Short-term funding: The Grind roastery
Table of contents
Executive Summary
Information about the Industry
Marketing Plan
Competitor Analysis
3 Year Income Statement
Assumptions
3 Year Proposed Funding Schedule
Break-Even Analysis
Expanding Internationally
Disadvantages and Advantages of Debt Financing
Venture Capital
Academic and Business References
Within my presentation, I will be reviewing my marketing plan along with an analysis of my competitors and why I feel I would be successful. I will review a 3 year plan with you with the hopes you can invest in my start up business.
2
Executive summary
All coffee is different. From the region, to the farm, to the roaster, to the brewer, all coffee is different. The key is to inform and educate ourselves on these variables and make small decisions in order to ensure excellency in flavor and consistency.
39% of younger consumers drink gourmet coffee – suggesting new opportunities for coffee companies.
40% of daily consumers are drinking coffee prepared out-of-home, reflecting a continuing trend in behavior as lifestyles become increasingly mobile. (Infographic: National Coffee Drinking Trends 2017).
The Grind Roaster provides the highest quality coffees, teas, sourced from the 13 nations in the world and crafted in unique and exciting ways. The company creates new coffee and tea recipes and improves upon existing ones to create that novelty that 62% of consumers love. There is a growing public awareness of organic products and a responsible sourcing and that is what The Grind Roaster looks to target: the needs, cares and concerns of both modern-day coffee lovers. The Grind realizes that it is not just the modern-day coffee drinkers, but also those that can just appreciate a good “cup of joe.” The Grind will offer low cost cups of pick-me-up. The company will offer coffee, tea and desserts; all created by company owners and associates. The company is seizing the moments of coffee needs and will use that to capture customers. “The average U.S. coffee drinker consumes 2.7 cups per day, with the average size of a coffee cup measuring 9 ounces. In total, approximately 150 million Americans drink 400 million cups of coffee per day -- or more than 140 billion cups per year” (Saad, 2015). The retail value of the U.S. coffee market is estimated to be $48 billion, according to the National Coffee Association (NCA). All coffee is different. From the region, to the farm, to the roaster, to the brewer, all coffee is different. The key is to inform and educate ourselves on these variables and make small decisions in order to ensure excellency in flavor and consistency.
“39% of younger consumers drink gourmet coffee – suggesting new opportunities for coffee companies.
40% of daily consumers are drinking coffee prepared out-of-home, reflecting a continuing trend in behavior as lifestyles become increasingly mobile” (Infographic: National Coffee Drinking Trends 2017).
I have been in management for many years and my loyalty and integrity is very high for my own expectations. I am committed to make this business work and I am searching for an investor that would believe and trust in my ability to make this business work. I am looking for $500k to help me get started in this project.
3
Industry Information
Frequency of Daily Coffee Consumption
This refers to consumers who reported having consumed a coffee beverage within the past day:
Ages 13-18: 37 percent, up 6 percent from last year
Ages 18-24: 50 percent, up 2 percent from last year
Ages 25-39: 63 percent, up 3 percent from last year
Ages 40-59: 64 percent, up 11 percent from last year
Ages 60+: 68 percent, up 4 percent from last year
Daily ‘Gourmet’ Consumption Daily consumption of ‘gourmet’ coffee beverages generally saw much higher rates of increase in 2017:
Ages 13-18: 29 percent
Ages 18-24: 39 percent, up 3 percent from last year
Ages 25-39: 50 percent, up 9 percent from last year
Ages 40-59: 39 percent, up 15 percent from last year
Ages 60+: 34 percent, up 10 percent from last year (11 percent); and nitrogen-infused (3 percent).
Coffee is one of the most consumed commodities in the world; loved by billions worldwide. It is attributed to maintaining production levels of all workers globally. Coffee is also the second-most-traded commodity. Consumption is chiefly seen in industrialized nations, however, its production in less developed nations. The coffee supply chain consists of growth, harvest, import/export, roasting, distribution, and retail. It is the top agricultural export for twelve countries and over 25 million small producers rely on coffee for a living. According to The National Coffee Association, experts measured all the ways that coffee contributes to the U.S economy:
“The total economic impact of the coffee industry in the United States in 2015 was $225.2 billion
Coffee-related economic activity comprises approximately 1.6% of the total U.S. gross domestic product
Consumers spent $74.2 billion on coffee in 2015
The coffee industry is responsible for 1,694,710 jobs in the US economy
The coffee industry generates nearly $28 billion in taxes (including ancillary goods)” ("National Coffee Association", n.d.).
The above information was gathered from Brown, N. (2017). Daily Coffee News. Retrieved from https://dailycoffeenews.com/2017/03/27/2017-us-coffee-drinking-trends-include-more-gourmet-more-youth/
4
Marketing Plan
Marketing Objectives
Competition
Trends: Pricing:
Distribution: Offerings
Promotions
Logo Placement
The marketing plan will emphasize the company’s commitment to bringing a less expensive and flavorsome cup of coffee to customers. This plan will cover the target market, competition within the market and any trends, both current and foreseeable. It will also cover pricing, distribution, offerings and promotions.
Marketing Objectives: Establish the company as a leading coffee retail sales chain in Monmouth County, NJ. The most recent census totaled 625,846 residents inside the county ("U.s. Census Bureau", 2016). Target consumers consist of coffee and tea drinkers of all ages and races.
Competition: Dunkin Donuts and Starbucks are the main competitors, however both lack the “hometown appeal.” The Grind Roaster will focus on locally owned and ran and emphasize this quality.
Trends: The Grind Roaster will be located in a commercial area with a hospital across the street, a high school and middle school close by and a train station that travels the Jersey Shore Coastline and enters into New York City. These are advantages that would not only attract the professionals who are in need of coffee, but also attract those that want a safe place to hang out with friends after school and be able to do homework.
Pricing: The high expense of sourcing will be offset by creating a lean enterprise that systematically reduces and eliminates waste. The higher cost will be justified to the consumer by emphasizing the quality of the product, and its minimal impact on the environment.
Distribution: The product will be supplied from physical retail locations similar to Starbucks and Dunkin Donuts. Coffee drive-up kiosks will also be used to increase availability in high population areas. Customers will also be able to purchase coffee grounds and teas from the company’s online website.
Offerings: The Grind Roasters will offer a rewards program that uses a business card that gets punched for each coffee you purchase. After 10 coffees, you get the eleventh one free.
Promotions: The company will employ online and radio promotions. The radio promotions will be short and evoke a feeling of community. Online promotions will be used via social media venues. Word of mouth for local businesses is huge!
Brand Recognition is key to any business. Th Grind Roaster will include a logo placement on cups and merchandise.
5
Competitor Analysis
Starbucks:
23,000 chain stores globally. Its
High brand recognition
Market share is 39.8%
Offerings include coffee, tea, and other consumables such as breakfast items, sandwiches, and prepackaged goods
Dunkin Donuts:
12,000 locations in 36 countries
Market share is 29.1%
Offerings include donuts, bagels, and other baked goods.
Coffee and other beverage sales account for over 65% of sales
McDonalds:
McDonald’s McCafe chain have more than 1300 operations world-wide
Success credit to McDonald’’s name brand
Starbucks, Dunkin Donuts and McDonald’s McCafe all have brand recognition on their side. The Grind Roaster will prioritize brand recognition and logo creation.
As a start-up business we must remember the customers and competition. We must constantly assess how wel or porrly they are doing. We must also assess what the needs of our customers are, constantly.
6
3 Year income statement projections
| The Grind Roaster | 3 Year Income Statement | |||||||
| INCOME | 2017 | 2018 | 2019 | % of TS | ||||
| SALES | ||||||||
| Q1 | $455,000 | $515,000 | $595,000 | |||||
| Q2 | $465,000 | $570,000 | $675,000 | |||||
| Q3 | $445,000 | $525,000 | $660,000 | |||||
| Q4 | $455,000 | $550,000 | $635,000 | |||||
| Total Sales (TS) | $1,820,000 | $2,160,000 | $2,565,000 | |||||
| COST OF GOODS | ||||||||
| Beginning Inventory | $255,000 | $267,000 | $268,000 | |||||
| Purchases and Production Costs | $260,000 | $255,000 | $262,000 | |||||
| Shipping and Delivery | $110,000 | $112,000 | $115,000 | |||||
| Labor (wages and payroll) | $625,000 | $635,000 | $636,000 | |||||
| Other | $27,000 | $28,000 | $28,000 | |||||
| Less Ending Inventory | $95,000 | $96,000 | $89,000 | |||||
| Total Cost of Goods Sold | $1,372,000 | $1,393,000 | $1,398,000 | |||||
| GROSS PROFIT | $448,000 | $767,000 | $1,167,000 | |||||
| Non-Operating Income | ||||||||
| Interest Income | ||||||||
| Rental Income | ||||||||
| Other | ||||||||
| Total Non-Operating Income | ||||||||
| Total INCOME | $448,000 | $767,000 | $1,167,000 | |||||
| EXPENSES | ||||||||
| OPERATING EXPENCES | ||||||||
| Accounting and Legal | $18,000 | $18,000 | $18,000 | |||||
| Advertising | $150,000 | $150,000 | $150,000 | |||||
| Deprecition | $45,000 | $45,000 | $45,000 | |||||
| Dues and Subscriptions | ||||||||
| Insurance | $12,000 | $12,000 | $12,000 | |||||
| Interest Expense | ||||||||
| Maintenance and Repairs | $8,000 | $8,000 | $8,000 | |||||
| Office Supplies | $10,000 | $10,000 | $10,000 | |||||
| Payroll Expenses | $9,500 | $9,500 | $9,500 | |||||
| Postage | ||||||||
| Rent | $26,000 | $27,000 | $28,000 | |||||
| Research and Development | ||||||||
| Salaries and Wages | ||||||||
| Taxes and Licenses | $13,000 | $13,000 | $13,000 | |||||
| Telephone | $3,000 | $3,000 | $3,000 | |||||
| Travel | 10,000 | 12,000 | 12,000 | |||||
| Utilities | $15,000 | $15,000 | $15,000 | |||||
| Web Hosting and Domains | $1,200 | $1,200 | $1,200 | |||||
| Other | ||||||||
| Total Operating Expenses | $320,700 | $323,700 | $324,700 | |||||
| NON-REOCURRING EXPENSES | ||||||||
| Furniture, Equipment and Software | $80,000 | $80,000 | $80,000 | |||||
| Gifts | $2,000 | $2,000 | $2,000 | |||||
| Other | ||||||||
| Total Non-Reocurring Expenses | $82,000 | $82,000 | $82,000 | |||||
| Total EXPENSES | $402,700 | $405,700 | $406,700 | |||||
| Net income Before Taxes | $245,300 | $553,300 | $942,800 | |||||
| Income Tax Expense | $78,917 | $238,037 | $389,942 | |||||
| NET INCOME | $166,383 | $315,263 | $552,858 | |||||
| Owner Distributions / Dividends | $83,192 | $157,632 | $276,429 | |||||
| Adjustment to Retained Earnings | $83,192 | $157,632 | $276,429 |
The 3 year income statement projections shows that The Grind Roasters will turn a profit and that expenses remain steady.
7
Assumptions
Sales growth will average 25-27% annually
Payroll (25-34% of revenue)
Beginning inventory (10-14% of revenue)
Purchases and production goods (10-14% of revenue)
Advertising (6-8%)
The Grind will focus the assumption of growth with how the average coffee companies initially performed. Production and payroll will be the greatest expenses. Other costly expenses are associated with advertising (to raise awareness), initial startup (location, hiring, machinery/equipment, and inventory acquisition), and any costs that may be driven by promotions and/or special offers. Coffee and tea consumers visit their establishments on average, 6 times weekly. The Grind Roaster knows that if we are able to stay within the price rates or cheaper and stay committed to the community, then we will be able to build or customer base, not only by the value of our work but also from word of mouth from our customers.
8
3 year proposed funding schedule
| 3 Year Proposed Funding Schedule | ||||||
| Amount | Firm | Amount Approved | Date | Date Received | Fund Application | |
| $250,000 | Founder/Owner | $250,000 | 1/8/18 | 1/23/18 | Start-up acquisition of store front rent ($26,000) and equipment/furniture ($80,000) | |
| $500,000 | Bank | $500,000 | 1/9/18 | 1/24/18 | Inventory acquisition ($255,000) and hiring labor ($84,500) | |
| $325,000 | Partner | Capital infusion, utiities and legal services | ||||
| $100,000 | Partner | Capital infusion (owner equity) | ||||
| Total Requested | $1,175,000 | |||||
| Total Approved | $750,000 | |||||
| Difference | $425,000 |
This funding schedule is based on The Grind Roaster’s need for capital. Total requested is $1.175M in funding with $750,00 having been approved and applied.
9
Break-even analysis
Breakeven = Fixed costs / (Unit Selling Prices – Variable Costs)
Average unit selling price for cup of coffee across all chains = $2.70
Assumed average unit selling price for The Grind Roaster coffee $2.75
Fixed costs = $1,492,700
Variable costs per unit = $1.65
Breakeven = $1,492,700 / ($2.75 - $1.65) = 1,357,000
The break-even analysis shows that The Grind Roaster must sell over 1 million cups of coffee to make a profit. Please keep in mind that this analysis is based off a regular cup of coffee priced at $2.75 and not on any of the specialty coffees on our menu. A separate break-even analysis was also performed for a Guatemalan medium roast is priced at $3.25 a cup would create a break-even analysis under 1 million.
10
Fixed Cost
Variable Cost
Cost Bid Pricing
Price Bid Costing
Formula
International Expansion
Japan: one of largest consumers of coffee and tea in the world
United Kingdom: coffee sales exceed $1B
Italy: tremendous love for coffee and mass consumer per capita
Expanding internationally to outsource labor and reduce manufacturing costs is of interest to The Grind Roaster. The counties selected for expansion represent some of the greatest industrialized coffee drinking countries in the world.
Japan: one of largest consumers of coffee and tea in the world
United Kingdom: coffee sales exceed $1B
Italy: tremendous love for coffee and mass consumer per capita
The factors to be considered are the economic indicators such as status of import/exports, market size, the rate of growth and the country’s economy. U.S. market share and how hard it is to enter into the industry are key factors as well as cultural and legal differences.
Tax rates for each country:
Japan: 30.86%
United Kingdom: 19%
Italy: 27.9%
11
Decision tree
Start-up of $300,000
Location size
Paper Ads
Social Media
Small
Radio Ads
Paper Ads
Social Media
Medium
Advertising Methods
Advertising Methods
This decision tree is based on $300,000 initial funding. The size of the storefront would definitely be an issue and that will then affect advertising, which in turn will affect sales. Having $200,000 given in 3 years is not sufficient.
12
Advantages and disadvantages of debt financing versus selling company stock
Debt Financing
Advantages include:
Owners retain ownership of the firm provides greater degree of financial freedom than equity financing
Less administrative costs
Debt interest is tax deductible.
Disadvantages include:
The firm is obligated to pay back the debt monthly, lenders may impose harsh penalties for late payments, failure to pay can adversely impact a company’s credit score, and it can be hard for newer firms to obtain since they have no established credit.
Selling Company Sock
Advantages:
No New Debt
Shared Risk
Disadvantages:
Loss of Ownership
Loss of Control
Advantages: Retain control over decision making and business relationship ends once you repay loan in full. Amount you pay in interest is tax deductible, which reduces net obligation. It is easier to plan how much capital and interest you will pay back each month.
Disadvantages: Must have good enough credit rating to receive financing. Good financial judgement is needed to make repayments; do not be overly dependent on debt because they could be considered “high risk”. Business assets could be at risk as collateral, including personally.
Common Stock: Investors have a say at meetings and benefit from higher stock prices and dividends. Companies pay the cost of issuance for underwrites the new issue. Maintain credit rating by issuing stock and not taking on debt.
13
Venture capital
Business Plan
Proposed meeting
Due diligence
Term Sheet
Venture capital is the financing that investors provide start-up companies that are believed to have long-term growth potential. These investors are usually monetarily rich people or an investment bank. It does not have to be monetary, however, it can also be in some form of expertise. Investors are looking for above-average returns. One downside is that investors often get equity or stock in the company and are able to help make decisions for the company. One can see venture capitals more so for new or emerging companies.
First there is a business plan proposed and meeting, which includes a description of the opportunity at hand and market size; thorough investigation of the management; review of competitive landscape and solutions; financial projections; executive summary and business plan and capitalization table. All of this will be reviewed by the investor. Then a meeting will occur if you fit with the investors preferences. Then there is a due diligence phase that will include a lot of communication, interviews, references, strategy evaluations, just to name a few. Then, a term sheet will be presented by the investor that states the basic terms and conditions of the investment agreement.
I would not advise venture capital for The Grind Roaster. The issue with the start-up company I have presented is that there are so many alternatives. This industry and the product is not truly unique. I further believe that the return will not be as great, right away and the fact that an investor may play a role in how I am dreaming to open and run the company is not cohesive to my business plan and strategy.
14
Academic and business references
Bank, E. (n.d.). Chron. Retrieved from http:// smallbusiness.chron.com/advantages-issuing-common-stock-vs-long-term-debt-76860.html
Brown, N. (2017). Daily Coffee News. Retrieved from https://dailycoffeenews.com/2017/03/27/2017-us-coffee-drinking-trends-include-more-gourmet-more-youth/
Investopedia. (n.d.). Retrieved from https://www.investopedia.com/terms/v/venturecapital.asp
Kunigis, a. (n.d.). Business Owner's Playbook. Retrieved from https:// www.thehartford.com/business-playbook/in-depth/debt-financing
National Coffee Association. (n.d.). Retrieved from http://www.ncausa.org
National Coffee Association. (2017). Retrieved from https://nationalcoffeeblog.org/2017/04/03/infographic-national-coffee-drinking-trends-2017/
Academic and business references
Saad, L. (2015). GALLUP News. Retrieved from http:// news.gallup.com/poll/184388/americans-coffee-consumption-steady-few-cut-back.aspx
Statistica. (2017). Retrieved from https://www.statista.com/statistics/543629/us-coffee-retail-sales /
TradingEconomics. (2018). Retrieved from https:// tradingeconomics.com/united-kingdom/corporate-tax-rate
TradingEconomics. (2018). Retrieved from https:// tradingeconomics.com/japan/corporate-tax-rate
TradingEconomics. (2018). Retrieved from https:// tradingeconomics.com/italy/corporate-tax-rate
U.S. Census Bureau. (2016). Retrieved from https://www.census.gov/quickfacts/fact/table/monmouthcountynewjersey/PST045216
Get help from top-rated tutors in any subject.
Efficiently complete your homework and academic assignments by getting help from the experts at homeworkarchive.com