Business Plan for a Coffee Shop - Key Costs, Profit Forecast, and Cash Flow

This business plan outlines the key costs, profit forecast, and cash flow for a coffee shop. It includes an analysis of the risks, funding sources, and market research for a successful coffee shop. The plan covers the business idea, location, competitors, and customer preferences. It also includes a budgeted profit forecast and cash flow for the first year of operation.

Business Plan for a
Coffee Shop

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
1. Summary of the business idea, an analysis of the risks that the business will face and the source(s)
of initial funding for the business............................................................................................................3
2. An outline and discussion of the key fixed and variable costs.............................................................5
3. A budgeted profit forecast for the first year of operation...................................................................6
4. A budgeted cash flow for the first year of operation...........................................................................7
5. Calculation of the breakeven point and margin of safety..................................................................10
6. Key performance indicators (KPIs) to monitor progress towards business goals..............................11
7. Recommendations based on the results of your analysis above.......................................................12
REFERENCES..............................................................................................................................................13

INTRODUCTION
A business plan is an important component of starting and operating a successful restaurant,
if they're a single trader, partnerships, or a private corporation. A business plan is an important
printed statement that details and summarizes a team's growth. A business strategy is required for
all enterprises. The approach and major goals for getting from where are today to where need to
be in the term should be explained in the plan (Koundouri and et.al, 2021).
A coffee shop's core concept is straightforward. To pay costs and earn a profit, the company
must sell enough coffee goods. Various factors, though, will determine whether or not a firm is
successful. A coffee shop business plan can assist in devising a winning approach. It will take
into account things like possibilities, dangers, and how plan to promote. They would be uniquely
equipped to handle or prevent any issues if they have a strong understanding about this before
opening a coffee shop.
MAIN BODY
1. Summary of the business idea, an analysis of the risks that the business will face and the
source(s) of initial funding for the business
Business idea: It's no surprise that people like a hot cup of tea or coffee at any moment daylight!
In fact, most individuals can't begin their day without a steaming cup of tea or coffee! As a result
of the recent increase in dining out culture, owing to foreign interference, the café industry has
exploded in the last century or so. Java Culture is on a mission for becoming a regular need for
local coffee lovers, a location to dream of as people tried to flee the strains of everyday life, and
simply a nice spot to meet friends or read some books, all in one (de La Brosse and et.al, 2021).
Conduct market research: Java Culture will concentrate its marketing efforts on college
students and teachers, individuals who work in workplaces near the coffee shop, and educated
teens. According to our study, these are the customers who are most inclined to purchase
gourmet coffee goods. Because gourmet coffee consumption is ubiquitous across all economic
levels and most of it is determined by one's degree of university education, being close to the
University of Oregon campus will offer access to the desired client base (Fbeil, Pazim and
Langgat, 2020).

Location: To begin with, coffee shops are fantastic locations to interact and catch up with
friends, as well as to pass the time when studying or browsing whilst sipping a beverage and
food. Coffee shops are also a great attraction for students who need to keep up on coursework or
for casual work meetings. A realtor examining postings with a customer or a fellow student
brainstorming on a school assignment are likely to be found in any prominent coffee shop (Huy,
Dat and Anh, 2020).
Competitors: Several coffee shops around the University of Oregon campus will be main
competitors of Java Culture. Starbucks, Cafe Roma, The UO Bookstore, and other coffee-serving
enterprises are among them.
Customer: Customer service, particularly in the food customer service, is critical to any
profitable business. Counter service is used by the majority of successful coffee businesses.
Clients ordering and paying in advance and being notified whenever their beverages and snacks
are available reduces labor expenses and allows to best manage rush hours. Table service is
longer, more employment, and particularly equipped to eateries wherein customers buy complete
meals and invest extra time in the place, but it's not impossible. Table service provides additional
opportunities for up selling and may be a good fit for your business strategy.
Why customer prefer these products and services: Great coffee, pastries, extra tea options,
very pleasant attitude, decent internet, desk space, nice seating, good desserts, and a position
near the university campus (Malagapo and Ediza, 2020).
There are mentioned different risks occurred in Coffee shop that are mentioned below:
Burns or cuts: Burns from hot coffee are perhaps the most visible coffee shop danger.
Customers are exposed to this risk when they are offered coffee that is "too hot." Workers are
also at danger of getting burned when handling coffee-making technology or by the coffee itself.
Improper machine setup, faulty electrical cabling, and other factors might cause coffee to
overheat. Additionally, if the coffee shop sells food such as sandwiches, staff may be exposed to
cuts while serving these products.
Property: Coffee businesses necessitate the use of costly equipment such as espresso equipment
and immersion blenders. The majority of establishments provide seats and chairs for their

customers. There is inventory such as coffee, food, and milk, all of which are susceptible to
spoilage if a refrigerator fails and these goods deteriorate. The building, outside furniture (if
applicable), signs, and other aspects of the shop's assets are all covered by health insurance
(Moşteanu and Roxana, 2020).
2. An outline and discussion of the key fixed and variable costs.
The proprietors will invest $140,000 and take out a $30,000 bank policy to build start-up costs
and assets, as well as inadequate expenditure in the first several months.
The $27,000 in start-up costs involve:
 A total of $1,300 was spent on legal fees for obtaining licenses and permissions, and also
financial solutions.
 A total of $3,580 was spent on marketing and sales for Java Culture's launch party,
including $3,500 for flyer production (2,000 flyers at $0.04 per copy).
 Consultant costs of $3,000 were paid to Unique Espresso Solutions for assistance with
the coffee bar's setup.
 A total premium of $2,400 was paid for health insurance (general liability, workers'
health, and asset damage).
 Rent expenditures for one month at $1.76 per square foot totaling $4,400 in advance.
 A $10,000 renovation to the premises is planned (Giones and et.al, 2020).
 Stationery ($500) and telephone and utilities deposit ($2,500) are among the other startup
costs.
 As these costs will be paid before then to launch, they will appear in our financial
predictions as minus retained earnings of $27,680 at the end of the weekend already
when we start. That figure appears on the balance sheet (Town, 2020).
Funding: The firm is financed primarily through various systems: owner contributions and bank
loans. Arthur Garfield and James Polk, two big shareholders, have each given $70,000 and
$30,00. The remaining $40,000 has been given by all other investors, bringing the total
contribution to $140,000. The remaining $30,000 stems from various bank loans–a $10,000 yet
another loan and a $20,000 long-term (five-year) loan–to pay start-up expenditures and property.

Bank of America was used to secure both loans. As a result, a total start-up loss of $27,000 is
estimated.
3. A budgeted profit forecast for the first year of operation
Jan
uar
y
Feb
rua
ry
Ma
rch
Ap
ril
Ma
y
Jun
e
Jul
y
Au
gus
t
Sep
tem
ber
Oct
obe
r
No
ve
mb
er
Dec
em
ber
Tot
als
Sale
s
152
,23
8
152
,23
8
152
,23
8
152
,23
8
152
,23
8
152
,23
8
152
,23
8
152
,23
8
152
,23
8
152
,23
8
152
,23
8
124
,96
8
1,79
9,58
2
Les
s
Cos
t of
sale
s/
V
ari
ab
le
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(74,
083
.75)
(60,
663
.75)
(87
5,58
5.00
)
Wages
(Variable
)
Gross
Profit/Contr
ibution
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
78,
153
.85
64,
304
.54
923,
996.
83
Les
s
Fixed
Costs
Sala
ries
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(3,0
00.
00)
(36,
000.
00)
Ren

t
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(44
0.0
0)
(5,2
80.0
0)
Marketin
g etc
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(1,0
00.
00)
(12,
000.
00)
Electricit
y
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(12
0.0
0)
(1,4
40.0
0)
Insurance/6
months
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(50
0.0
0)
(6,0
00.0
0)
Net
Profit
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
73,
093
.85
59,
244
.54
863,
276.
83
GP
M
%
51
%
51
%
51
%
51
%
51
%
51
%
51
%
51
%
51
%
51
%
51
%
51
%
51
%
NP
M%
48
%
48
%
48
%
48
%
48
%
48
%
48
%
48
%
48
%
48
%
48
%
47
%
48
%
4. A budgeted cash flow for the first year of operation.
Pro Forma Cash Flow
Cash Received
Cash from Operations
Cash Sales $2,781,081 $4,977,966 $5,319,329

Cash from Receivables $2,181,014 $4,589,661 $5,251,552
Subtotal Cash from Operations $4,962,095 $9,567,628 $10,570,881
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $4,962,095 $9,567,628 $10,570,881
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $638,317 $731,674 $766,217

Bill Payments $2,550,053 $4,869,143 $4,069,070
Subtotal Spent on Operations $3,188,370 $5,600,817 $4,835,288
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $42,594 $46,908 $49,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $45,000 $60,000
Subtotal Cash Spent $3,230,963 $5,692,725 $4,944,288
Net Cash Flow $1,731,131 $3,874,902 $5,626,593
Cash Balance $2,119,915 $5,994,817 $11,621,410

5. Calculation of the breakeven point and margin of safety.
Step 1
Calculate
Total
Contributio
n
SALES Cont/Unit
Total
Contribution
Average
Cont..
Coffee 3,600 29.69 106,887.58
Pastries 8,260 38.57 318,593.52
Tea 7,080 70.41 498,515.73
Total Sales 18,940 923,996.83 48.79
Breakeven Point
Total Fixed Costs 60,720
Average Cont £ 48.79
Breakeven Point
Overall 1,245
Margin of Safety 17,695
6. Key performance indicators (KPIs) to monitor progress towards business goals
Key performance indicators are more than a means for coffee shop franchisees to see if
they're hitting their targets. KPIs are used to build processes and information that help licensees
accomplish their own business objectives while also ensuring that they act in a manner that
promotes good unit-level profitability.

Labor cost percentage: The labor cost percentage is a calculation of how much money company
makes compared to how much it costs to employ people at the same time. The labor cost % is an
essential metric because it indicates where big savings may be realized by making minor
adjustments in expenditure. A 1% variation in manpower sales might be the variation between
profitability and a potentially fatal loss. The near infinite possibilities to make improvements to
organization and enhance earnings create this an excellent KPI to measure (Cosenz and Bivona,
2021).
Employee retention rate: Whenever measuring any organization KPIs, one of the most
significant variables that might connect to performance is staff retention rate. This is the
proportion of workers that stay with the company for an extended length of time. The café
business is acutely aware of the situation of excessive mobility, which is particularly frequent
among hourly employees, whom the bulk of café owners hire.
Retail establishments frequently recruit the incorrect individuals and have a lot of turnover. A
single inept employee may ruin the entire eating experience, affecting on client base. In addition,
employing new staff and retaining them to open them back to desired efficiency levels takes a lot
of time and work. It is best to recruit the appropriate people from the start and to look after your
employees so that they are less likely to leave.
Revenue per employees: Sales per head, or average ticket size, is another term for revenue per
employee. Cafés estimate their revenues per person at various periods throughout the day. Most
café owners, for instance, want to know how much money they make per person between
lunchtime and supper. Cafés also keep track of their per-head sales every week or month,
searching for good or negative trends. Whenever a café offers a bargain or a discount, for
instance, income per employee tends to fall (Nekula, 2020).
7. Recommendations based on the results of your analysis above.
Although it should go on stating, in a competitive market like coffee, you must constantly
serve the greatest coffee and espresso. This necessitates the purchase of high-quality equipment
as well as the use of high-quality coffee beans and goods. People travel to tremendous lengths
for outstanding coffee, and if you're one of five nearby coffee houses, you probably couldn't
afford to scrimp. Choosing the proper workers to work in your coffee shop is also important. It's

possible that this will determine whether you succeed or fail. While it might be enticing to
engage the lowest wages, they must guarantee that the front line is set up to encourage customer
loyalty and development through word - of - mouth in the lengthy period (Barbosa, Castañeda-
Ayarza and Ferreira, 2020).

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