Buisness Plan Cafe
Buisness Plan Cafe
Buisness Plan Cafe
Submitted to – Ins.Yimer
June.2014
Table of content
Page
Organizational information...………………………………………………………...1
Part one
Part two
2. Feasibility study
2.1 Marketing demand ……………………………………………………..4
Part three
Part four
Part five
5. Financial evaluation
5.1 profitability and financial analysis………………………………………..18
5.2 business profit and loss…………………………………………………….20
5.3 business cash flow………………………………………………………….21
Appendix ……………………………………………………………………………..22
Organizational information
The applicant
Bekele Anole
Address
Region –Oromia
- East shoa
Woreda- Adama
Town- Adama
The:business plan
Name; Nabeekii cafe
Address -nabekicafe@ymail.com
Types of business plan – service sector
Status of the business-new
EXECUTIVE SUMMERY
This is a business plan proposal for the establishment of cafe having the name “Nabeekii café”
in Adama town. This profile envisages the establishment of a cafe for the delivery of cafeteria
services. The present demand for the proposed service delivery is estimated from different
perspective and it expected to decline after five year of its operation but through diversifying the
customer service approach we intend to handle the existing customers along with attracting new
customers. The cafe will expect to create employment opportunities for 12 persons. The total
investment requirement is estimated at about Birr 188,415 and out of which Birr 140,000 is
required for furniture and kitchen equipment. The total cost investment is to be covered by
Owens capital. The business is financially viable with an internal rate of return (IRR) of 16.65%
% and a net present value (NPV) of Birr 172,433 discounted at 10%.
Part one
Nabeekii café is a new café solepropernership with an expected to open in July, 2014 at the heart
of Adama, Franco and expected to give a standardize café service in Adama. It is a
soleproporneship business. I will specialize in fast foods, dinners, coffee, tea, cappuccino, frozen
cappuccino, and homemade cookies and brownies, and other related activities.
In Adama city there are many cafe that give services to their customers but they cannot still
satisfy the need and want of the customer in terms of both quality and quantity. In order to
maximize customer satisfaction and to maximize my profit i decide to open a café in Adama city.
my target customers are intellectuals, artists, and writers with reserved VIP seats, and students,
couples, families and strangers. Nabeekii cafe expected to serve this area well.
This plan offers financial institutions an opportunity to review our vision and strategic focus. It
also provides a step-by-step plan for the business start- up, establishing favorable sales number,
gross margin and profitability.
Establishing this cafe has beneficiary in maximizing the welfare of the society from different
perspective. Some of them are,
Part two
2. Feasibility study
2.1. Marketing and Demand
2.1.1. Marketing survey
Adama is experiencing a trend toward the creation of evening dining/entertainment venues. They
are popular and gaining more recognition. Evidence of this is found in local news and magazine
coverage. These venues are finding new homes in the areas close to and/or adjacent to
downtown.
The market opportunity for cafeterias establishments has never been better in this area of Franco.
The immediate area surrounding the business venue is undergoing a building renaissance as
former “Genbe” and the currently finished multi- purpose building for business.
Target customer
One of my target customers are artists and writers who need a nice quite cozy place to think and
do their work with reserved VIP seats and for commons and strangers. The other target customer
of mine is couples that want to recreate themselves.
The atypical Adama intown resident. This urban professional works long hours and has
relatively little time to cook at home. She/he has an active social life and spends a
substantial amount of disposable income maintaining it.
The many businesses which regularly use restaurant dining as an function of conducting
business.
Market Segmentation
A restaurant/coffee house would provide one of the best food and beverage opportunities for
more than 30,000 per month and adjacent neighborhoods.
Market Analysis
potential customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR
Adama Area Residents 4.00% 1,568 2,725 5,798 7,878 12,066 4.00%
Hotel/Convention/Visitors 6% 2,100 3,915 4,452 5,820 6,143 6.00%
Downtown Workers 10.6% 3,350 8,020 10,624 11,349 10,419 10.60%
Total/average 6.6% 147,018 165,660 186,874 211,047 238,628 6.6%
The demand for the service is directly related with the growth of the population and income of the
society. Taking this in to consideration annual average growth of 6.6% is applied to forecast the future
demand then it expected to decline after its maturity over the 5 year period. But through diversifying
the service that provided to the customers, the café will able to maintain keeping its customers.
The Nabeekii café will offer high quality coffee, tea, hot coca, and cappuccino, fast foods and
dinner at a very reasonable price. I will also sell homemade cookies, brownies, and doughnuts,
with fair price.
All drinks will be made with filtered water and the highest quality ingredients we can get. Frozen
drinks will have caramel or chocolate syrup drizzled in the glass and over the drink. Cappuccino
and hot coca will have whipped cream toppings as well as the option for candy sprinkles.
Cookies will have the option of a chocolate or caramel dip and sprinkles. We will offer designer
flavored cream and five kinds of sweetener, i.e. sugar, honey, Equal, Splenda, and Sweet-n-Low.
Cream and sweetener is at no extra charge. Furthermore, the fast foods includes chips, cookies,
Burger, pizza, Mushebek, Baklaba, Halawa, Fetera, and dinner include Kitffo, Key Wott,
Minchet.
I will use only filtered water and will brew our coffee in commercial coffeepots that will be
thoroughly cleaned between uses. I will bake and cook cookies, brownies, fast foods and dinner
in our own on-site oven from proven recipes, daily.
Within the next three to five years we expect to branch out into catering and offer homemade
pies, whole or by the slice.
My low overhead and cheaper pricing will be the key to our success.
Nationally, the industry is quite large, for example in Addis Ababa there are many cafeterias, we
can found cafeterias in average almost 200 meter apart in Addis but around Adama city there are
a few cafeterias.
This industry is booming at the present time, there is a trend toward small cozy places and away
from the large generic chain.
The cafeteria business does not show signs of slowing down. With new innovations such as
flavorings and additives, it should continue for some time.
I hope my customer will be attracted by my service in addition to this they may be attracting by
my standardize customer approach, building, chairs, tables, glasses and strategic placement.
The restaurants and cafes that make up the community of establishments in the area
surrounding. Their concepts range from typical fast food/chain venues to expensive fine dining
establishments. However, the predominating nature of the immediately surrounding restaurants
and cafteria is casual/upscale.
Of the few cafeterias in the area, some are large chain with a very expensive product, others are
really home style cafeterias, the last one, and competitors are an antique store with a "tea room".
Nabeekii cafe: Located in the heart of Adama, while its location near many longstanding Adama
restaurants and cafeteria would seem to offer considerable overflow, the café is not easily seen
from the street and parking is at a premium. Its concept has received very favorable press in
Adama.
Strength
Consider quality of food and service with a reasonable price, and its skilled manager together
with its bright waiter can attract customers, so it has acceptance (brand name) by the customer.
Weakness
No variation on menu or service it provides. Most of its activities like the menu are limited.
Kereyu resort: Located on just south of Adama landmark. The location is very "out-of-the-way"
and can be perceived as a marginally safe area. Nevertheless, the café remains wildly popular
given the parking difficulties, its small size, and it's rather hidden location.
Strength
Often have interesting alternative dishes on the menu and designer décor. The evening
atmosphere is also so attractive and suitable for customers.
Weakness
Even if there is widely varying standards of food and service, they are often expensive which
does not consider the buying capacity of the customers.
Melek cafe: Located on nearer to Adama university, this is a traditional corporate coffeehouse
which provides morning coffee and sandwich service. The owners are currently expanding to
provide evening service.
Strength
This cafeteria has relatively many customers because of its reasonable price and good location.
Weakness
The quality of the goods and service are not that much satisfactory beside the low price
Relative to the location of these establishments, the center of twon is centrally geographically
located. Its location will easily allow for passangers from those who came others area. .
My pricing strategy and comfortable atmosphere will be the key to our success. None of the
other cafeteria in the area can offer this.
Competitive Edge
Nabeekii will position itself as unique cafeteria where its customers 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 Nabeekii cafeteria from current competitors.
2.4 Financial Analysis
I want to finance growth mainly through cash flow. i recognize that this means we will have to
grow more slowly than we might like.
The most important indicator in my case is inventory turnover. I have to make sure that food
inventory turnover stays at approximately four turns per month.
I do not want to let my average collection days get above 45 under any circumstances. This could
cause a serious problem with cash flow, because our working capital situation is tight. Most
credit sales will be via credit and debit cards. I do have plans to initiate direct billing for law
firms and other businesses conducting regular visits. I must target a net profit of 14% at the least,
and hold marketing costs to no more than one to three percent of gross sales.
Include:
Legal expenses for obtaining licenses and permits as well as the accounting services
totaling Birr1, 300.
Marketing promotion expenses for the grand opening of Java Culture in the amount of
Birr3,500 and as well as flyer printing (2,000 flyers at Birr0.04 per copy) for the total
amount of Birr3,580.
Consultant’s fees of Birr3, 000 paid to ABC Espresso Services for the help with setting
up the coffee bar.
Insurance (general liability, workers' compensation and property casualty) coverage at a
total premium of Birr2, 400.
Pre-paid rent expenses for one month at Birr1.76 per square feet in the total amount of
Birr4, 400.
Premises remodeling in the amount of Birr10, 000.
Other start-up expenses including stationery (Birr500) and phone and utility deposits
(Birr2, 500).
Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the following
table. The key underlying assumptions are:
General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest
12.25% 12.25% 12.25%
Rate
Long-term Interest
6.75% 6.75% 6.75%
Rate
Other 0 0 0
Part Three
Business Goal, Mission and Objective
3.1 Objectives of the business
My primary goals over the next year are:
Secure financing for start-up of at least Birr75000 for space and equipment
Renovate our space in Adama.
Acquire equipment necessary for business, i.e. coffee pots, cappuccino machines,
blenders, etc.
Make agreement with the supplier of our raw material and bakery vendors.
Create a cozy, artist friendly environment (i.e. choice of colors, choice of music, decor)
Open for business and become the most popular café in the area.
Expand our business in different in area of the country
Targeting and maintaining a net profit of at least 14 % by the second year.
To generate monthly sales to reach Birr 15000 by the end of forth month of operation,
and Birr 30000 monthly by the end of the first year of operation. I use different attractive
methods to get more customers over time. For instance i provide less price compare to the
another cafeterias and we also provide some entertainment activities for the customers
like showing DSTV, inviting music bands for special days like Valentine ’s Day and
there will also be candle night on Sunday.
This plan includes chapters on the company, products and services, market focus, action plans
and forecasts, management team and financial plan.
The cafe's aim is simple. It will provide a completely sophisticated, sensual, yet casual dining
and/or coffee house experience for the many Adama people and visitors who frequent the city's
casual dining spots and entertainment venues.
My aim to be able to employ several full time members of staff and build up a team so that the
partners can be clear of routine tasks and consentret on day to day activities like meeting
customer, supervising the cafeteria, holding extensive promotion activity and so on which help
the business to develop well.
3.3Keys to Success
The keys to success in this business are:
1. Product quality: Food, coffee-based beverages, and entertainment are our products. They
must be of the high quality and value.
2. Service: My patrons are paying to have a good time. Their experience will suffer if
service is not of the highest caliber. Each member of the staff will be courteous, efficient,
and attentive.
3. Marketing: I will need to target our audience early and often. While the business is
located in a central and accessible location, many people will have to be re-introduced to
the neighborhood .
4. Management: I will need to have a firm grasp on food, beverage, and labor costs. The
dining/entertainment/coffeehouse experience must be delivered in a fashion that will not
only inspire repeat business, but encourage word-of-mouth recommendations to others.
Proper inventory, employee management, and quality control is key.
3.4 Strategies
3.4.1 Sales Strategy
Our food, drinks, and entertainment options are priced to give us an attractive margin while at
the same time offering value to the consumer. I want repeat business. I also want the experience
to remain fresh. Therein lies why the food, beverages, and musical/entertainment programming
will be relatively flexible.
Comparing with other competitive cafeterias we will provide fewer prices to our customers. I
will offer three sizes of drinks, small Birr1.00, medium Birr1.50 and large Birr2.00. Our cookies
and brownies will sell for Birr1.00 each.
.The first step that we take in promoting our cafeteria is conducting an opening ceremony. On
this ceremony different well known peoples will be invited and some part of the customers will
also be invited. I also invite our neighbors to have a good public relationship.
I intend to advertise in the local newspapers and offer a "frequent drinkers club" discount to our
best customers. We will also send out advertise through direct mail, which will include cents off
coupons.
I will promote our company name and label almost more than the product itself, because to be
successful we have to stand for brand-name integrity, excellent menu offerings, and first class
entertainment and fun.
.I will have Happy Hour, price reduction for special days, like holidays, Valentine’s Day. I
provide special Torta cake for those of who celebrate their birthday parties in our cafeteria with
low price.
Two thousand flayers 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
Nabeekii cafeteria. Subsequently, free postcards with Nabeekii endorsement will be printed to
increase the company visibility among the patrons
Part four
Implementation, Resource plan and Organizational structure
4.1 Time plan
The operation of the project will start at the beginning of 2013 after certain pre-request activities
are accomplished.
4.2resource plan
No Item Cost
1 Coffee boiler machine 20,000
2 Kitchen equipment 40,000
2 Refrigerator 8000
4 Sofas and chairs (furniture) 100,000
5 Rental for building 10000
6 Labor cost 8415
7 Miscellaneous expenses 2000
Total cost of the business 188,415
The personnel plan calls for hiring 12 full-time salaried employees at start-up. Any additional
hires will be part time and devoted to the expansion of any catering function, as well as increased
capacity/operation of a private party function.
No. Sr. Manpower No. Monthly Salary (Birr) Annual Salary (Birr)
1 General manager 1 1,000 12000
2 Chief 1 950 11400
3 Line cook 2 1200 14400
4 Waiter 4 2000 24000
5 Dishwashers/Bussers 3 2,100 25200
6 Guards 1 400 4800
Sub total 12 7650 91,800
Benefits (10% basic salary) 765 9180
Total 8415 100,980
4.4Organizational structure
My organizational structure will be a simple pyramid style with the owners putting in as much
work as the employees. An additional manager (to be hired) will assist in maintaining and
reviewing operations of the restaurant and the entertainment venue/bar.
A chef (to be hired) will manage kitchen operations and be crucial to maintaining food inventory
stability and assistance in menu development.
An assistant manager/senior server (to be hired) who will be a salaried employee will provide
regular table service as well as assistance to the manager and the general manager. A
sous-chef/line cook (to be hired) will perform secondary management functions in the kitchen as
well as provide assistance to the chef in main kitchen/cooking functions.
Part-time personnel will be hired to handle bartending, serving, and dishwashing functions. The
marketing and accounting function will be handled by independent contractors/consultants.
Part five
Financial Evaluation
I must target net profit/sales figures toward the 14% level with gross margins never dipping
below 38%. Marketing costs should never exceed three percent of sales.
According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as profit to total sales, net profit to equity (Return on
equity) and net profit plus interest on total investment (return on total investment) show an
increasing and stability trend (see the appendix) during the life-time of the project.
1. Break-even Analysis
The Break-even Analysis shows that Nabeekii café has a good balance of fixed costs and
sufficient sales strength to remain healthy. Our break-even point is Birr 320,101 on sales
averaging Birr12.54 per patron. This break-even position is achieved on a monthly fixed cost of
Birr 107,873.
The break-even point of the project including cost of finance when it starts to operate at full
capacity (year 3) is estimated by using income statement projection.
Break-even Analysis
Assumptions:
Average Percent Variable Cost 20 %
2. Payback Period
The investment cost and income statement projection are used to project the pay-back period.
The project’s initial investment will be fully recovered after 3 year.
Based on the cash flow statement, the calculated IRR of the project is 16.65% and the net present
value at10 % discount rate is birr 172,433.
4. Economic benefits
The project can create employment for 12 persons. In addition to providing services to the
customer, the project will generate tax revenue to the government.
I expect income to approach Birr 780,850 for calendar year 2016. It expected to increase to Birr
900,000 by the end of the years covered in this plan.
I expect to manage cash flow over the next three years with minimal new investment required
over the first two years. It is my expectation that revenue beyond business sales will be invested
in retiring long-term debt early.
No Years
1 2 3 4 5
Cash flow from operation
1 Cash sales (CIF) 500,000 658,90 780,850 900,000 990,428
0
2 Operation expense(COF) 213352 217776 218566 213352 220318
3 Net cash flow 386,648 441,12 562284 686648 770110
4
Appendix
As shown in the Balance Sheet, i expect a healthy growth in net worth from approximately
Birr172,000 at the end of 2002 to almost Birr1 million by the end of the plan period.
Appendix 1
Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the
Standard Industrial Classification (SIC) code 5812, Eating Places, are shown for comparison.
The ratios show a plan for balanced, healthy growth.
Ratio Analysis