Grand Cafe – Premium Coffee Bar Near Moldova State University

Market Analysis

The business will operate at 2300 square foot coffee bar within a walking distance from the Moldova State University. This location has been secured by the owner by 3 years of lease and there is an alternative to extend as well. The needed start-up funds are of €170,000 out of which €140,000 have already been provided. The balance capital will be taken as a commercial loan from the local bank.

The cafe is anticipated to enhance the sales revenue from €584,000 in financial year 2018 to €706,000 in the third year. Since Grand Cafe will strive to hold up a 65% of gross profit margin and the appropriate operating expenses therefore it is expected to get net profits expand from €100,000 to €125,000 in the same duration. 

 Grand cafes objectives for the initial year of operations are:

• to be selected as the best new coffee bar in the region by the local cafe guide,
• to become profitable from the first month of operations (Ghandour, 2014),
• to uphold 65% of gross margin

 Grand Cafe the keys to success will be:

• the marketing strategies focusing on building a solid base of loyal clients along with maximization of sales of high margin items like espresso (Cebano et al. 2018),
• training the staff members for ensuring the best coffee preparation methods,
• The store design that will be appealing to the clients and laid down for quick and efficient operations.

Grand Cafe will put in the best efforts for creating a unique location where the clients can socialize with one another in a relaxing environment along with the excellent brewed coffee or espresso in town (Bridonneau, 2015). The customers will get help in relieving the daily stress by getting Peace of mind by convenient site, great ambience, friendly customer service and high quality of drinks. The investment of profits will be there for increasing the employee satisfaction and generating constant returns for the shareholders.

The Grand Cafe will be a limited liability organisation selling coffee, snacks and other beverages in the 2300 square feet premium coffee bar situated besides the Moldova State University in Chisinau. The main investment will be done by XXXX and YYYY who cumulatively will be owner of 70% of the company. The start-up loss of the organisation is expected to be €27680.

Grand Cafe is registered as a limited liability Corporation in the state of Chisinau. xxx possesses 51% of the company with his cousin YYYY and ZZZZ holding minority state in The  Grand Cafe LLC. 

The start-up expenditures involve:

• Marketing and promotion expenditures for the grand opening of Grand Cafe with the amount of €3500 and flyer printing for 0.04 €per copy with mm flyers for the entire amount of €3580.
• The legal expenditure to get licensing and permits along with the accounting services with the total of €1300.
• The consultant fee of €3000 given to LMN espresso services for assistance in establishing the company.
• Insurance coverage has the total premium of €2400 with the property casualty insurance, worker compensation insurance, and general liability.
• The restructuring of the premises will cost to around €10000,
• prepaid rent expenditure for one month is €1.76 per square feet with the total cost of €4400
• the remaining start-up expenditures involving stationery of €500 and phone bills and utility services of €2500

The required assets for the start-up will be of €142320 involving:

• start-up inventory amounting to €16027 which means
  • the office supplies of €287,
  • retail supplies of €1840 including napkin, coffee back, cleaning material etc,
  • coffee filters, salads, sandwich, beverages, baked items and tea etc will be of €7900,
  • the main ingredient would be coffee beans with 12 variety of brands and 5 decaffeinated brands costing to €6000
• The equipments for the business will be of €59170 which will involve:
  • coffee grinder of €200,
  • coffee maker of €900,
  • espresso machinery of €6000,
  • food service equipments such as Blender, refrigerator, toasters, microwave, dishwashers etc. costing to €18000,
  • counter area equipments such as sink, ice machine, countertop, etc of €9500,
  • storage hardware such as food cases, shelves, utensil rack, and dustbins will be of €3720.
  • The serving area will need flatware, plate, glassware and that would be of around €3000,
  • office equipments involve furniture, phone, pc, file cabinets, fax or printing machines for €3600
  • the store equipments involve signage, security, ventilation, cash register costing to €13750 and the other miscellaneous expenditure will be of €500.

The finances of the company will be from two key sources that is investment from the owners and bank loans. The two owners named as XXX and YYY have given a contribution of €70,000 and €30000 respectively. The remaining investors give a contribution of €40000 so the total investment made is €140000. the balance of €30000 for covering the expenditures of start-up and buying assets came from two loans from the bank that is a long run loan of €20000 that would be for 5 years and loan of €10000 for 1 year. These loans had been secured by the Procredit Bank. Therefore the entire start-up loss is expected to be of €27 680. The given chart shows a summary of the junctions and Expectations of the start-up along with the information details in the tabular format as below: 

START-UP REQUIREMENTS
Start-up Expenses
Legal	€1,300
Remodeling	€10,000
Insurance	€2,400
Other	€2,500
Consultants	€3,000
Brochures	€3,580
Rent	€4,400
Stationery etc.	€500
TOTAL START-UP EXPENSES	€27,680
Start-up Assets
Other Current Assets	€0
Start-up Inventory	€16,027
Long-term Assets	€59,170
Cash Required	€67,123
TOTAL ASSETS	€142,320
Total Requirements	€170,000
START-UP FUNDING
Start-up Assets to Fund	€142,320
Start-up Expenses to Fund	€27,680
TOTAL FUNDING REQUIRED	€170,000
Assets
Additional Cash Raised	€0
Cash Requirements from Start-up	€67,123
Cash Balance on Starting Date	€67,123
Non-cash Assets from Start-up	€75,197
TOTAL ASSETS	€142,320
Liabilities and Capital
Liabilities
Accounts Payable (Outstanding Bills)	€0
Other Current Liabilities (interest-free)	€0
Current Borrowing	€10,000
Long-term Liabilities	€20,000
TOTAL LIABILITIES	€30,000
Capital
Planned Investment
XXXX	€70,000
YYYY	€30,000
Remaining investors	€40,000
Additional Investment Requirement	€0
TOTAL PLANNED INVESTMENT	€140,000
Loss at Start-up (Start-up Expenses)	(€27,680)
TOTAL CAPITAL	€112,320
TOTAL CAPITAL AND LIABILITIES	€142,320
Total Funding	€170,000

Start-up Requirements

The Grand Cafe will be situated on the ground floor of the commercial building at Alexei Mareevici St 60, Chisinau. The company has God the vacant premises of 2500 square feet for one year only which was earlier occupied by a hair salon. The choice is given in the lease contract for renewing for the next 3 years with the predetermined rate that will be executed as per the financial strength of the Grand Cafe. The property is situated in the commercial block within the walking distance from the university and therefore it connects the area with busy downtown commercial places. There is necessary water and electricity hook up and a little restructuring is required for accommodating kitchen, storage space and espresso bar. The clean and open interior design of the coffee bar will have modern utility his conveying the quality of soft beverages and items along with the right mix of relaxing space for people (Miller, 2012). There will be clear window display by which the password by can see the clients enjoying their drinks and the electric signal will be displayed outside the coffee bar with the books so that the customers traffic can be gained. 200 square feet will be allocated to the back office and 2300 square feet will be allocated to the coffee bar find the seating area will be of 15 tables with two bathrooms, one kitchen and one Storage Area. Seating area will acquire around 55% of the entire area that is of 1260 square feet. The production area will be of 600 square feet with the 440 square feet allocated to customer service.

• The best tasting coffee beverages in the area with high quality ingredients with the strict adherence to preparation guidelines (Coulton, 2011).
• Brewed coffee, espresso drinks with a few refreshments and beverages
• Pastries, small salads and sandwiches can also be offered.
• Coffee beans sold for the gourmet customers who want to prepare coffee at home
• Free books and magazines which can be read inside the coffee bar.

2000 flyers distributed in the neighbourhood, campus of the university, commercial area, malls, and chosen office buildings. On this will be done two weeks before the starting of the Grand Cafe. After this the free postcards with the endorsement of the Grand Cafe will be printed for increasing the visibility of the cafe among the users.

There are around 50,000 individuals who reside in Chisinau area and 10% of them usually come to the Moldova State University. The forecast has been made by the past tourism and therefore we are targeting 200 visitors daily.

The Grand Cafe will focus its marketing practic3s on reaching the university faculty and students, people working in the commercial buildings near the cafe and the segment of teenagers. The market research shows that these customer groups are who are expected to purchase gourmet coffee items. The consumers of gourmet coffee are global and in all income groups depending on education levels, so the nearness to the campus will give access to targeted clients.

Location

The chart underneath displays total potential of market (in terms of clients) of gourmet coffee drinkers in the chosen area:  

MARKET ANALYSIS
		YEAR I	YEAR II	YEAR III	YEAR IV	YEAR V
Potential Customers	Growth						CAGR
Teenagers	1%	€3,000	€3,030	€3,060	€3,091	€3,122	1.00%
Office workers	2%	€8,000	€8,160	€8,323	€8,489	€8,659	2.00%
Students and Faculty	2%	€18,000	€18,360	€18,727	€19,102	€19,484	2.00%
Other	0%	€5,000	€5,000	€5,000	€5,000	€5,000	0.00%
Total	1.63%	€34,000	€34,550	€35,110	€35,682	€36,265	1.63%

The Grand Cafe will cater to individuals who wish to get their daily cup of great coffee with relaxing atmosphere. The age differs even though the location is in proximity to the campus of University therefore most of the customers will be the faculty and college students. A lot of students feel that coffee shops are convenience place to read, relax, study, and meet people without paying the cover charges (kirugumi, 2015). This will help in getting a loyal client base for the company.

The coffee consumption has depicted a constant growth rate of 2.5 % in the past decade and the retail coffee industry has been rising in the chosen area. The regional climate with long rainy seasons is highly useful for consuming hot non alcoholic beverages and when there are hot dry summers than people go to Café for drinking ice drinks (Quader, 2013). Coffee has been important constituent of the lifestyle of people.

The main competitors for the business will be Bar Canete and Enigma. These are considered to be the top competitors because they also offer that similar kind of surfaces. The competition is highly stiff and therefore the organisation will train the staff, market for higher level keep a check on the quality of goods and services and use the modern technology so that it can stay ahead in the competition and enhance the revenues. It is important to understand the competitions that exist in the industry so that appropriate strategies can be introduced.

The key cause for the customers to come back to a particular coffee bar is a great tasting coffee, fast service and pleasing atmosphere (Kasnaeny K, 2013). Even though, as stated earlier, coffee utilization is uniform all over different income segments, The Grand Cafe will price its items offerings competitively. We strongly consider that selling coffee with a great service in nice surroundings will assist in building a strong set up of loyal customers.

As per the Ansoff’s matrix there is growth strategy to be employed in this cafe/ cafe.

• Market penetration- The current market segment could be utilised with the existing products and services so that market share can be expanded.
• Market development – As per the Ansoff’s matrix, the growth and development will be sort by targeting new market segment.
• Product development – The current market segments would be used for developing new products (MONSHOUWER, VAN LAAR & VOLLEBERGH, 2011).
• Diversification- A new venture is expected to be used for diversification and adding new products to the new market segments.

The marketing goals will be dependent on:

• Satisfying the customers and expanding business loyalty,
• generating traffic to the cafe (Müller, Mitchell & de Zwaan, 2015),
• Achieving the financial goals.

The Grand Cafe’s marketing strategy will be focused at acquiring new customers, keeping hold of the existing clients, making clients to spend further and come back quite frequently. Setting up a loyal customer base is of a supreme significance because such customer core will not only produce the majority of the sales but also will offer complimentary referrals.

Competitors

The Grand Cafe will position itself as exceptional coffee bar where its customers can not only take pleasure in a cup of flawlessly brewed coffee but also use their time in an ambient atmosphere. relaxing sofas and chairs, soft light and quiet soothing music will assist the clients to relax from the every day stresses and will set the Grand Cafe apart from current competitors.

The Grand Cafe baristas will deal with the sales transactions. To accelerate the customer service, minimum two workers will be servicing customers–while one worker will be busy in preparation of the customer’s order, the other worker will handle the sales transaction. Afterwards, all the sales data recorded on the programmed.-of-sale terminal will be assessed for marketing goals. For building up of client base, the Grand Cafe will utilize banners and fliers, use client referrals and cross-promotions with other firms in the society. Also, customer retention schemes will be applied to ensure the customers are returning and spending more time at the coffee bar.

Food costs are taken at 1/4th for coffee beverages and half for pastries and retail beans. Closeness to the University campus will state some sales seasonality with revenues somewhat declining for the duration of the school break periods. The chart and table underneath delineate our projected sales predictions for the upcoming three years:

SALES FORECAST
	YEAR 1	YEAR 2	YEAR 3
Sales
Coffee beans	€87,600	€96,360	€105,996
Coffee beverages	€350,400	€385,440	€423,984
Pastries, etc.	€146,000	€160,600	€176,660
TOTAL SALES	€584,000	€642,400	€706,640
Direct Cost of Sales	Year 1	Year 2	Year 3
Coffee beans	€43,800	€48,180	€52,998
Coffee beverages	€87,600	€96,360	€105,996
Pastries, etc.	€73,000	€80,300	€88,330
Subtotal Direct Cost of Sales	€204,400	€224,840	€247,324

For internal analysis the tools and equipments, supplies, value chain, licences, insurance, performance assessment and staff assessment has to be carried out. The equipment and supplies would be required for running the cafe smoothly. It is important that in a cafe there are modern equipments, pots pans dishwasher, cookware, refrigerator, freezers. The cost assessment for all these has been done in the previous section.

The licences will be required for operations from local authorities of Moldova and therefore health permit is needed which will require inspection of the place of work.

The staffs have to be properly trained and there has to be a location of a backup for IIT staff members so that in case of any absence or attrition the operations of the cafe do not suffer. For this the cross training will be provided to the staff members.

A full-time manager will be recruited to manage the everyday operations at The Grand cafe. The applicant chosen has had 4 years of managerial experience in the same industry in Barcelona. This individual’s roles will comprise managing the personnel, placing order for stock, handling suppliers, creating a marketing strategy and carry out other daily managerial tasks. We consider that our candidate has the accurate experience for this position. A profit-sharing agreement for the manager might be well thought-out as per the initial year operational outcomes.

With average monthly fixed costs of €20300 in first year and an average margin of 65%, The Grand Cafe’s break-even sales quantity is approximately €31,300 per month. As revealed below, the corporation is likely to produce such sales level from the beginning.

BREAK-EVEN ANALYSIS
Monthly Revenue Break-even	€31,247
Assumptions:
Average Percent Variable Cost	35%
Estimated Monthly Fixed Cost	€20,311

SALES FORECAST
		MONTH 1	MONTH 2
Sales
Pastries, etc.	0%	$10,000	$11,250
Coffee beans	0%	$6,000	$6,750
Coffee beverages	0%	$24,000	$27,000
TOTAL SALES		$40,000	$45,000
Direct Cost of Sales		Month 1	Month 2
Pastries, etc.		$5,000	$5,625
Coffee beans		$3,000	$3,375
Coffee beverages		$6,000	$6,750
Subtotal Direct Cost of Sales		$14,000	$15,750

Conclusion

For setting up a coffee shop, the business idea has been developed and a great research has been carried out from different articles, journals and other secondary sources so that the business plan is effective and beneficial. The business idea has been created with the identification of potential market and segmentation so that this cafe unfavorably competes with the existing players in the industry.

References

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Cebanu, S., Tutunaru, M., Deleu, R., Cazacu-Stratu, A., & Friptuleac, G. (2018). Promoting and supporting physical activity and sport among young people in the Republic of Moldova. Palestrica Of The Third Millennium – Civilization And Sport, 13(3), 158-164.

COULTON, R. (2011). ‘The Darling of the Temple-Coffee-House Club’: Science, Sociability and Satire in Early Eighteenth-Century London. Journal For Eighteenth-Century Studies, 35(1), 43-65.

Ghandour, A. (2014). Identifying Dimensions of Business Continuity Plan from Common Expressions among Business Continuity Professionals. International Journal Of Business Administration, 5(3).

Kasnaeny K, K. (2013). Patronage Buying Motives of Coffee shop’s Consumers. IOSR Journal Of Business And Management, 8(3), 19-22.

kirugumi, j. (2015). ROLE OF TOTAL QUALITY MANAGEMENT IN KENYAN COFFEE HOUSE REVENUE GENERATION. Archives Of Business Research, 3(2).

Miller, M. (2012). Europe and the maritime world. Cambridge: Cambridge University Press.

MONSHOUWER, K., VAN LAAR, M., & VOLLEBERGH, W. (2011). Buying cannabis in ‘coffee shops’. Drug And Alcohol Review, 30(2), 148-156.

Müller, A., Mitchell, J., & de Zwaan, M. (2015). Compulsive buying. The American Journal On Addictions, 24(2), 132-137.

Quader, S. (2013). Drinking Coffee in Europe: A Demographic Analysis. SSRN Electronic Journal.