is different kind of cultural audiences residing in the country such as
European, American, Arabic, Chinese, Indian and others. In today’s period, more and more
citizens in the nation prefer dinning out to satisfy their need and expectations. As presented in
the graph, it is visualized that from Q1 2013 to Q2 2016, the eating out participation in the
country gone up from 92.2% to 93.1%. Approximately, 90% of the citizens go out to have tasty
eat.
In UK, by 2021, it is projected to grow the number of branded coffee outlets to 9400
which will record the turnover of around £6 bn. All the large chains will continue to bring
innovative strategies to meet intensifying & fierce competition. However, total number of coffee
shops has been projected to exceed beyond 32,000 with turnover of £16 bn by 2025. Around
2/3rd (65%) of the British population visited coffee shops frequently and only 1/5th (19%) Brits
never visit coffee houses out of their home. The immense progress of the industry is majorly
driven by the faster increase in number of high street coffee retailers and habitual drinkers.
4

Statistical data reported that UK becomes a hub of coffee drinkers where approximately 2.3
billion cups of coffee are sold within a year. The statistical data clearly reports that change in
consumer demand, lifestyle, and growth in their income are the reasons behind remarkable
progress of the sector (Van Loo, E.J. and et.al., 2015). Thus, it will be definitely a wonderful
opportunity for the entrepreneur to set up a new coffee shop in the Northampton and gain
phenomenal brand popularity.
Current and projected demand analysis using both primary and secondary research
Primary survey to analyze market demand for proposed business
See Appendix
Daily 2-3 times a
week 1-2 times in
a month Never
0
5
10
15
20
25
30
14
27
9
0
Quality
Affordability
Convenience
Good ambiance
Atmosphere
0
5
10
15
20
25
20
12
8 6 4
High price
16%
Affordable prices
52%
Low prices
32%
Yes
6%
Sometimes
26%
Never
68%
5

Coffee Frapuccino
Caramel
Mocha
Mango & Passion fruit
Espresso
Strawberry
0
2
4
6
8
10
12
14
16 15
10 11
6 5
3
Extremely well
Highly important
Neutral
Little bit important
Not important
0 5 10 15 20 25
22
14
8
6
0
Yes, definitely
52%
Never
18%
Sometimes
30%
Market research results clearly present that maximum number of target audiences (54%)
visit at least 2-3 times in the coffee shop to enjoy a great taste of the desired flavor. It clearly
presents increasing consumer demand in the market about best coffee, breakfast and lunch with a
variety of dishes. Guests need exceptional taste of coffee at an affordable/economical charge
henceforth; both the quality and affordability are the factors which influences their purchase
decisions. It can be evident from the survey results wherein 40% and 24% people stated that they
demand a great taste at competitive prices which they can afford. In the survey, it is being
assessed that 26(52%) surveyed people said that they are willing to pay off affordable prices
considering their affordability. However, few of the participants said that they are ready to pay
high prices due to high income as in the survey; only 8(16%) people said that they can pay high
prices. Most of the audiences said that WOM publicity and quality of services have a
6

considerable impact over their buying decisions (Brinckmann and Kim, 2015). Maximum
number of audiences likes to have Coffee Frappuccino, Caramel and Mocha flavors. Besides
this, 26(52%) people are willing to enjoy new taste of products at coffee shop and they do not
want to compromise with the taste and quality just for discount. Thus, considering the findings, it
is decided to enter into a challenging coffee sector and to gain excellence in the industry by
providing the best taste to the guests.
Secondary market analysis for assessing future landscape of market demand for proposed
business
Leading coffee houses in UK and growth
(Source: UK coffee: market grows and to grow strongly, 2015)
UK becomes a hub of coffee drinks, and all the drinkers are demanding variety of choices
for satisfying their need which increase overall demand. More importantly, artisan coffee is
generating attractive demand to satisfy consumer need of premium quality café. It is a fastest
growing market and estimated to increase the independent coffee venues from 1400 to 2500 by
2020 with a YOY growth of 12% (Allegra, 2017).
7

(Source: UK coffee: market grows and to grow strongly, 2015
Northampton is the midst of professional awakening and cultural advancement.
Attractiveness of the city and rising café culture with growing demand attracts new start ups.
Looking to growing popularity and growth opportunities in the coffee sector, one of the leading
coffee houses of UK, Starbucks also opened a two storey café in the Northampton for business
growth.
Within just 5 year, market rose from GBP 2.4 bn to GBP 3.4 bn in 2016 clearly reveals
rising café culture. More importantly, the demand shows a significant increase among people
aged 16-24 years (Grand Growth: UK Coffee Shop Sales Enjoy a Growth High, 2017). The
demand has been grown among habitual coffee drinkers, increasing retailers and street coffee
shops. Fast food chains and bakeries also came in the sector and competing on three factors that
are price, geographical reach and convenience. In future, it is expected that total number of
coffee shops has been projected to exceed beyond 32,000 with turnover of £16 bn by 2025. The
growth is especially underpinned by widening participation of the customers, aspirational appeal
and embedded café culture into people lifestyle. More importantly, high quality artisan cafes are
fuelling demand and driving larger coffee chains to focus on their interiors, baristas and thriving
innovation (Law, Harvey and Reay, 2013).
8

Internal Analysis: SWOT
Detailed explanation is in Appendix.
Business model: Canvas
Key Partners
 Material
suppliers
 Equipment
Key Resources
 Enough capital
 Competent personnel
 Furniture (chair & table)
Key Activities
 Sound consumer
relationship
 Great quality taste
9
InternalS:StrengthStrengthClean&EclecticatmosphereGreatqualitytasteindifferentvarietiesPerfectlocationCompetitivepricesIntegrity&respectInternalW:WeaknesWeaknessLimitedmenuchoicesLackofresourcesLesscustomerawarenessProductdifferentiationissuesExternalO:OpportunityExternalT:ThreatsThreatsToughcompetitionLessreturninthebeginingperiodHighpossibilityofentrythreatsUncertainitiesduetorefendum

sellers
 Furniture &
fixture vendors
 Office equipments
 Technology
 Consumer service management
 Clean and hygiene
maintenance
 Integrity & respect
for all
Customer Segments
 University students
under the age
category of 16-30
 Shoppers
Channels
 Social-Media marketing
 FM radio
 Brochure
 Leaflet
 WOM publicity
Customer
Relationships
 Talented people
who are able to
meet customer
desires Dealing with the
client issues
successfully
Cost Structure
 Marketing
 Operational
cost
(Ingredients,
electricity,
utility and
daily
expense)
 Capital
expenditure
(Furniture,
equipments
and
technology)
Revenue Streams
 Sales revenues
 Loyalty cards &
membership
 Setting more
outlets in future
 Online operations
Value Proposition
 Delivering an
exceptional and
delicious taste
 Quality
management &
assurance
 Clean atmosphere
 Modern
infrastructural
design
Competitive analysis: Porter’s 5 forces
See appendix
10

Competitive rivalry: Dreams Cofee Lounge, Magee Street Bakery and The Good Loaf
will be the direct competitors from which the newly planned coffee shop will compete; however,
as there are well established coffee houses in the country, therefore, intensity of competition is
very high (Hyun, 2010).
Name TripAdvisor Rating Overview
Magee
Street
Bakery
It is an artisan baery
offers consumers with
the best quality baked
food items with
varieties of options to
the foodies. Friendly
staff, special coffee
and wild yeast sour
dough breads is its
core competencies.
11

The
Good
Loaf
The Good Loaf is a
café in Northampton
that serves users with
the delicious artisan
bread and ultimate
taste of coffee with
breakfast and lunch
services.
Dreams
Coffee
Lounge
It provides home
baked food items,
dairy-free products
and gluten-free.
Along with this, free
wifi, friendly staff and
variety of choices in
menu offers better
consumer experience.
12

Customers and value preposition
Target customers:
Café Art will target specially university students, the planned coffee shop will be able to
grab a good market share (Grand Growth: UK Coffee Shop Sales Enjoy a Growth High, 2017).
See STP approach in appendix for detailed analysis
Unique Selling Preposition (USP)
As customers are now health conscious, therefore, “Organic Food and Drink” will be
the USP for the planned coffee retail shop, “Café Art”. As per the data analysis through both
primary and secondary data, it is identify that currently customers prefer healthy food and drink
instead of only tastier and flavorful drinking. This USP will aware our consumers about healthy
food and drinks with great taste that is made up without any chemical substances and pure that
consider consumer health requirement.
Value preposition
 Great quality of coffee taste in different varieties
 Eclectic & friendly environment
 Highly competitive prices
 Instant delivery
 Cleanliness & hygiene maintenance
Market strategy
7Ps of marketing mix is a tool for creating marketing mix for the new business,
conducted here as under:
7Ps of marketing
mix
Decisions
13

Product" “Café Art” will offer great taste of coffee in three flavors coffee frappuccino,
Caramel and Mocha. Moreover, it will offer cakes, snacks and drinks through
hiring experienced chefs. Besides this, consumer services, unique
infrastructure, good ambiance and friendly environment will be focused
(Lane, 2010). Being a new set up, it will pay specific attention to the
awareness through putting extensive marketing efforts to build product
positioning. Food safety, proper hygiene & cleanliness will be maintained for
delivering ethnic food keeping into account their health expectations
(Ramanathan and Ramanathan, 2011).
Price All the delivering will be provided at an economical charges following cost
leadership strategy. By setting competitive and affordable prices, “Café Art”
can attract more proportion of target audiences and build a good position.
Here, it must be noticed that pricing mechanism will be devised considering
factors like rivalries prices, consumer’s affordability and cost recovery
(Hingley, Lindgreen and Beverland, 2010). Negotiation with the suppliers &
cost control mechanism will enable the unit to fix competitive prices by
adding a desired profit margin.
Place It is decided to open the “Café Art” in Northampton where there are number
of people participating in eating out activities. Besides this, existence of
number of large universities, attractive destinations and corporate sector, it
will be surely a convenient place for a big proportion of targeted audience
who can come and eat delicious taste of coffee in different varieties
(Watson, McGowan. and Cooper, 2016) . Hence, coffee house will be able to
generate crowded audience by opening a street shop at Northampton
Promotion Social media marketing, FM radio promotion, leaflet, broachers, discount
cards and Word of Mouth (WOM) marketing will be the part of Café Art’s
promotional strategy to generate a good customer base (Schaper and et.al.,
2014).
People Highly experienced chef and localized but experienced people with good
competencies will be hired in the staff, so as to serve a good taste to the
14

people (McKeever, 2016).
Physical
evidences
Proper inventory management embedded with adequate cleanliness &
hygiene maintenance will be focused to value consumer’s health
requirements and deliver them superb quality coffee, snacks and drinks.
Process Café Art will carry out various functions in regular process i.e. ordering,
purchasing, maintenance, preparation, receiving orders from customers and
supplying it at their desk, cleanliness & sweeping, entertainment and others
to reach targeted objectives.
Management team & company structure
Structure
Entrepreneur alone hold the position of street coffee shop owner, hence, it will follow
sole proprietorship structure wherein, entity will put investment, take risk and carry out daily
functions for achieving the profit-oriented objectives. The benefit of the decided structure is that
it involves less legal complications to set up the new establishment. However, it is risky also
because entity has to bear all the risk associated with the business. In this, all the profit as well as
losses will be available for the entity (Thomas and et.al., 2014).
Management
Being a sole proprietor, owner will hold the managerial position and devise policies,
plans and rules to regulate daily functions for the purpose of sound governance. It requires
number of skills i.e. planning, decision making, leadership, analytical and managerial skills for
accomplishing the mission & vision. Entrepreneur alone is accountable for all the administrative
work to succeed progress in the market.
Resources
 Funds
 Competent, trained and experienced personnel
 Furniture & fixtures: Table, Chair, Reception counter
 Equipments: water Filter, Air condition, Coffee vending machine, Stereo, refrigerator,
personal computer, printer etc.
 Supplies: utensils, napkin, coffee cups, plates, forks, knives etc.
 Decoration items i.e. designer lightings etc.
15

Financing
The planned coffee shop, “Café Art” will require investment worth 50,000GBP that will
be obtained through owner investment and bank loan as well.
Start up cost GBP
Building rent annual 13000
Required cash balance 10000
Beginning inventory 12000
Equipments 11000
Furniture 5000
Kitchen supplies 3500
Promotional cost 1500
Registration fees 1200
Market survey 800
Total Start up cost 58000
Modes of finance
Source of finance GBP
Owner's investment 20000
From family, friend and relatives 13000
Bank borrowing 25000
Total 58000
Owner will invest 20,000 GBP, collect 13000 from relatives and friends as financial
assistance. However, remaining will be borrowed from bank @ 3.5% interest charges per annum.
Demand projections
 In the first month, it is expected that 20 customer visit Café Art in a day which is
expected to rise @ 10% till 4th month and thereafter at 6% monthly increase.
 In second and third year, demand has been increased by 12% considering prevailing trend
of the industry.
 Average coffee price is 3.50 whereas charges for breakfast are taken to 6GBP per unit.
 Average direct cost per unit is taken to 60% of the selling price.
16

See Appendix.
Profitability statement
 In the second and third year of operations, number of customer is expected to grow at
12% whereas coffee price is increased to 4 and 4.5 each unit considering inflation rate.
Similarly, cost each unit of coffee is increased to 2.18 and 2.27 respectively.
 Furniture is depreciated at 10% per annum and equipment at 12% per annum using
straight depreciation method.
 There are 2 baristas hired at a 6 GBP hourly wages rate.
 Utility charges is taken to 1,500GBP per year and increased at 5% per annum.
 Marketing and promotional charges in first year is 800 increased at 3% each year.
 Corporate tax rate is 20% on net profit before taxation necessary to be paid to HMRC.
 General expenditures such as stationery, other kitchen supplies is expected to 1,850 in
first year and increased by 5% every year.
In Appendix
Month
1 Month
2 Month
3 Month
4 Month
5 Month
6 Month
7 Month
8 Month
9 Month
10 Month
11 Month
12
Project revenue and cost of sale
Total revenues Total cost of sales
According to the graph, it can be seen that total revenues of the Café Art will be
continuously increase with the rising popularity, widening demand and the best quality coffee
and other facilities.
Gross profit
Operating
profit Net profit
Return on
investment
1 44.35% 3.64% 1.74% 1.80%
17

2 47.25% 5.64% 3.73% 4.66%
3 49.70% 16.10% 12.39% 18.66%
1 2 3
44.35% 47.25% 49.70%
3.64% 5.64%
16.10%
1.74% 3.73%
12.39%
1.80% 4.66%
18.66%
Profitability ratios
Gross profit operating profit
Net profit Return on investment
Return on investment
It is found that return on investment in the first year will be very less to 1.80% but with
the period, it will be increased to 4.66% and 18.66% due to greater demand, increasing selling
price and controlled cost. Café Art will generate increased return over the period with the larger
amount of sales volume at increased prices. Moreover, with the brand popularity, it will generate
crowded audience and reach success.
Cash flow statement
Appendix
Café Art will receive income from coffee, breakfast and other sales, however, cash inflow
includes cost of sale, staff salary and wages, promotion, general expenditures, office rent,
registration charges and others. Here, tax on the net profit is charged @ 20% per annum.
Calculation of pay-back period
Start up costs 58000
Cumulative cash
flows
Net cash flows
Year 1 14704 14704
Year 2 14404 29109
Year 3 22053 51161
Year 4 23376 74537
18

Pay−back period=3 year +(58,000−51161)/23,376
¿ 3.29 year∨3 Year 5 months
It is expected that Café Art will recover its start up costs of 58,000GBP within 3 year 5
months.
Break-even point
Start up cost GBP
Building rent annual 13000
Equipments 11000
Furniture 5000
Kitchen supplies 3500
Promotional cost 1500
Registration fees 1200
Market survey 800
Total Start up cost 36000
Pre operating year
Selling price per unit £4.75
Less: Variable cost £2.55
Contribution per unit £ 2.20
Particulars BEP
Total fixed costs 36000/2.2
BEP (customers) 16364
19

10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
20000
0.00
10000.00
20000.00
30000.00
40000.00
50000.00
60000.00
70000.00
80000.00
90000.00
100000.00
Total revenues
Total cost
TFC
TVC
At 16,364 consumers, Café Art will achieve BEP position and will have neither any profit
nor suffer from business loss. In the graph, at these level, total revenue and total cost curve
intersects each other that show null return.
Risk and strategic options
In order to manage risk, Café Art will hire experienced staff and owner will monitor
regular activities so as to take timely corrective actions. Specific focus will be given to the cost
control for achieving brand position following cost leadership strategy. As part of strategic area
firm must focus on specific sort of products in its business. Under this CafeArt can target Indian
customers or UK people and by targeting specific item can be made available to them. By taking
such kind of strategic decision, business will be able to attract specific sort of people at
workplace and good amount of profit will be earned in the business. It is observed that there are
few of coffee houses that are offering specific sort of products to the people according to their
needs and preference. Hence, it can be said that strong positive perception people will form
about Café Art. Apart from this, as part of strategic objectives attempt must be made to make
available hygiene food to the people in the business unit. This will promote positive word of
mouth marketing of the business firm. Thus, it can be said by working on all these strategic areas
firm can expand its business at rapid rate.
20
BEP = 16,364
customers

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from-propel/allegra-speciality-coffee-sector-set-for-strongest-growth-in-coffee-market/.
[Accessed on 15th November 2017].
22

UK coffee: market grows and to grow strongly, 2015. [Online]. Available through: <
https://www.hospitalityandcateringnews.com/2013/01/uk-coffee-market-grows-and-to-
grow-strongly/>. [Accessed on 15th November 2017].
23

Appendix: Questionnaire
Demographic information
Name: ___________________
Age: _______________________
Annual salary: __________________
Q.1: How often do you go street coffee shops to enjoy a great taste of coffee?
 Daily
 2-3 times a week
 1-2 times in a month
 Never
Q: 2: Which factor highly encourages you to visit in the coffee shop?
 Quality
 Affordability
 Convenience
 Good ambiance
 Atmosphere
Q: 3: How much would you willing to pay for the coffee shop to satisfy your food demand?
 High price
 Affordable prices
 Low prices
Q:4: Are you ready to compromise with the quality of taste at high discounts?
 Yes
 Sometimes
 Never
Q:5: What flavors you often like to have from a new coffee shop which is going to open near
you?
 Coffee Frapuccino
 Caramel
 Mocha
 Mango & Passion fruit
 Espresso
24

 Strawberry
Q:6: How extremely the quality of staff services encourages you to visit a particular coffee shop?
 Extremely well
 Highly important
 Neutral
 Little bit important
 Not important
Q:7: How well word of mouth publicity influence you to visit at a particular coffee shop?
 Strongly
 Moderately
 Neutral
 A little bit
 Not at all
Q:8. Would you like to taste new flavors of coffee in a new coffee shop?
 Yes, definitely
 Never
 Sometimes
Q:9: What changes would you recommend to a new coffee shop which is going to establish in
your city?
------------------------------------------------------------------------------------------------------------
Survey results
Number of respondents percentage
Daily 14 28%
2-3 times a week 27 54%
1-2 times in a month 9 18%
Never 0 0%
50 100%
Number of respondents percentage
25

Quality 20 40%
Affordability 12 24%
Convenience 8 16%
Good ambiance 6 12%
Atmosphere 4 8%
50 100%
Number of respondents percentage
High price 8 16%
Affordable prices 26 52%
Low prices 16 32%
50 100%
Number of respondents percentage
Yes 3 6%
Sometimes 13 26%
Never 34 68%
50 100%
Number of respondents percentage
Coffee Frapuccino 15 30.00%
Caramel 10 20.00%
Mocha 11 22.00%
Mango & Passion fruit 6 12.00%
Espresso 5 10.00%
Strawberry 3 6.00%
50 100.00%
Number of respondents percentage
Extremely well 22 44%
Highly important 14 28%
Neutral 8 16%
Little bit important 6 12%
26

Not important 0 0%
50 100%
Number of respondents percentage
Strongly 20 40%
Moderately 13 26%
Neutral 9 18%
A little bit 5 10%
Not at all 3 6%
50 100%
Number of respondents percentage
Yes, definitely 26 52%
Never 9 18%
Sometimes 15 30%
50 100%
SWOT analysis
Strengths: “Café Art” will be embedded with the attractive infrastructure, (both internal
and external) that will provide a great atmosphere to the visitors. Coffee shop’s staff will also
pay special attention to the cleanliness & ethnicity for the public. Along with this, by combining
variety of coffee, drinks and snacks at fairly prices and superb quality offerings instantly will be
serving as core business strength. Besides this, Northampton is a place which is close to the
university, corporate offices and target people, thus, perfect and stunning location is its strength.
Weakness: Being a new set up, lack of consumer awareness and limited availability of
necessary resources i.e. funds, workforce and others will be the key weaknesses. Besides this,
location may be an inconvenient place for several audiences who live far away from the
Northampton. In case of availability of substitute supplying by the competitors, lack of product
differentiation might bring issues for the Café Art. (Lane, 2010).
Opportunities: As a new establishment, initially, it will be set up as a medium sized
street coffee shop but as the business grows over time, owner can expand its sizes to a large scale
coffee chain and also introduce more coffee products, snacks and dishes in their menu by
27

targeting other people also. Geographical expansion can also be done through opening more
outlets in other cities (Manchester, Southwark, Hackney, Bristol, Leicester etc.) and through
online operations as well.
Threats: No-doubt, tough competition by rivalries and limited scope of menu will be
possibly threats for the entity. It can be combat through expanding customer base by offering
choices in diversified varieties. Besides this, in order to attract more people, high discounts can
have an adverse impact over the return (McKeever, 2016).
Porter’s 5 forces
Threats of new entrants: As industry shows immense and phenomenal progress over a
decade with the rising household income, changing lifestyle, growing consumer spending over
dinning out, more number of entrepreneurs are taking interest to set up their own establishment
in the sector.
Threats of substitutes: Planned street coffee shop will offer coffee products along with
several drinks & snacks to the audiences in great taste keeping into account their health &
hygiene need, therefore, threats regarding availability of substitute products offering by rivalries
is comparatively low (Hingley, Lindgreen and Beverland, 2010).
Bargaining power of suppliers: UK coffee shops are suffering financial difficulties due
to high cost of imported food. Besides this, inflationary pressure brings out threats for the
business due to rising cost of ingredients and supplies. Recently, Brexit had resulted 15% decline
in the value of pound relation to euro which is an ongoing challenge for the coffee retailers.
However, still, as there is high number of ingredients suppliers in the industry, therefore,
suppliers have limited power to bargain.
Bargaining power of buyers: In UK, at the end of 2015, 20728 outlets are operating
which is expected to grow to 30000 in future that present a lot of choices to the customers. It
clearly indicates customers have high power to bargain (Watson, McGowan. and Cooper, 2016).
However, the planned street coffee retailer with sophisticated blends of products along with right
atmosphere by hiring dedicated team provide good value to the guests, therefore, consumers will
have less bargaining power. Moreover, cost leadership (economical price) and differentiation
strategy will facilitate new business to reach success.
28

STP Approach:
Segmentation: Demographic segmentation will be used for classifying the target
audiences in different groups. In this, age will be used as a factor for the purpose of market
classification in 3 groups, less than 16, 16-30 and above 30 year.
Targeting: Café Art will target people, who are under the age group of 16-30 years,
evidencing it from the market research reports, people aged 16-24 years alone accounted for 73%
of the total number of guests.
Positioning: Product differentiation by serving hygienic blend of coffee products, cakes,
drinks and dishes and cost leadership following competitive pricing mechanism will enable the
entrepreneur to gain a good position in the industry.
Demand projection
Particulars 1 2 3 4 5 6 7 8 9 10 11 12
Yr
1
Yr
2
Yr
3
Average
price of
coffee (in
GBP)
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
3.5
0
4.0
0
4.5
0
Expected/
potential
consumers
52
0
57
2
62
9
69
2
73
4
77
8
82
4
87
4
92
6
98
2
10
41
11
03
96
75
10
83
6
12
13
6
Monthly
revenue
18
20
20
02
22
02
24
22
25
68
27
22
28
85
30
58
32
42
34
36
36
42
38
61
33
86
1
43
34
2
54
61
1
Breakfast
Average
price 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6
Expected/
potential
consumers
23
4
25
7
28
3
31
1
33
0
35
0
37
1
39
3
41
7
44
2
46
8
49
6
43
54
48
76
54
61
Monthly
revenues
14
04
15
44.
4
16
98.
84
18
68.
72
4
19
80.
84
7
20
99.
69
8
22
25.
68
23
59.
22
1
25
00.
77
4
26
50.
82
1
28
09.
87
29
78.
46
2
26
12
1.3
4
29
25
5.9
32
76
6.6
1
Total
revenues
32
24
35
46
39
01
42
91
45
49
48
22
51
11
54
17
57
43
60
87
64
52
68
39
59
98
2
72
59
8
87
37
8
Particulars M
on
th
M
on
th
M
on
th
M
on
th
M
on
th
M
on
th
M
on
th
M
on
th
M
on
th
M
ont
h
M
ont
h
M
ont
h
Ye
ar
1
Ye
ar
2
Ye
ar
3
29

1 2 3 4 5 6 7 8 9 10 11 12
Cost /unit
(in GBP) 2 2 2 2 2 2 2 2 2 2 2 2
2.1
0
2.1
8
2.2
7
Expected/
potential
consumers
52
0
57
2
62
9
69
2
73
4
77
8
82
4
87
4
92
6
98
2
10
41
11
03
96
75
10
83
6
12
13
6
Cost of sale
10
92
12
01
13
21
14
53
15
41
16
33
17
31
18
35
19
45
20
62
21
85
23
17
20
31
7
23
66
5
27
56
5
Breakfast
Cost 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Cost of sale
70
2
77
2.2
84
9.4
2
93
4.3
62
99
0.4
23
7
10
49.
84
9
11
12.
84
11
79.
61
12
50.
38
7
13
25.
41
14
04.
93
5
14
89.
23
1
13
06
0.6
7
14
62
7.9
5
16
38
3.3
Cost of sale
17
94
19
73
21
71
23
88
25
31
26
83
28
44
30
15
31
95
33
87
35
90
38
06
33
37
7
38
29
3
43
94
8
Total cost
of sales
28
86
31
75
34
92
38
41
40
72
43
16
45
75
48
50
51
40
54
49
57
76
61
22
53
69
4
61
95
7
71
51
3
Profit and loss account
Particulars 1 2 3 4 5 6 7 8 9 10 11 12
Ye
ar
1
Ye
ar
2
Ye
ar
3
Total revenues
32
24
35
46
39
01
42
91
45
49
48
22
51
11
54
17
57
43
60
87
64
52
68
39
59
98
2
72
59
8
87
37
8
Less: Cost of
sales
17
94
19
73
21
71
23
88
25
31
26
83
28
44
30
15
31
95
33
87
35
90
38
06
33
37
7
38
29
3
43
94
8
Gross profit
14
30
15
73
17
30
19
03
20
18
21
39
22
67
24
03
25
47
27
00
28
62
30
34
26
60
5
34
30
5
43
43
0
Other
operational
income
15
00
15
00
15
00
15
00
15
00
15
00
15
00
15
00
15
00
15
00
15
00
15
00
18
00
0
19
80
0
21
78
0
Total revenues
29
30
30
73
32
30
34
03
35
18
36
39
37
67
39
03
40
47
42
00
43
62
45
34
44
60
5
54
10
5
65
21
0
Rent of the
restaurant
65
00
13
00
0
13
00
0
30

Utilities
12
5
12
5
12
5
12
5
12
5
12
5
12
5
12
5
12
5
12
5
12
5
12
5
15
00
15
75
16
53.
75
General
Expenses
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
15
4.
17
18
50
.0
4
19
42.
54
2
20
39.
66
9
Salaries and
Wages
(2 baristas @
6/hour)
24
96
24
96
24
96
24
96
24
96
24
96
24
96
24
96
24
96
24
96
24
96
24
96
29
95
2
30
85
0.5
6
31
77
6.0
8
Marketing &
promotion
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
66
.6
7
80
0.
04
82
4.0
41
2
84
8.7
62
4
Depreciation
on furniture
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
41
.6
7
50
0
50
0
50
0
Depreciation
on equipment
11
0
11
0
11
0
11
0
11
0
11
0
11
0
11
0
11
0
11
0
11
0
11
0
13
20
13
20
13
20
Total
operating
expenses
29
94
29
94
29
94
29
94
29
94
29
94
29
94
29
94
29
94
29
94
29
94
29
94
42
42
2
50
01
2
51
13
8
EBIT
(Earning
before interest
and tax)
-
64 79
23
7
41
0
52
4
64
5
77
3
90
9
10
54
12
06
13
68
15
40
21
83
40
93
14
07
1
Interest
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
72
.9
2
87
5
71
1.8
3
54
2.9
5
EBT (Earning
before tax)
-
13
6.
42
6.
58
16
3.
88
33
6.
91
45
1.
11
57
2.
16
70
0.
47
83
6.
49
98
0.
66
11
33
.4
9
12
95
.4
8
14
67
.2
0
13
07
.9
9
33
81.
28
13
52
8.3
8
Tax
-
27
.2
8
1.
32
32
.7
8
67
.3
8
90
.2
2
11
4.
43
14
0.
09
16
7.
30
19
6.
13
22
6.
70
25
9.
10
29
3.
44
26
1.
60
67
6.2
6
27
05.
68
Net profit
-
10
9.
14
5.
26
13
1.
10
26
9.
53
36
0.
89
45
7.
73
56
0.
38
66
9.
19
78
4.
53
90
6.
79
10
36
.3
8
11
73
.7
6
10
46
.3
9
27
05.
02
10
82
2.7
0
Gross margin 44 44 44 44 44 44 44 44 44 44 44 44 44 47. 49.
31

.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
.3
5
%
25
%
70
%
Operatin
margin
-
1.
97
%
2.
24
%
6.
07
%
9.
55
%
11
.5
2
%
13
.3
8
%
15
.1
3
%
16
.7
9
%
18
.3
5
%
19
.8
2
%
21
.2
1
%
22
.5
2
%
3.
64
%
5.6
4%
16.
10
%
Net margin
-
3.
39
%
0.
15
%
3.
36
%
6.
28
%
7.
93
%
9.
49
%
10
.9
6
%
12
.3
5
%
13
.6
6
%
14
.9
0
%
16
.0
6
%
17
.1
6
%
1.
74
%
3.7
3%
12.
39
%
Return on
investment
1.
80
%
4.6
6%
18.
66
%
Cash flow statements
Pre operating
year Year 1 Year 2 Year 3
Sales 59982 72598 87378
Other income 18000 19800 21780
Owner's contribution 33000
Loan 25000
Cash inflow 58000
77982.331
6
92397.9
7
109157.
6
Cost of sales 33377 38293 43948
Office rent 6500 6500 13000 13000
Salaries and wages 29952
30850.5
6
31776.0
8
General expenditures 1850.04 1942.54 2039.67
Utilities 1500 1575 1653.75
Loan installments inclusive interest 5537.03 5537.03 5537.03
Market survey cost 800 0 0 0
Furnitures & fixtures 5000 0 0 0
Legal & regulatory compliance 1200 0 0 0
Promotional cost 1500 800 824 849
Tax payment 262 676 2706
Office equipments 11000
Inventory 12000
Kitchen supplies 3500
Total cash outflow 41500 79778 92698 101509
Cash balance 16500 -1796 -300 7649
Initial balance 0 16500 14704 14404
Closing cash balance 16500 14704 14404 22053
32

33