Marketing Plan

Ally Cafe

Prepared By:
Sudarshan Paudel

11/29/2015

Executive Summary
The interest by consumers in the coffee house industry is sweeping the Kathmandu
valley. Taking advantages of such demand Ally Caf is positioned to open at New
Baneshwor area. Ally Cafe will provide varieties of coffee and some food items. Apart
from the product, Ally Caf provides meeting hall reservation service for different event
like seminar, birthday party etc. to its customer in its own premises. It will even provide
free Wi-Fi service, some daily newspaper and magazines. It aims to serve its customer
quality food and services at reasonable price.
Ally Cafe will come up with the motto Enjoy the Life fullest and will target mostly
young college students and young professionals. Its motto will reflect how it wants to be
positioned in the minds of the customers. It will be the place to socialize with your
friends and family.The interior design of the building will focus on projecting a relaxed
atmosphere.
Ally Caf aims to acquire 5% of market share now and increase to 10% in 2 years. The
main competitor of Ally Caf is Himalayan Java who is market leader in coffee house
business. The Ally cafe will follow differentiation strategy and will attempt to
differentiate itself by providing quality food and services at reasonable price. It will even
have first mover advantages as coffee house in New Baneshwor area.
The caf will use cost plus pricing method in which the caf plans to charge a markup of
30% to 50% on most of product it sales. The price for full day hall reservation is Rs 5000.
The event organized in this hall will be mostly be hi-tea party so it will serve mainly
items like Cappuccino, Sandwich and Cookies for event at discount price. The hall can be
used by customers at free of cost for maximum 2 hours if it is not reserved.
As promotion strategy AC will distribute flyers, advertisement in Facebook, daily
newspaper like Kantipur and Himalayan Times and F.M. radios & promotional campaign
in various events. AC will even distribute t-shirt, mug and sticker for first 100 customers
at grand opening day. The total advertisement cost is Rs. 160,700 for first year. After first
year, advertisement expense will be reduced largely since AC believes to capture market

in forthcoming year by providing quality product and services and depended mostly on
personal contract and word of mouth strategy
The sale for the first year is expected to be Rs 7,765,200. The sale is expected to increase
every year by 10%.The cost of goods sold is expected to be Rs 4,258,800 for first year.
The cost is expected to increase by 10%. The total capital requirement of the caf is
Rs. 2,000,000. The income statement for the five years shows the increase in net profit
after tax from Rs. 121,091 to a profit of Rs. 1,228,428 at the end of fifth year. Further, the
projected cash flow statement also shows a continuous cash surplus in the caf and the
surplus is following an increasing trend. The payback period is 3.38 years and NPV is
positive so this business is viable.

Introduction
Background about Coffee
The introduction of coffee to the human palate can be recorded as far back as the ninth
century. The first known coffee plantation was confined to Ethiopia, where its native
beans were first cultivated by Ethiopian highlanders. However, the Arab world began
expanding its trade horizons, and the beans moved into northern Africa where it was
mass-cultivated. From there, the beans entered the Indian and European markets, and the
popularity of the beverage spread all over the world.
The word coffee came into English in 1598 via Italian caff. This word was created via
Turkish kahve, which in turn came into being via Arabic qahwa, a truncation of qahhwat
al-bun or wine of the bean. Islam prohibits the use of alcohol as a beverage, and coffee
provided a suitable alternative to wine. Today, coffee is one of the most popular
beverages in the world.

Coffee in Nepal
Coffee culture in Nepal is relatively a new phenomenon. Tea was introduced in Nepal in
the mid 1800s and has been the main social beverage. The day of most people would
start with a cup of tea & any guest who comes to a house is offered tea first. Coffee
entered Nepal during the mid-1900 only. Tea as a social beverage had a hundred years of
head start over coffee and due to it; tea became the ubiquitous drink for all ages of
people. Coffee culture never caught on as much as tea drinking culture.
However, coffee is grown in Nepal at the altitude of 500 to 1500 meter above sea level
and the temperature is about 30 degree Celsius. Coffee is a high value cash crop with
environmental importance and is being popular among Nepalese people since last few
decades. It has been spreading in over 33 districts of the middle hill Zones. Districts like
Arghakhanchi, Kaski, Parbat, Lamjung, Lalitpur, Kavre, Sindhu Palchok, Gorkha, Ilam,
Nuwakot, Tanahu, Dhading, Sankhuwasava, Palpa, Gulmi and Makawanpur are
successfully growing and producing coffee beans. Of the two variety of coffee found
Arabica and Robusta, only Arabica variety is grown in Nepal. According to the

National Coffee Development Board in Kathmandu, Nepal's annual production is around

460 metric tons of cherry coffee.
Today, the Nepalese culture has slowly warmed on to coffee culture. Tourists who visit
Nepal, expatriates, and Nepalese returning from foreign countries have slowly brought in
the coffee culture. The trend of going out with friends for a cup of coffee and have
relaxed and fun time with them is increasing. Words such as espresso, cappuccino and
cafe latte have been common among Nepalese people too. Therefore change that has
taken place in lifestyle of Nepalese people due to globalization shows that there is great
scope of coffee house business in Nepal. In short, the "Dark Age" of coffee is well and
truly over.

Description of Business
Ally Caf (AC) is coffee house which will be located in New Baneshwor within 1700
square foot area. It will be regular meeting place especially targeted for 15 to 50 years
old, who are waited on by friendly and informed staff, and are offered the best made hot
or cold coffee, beverages and food in an invigorating ambience. It will come up with the
motto Enjoy the Life fullest and will target mostly young college students and young
professionals. Its motto will reflect how it wants to be positioned in the minds of the
customers. It will be the place to socialize with your friends. Drinking coffee would be an
experience; it would be an enjoyable moment because you would be sharing it with your
friends and family.
AC serves varieties of hot coffee and cold coffee, good tea and snacks. It serves fresh cup
of coffee of high quality at affordable price. AC will even serve Nepali Organic Coffee in
order to promote Nepali Coffee. AC will even facilitate its customer to organize small
event like seminar, success function, birthday party, re-union and farewell program in its
400 square feet meeting hall. To complement such event, this hall will even have special
Audio Video facilities which include, sound system, projector etc. Booking of hall will be
available for half day or full day at reasonable price. The customer can use the hall
without paying any additional charge for 2 hours if hall is not reserved
The interior design of the building will focus on projecting a relaxed atmosphere. It will
have basically wood and granite based interiors with

young colors of today like lime

green, yellow, orange, and purple. AC will be divided into three different areas. Some
will have tables and chairs, another will have couches, coffee tables and last area will be
meeting/party hall. It will have shelves filled with some books, magazines and daily
newspaper. Public Address system (PA) will be installed so that instrumental music can
be heard throughout. The reason behind selecting New Baneswhor as the location for AC
is that it is growing continuously as a major commercial place and has many established
business like educational institutions, departmental store, banks, showrooms etc. whose
employees prefer to have cozy caf to hang out in break time or after the work is over.
Besides this, it offers transportation facilities to almost any location in Kathmandu Valley.

Despite the fact that there are many established leaders in this business like Himalayan
Java, Illy, Kaldi, Central Perk. This is an innovative idea because these established coffee
house are mostly expensive and mainly targets business person and tourist. But, AC will
be the one whose main target customer will be college student and young professionals
and offer product and service at reasonable price. As expected by its name indeed AC
will be a good spot to gather with friends and relax on the couches or sit on chairs taking
a sip of coffee or any food items and using Wi-Fi or watching TV. It will even have
meeting room having capacity up to 40 people where variety of event can be organized.
In addition AC will have first mover advantages as a coffee house in New Baneshwor
area as there are many restaurant and bakery caf but not a coffee house which provides
varieties of coffee.

Statistics on Coffee Business

Nepal as a developing nation, its really hard to find the exact data about any industry. So
I have collected the data from various sources like business magazines & coffee shop
owners. So, these data are not official but are near to the real world.

Growth of coffee business in Kathmandu

450
400
350
300
250
200
150
100
50
0
2009

2010

2011

2012

2013

2014

2015

2016

Figure 1: Statistics of Coffee Business in Nepal

This figure shows the trend of coffee business in Kathmandu. The coffee business here
means only the coffee that is sold as drinking beverages in the caf & restaurants. Here

we can see that the increasing trend in this business from 2010 in very rapid growth rate
which is somehow decreased in year 2015 but still it is increasing. This trend shows that
there is an opportunity for coffee business because coffee is a new trend in the city and
its slowly replacing tea as a major beverage. As we dont have exact facts and figure
about this industry so this figure and data are collected from various personal sources like
journals, national newspapers, research papers of university students and some
information from the interview with the related people of this industry.
From the analysis of these resources, following table is created which gives the
information about the overall coffee business in Kathmandu. This also helps to determine
the factors that are important to make decisions regarding investing and marketing in this
business.
From around Rs 2 million to Rs 10 million on a single
Investment:

store. Around 50-60 percent of the investment made in a

coffee shop is spent on ambience and furnishing.

Price

Rs 100 to Rs 300 per cup.

Rs 10,000 to Rs 25,000 daily. Of the total sales, coffee

Business/Sales

accounts for 70 percent

The gap in sales during

the

winter

and

the 10-15 percent

summer
Ease of opening new Opening a coffee outlet costs 50-60 percent less than
business

opening a restaurant
Table 1: Facts about coffee business in Kathmandu

Assessment of Business Environment

SWOT Analysis
Strength:

Knowledgeable and friendly staff, we've gone to great lengths to find people with

a cafe experiences. Our staffs are both knowledgeable and eager to please.
State-of-the art equipment, Part of the Cafe de Server experience includes access
to state-of-the-art facility. Invigorating ambience where customers can enjoy

varieties of coffee and some other food items.

Upscale ambiance, when you walk into Cafe, you'll feel the difference. The
environment provide a cozy hideaway for meetings and small friendly gatherings.
Large round tables with displays viewable from above provide a forum for larger
gatherings. Last, but not least, quality cappuccino machines and a glass pastry

display case provide enticing refreshments.

Clear vision of the market need, Ally cafe knows what it takes to build an upscale
cafe. We know the customers, we know the technology, and we know how to

build the service that will bring the two together.

First mover advantage as a coffee house in New Baneshwor area. Which provides
quality product at affordable price and in addition it facilitate customers to
organize varieties of event like seminar, birthday party etc.

Weakness:

Not suitable for those who prefer variety of food. As the caf is mainly
specialized with coffee products and some snacks it will not be able to cater all

the needs.
Cost factor associated with keeping state-of-the-art facility. Keeping up with the
technology of the Internet is an expensive undertaking. Cafe needs to balance
technology needs with the other needs of the business. One aspect of the business
can't be sacrificed for the other.

Opportunities:

Growing population of coffee consumption in town, the trend shows that people
now prefer coffee over tea. Coffee now has become a part of social class and

people drink it to get associated with higher class of the society.

Growing demand of warm, calm environment in which people can come to
socialize, relax or even catch up on work added by the change in the life style of

the customers.
Increasing eat out trend in Nepalese society, the young generation of Kathmandu
city who are busy prefer to eat out rather than cooking at home. This trend will
help the caf as the no of customer will increase.

Threats:

Coffee is very easy to prepare to product so there will be always a possibility that
people will prepare themselves and there is competition from not only other
coffee shops but also from quick service and fast food restaurants, convenience

stores and bakery caf.

As the Nepalese raw coffee is getting good international market and there is huge

demand in Europe, there is high chance that the cost of raw materials will go up.
The political environment is not well settled in the country so it is always
uncertain to talk about that factor and it always poses threat to the business.

Environmental Analysis
Political Environment:

The political environment of any country affects the different kind of businesses that
exits. The political condition of our country is unstable, thus we may face many
obstacles in the operation of our business. There might be problems in the smooth
flow of our business i.e. acquiring raw materials, operating in the bandhs etc. It may
hamper the business to certain aspect because of bands and strikes. Due to which people
may not be able to come to the coffee house which will ultimately hampered the business.
Economic Environment:
Living standard of average Nepalese people has been high as compare to previous year
.In addition customer preference are increasing towards the coffee house where they
can find varieties of coffee and can organize some event are also increasing. Therefore it
wont be hard for AC to find the customer coming to coffee house.
Social-cultural Environment:
These days people are influenced by the western culture and their life style. To spend
some quality time they prefer to visit caf and all. There has been change in the cultural
aspect of the people and more and more people have started to go to the restaurants and
coffee house to hang out with friends and family. So due which it will be profitable for
this kind of coffee house.
Technological Environment:
Due to globalization the world has been technological advanced so we can purchase best
equipment at reasonable price and can even

give special training to employee. These

technologies will help to gain competitive edge in this competitive world. Technology has
changed the ways of how business operates now. This is leading to many new business
opportunities as well as making obstacles for many existing systems. Since the
infrastructure of country in telecommunication area is not so good. So businesses which
rely in such technology will always face challenge.
Legal Environment:

There is no restriction from the government while opening this coffee house. We can
register this coffee house under company act. In order to register this company under the
name of Ally Caf we need to fulfill some legal formalities as follows:
Need to submit an application form along with the Rs 5 stamp and necessary documents
like Article of Association, Article of Memorandum, attested copies of citizenship
certificate of the partners, a copy of the mutual agreement (if any) and the company
register stamp at the office of the Company Registrar, Tripureshwor, Kathmandu. Next
step is to take PAN number that is Permanent account number from In-land revenue
Department which situated at Lazimpat. To take PAN number necessary documents are:
Application form, Copy of the citizenship certificate of the Partners, Copy of the
company/firm registration certificate, two passport size photo of the Partners, and Hand
drawn sketch of the business location.
Ecological environment
Today the environment issues are taken seriously because the adverse effect of pollution
like global warming is creating problem for all the creature of the earth. Cafe itself and its
customers create a lot of waste so; the caf will have different dustbins for different
nature of wastes. To save the energy unnecessary lighting will not be used and to control
the sound pollution generated by the generator and music system will be minimized by
making the cafs surrounding sound absorber and keeping purchasing the generator
which produce low sound.
Competitors:
There is no direct competitor for this business in this location but if we take whole city as
a market then the main competitor would be Himalayan Java. The SWOT analysis of
Himlayan Java is performed for comparison purpose.

SWOT Analysis of Himalayan Java:

Strengths

Market leader in coffee product as it one of the pioneer business that helps to

promote coffee business in Nepal.

The brand image of Himalayan Java is very high particularly in city areas. It is

regarded as one of the high class caf where elite class of society goes.
It has many branches in different part of the country, which helps it to cater more
people and also to be known in the market.

Weakness

The cost of coffee per cup is high compared to other cafes and restaurants so

people of middle class and lower cant afford it.

It mainly focus its business for elite class people and business houses, so it
follows niche marketing strategy. It is not a good options for students and youths.

Opportunities

Increasing numbers of coffee drinking people and the developing culture of coffee

in Nepal.
Almost all of its branches are located in the tourist hubs so it can cater the tourists
also.

Threats

Presence of substitutes: cafes and traditional sit down restaurants in the

neighborhood which are relatively inexpensive.

There is an image built in peoples mind that this caf is only for rich people so
some people will never enter to this store.

From the competitive analysis we can see that Himalayan Java Coffee is one of the strong
competitors in the market. It excels in quality and customer service .However, this coffee
house is expensive and specially focused for business group rather than teenagers. Some
of the competitive advantages that Ally Caf possesses are as follows:

Provides quality product at affordable price, relatively low price than of

Himalayan Java.

Targeted customers are mostly students, young working professional, young

couple, and Lonely Rich and located at prime location.

Focused to maintain an attractive and soothing ambience by specially using the

vibrant color like green, yellow, orange, and purple that predominate youngster.
Facilitate customer to reserve hall to organize event like seminar, birthday party
etc. at very affordable price.

Competitive Analysis
The competitor of AC will be coffee house as well as restaurant. But however among
them its main competitor will be restaurant located itself in New Baneshwor area. Among
them Himalayan Java Coffee House is the first specialty coffee house in Nepal, which
excels in quality and customer service. It has been running very successfully and has
open many outlets across the national boundaries. After that many coffee house as well as
restaurant was established that offer varieties of coffee among them most popular other
coffee house are Illy, Caf Shop, Central Perk, Kaldi etc. But, the price ranges of these
coffee shops are very high and targeted customer are mostly business person and tourist.
Including these there are more than 40 other restaurants around Kathmandu which has
capture large number of market share. The major players beside them in the market are
Nanglo, Bakery caf, Lazimpat Gallery Caf, Road house caf, etc.
Under the competitive analysis we can see the five competitive forces:
Intensity of rivalry
Being first mover in the short run the business will not face any sort of competition but
there might be huge in long run. So there is no threat in short run. There will be intense
rivalry future as there are various restaurants and caf around the town but AC will stands
out from the competition by providing quality products at affordable price with good
ambience .In addition its strategy of promoting AC by distributing free t-shirt, mug and
sticker will play a great role to attract large number of customer.
Threat of new entrants

There is presence of threat of new entrants in the coffee business. In opening up a caf a
person doesnt require huge amount of capital hence anyone can easily enter in this
market after a thorough study of a market and with some trained staffs. But the threat is
not substantial because of cost disadvantages, capital requirements and low level of
differentiation possible
Threat of substitute products
The threat of the substitute products is not that high because people who want to go to
restaurant dont weigh it against the substitutes. However, when the economic situation
stays bad, people want to spend less on average. In this case, the threat of the substitutes
can become higher. The substitutable products can be having tea instead of coffee.
Bargaining power of customer
The bargaining power of customer is high as there many restaurants present and the
switching cost is low, so to meet up the customer expectation caf will focus on quality
products and at reasonable price.
Bargaining power of supplier
Since there are many suppliers who supply grocery items, coffee and fresh vegetables and
fruits, so the bargaining power of suppliers is low. But the suppliers of coffee are
relatively low and they prefer to export for higher prices so the bargaining power of these
suppliers is high.

Marketing Planning

Restaurant business has been gaining popularity in this modern world. Previously going
to the restaurants was thought of just a status thing. But today it is just normal thing. The
trend of going to the restaurant is increasing. Ally Caf which provides variety of hot and
cold coffee and some other items also falls under the restaurant business.
From recent decade there is excessive growth of coffee house business in Nepal. Ally
Caf outlet will be opened in New Baneshwor because it is growing continuously as a
major commercial place and has many established business, whose employees prefer to
have good caf to hang out in break time or after the work which creates attractive market
potential. Even though there are numbers of restaurants in Baneshwor most of the them
are running quiet successfully so all that we need to do is add something of value to the
customer and this coffee house business is just the thing that people wants and will be
very successful if it is operated properly & provide quality product and services at
affordable price. It will even distribute different merchandise like t-shirt, mug, sticker at
grand opening day of AC to about first 100 customer including this ambience will be very
lively that will be adorable to the young generation.

Marketing Objectives
Building brand equity and product awareness are core drivers for Cafs success. Allay
Cafe will utilize a varied and aggressive communications marketing mix in order to
access the broadest range of consumers, and to saturate this relatively new and still
developing coffee market. Increasing brand awareness and positive CRM, while targeting
a specific consumer market and positioning cafe in the beverage and bakery markets will
most advantageous for moving the company. Ally Cafe is a truly innovative business that
provides authentic Nepalese coffee to its customers. It has following measurable
objectives.

To serve 10% of target group population in 2 years.

To create awareness about the coffee business in Nepal

To build a robust brand image among coffee consumers

Market Segmentation

Demographic Segmentation
Gender: Both men and women have different interests and preferences, and thus the need
for segmentation. The caf will serve the customers of all genders.
Age Group: The Caf will mainly target the youth so the age group will be little bigger
(i.e. 18-50 years).
Income: Individuals are classified into segments according to their monthly earnings. The
caf will target the customers of high and middle class income group.
Psychographic segmentation
The basis of such segmentation is the lifestyle of the individuals. The individuals
attitude, interest, value are taken as the basis. Caf will mainly target the youth who goes
to college and working youths. They have the trend of eating out, hanging on internet and
enjoying with friends in a group.
Behavioral Segmentation
The loyalties of the customers towards a particular brand help the cafe to classify them
into smaller groups, each group comprising of individuals loyal towards our caf. The
caf will try to make such a bond between customers and caf with good customer care.
Geographic Segmentation
The caf will mainly serve the people around Baneshwor area and as broad market it will
try to get customers around Kathmandu city. People from different place come to
Baneshwor area for different purpose and the caf will always try to capture those
peoples attention so that they can be turned into our regular customers.

Target Market:
The total population of Kathmandu is 2,517,023 as per Census of 2011 and the
population growth rate of Nepal is 1.596% so, the Population in 2015 will be 2,681,598.
From the same census, total population of age group 15-50 are 61 % of so the total
population so youth in Kathmandu will be 1,635,775. According to the trend in

Kathmandu 20% of this age group goes to caf. Then the population going to caf would
be 327,155. The caf is planning to serve 5% of the market so the total target market for
the caf is 16,360 people.
Since, from last decades with the advancement of technology and globalization the life
styles of Nepalese people are changing. There is increasing trend of people who prefer to
visit restaurants and have refreshing time. This people mostly fall in the age group of
15- 50. So our target customer will be mostly student, people from middle income to
higher middle level income, lonely rich, young and happy couples.
Local residents : Research shows that mostly

New Baneshwor area people fall in

middle income to higher middle level income group and has mostly residence of 15-50
age group so, the local residents are one of the targeted customers of AC.
College students: These are the college student around the Kathmandu valley especially
around Baneshwor as they can come to the caf in their break time or after college.
Similarly in weekends other students from different location can also come.
Working people: They are the employees of the corporate houses. As there are many
banks and offices around Baneshwor. They are potential customer for the caf. They can
come and do their work in sitting in couch or chair while enjoying a cup of coffee.
The Lonely Rich: Most of the lonely rich are technology workers these days, who are
mostly Internet workers. Their life has become their website servers and code they write,
and the people who help them to make the decisions in that world. They hang out with
each other, but desperately want to get away from it and use the

money

they

are

racking up. As, they spend the most on their money in drinks, appetizers and tips so they
are also AC targeted customer.
Young Happy Couples: The restaurant will have an atmosphere that encourages people
to bring dates and to have couples arrive. It won't be awkward for others, and AC does
want to be a social place where people meet each other and develop a network. These
young couples are also AC targeted customers.

Tourist: Tourist are one of the great source of earning revenue for AC. targeting specially
tourist we provide Himalayan Organic Coffee .The main reason behind keeping this
coffee is to promote Nepalese coffee among foreigners.

Positioning:
Ally Caf will position itself as a brand for youth who loves coffee and looks for a nice
quite time .Its main targeted customers will be 15-50 age group who are mainly students
and young urban professionals. It will come up with the motto Enjoy the life fullest. Its
motto will reflect how they want to be position in the mind of the customers. It will
present the coffee house as the third place a place in the minds of the customers after
their home and office. It will be a place where they could relax, unwind and socialize
over a cup of coffee listening the instrumental music, using Wi-Fi services, reading any
magazine or newspaper or watching television, drinking coffee would be an experience; it
would be an enjoyable moment because you would be sharing it with your friends and
family. It will even position itself as a great place to organize event like seminar, birthday
party, and success function with excellent facilities of audio visual.

Marketing Mix:
Product:
Ally Caf product mix constitutes a wide range of products that appeal primarily to
coffee lovers. The bestselling item in summer will be frappe, which is coffee and ice
cream blended together. The young people favor it. In winter it is cappuccino. It will even
provide varieties of eatable items like sandwich, pizza and momo. Its merchandising
includes funky stuff like t-shirts, mugs and sticker which will be freely distributed to first
100 customers at opening day as promotion campaign. AC will follow cost plus basis for
pricing which will be approximately more than 30 % mark up in all items like coffee
beverages, pizza, momo due to various indirect costs associated with each item.
Hot Coffee
Cappuccino
Irish Coffee
Latte
Caf Mocha
Macchiato
Espresso

Cold Coffee
Mochchilly
Devils Own
Happi Nirvana
Iced Eskimo
Caf Frappe

Coffee Alternatives
Nepali Tea
Green Tea
Honey Lemon Tea
Himalayan Organic Coffee

Cookies
Fruit Drop Cookies
Chocolate Chips Cookies
Butter Cookies

Other Drinks
Mineral Water
Soft Drink
Juice

Dessert
Black Forest
Pineapple pastries
Chocolate Pyramid
Table 2: Product Mix

Other Food Items

Veg Pizza
Chicken Pizza
Mushroom Pizza
Salami Pizza
Mixes Pizza
Veg Momo
Chicken Momo
Sandwich
Veg Sandwich
Chicken sandwich
Salami Sandwich

Pasta
Veg Spaghetti
Non-Veg Spaghetti

These are the varieties of product the caf will be providing to the customers. The details
of the prices are shown in appendix. The food and drinks provided in this coffee house
will be of high quality and will be very hygienic in nature.
Description of varieties of Coffee Available

Hot Coffee
Cappuccino: Strong milk based coffee with a shot of Espresso, milk and milk
foam.
Irish coffee: A light Espresso flavored with a choice of Irish Cream/ Hazelnut/
Caramel and topped with Whipped Cream.
Latte: Milkier hot coffee, mild and goes best with coffee flavoring syrups. It has
a very thin layer of milk foam.
Caf Mocha: Like a caf latte, typically one third espresso and two thirds
steamed milk, but a portion of chocolate is added, typically in the form of
sweet cocoa powder.
Espresso: Strong black coffee extracted at high pressure and optimum
temperature.
Macchiato: A shot of Espresso topped up with milk foam.
Cold Coffees
Mocha chilly: Chocolate flavored coffee with sweetened creamy milk served on
the rock.
Cafe Frappe: A judicious blend of ice cream and coffee that gives a smooth and
creamy effect.
Devils Own: Like a coffee Frappe loaded with chocolate poured over ice.
Happy Nirvana: A chilled out espresso with subtle Caribbean flavors topped
with

whipped ice-cream and chocolate vermicelli.

Iced Eskimo Ice blended cold coffee with notes of coffee and cream balanced in
right proportions.

Service Features
Apart from the food and beverages the customer will be able to use free Wi-Fi services in
their web portals as well and can even read varieties of newspaper and magazine
available.
In addition to this AC will facilitate its customer to organize small event like seminar,
success function, birthday party, re-union and farewell program in its 400 square feet
meeting hall. The total capacity of the hall is 40 people. To complement such event, this
hall will even have special Audio Video facilities which include, sound system, projector,
karaoke etc. Booking of hall will be available for half day or full day .Price of full day
hall reservation is Rs 5000 and half day is Rs 3000.Food item will be available as per
customer demand. However main categories of food that will be served for this event are
Cappuccino, Cookies and Sandwich.
Since, there has been high increasing trend among students and young professional to go
to restaurant and have cup of coffee. Similarly, people nowadays like to work on their
laptop as well as stay connected with their near and dear ones anywhere it is possible. In
addition there is increasing trend of organizing party or program like birthday party,
seminar etc. AC will be right choice for those customers because it offers varieties of
coffee at affordable price, hall reservation facilities for varieties of program and free WiFi service, newspaper and magazines available to read.

Price:
AC has priced their items in a very reasonable way. Since the overhead cost due to
location, the level of services and the furniture it will use are high, so it has high
overhead and operating cost. However, considering all those factors, it has still tried to
lower their cost as much as possible to offer an affordable cost to their customers. We will
charge a markup of 30% to 50 % on the cost of producing any item. So AC believes that
the price range they have offered can cater every customer from middle to high level.

Place:
Any product or service determines the visibility among the customers and even the
success of the business. No matter how good a product or service the business provide,
being out of reach or in inconvenient position makes the customers switch to the
competitors. Caf will be located in Baneshwor. This would make it convenient for the
customers to visit it and even the targeted group visits the place often because it is the
major business area of the city which would help in attracting the customers at very
initial stage. .As in this area there are many colleges, schools, and banks. It is very easy to
find the place, refer to their friends and convenient to find taxi or any local transportation.
In addition to this customer can enjoy longer hours and enjoy their book, surfing the net
or simply watch some songs or sports program on the big plasma TV having a sip of
coffee. AC will even have a first mover advantages as coffee house in New Baneshwor
location.

Promotion:
As promotion strategy Cafe will implement a pull strategy in order to build consumer
awareness and demand. AC will distribute flyers, advertise in Facebook, daily newspaper
like Kantipur and Himalayan Times and F.M. radios. AC will distribute flyers in different
nearby colleges like Ace Institute of Management, Global College, Uniglobe, Apex,
Himalayan White House etc. It will even do advertisement of its caf in face book and in
some local daily newspaper at starting phase. This is one effective way to connect with
number of people. This will even help us to provide word of mouth advertisement which
is a very powerful way to advertise the product. AC will also launch website of Caf, so
that people from any corner can view information about it. As a part of the promotional
advertisement AC will even provide 5 % discount in every food item for first month and
will distribute free t-shirt ,sticker or mugs having AC log for first 100 customers in
opening day. This strategy will also play a great role to attract customer in its initial

phase. Advertisement will add lots of cost to the caf, so AC will decrease advertisement
slowly once the caf is established. Later it wills mostly belief on the word of mouth
strategy by consistently providing quality food and services at affordable price with clean
environment.
S. No

Advertisement

Charge

Flyers (5000 x Rs 3) + ( 2500 x Rs 7)

Rs 32500

Design of flyer

Rs 4000

Website launch

Rs 8000

Advertisement on face book

Rs 0

Advertisement on daily newspaper and in F.M radios

Rs 65,000

Total Cost

Rs 109,500
Table 3: Advertisement cost

The advertisement cost above is for the first two years and after third year we will only
distribute 2000 Flyers for Rs 3 and 1000 large size flyers worth Rs 7.
Merchandise

Number

Rate

Total

T-Shirt

100

380

38,000

Sticker

100

18

1,800

Mug

100

114

11,400

Total

51,200

Grand Total

51,200
Table 4: Merchandise Cost

The merchandise cost above is for first 100 customers in opening day of AC. This is a
part of AC promotional campaign at its initial phase. Since we believe this strategy will
play a great role to associate customer with AC.

People
People are crucial in service delivery. The best food may not seem equally palatable if the
waiter is in a sour mood. A smile always helps. Intensive training for human resources on
how to handle customers and how to deal with contingencies is crucial for success.

Processes
Processes are important to deliver a quality service. Services being intangible, processes
become all the more crucial to ensure standards are met with. Process mapping ensures
that service is perceived as being dependable by target segment.

Physical evidence
Physical evidence affects the customers satisfaction. Often, services being intangible,
customers depend on other cues to judge the offering. This is where physical evidence
plays a part. Would you like eating at a joint where the table is greasy or the waitresses
and cooks look untidy and wear a stained apron? Surely you would evaluate the quality
of your experience through proxies such as these.

Sales Forecast
Cafe is basing is projected coffee and Bakery sales on the information provided
Himalayan Java. The sale for the first year is expected to be Rs 77, 65,200. The sale is
expected to increase by 10% every year up to five years. The revenue earned from hall
reservation for the first year is expected to be Rs 3, 60, 000. The sale is expected to
increase by 10% every year up to five years.
Item
Hot Coffee
Cappuccino (Regular )
Irish Coffee
Latte
Macchiato
Espresso
Caf Mocha
Total
Cold Coffee
Mochchillo
Devil's Own
Happy Nirvana
Iced Eskimo
Coffee Frappe
Total

Sales

Rate

Value

Volume
9000
2160
2520
1800
1080
1800

75
110
80
75
60
95

675,00
237,60
0
201,60
0
135,00
0
64,80
0
171,00
0
1,485,000
0

3600
1800
1080
360
2520

95
140
145
85
110

342,00
252,00
0
156,60
0
30,60
0
277,20
0
1,058,400
0

Nepali Organic Coffee

Item
Himalayan Organic Coffee
Coffee Alternatives
Nepali Tea
Green Tea
Hot Lemon with honey
Total

1080

85.0

91,800

0
7200
1800
3600

40.0
288,00
75.0
135,00
0
0
40.0
144,00
0
0
567,000
0
0

Other Drinks
Mineral Water
Soft Drink
Juice
Total

2520
5400
3600

Cookies
Fruit Drop Cookies
Chocolate Chips Cookies
Butter Cookies
Total

1800
720
720

50
90,00
60.0
43,20
0
60
43,20
0
0
176,400
0

Pastries
Black Forest
Pineapple pastries
Chocolate Pyramid
Total

1800
1440
720

75
65
50

135,00
93,60
0
36,00
0
264,600
0

3600
3600
3600

90
115
110

324,00
414,00
0
396,00
0
1,134,000
0

1440
1080

165
190

237,60
205,20
0
442,800
0

1440
1800

150
175

216,00
315,00

Other Food Items

Sandwich
Veg Sandwich
Salami Sandwich
Chicken Sandwich
Total
Pasta
Veg Spaghetti
Non Veg Spaghetti
Total
Pizza
Veg Pizza
Chicken Pizza

Rate
35
45
60

Cost
88,20
243,00
0
216,00
0
547,200
0

0
0

Mushroom Pizza
Total

2160

175
0

Momo
Veg Momo
Chicken Momo
Total

3600
5400

Extra Sales in Food Item from service

Item
Sales
Provided
Cappuccino
1800
Sandwich
1800
Cookies
1800
Total
Grand Total
Table 5: Sales forecast

378,00
909,000

60
90

216,00
486,00
0
702,000
0

Rate
70
100
45

S.Value
126,00
180,00
0
81,00
0
387,000
0
7,765,200

Revenue Forecast from hall reservation:

S.NO

Service Offered
Hall Reservation

Reservation Per Month

6

Table 6: Revenue forecast from service provided

Rate
6000

Total
360000

Strategy and Implementation

Strategy
Cafe has two main strategies, the first strategy focuses on attracting new coffee
consumers who loves to learn coffee brewing by providing a friendly environment, Cafe
hopes to educate and train a loyal customer base. Another strategy focuses on building a
social environment for Cafs customers, that provides entertainment & serve to attract
customers that wouldn't normally think about drinking coffee in cafe. At Caf these
customers will realize the potential entertainment value that caf can provide.
Cafe's first strategy focuses on attracting consumers who wants to brew coffee
themselves. Cafe plans on attracting these customers by:

Providing a novice friendly environment. Cafe will be staffed by knowledgeable

employees focused on serving the customer's needs.

A customer service desk will always be staffed. If a customer has any type of

question or concern, a Cafe employee will always be available to assist.

Cafe will offer introductory classes on coffee brewing. These classes will be
designed to help novice consumers familiarize themselves with these key tools
and techniques of coffee brewing.

Competitive Edge
Cafe will follow a differentiation strategy to achieve a competitive advantage in the cafe
market by providing the facility of self-brewing, Cafe separates itself from all other cafes
in Baneshwor. In addition, Cafe provides a comfortable environment with coffee and
bakery items, distinguishing itself from other generic cafes.

Fulfillment

Cafe will obtain Internet access from Nepal Telecom which also provides network
consulting. The hardware and computer support will be provided by Kathmandu Tech
House. The bakery items will be purchased from Krishna Bakery House. Other raw
materials for kitchen item will be purchased from Goshali Departmental Store. The major
raw material coffee beans will be purchased from Lekali Coffee Estate because it
provides quality beans and also the location is near which saves the transportation cost.

Technology
Cafe will invest in high-speed computers to provide its customers with a fast and efficient
connection to the Internet. The computers will be reliable and fun to work with. Cafe will
continue to upgrade and modify the systems to stay current with communications
technology. All the coffee brewing & bakery making equipment will be of latest
technology which guarantee the high quality of coffee as final product.

Quality Assurance
Maintaining Quality is the major task for any organizations so as for Caf. Managing
cleanliness, managing the time and taking care of customers in very hospitable manner
are the most important things for caf. Caf will continuously check quality and
improvement policy. The customers will be asked to provide feedback and those will be
seriously taken care. The major quality parameters for Caf are:
Response: Customers feedback is the most for the improvement so there will be
mechanism for taking customer feedback and implementation. The service of the caf
will be managed as per the customer request.
Courtesy: The staff members need to be polite to the customer and greet them when they
enter in the caf and thus in this regard the staff members will be properly trained to
handle complaints and handle situation with smile.
Cleanliness: The focus will be in maintaining hygienic, clean and customer friendly
environment in the caf. Both the product and environment will be at most clean. The
computers will be virus free.

Aesthetics: Aesthetics also plays a very valuable role in defining quality in a caf. The
overall appearance of the caf will be well decorated with good color combination which
provide relax to eye and mind.
Availability: Both the coffee and bakery items will be available in adequate amount.
Customers will not face the situation of shortage. The bakery items are purchased daily
because of its nature and our supplier is ready to supply any amount at any time.

Grant Chart (To show work flow)

S.No
.
1
2
3
4

5
6
7
8
9

Activities/Ti
me
Get Business
License
Rent a
building
Renovation of
building
Search
Suppliers &
Make
Contract
Purchase
equipment &
Merchandise
Hiring &
training Staffs
Advertisemen
t
Opening &
Promotional
Activities
Regular day
to day
business

Ja
n

Fe
b

Ma
r

Ap
r

Ma
y

Ju
n

Ju
l

Au
g

Sept

Oct

Nov

Dec

Figure 2: Grant Chart

First step of this business will be to take license from license department of Nepal
government which normally takes a week and at the same time suitable building will be
searched which will tentatively take around a month. Once the building is finalized then
it have to renovated as per our plan which starts from second month, we are planning that
will be done in a month. When the building is being renovated we will search for the
suppliers and finalize the best available suppliers and start to purchase necessary
equipment and merchandises. At the end of the month hiring of staffs will be started and

the selected employees will be sent for training. In the same month we will start to
advertise in the market using our newly hired marketing staffs. Then in the third month
business will be opened and our one month promotional campaign will kick off after that
we will be doing our normal business. If any changes are needed in between than we will
plan and act accordingly.

Financial Plan
Assumptions:
Following are the assumptions which have been made while making the financial pan.

Deprecation is provided on diminishing balance method at the rate of 10% per

year for fixed assets.

Tax rate is taken 25%.
Salary Expenses, Dress Allowance, Registration and Renewal Expenses,
Miscellaneous

Expenses, Electricity Expenses, News Paper and Magazine,

Repair & Maintenance, Rent Expenses, Internet Expenses, Travelling Expenses,

Auditing Fee Expenses will increase by 5% every year.

Discount Expenses is 5% on each item for only 3 month of first year.
Overtime expenses will be 20 % of employee salary
Sales increases by 10% every year
Cost increases by 10 % every year.
Stock of raw material is kept for 1 month
Interest from investment is 9%

Capital Requirement:
Capital requirement

Amount (Rs)

Fixed Assets :
Furniture and Fixtures

420000

Kitchen Equipment:
Refrigerators

35,000

Espresso Machine

150,000

Microwave Oven

30,000

Crockery and Cutlery

29,800

Kitchen Utensils

250,000

Freezer

122,000

Others:
Computer

45,000

Music System

150000

Generator

80,000

Air Condition

60,000

Television

100,000

Fixed Assets

1,471,800

Working Capital

528,200

Total Capital Required

2,000,000
Table 7: Capital Requirement

Income statement:
Particulars

2015

2016

2017

2018

2019

Sales

7,765,20
0

8,541,72
0

9,395,89
2

10,335,48
1

11,369,02
9

Add: Revenue from event

360,000

396,000

415,800

436,590

458,420

Less: Cost Of Goods Sold

4,258,80
0

4,684,68
0

5,153,14
8

5,668,463

6,235,309

Gross profit

3,866,40
0

4,253,04
0

4,658,54
4

5,103,608

5,592,140

Add: Investment Income

27,000

86,400

166,500

3,866,40
0

4,253,04
0

4,685,54
4

5,190,008

5,758,640

Less: Admin& other

expenses

3,704,94
5

3,706,96
2

3,770,46
6

3,940,457

4,120,735

Net Profit Before tax

161,455

546,078

915,078

1,249,552

1,637,904

Less: Tax @ 25%

40,364

136,520

228,770

312,388

409,476

Net Profit Tax tax

121,091

409,559

686,309

937,164

1,228,428

Table 8: Income statement

From the five years forecasted income statement, we can see that every year, there is
increase in the revenue from sales of product and service provided and the cost of goods
have also increased due to the inflation or due to the increase in demand of product and
services but the Net Profit after Tax has increased from Rs 121,091 to Rs. 1,228,428 by
the end of 5 years. From this, we have analyzed that the project seems to be profitable
with respect to the amount of Net profit it will be giving in the period of five years.

Cash flow
Particulars
A. Opening Balance
Add: Cash Inflows
Equity
Cash Sales
Cash Revenue
Interest from
investment
Total
Cash Available
B. Payments
Payment for
Purchase of Fixed
Assets
Administrative
Expenses
Investment
Selling Expenses
Direct Expenses
Telephone Deposit
Tax

2015 (Start)

2015 (End)
528,200

2016
441,571

2017
648,102

2018
754,587

2019
866,102

2,000,000

7,765,200
360,000

8,541,720
396,000

2,000,000

8,653,400

9,379,291

9,395,892
415,800
27,000
10,486,794

10,335,481
436,590
86,400
11,613,058

11,369,029
458,420
166,500
12,860,051

1,471,800

4,613,700
3,557,765
40,364

4,720,170
3,574,500
300,000
136,520

5,192,187
3,651,250
660,000
228,770

5,711,406
3,833,163
890,000
312,388

6,282,546
4,024,171
1,170,000
409,476

Total Cash Outflow

1,471,800

8,211,829

8,731,190

9,732,207

10,746,956

11,886,193

C. Surplus/ Deficit

528,200

441,571

648,102

754,587

866,102

973,858

Table 9: Cash Flow Statement

From this cash flow statement, we can see that there is surplus cash at the end of the
every year so this gives the satisfactory result.

Balance Sheet
Particulars
Capital &
Share Holders'
Liabilities:
Share
Fund: Capital
Total Equity
Assets:
Net Fixed Assets
Current Assets
Inventories
Cash
Bank
Investment
Total Current
Assets
Total Assets

2015

2016

2017

2018

2019

2,121,091

2,530,650

3,216,958

4,154,122

5,382,550

2,121,091

2,530,650

3,216,958

4,154,122

5,382,550

1,324,620

1,192,158

1,072,942

965,648

869,083

390,390
148,102
- 500,000
300,000
1,338,492

429,429
154,587
600,000
960,000
2,144,016

472,372
166,102
700,000
1,850,000
3,188,474

519,609
173,858
800,000
3,020,000
4,513,467

Table 10:
Balance Sheet
2,530,650
3,216,958
4,154,122

5,382,550

354,900
141,571
300,000
796,471
2,121,091

Payback Period
Year
0
1
2
3
4
5

Cash Flow
Cumulative Cash Flow
268,271
268,271
542,021
810,292
805,524
1,615,816
1,044,458
2,660,274
1,324,993
3,985,267
Table 10: Payback Period

Payback period= 3.38 Years. The project will pay back its investment in 3.38 years.

Net Present Value

Year
0
1
2
3
4
5
NPV

Cash Flow
(2,000,000)
268,271
542,021
805,524
1,044,458
1,324,993

PVIF@15%
1
0.8696
0.7561
0.6575
0.5718
0.4972

PV
(2,000,000)
233,289
409,822
529,632
597,221
658,787
428,750

Table 11: Net Present Value

The NPV is positive so the project can be accepted.

Appendix
Please see the attached excel file for all the financial calculations.

References
Beuareu of Statistics. (2015). Retrieved from http://www.cbs.gov.np/
Federation of Nepalse chamber of commerce and industry. (2015). Retrieved from
http://www.fncci.org/excom.php
Government of Nepal Central Bureau of Statistics. (2015). Retrieved from
http://www.cbs.gov.np/
Helvates Nepal. (2014). Retrieved from
https://assets.helvetas.org/downloads/coffee_database_in_nepal__2014_.pdf
Himalyan Java Coffee. (2015). Retrieved from http://www.himalayanjava.com/
History of coffee. (2015, Nov 2). Retrieved from
http://www.worldhistory.ihr.ucsc.edu/coffee/
Kantipur National Daily. (2010). Retrieved from http://www.ekantipur.com/
Lekali Coffee Estate. (2015). Retrieved from http://www.lekalicoffee.com/lekalikavre.htm
National Tea & Coffee Development Board. (2015). Retrieved from
http://www.teacoffee.gov.np/
Nepal Government Business License Department. (2015). Retrieved from
http://www.licenseportal.gov.np/index.php/browse_license/license_details/247
Nepal government national Planning commision. (2014). Retrieved from
http://www.npc.gov.np/en/category/publications/sector_reports
Nepali Times Journal. (n.d.). Retrieved from http://nepalitimes.com/news