A

BUSINESS PLAN ON COFFEE CAFE

INSTIUTE OF MANAGEMENT SCIENCE,

UNIVERSITY OF LUCKNOW

SUBMITTED TO:DR. RAJ KUMAR SINGH

SUBMITTED BY:
S
HILPI SINGH
MBA (HR & IR)-IV SEM
Page 1

ROLL NO.- 11001116054

DECLARATION

I, SHILPI SINGH hereby declare that the project entitled

Mid Town Coffee Cafe, The Coffee Bar is my original
work, done by me except the material and information
gathered from the various coffee cafe. This has not been
previously submitted for any other degree or diploma.

I have done my comprehensive project under the guidance of

Mrs. ARCHANA SINGH, coordinator of MBA HR department
IMS ,University of Lucknow.

SHILPI SINGH
MBA(HR & IR)- IV Sem
IMS ,University of Lucknow

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ACKNOWLEDGEMENT
The study was conducted by the assistance of several
individuals. Their co-operation and guidance has resulted in
the completion of the entire comprehensive project, without
which this task was almost impossible. I really appreciate their
help and hereby thank them.
I would like to give special thanks to the following people:
Firstly, I would like to thank Director Dr. Rajkumar singh
and coordinator Mrs. Archana Raj maam

for providing

me the opportunity to take up this project and for his valuable

guidance, academic and moral support which made this
report a reality.

I also thank my family members and friends whose support

and encouragement has meant a lot to me personally and
also for the completion of the report.

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Finally, my acknowledgement goes to all those people who

have helped me in carrying out this project work in an
effective manner.

SHILPI SINGH

TABLE OF CONTENTS
SL. NO.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

PARTICULARS
Executive Summary
Company Summary
Company Ownership
Start-up Summary
Products
Market Analysis Summary
Market Segmentation
SWOT Analysis
Strategy and Implementation Summary
Sales Forecast
Management Summary
Personnel Plan
Financial Plan
Projected Cash Flow
Projected Profit & Loss Account and Balance sheet

PAGE NO.
5
7
8
8
12
13
14
16
18
20
21
23
26
28
30

Page 4

Executive Summary
Mid Town Coffee Cafe is determined to become a daily
necessity for local coffee addicts, a place to dream of as you
try to escape the daily stresses of life and just a comfortable
place to meet your friends or to read a book, all in one. With
the growing demand for high-quality gourmet coffee and great
service, MTCC will capitalize on its proximity to the Kanpur
University campus to build a core group of repeat customers.
The Cafe will offer its customers the best prepared coffee in
the area that will be complimented with pastries.
The company will operate a 500 square foot coffee bar within
a walking distance from the Kanpur University campus. The
owner has secured this location on a lease contract with an
option to extend up to three years. The owner have also
provided Rs. of the required Rs.539,900 start-up funds.
The company is expected to grow sales revenue from
Rs.191,2500 in FY2014-15 to Rs.2988281 in FY2015-16 . As
MTCC will strive to maintain a 37.5% gross profit margin in
FY2014-15 and it will grow to 42.3% in FY2015-16 with
reasonable operating expenses, it will see net profits grow
from Rs.166,768 to Rs.486388.875 during the same period.
Page 5

1.1 Objectives
Mid

Town

Coffee

Cafe's

objectives

for

the

first

year

of operations are:

Become selected as the "Best New Coffee Bar in the

area" by the local restaurant guide.

Turn in profits from the first month of operations.

Maintain a 37.5% gross margin in first year

1.2 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.

Page 6

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.

1.3 Mission
Mid Town Coffee Cafe 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. Mid Town Coffee Cafe will
invest its profits to increase the employee satisfaction .

2 Company Summary
Mid Town Coffee Cafe, limited liability Company, sells coffee,
other beverages and snacks in its 500 square feet premium
coffee bar located near the Kanpur University campus.

Page 7

2.1 Company Ownership

MTCC is a sole proprietorship firm, and the owner contributes
the entire capital. This gives increased profit margins from the
start and as the company grows, the debt-free philosophy will
be maintained. However, recognizing that in reality not all
variables are controllable. The founder owns a shop and has
enough funds to start the business.

2.2 Start-up Summary

The start-up expenses include:

Legal expenses for obtaining licenses and permits as well as the

accounting services totaling Rs. 2,000.

Marketing promotion expenses for the grand opening of MTCC in

the amount of Rs.60,000 in the start .

Page 8

Insurance (general liability, workers' compensation and property

casualty) coverage at a total premium of Rs.10,000.

Pre-paid rent expenses for three month at Rs.20 per square feet in
the total amount of Rs.30,000.

Other start-up expenses including stationery (Rs.500) and phone

and utility deposits (Rs.24, 000).

The required start-up assets of Rs.262, 600 include:

Furniture & fitting of the total amount of Rs.160, 000.

Espresso Machine of Rs. 11,000. Coffee Grinder & maker of Rs.

600 and 1500 Respectively.

Computer, Air conditioner and Billing Machine of the total amount

of Rs.89,500.

The following table summarizes the start-up assumptions.

Particulars

Amount (in Rs.)

Start Up Expenses
Legal expenses
Insurance
Stationary
Menus
Advertisement
Total start up expenses

2000
10000
500
1000
60000
73500

Start Up Assets
Furniture & fittings

160000
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Espresso machine
Coffee Grinder
Coffee maker
Computer
Air conditioner
Billing Machine
Total Start Up Assets
Cash Reserve#
Total start Up Costs A+B+C

Utilizes
salaries*
Rent
supply cost
Emergencies
Total

#Cash Reserve (in Rs.)

8000 3
26600 3
10000 3
20000 3
10000 -

11000
600
1500
40000
40000
9500
262600
203800
539900

24000
79800
30000
60000
10000
203800

Salaries *(in Rs.) per month

Waiters 2
Coffee makers 2
Accountant 1
Total

Rs.15 per hour

12 a day
Rs.15 per hour
5000

10800
10800
5000
26600

Page 10

2.3 Company Locations and Facilities

MTCC, coffee bar will be located on the ground floor of the
commercial

place

near

Kanpur

University

Campus

in

Kalyanpur. The company has secured a one-year lease of the

vacant 500 square feet.
The lease contract has an option of renewal for three years at
a fixed rate that MTCC will execute depending on the financial
strength of its business.
The floor plan will include a 200 square feet back office and a
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--275 square feet (i.e., 55% of the total) for
the seating area, 130 square feet (26%) for the production
area, and the remaining 95 square feet (19%) for the
customer service area.
Page 11

This property is located in a commercial area within a walking

distance

from

the

Kanpur

University

campus.

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.

Products
MTCC will offer its customers the best tasting coffee
beverages in the area. This will be achieved by using highquality

ingredients

and

strictly

following

preparation

guidelines. The store layout, menu listings and marketing

activities will be focused on maximizing the sales of higher
margin espresso drinks. Along with the espresso drinks,
brewed coffee and teas, as well as some refreshment
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beverages, will be sold in the coffee bar. MTCC will also offer
its clients cakes and cookie. For the gourmet clientele that
prefers to prepare its coffee at home, MTCC will also be selling
coffee powder.

3.1 Product Description

The menu of the MTCC, coffee bar will be built around
espresso-based

coffee

drinks

such

as

lattes,

mochas,

cappuccinos, etc. Each of the espresso-based drinks will be

offered with whole, skimmed, or soy milk. Each of these coffee
beverages is based on a 'shot' of espresso, which is prepared
in the espresso machine by forcing heated water through
ground coffee at high pressure. Such espresso shots are
combined with steamed milk and/or other additives like
cocoa,

caramel,

etc.,

to

prepare

the

espresso-based

beverages. Proper preparation techniques are of paramount

importance for such drinks. A minor deviation from the
amount of coffee in the shot, the size of the coffee particles,
the temperature of milk, etc., can negatively affect the quality
of the prepared drink.

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3.2 Sales Literature

Two thousand flyers will be distributed in the adjacent
neighborhood, on the University campus, at the malls and in
the selected office buildings within two weeks prior to the
opening

of

MTCC.

Subsequently,

pamphlet

of

MTCC

endorsement will be printed to increase the company visibility

among the patrons.

Market Analysis Summary

Coffee consumption has shown steady growth, with gourmet
coffee having the strongest growth. Coffee drinkers in that
area are among the most demanding ones. They favor wellbrewed gourmet coffee drinks and demand great service.
MTCC will strive to build a loyal customer base by offering a
great tasting coffee in a relaxing environment of its coffee bar
located close to the Kanpur University campus.
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4.1 Market Segmentation

MTCC will focus its marketing activities on reaching the
University students and faculty, people working in offices
located

close

to

the

coffee

bar

and

on

sophisticated

teenagers. Our market research shows that these are the

customer groups that are most likely to buy gourmet coffee
products. Since gourmet coffee consumption is universal
across different income categories and mostly depends on the
level of higher education, proximity to the Kanpur University
campus

will

provide

access

to

the

targeted

customer

audience.
The chart and table below outline the total market potential
(in number of customers) of gourmet coffee drinkers in
Kanpur.

Page 15

4.2 Target Market Segment Strategy

MTCC 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.

Page 16

4.2.1 Market Needs

General

trend

toward

quality

among

consumers

definitely plays an important role in the recent growth

in gourmet coffee. Additionally, such factors as desire
for small indulgencies, for something more exotic and
unique, provide a good selling opportunity for coffee
bars.

4.3 SWOT Analysis

Before opening a coffee shop, it is wise to do a SWOT analysis
(Strengths, Weaknesses, Opportunities and Threats). This is a
few things that I could think of:
Strengths:
Its a youth oriented brand, hence huge potential since 40 %
population is below 20.
Strong management

Weaknesses:
Small Staff
Growing Operation without enough space
Online Presence
Page 17

 Weak Brand

Opportunities:

Coffee cafe industry is one of the fastest growing industry in India.

More people like to visit coffee cafe for informal meetings.

Threats:
Competition with local coffee cafes and cafeteria of university.

4.3.1 Competition and Buying Patterns

Competition
MTCC's direct competitors will be other coffee bars located
near the Kanpur university campus and cafeteria of university.
MTCC will position itself as a unique coffee bar that not only
offers the best tasting coffee, cakes and cookie 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.

Page 18

Buying Patterns
The major reason for the customers to return to a specific
coffee bar is a great tasting coffee, quick service and pleasant
atmosphere. Although, as stated before, coffee consumption
is uniform across different income segments, MTCC will price
its product offerings competitively. We strongly believe that
selling coffee with a great service in a nice setting will help us
build a strong base of loyal clientele.

Strategy and Implementation Summary

MTCC's marketing strategy will be focused at getting new
customers,

retaining

the

existing

customers,

getting

customers to spend more and come back more often.

Establishing a loyal customer base is of a paramount
importance since such customer core will not only generate
most of the sales but also will provide favorable referrals.

Page 19

5.1 Competitive Edge

MTCC 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 MTCC from incumbent competitors.

5.2 Sales Strategy

MTCC baristas will handle the sales transactions. To speed up
the customer service, at least five employees will be servicing
clients--while two employee will be preparing the customer's
order, two waiters and 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.
In order to build up its client base, MTCC will use banners and
fliers, utilize customer referrals and cross-promotions with
other businesses in the community. At the same time,
customer retention programs will be used to make sure the
Page 20

customers are coming back and spending more at the coffee

bar.

5.2.1 Sales Forecast

Food costs are assumed at 25% for coffee beverages and for
retail cookie and cakes. Proximity to the University campus
will dictate certain sales seasonality with revenues slightly
decreasing during the school vacation periods.
The chart and table below outline our projected sales forecast
for the First years.
FORECASTED SALES
COFFEE

CAKE

COOKIE

Price per Unit

(IN Rs.)

15

20

25

20

25

40

10

15

20

Forecasted sales
(in Units)

50

60

40

40

30

20

30

25

20

Total sale p/d

750

1200

1000

800

750

800

300

375

400

Days in month

25

25

25

25

25

25

25

25

25

Total sale p/m

18750

30000

25000

20000

18750

20000

7500

9375

10000

No. of months

12

12

12

12

12

12

12

12

12

22500
0

36000
0

30000
0

24000
0

22500
0

24000
0

9000
0

11250
0

12000
0

Total sales for 12

months

Page 21

SALE
(in Rs.)

1912500

COST OF FORCASTED SALES

COFFE

CAKE

COOKIE

E
Cost per Unit (IN
Rs.)
Forecasted sales
(in Units)
Total Cost of sale
p/d
Days in month

11

17

13

17

24

11

14

50

60

40

40

30

20

30

25

20

400

660

680

520

510

480

180

275

280

25

25

25

25

25

25

25

25

25

Total Cost p/m

10000

16500

17000

13000

12750

12000

4500

6875

7000

No. of months

12

12

12

12

12

12

12

12

12

12000
0

19800
0

20400
0

15600 15300 14400

0
0
0
1195500

5400
0

8250
0

8400
0

Total Cost for 12

months
COST (in Rs.)

Management Summary
MTCC is owned by the owner holds a Master Degree in
Business Administration from the Department of Business
Administration, University of Lucknow.

Page 22

However, because of various activities and functions there will

be need to hire some employee who can perform these
activities. An Accountant (Rs.60,000/yr) will be hired who will
oversee all the coffee bar operations. Four other employees
(Rs.54,000/yr each) will be in charge of coffee preparation and
serving. These four employees will be hired to fulfill the
staffing needs on part time basis. In the second and third year
of operation, salary will increase by 10% .

6.1 Management Team

A full-time accountant will be hired to oversee the daily
operations at MTCC. The candidate (who's name is withheld
due to his current employment commitment) has had three
years

of

experience

in

accounting.

This

person's

responsibilities will include managing the staff, ordering

inventory, dealing with suppliers, developing a marketing
strategy and perform other daily duties. We believe that our
candidate has the right experience for this role.

HUMAN RESOURCE PLANNING

Human resource management (HRM) is the strategic and coherent approach to the
management of an organizations most valued assets - the people working there who
Page 23

individually and collectively contributes to the achievement of the objectives of the

business. The terms "human resource management" and "human resources" (HR) have
largely replaced the term "personnel management" as a description of the processes
involved in managing people in organizations. Human Resource management is evolving
ra. As such, HRM techniques, when properly practiced, are expressive of the goals and
operating practices of the enterprise overall. HRM is also seen by many to have a key
role in risk reduction .
Synonyms such as personnel management are often used in a more restricted sense to
describe activities that are necessary in the recruiting of a workforce, providing its
members with payroll and benefits, and administrating their work-life needs. So if we
move to actual definitions, Torrington and Hall (1987) define personnel management as
being rapidly a series of activities which: first enable working people and their
employing organizations to agree about the objectives and nature of their working
relationship and, secondly, ensures that the agreement is fulfilled".
While Miller (1987) suggests that HRM relates to:
".......those decisions and actions which concern the management of employees at all
levels in the business and which are related to the implementation of strategies directed
towards creating and sustaining competitive advantage"
. Human resources management comprises several processes. Together they are supposed
to achieve the above mentioned goal. These processes can be performed in an HR
department, but some tasks can also be outsourced or performed by line-managers or
other departments.
Human Resources Planning (HRP)
Page 24

 Design of Organization and Job

Selection and Staffing
Training and Development
Organization Development (OD)
Compensation and Benefits
Employee Assistance

Nature of HRM
Simply put, Human Resource Management (HRM) is a management
function that helps managers to recruit, select, train and develop
members for an organization. Obviously, HRM is concerned with the
people's dimension in organizations. Following are few definitions of
HRM:
1. HRM is a series of integrated decisions that form the employment
relationship; their quality contributes to the ability of the organizations
and the employees to achieve their objective.
2. HRM is concerned with the people dimension in management. Since
every organization is made up of people, acquiring their services,
developing

their

skills,

motivating

them

to

higher

levels

of

performance and ensuring that they continue to maintain their

commitment

to

the

organization

are

essential

to

achieving

organizational objectives. This is true, regardless of the type of

Page 25

organization- government, business, education, health, recreation, or

social action.
3. HRM is the planning, organizing, directing and controlling of the
procurement, development, compensation, integration, maintenance
and separation of human resources to the end that individual,
organizational, and social objectives are accomplished.

HR ACTIVITES
1.RECRUITMENT/SELECTION
2.TRAINING AND DEVELEPMENT
3.PERFORMANCE APPRAISAL
4.RECLOCATION
5.INDUCTION
6.DOMESTIC TRAVEL POLICY
7.SEPARATION
8.EXIT INTERVIEWS
9.

ATTENDENCE/AWARD/REWARD

10.

CONFIRMATION PROCESS
Page 26

In Human resource management is a process of bringing

people and organizations together so that the goals of each
are met. It is that part of the management process which is
concerned with the management of human resources in an
organization. It tries to secure the best from people by
winning their whole hearted cooperation. In short, it may be
defined, as the art of procuring, developing and maintaining
competent workforce to achieve the goals of an organization
in an efficient and effective manner.

Human Resource Development

At PBPL the main activities undertaken by HRD department ar
e recruitment, performance appraisal Training and developme
nt, welfare activities, personal growth & promotion.

Performance Appraisal.

To achieve this objective the company carries out performanc

e

appraisal

of

its

employees

so

as

to

assess

their

weaknesses& strengths& to take measures accordingly like

providing training or giving rewards or incentives
Page 27

 Recruitment
Recruitment at OPEN AIR RESTAURENT is carried out in close coordination with the department requiring the personnel. It is a process
where the qualification and other skills needed for the job are taken
into account & based on this the incumbent is selected after proper
screening & interviewing. He is then inducted & provided training if
needed.

Training and Development

Training & development is an important aspect. Coffee
shop

believes

employees

so

responsibilities

in
as

training
to
&

and

help
to

development
them

of

its

taken

higher

prepare

to

meet the challenging business environment. Coffee shop

believes in training and development of its employees so
as to help them taken higher responsibilities & to prepare
to meet the challenging business environment.

HR Techniques Will Adopt By coffee shop

KAIZENS
Page 28

 Total Quality Management(TQM)

6.2 Personnel Plan

The table below outlines the personnel needs of MTCC coffee
bar.
Personnel Plan Per Year

waiters 2

Rs.15 per hour

12 a day

108000

Coffee makers 2

Rs.15 per hour

12 a day

108000

Accountant 1
Total salary (in Rs.)

5000

60000
276000

Financial Plan
MTCC will capitalize on the strong demand for high-quality
gourmet coffee. The owners have provided the company with
sufficient start-up capital. With successful management aimed
at establishing and growing a loyal customer base, the
company will see its net worth doubling in two years. MTCC
Page 29

will maintain a healthy 40% gross margin average, which

combined with reasonable operating expenses, will provide
enough cash to finance further growth.

7.1 Projected Cash Flow

As the table below present, the company will maintain a
healthy cash flow position, which will allow for timely debt
servicing and funds available for future development.
FORECASTED CASH FLOW (in Rs.)
FY2012-13

FY2012-13

FY2012-13

Operating
Sales

1912500

2390625

2988281.25

COGS

-1195500

-1434600

-1721520

Salaries

-276000

-303600

-333960

Rent

-120000

-132000

-145200

-10000

-10000

Advertisement

-24000

-24000

-24000

Taxes@ 30%

-71472

-128299.5

-208452.375

Cash flow from operating activities

225528

358125

545148.875

Insurance

Financing
Page 30

Preliminary expenses

-73500

Cash at beginning

282700

434728

792853.5

Cash at end

434728

792853.5

1338002.375

Investing

7.2 Break-even Analysis

With average monthly fixed costs of Rs.262,700 in FY2012 and an
average margin of 37.5%, MTCC's break-even sales volume is around
35027 units. As shown further, the company is expected to generate
such sales volume from the out start.

7.3 Projected Profit and Loss

Annual projected sales of Rs.191, 2500 in FY2012-13.The
table below outlines the projected Profit and Loss Statement
for FY2012-13 to 2014-15.

Income statement (in Rs.)

Particulars
sale revenue
less: cost of sale
Gross margin

FY2012-13

FY2013-14

FY2014-15

1912500
1195500

2390625
1434600

2988281.25
1721520

717000

956025

1266761.25

Page 31

Less: Office Expense

Salaries
Rent
Advertisement
Utilities
Insurance
Depreciation furniture*
Preliminary Expenses
Depreciation Espresso*
Depreciation computer& AC *
Total office expense
EBIT
Tax Rate@30%
Net income

*The

276000
120000
24000
0
0
16000
24500
2260
16000
478760
238240
71472
166768

303600
132000
24000
0
10000
16000
24500
2260
16000
528360
427665
128299.5
299365.5

333960
145200
24000
0
10000
16000
24500
2260
16000
571920
694841.25
208452.375
486388.875

rate of Depreciation is taken as 10% in furniture and

espresso machine and for computer and AC it is 20%.

7.4 Projected Balance Sheet

Particulars

Balance Sheet (in Rs.)

FY2012-13

FY2013-14

FY2014-15

Owner's fund
Reserves
Net Profit
Liabilities

545300
0
166768
0

545300
166768
299365.5
0

545300
466133.5
486388.875
0

Total Liabilities and Owner's Fund

712068

1011433.5

1497822.375

Furniture & Fittings

Coffee machine
Computer
Air conditioners
Total depreciation
Net Assets

144000
9900
32000
32000
34260
228340

128000
8800
24000
24000
34260
194080

112000
7700
16000
16000
34260
159820

Other equipments
Preliminary Expenses
Cash
Total Assets

10440
49000
434728
712068

9280
24500
792853.5
1011433.5

8120
0
1338002.375
1497822.375

Page 32

Page 33