Financing Needed

The owners will invest $140,000 and take out a bank loan for $30,000 to cover the start-up expenses
and assets needed plus deficient spending in the early months.

The start-up expenses of $27,000 include:

Legal expenses for obtaining licenses and permits as well as the accounting services totaling $1,300.

Marketing promotion expenses for the grand opening of Java Culture in the amount of $3,500 and as
well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.

Consultants fees of $3,000 paid to ABC Espresso Services <name changed> for the help with setting up
the coffee bar.

Insurance (general liability, workers’ compensation and property casualty) coverage at a total premium
of $2,400.

Pre-paid rent expenses for one month at $1.76 per square feet in the total amount of $4,400.

Premises remodeling in the amount of $10,000.

Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500).

These expenses will be incurred before launch, so they take their place in our financial projections as
negative retained earnings of $27,680 at the end of the month before we begin. That number shows up
in the balance sheet.

The required start-up assets of $143,000 include:

Cash in the bank in the total amount of $67,000, which includes enough to cover employees and
owner’s salaries of $23,900 for the first two months and cash reserves for the first three months of
operation (approximately $14,400 per month).

Start-up inventory of $16,000, which includes:

Coffee beans (12 regular brands and five decaffeinated brands) – $6,000

Coffee filters, baked goods, salads, sandwiches, tea, beverages, etc. – $7,900

Retail supplies (napkins, coffee bags, cleaning, etc.) – $1,840

Office supplies – $287

Equipment for the total amount of $60,000:

Espresso machine – $6,000

Coffee maker – $900

Coffee grinder – $200

Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc.) – $18,000

Storage hardware (bins, utensil rack, shelves, food case) – $3,720

Counter area equipment (counter top, sink, ice machine, etc.) – $9,500

Serving area equipment (plates, glasses, flatware) – $3,000

Store equipment (cash register, security, ventilation, signage) – $13,750

Office equipment (PC, fax/printer, phone, furniture, file cabinets) – $3,600

Other miscellaneous expenses – $500

Funding for the company comes from two major sources–owners’ investments and bank loans. Two
major owners, Arthur Garfield and James Polk, have contributed $70,000 and $30,00 respectively. All
other investors have contributed $40,000, which brings the total investments to $140,000. The
remaining $30,000 needed to cover the start-up expenses and assets came from the two bank loans–a
one-year loan in the amount of $10,000 and a long-term (five years) loan of $20,000. Both loans were
secured through the Bank of America. Thus, total start-up loss is assumed in the amount of $27,000.

The amounts show up in the balance sheet in the month prior to opening. The $140,000 investment
shows up as Paid-in Capital. The $27,000 expenses show up as negative retained earnings. Assets and
liabilities are there. This is all according to financial standards.

Opportunity

Problem & Solution

Problem Worth Solving

People near the University of Oregon need not just coffee and tea, or pastries and snacks, but also a
place to meet comfortably, have a group discussion, or just sit quietly, work, and read. That is available
now near the University of Oregon campus, but too crowded too often, and not the right combination of
factors for everybody.

Our Solution

Java Culture 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. Java Culture will invest its profits to increase the employee
satisfaction while providing stable return to its shareholders.

Target Market

Market Size & Segments

Coffee consumption has shown a steady 2.5% growth rate in the United States over the last decade. The
retail coffee industry is flourishing in the U.S. Pacific Northwest. The local climate, with a long rainy
season, is very conducive for the consumption of hot non-alcoholic beverages. At the same time, hot dry
summers drive people into cafes to order iced drinks. Furthermore, coffee has really become a part of
the lifestyle in the Pacific Northwest. Its discerning coffee drinkers are in favor of well-prepared, strong
coffee-based beverages, which they can consume in a relaxing environment.

More specifically, the University of Oregon as close to 25K students and another 5-10K faculty and staff.
And it is embedded in the Eugene, OR community of 200K people. Our main market will be students,
faculty, staff, and nearby residents. But the campus area is a hub for the community and will attract
other customers.

Competition

Current Alternatives

Java Culture’s direct competitors will be other coffee bars located near the University of Oregon
campus. These include Starbucks, Cafe Roma, The UO Bookstore, and other Food service establishments
that offer coffee. Starbucks will definitely be one of the major competitors because of its strong financial
position and established marketing and operational practices. However, despite of Starbuck’s
entrenched market position, many customers favor smaller, independent establishments that offer cozy
atmosphere and good coffee at affordable prices. Cafe Roma is a good example of such competition. We
estimate that Starbucks holds approximately 35% market share in that neighborhood, Cafe Roma
appeals to 25% of customers, The UO Bookstore caters to another 10%, with the remaining market
share split among other establishments. Java Culture will position itself as a unique coffee bar that not
only offers the best tasting coffee and pastries 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.

Our Advantages

Java Culture 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.

Keys To Success

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.

Execution

Marketing & Sales

Marketing Plan

Java Culture 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 Java Culture from incumbent competitors.

In order to build up its client base, Java Culture will use some strategic banners and fliers during the
launch period, utilize customer referrals and cross-promotions with other businesses in the community
from time to time, and loyalty programs that work with android and IOS and other mobile phones,
which is the preference of our market.

Our main thrust will be getting people to know, like, and trust us with content and engagement in
Facebook, Instagram, Snapchat, and Twitter. We intend to maintain social media presences that are
light on self-serving promotional quasi-advertising content, heavy on community participation, content,
and engagement.

Sales Plan

Java Culture baristas will handle the sales transactions. To speed up the customer service, at least two
employees will be servicing clients–while one employee will be preparing the customer’s order, 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.

Operations

Locations & Facilities

Java Culture coffee bar will be located on the ground floor of the commercial building at the corner of
West 13th Avenue and Patterson Street in Eugene, OR. The company has secured a one-year lease of the
vacant 2,500 square feet premises previously occupied by a hair salon. The lease contract has an option
of renewal for three years at a fixed rate that Java Culture will execute depending on the financial
strength of its business.

The floor plan will include a 200 square feet back office and a 2,300 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–1,260 square feet (i.e., 55% of the total)
for the seating area, 600 square feet (26%) for the production area, and the remaining 440 square feet
(19%) for the customer service area.
This property is located in a commercial area within a walking distance from the University of Oregon
campus on the corner of a major thoroughfare connecting affluent South Eugene neighborhood with the
busy downtown commercial area. 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, and outside
electric signs will be aimed to grab the attention of the customer traffic.

Milestones & Metrics

Milestones Table

Milestone Due Date Who’s Responsible

Summer Promotion

Sept 13, 2018

Social Media Setup

Sept 14, 2018 Marketing

Launch Promotion

Sept 18, 2018 Team

Back to school promotion

Apr 16, 2019 team

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Key Metrics
We have our forecasts for sales, direct costs, and operating expenses. As we get into the business we’ll
develop standards based on experience for Facebook likes, Twitter follows, and other social media
engagement. We expect to watch these very carefully.

Company

Overview

Ownership & Structure

Java Culture is majority-owned by Arthur Garfield and James Polk. Mr. Garfield holds a Bachelor’s
Degree in Business Administration from the University of ZYX. He’s worked for several years as an
independent business consultant. Previously, he owned the ABC Travel Agency, which he profitably sold
four years ago. Mr. Garfield has extensive business contacts in Oregon that he will leverage to help his
new venture succeed. Mr. Polk has a Bachelor’s Degree in Psychology from the XYZ State University. For
the last five years he has worked as a manager of DEF Ristorante, a successful Italian restaurant in
Portland, OR. Under Mr. Polk’s management, the restaurant has consistently increased sales while
maintaining a lower than average level of operating expenses.

Investors will not be involved into the daily management decisions at Java Culture. They will hire a
professional manager who will oversee all the coffee bar operations. Three full-time baristas will be in
charge of coffee preparation. They will hire two more part-time employees to fulfill the staffing needs. In
the second and third year of operation will add additional employees if and when needed.

Team

Management Team

A full-time manager will be hired to oversee the daily operations at Java Culture. The candidate (who’s
name is withheld due to his current employment commitment) has had three years of managerial
experience in the definitely industry in Oregon. This person’s responsibilities will include managing the
staff, ordering inventory, dealing with suppliers, developing a marketing strategy and perform other
daily managerial duties. We believe that our candidate has the right experience for this role. A profit-
sharing arrangement for the manager may be considered based on the first year operational results.

Personnel Table

FY2019 FY2020 FY2021

Manager $60,000 $66,000 $72,600

Baristas (3) $90,000 $94,500 $99,225

Other employees (2) $43,200 $45,360 $47,628

Totals $193,200 $205,860 $219,453

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Financial Plan

Forecast

Key Assumptions

We assume a steadily growing potential market in line with growth at the university, trends.

We assume industry standard gross margins

We assume relative status quo regarding technology and trends in the coffee industry

Revenue by Month

Chart visualizing the data for Revenue by Month

Expenses by Month

Chart visualizing the data for Expenses by Month

Net Profit (or Loss) by Year

Chart visualizing the data for Net Profit (or Loss) by Year

Financing

Use of Funds

The start-up expenses include an estimated $17,000 consisting of several items:

Legal expenses for obtaining licenses and permits as well as the accounting services totaling $1,500.

Insurance (general liability, workers’ compensation and property casualty) coverage at a total premium
of $1,500.

Premises remodeling in the amount of $10,000.

Other start-up expenses including website ($4,000) and phone and utility deposits ($2,500).

The required start-up assets of $71,000 include:

Plates, glasses, etc. worth approximately $2,000

Equipment for the total amount of approximately $69,000

Espresso machine

Coffee maker

Coffee grinder

Food service equipment (microwave, toasters, dishwasher, refrigerator, blender, etc.)

Storage hardware (bins, utensil rack, shelves, food case)

Counter area equipment (counter top, sink, ice machine, etc.)

Serving area equipment (plates, glasses, flatware)

Store equipment (cash register, security, ventilation, signage)

Office equipment (PC, fax/printer, phone, furniture, file cabinets)

Other miscellaneous expenses

Sources of Funds

Funding for the company comes from two major sources–owners’ investments and bank loans. Two
major owners, Arthur Garfield and James Polk, have contributed $70,000 and $30,00 respectively. All
other investors have contributed $40,000, which brings the total investments to $140,000. The
remaining $30,000 needed to cover the start-up expenses and assets came from the two bank loans–a
one-year loan in the amount of $10,000 and a long-term (five years) loan of $20,000. Both loans were
secured through the Bank of America. Thus, total start-up loss is assumed in the amount of $27,680.

Statements

Projected Profit & Loss

FY2019 FY2020 FY2021

Revenue $561,010 $654,500 $743,000

Direct Costs $224,404 $261,800 $297,200

Gross Margin $336,606 $392,700 $445,800

Gross Margin % 60% 60% 60%

Operating Expenses

Salaries & Wages $193,200 $205,860 $219,453

Employee Related Expenses $38,640 $41,172 $43,891

Rent $36,000 $38,000 $42,000

Marketing $28,051 $32,725 $37,150

Utilities, phones, Internet etc. $6,000 $6,000 $6,000

Total Operating Expenses $301,891 $323,757 $348,493

Operating Income $34,716 $68,943 $97,306

Interest Incurred $951 $583 $427

Depreciation and Amortization $12,000 $12,000 $12,000

Gain or Loss from Sale of Assets

Income Taxes $3,265 $8,454 $12,732

Total Expenses $542,511 $606,593 $670,853

Net Profit $18,499 $47,907 $72,147

Net Profit/Sales 3% 7% 10%

Projected Balance Sheet

Starting Balances FY2019 FY2020 FY2021

Cash $67,000 $80,234 $133,240 $214,467

Accounts Receivable $0 $0 $0 $0

Inventory $16,000 $21,815 $24,765 $24,765

Other Current Assets

Total Current Assets $83,000 $102,048 $158,005 $239,232

Long-Term Assets $60,000 $60,000 $60,000 $60,000

Accumulated Depreciation ($12,000) ($24,000) ($36,000)

Total Long-Term Assets $60,000 $48,000 $36,000 $24,000

Total Assets $143,000 $150,048 $194,005 $263,232

Accounts Payable $0 $0 $0

Income Taxes Payable $2,232 $2,116 $3,184

Sales Taxes Payable $0 $0 $0

Short-Term Debt $13,683 $3,833 $3,989 $4,152

Prepaid Revenue

Total Current Liabilities $13,683 $6,065 $6,105 $7,336

Long-Term Debt $16,317 $12,484 $8,495 $4,343

Long-Term Liabilities $16,317 $12,484 $8,495 $4,343

Total Liabilities $30,000 $18,549 $14,600 $11,679

Paid-In Capital $140,000 $140,000 $140,000 $140,000

Retained Earnings ($27,000) ($27,000) ($8,501) $39,406

Earnings $18,499 $47,906 $72,148

Total Owner’s Equity $113,000 $131,499 $179,406 $251,553

Total Liabilities & Equity$143,000 $150,048 $194,005 $263,232

Projected Cash Flow Statement

FY2019 FY2020 FY2021

Net Cash Flow from Operations

Net Profit $18,499 $47,907 $72,147

Depreciation & Amortization $12,000 $12,000 $12,000

Change in Accounts Receivable $0 $0 $0

Change in Inventory ($5,815) ($2,950) $0

Change in Accounts Payable $0 $0 $0

Change in Income Tax Payable $2,232 ($116) $1,068

Change in Sales Tax Payable $0 $0 $0

Change in Prepaid Revenue

Net Cash Flow from Operations $26,917 $56,840 $85,216

Investing & Financing

Assets Purchased or Sold

Net Cash from Investing

Investments Received

Dividends & Distributions

Change in Short-Term Debt ($9,850) $156 $163

Change in Long-Term Debt ($3,833) ($3,989) ($4,152)

Net Cash from Financing ($13,683) ($3,833) ($3,989)

Cash at Beginning of Period $67,000 $80,234 $133,240

Net Change in Cash $13,234 $53,007 $81,226

Cash at End of Period $80,234 $133,240 $214,467

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Competition

Java Culture’s direct competitors will be other coffee bars located near the University of Oregon
campus. These include Starbucks, Cafe Roma, The UO Bookstore, and other Food service establishments
that offer coffee.