Business Plan For Second Cup Franchise Edmund Mupondwa
Josephine McKay Robert Daniels Shankar Das
Slide 2
Outline Operations Plan Marketing Plan Financial Plan
Slide 3
Operations Plan Fresh Specialty coffee Cold Beverages
Sandwiches and baked goods One Manager, one Full time, and four
Part time High volume of traffic location
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Location
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Floor Plan restrooms Office Dining Service Counter Kitchen
& Storage
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Average Business Day Manager opens store Administration and
preparation Fresh Coffee is brewed Employee support arrives One
full time shift Two part time shifts Manager assesses inventory
throughout day and orders
Human Resources Entry level positions Shift work Happy,
energetic, and committed Customer service
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Organizational Structure Owner and Operator Mary Hatch Part
time Full Time Ken Hatch (co- owner
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Marketing Plan Canadians drink over 15 billion cups of coffee a
year, making coffee Canada's favourite hot beverage Per capita
consumption of coffee increased from 4.27 kg (beans) in 1990 to
4.52 kg in 1999 The average coffee drinker consumes three cups per
day Of all coffee consumed 74% is roast and ground 20% is instant
6% is specialty Decaffeinated coffee represents 9% of total coffee
consumption About 90% of Canadians drink tea and consume about 7
billion cups per year.
Slide 13
Projected Growth in Coffee Sales The specialty coffee sector
accounts for 15% of the retail coffee market In the US, the retail
coffee market recorded a growth of 157% in value between 2000 and
2005: 2000 = $3,258 million 2005 = $8,372 million This growth was
driven by American consumer demand up-market and premium- priced
coffees Projected growth in coffee sales: 2005-2010 = 127% $3,258
million $8,372 million $18,839 million
Slide 14
Specialty Coffee Demand Factors Coffee quality rather than
price, customer demand, or convenience of supply is considered to
be the principal criterion for industry purchasing decisions
According to the International Coffee Organization (ICO), most
potential specialty coffee markets are far from saturated Specialty
coffee sales continue to expand by 5% to 10% per year The North
American specialty market represents one of the largest and most
vibrant coffee markets in the world Second Cup has an opportunity
to benefit from this market.
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Competition Product Competition Coffee and tea beverages
compete with a variety of other beverages including flavoured soft
drinks, milk, fruit juices, bottled water, vegetable juices, soy
beverages, hot chocolate, low alcohol wine coolers, and ciders.
Direct Competitors Second Cup faces direct competition from:
Starbucks Tim Hortons Locally-owned coffee shops: The Broadway
Roastery, The Co-op Local restaurants. McDonalds and other fast
food chains such as Dairy Queen, Burger King, and Subway.
Convenience stores such as 7-Eleven also provide direct
competition. Indirect Competition Supermarkets (Safeway) Purchase
whole bean coffees directly from suppliers Indirect competition by
enabling consumers access to specialty coffee for home
consumption.
Slide 16
Customers and Target Markets Second Cup will be located at the
new University Heights Shopping complex called The Village Square.
Home to one of Saskatoons fastest growing parts of the city
Population of 30,000 Expected to more than double to 62,000 by 2015
These areas include Erindale, Silverspring, Arbor Creek, and the
new Willowgrove estate Willowgrove is an exciting new
neighbourhood: Homeownership = 93.5% Average value of dwelling =
$218,357 An average family income = $81,774 Average household size
= 3.2.
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Location The Village Square includes a strip mall with
street-front coffee shops, boutiques, and other retail and
community services. Two elementary schools (Forest Grove School and
St. Volodymyr School) Two high schools (St. Joseph High School and
Centennial Collegiate), with an additional high school recently
announced. This location is adjacent to the world class new SaskTel
Indoor and Outdoor Artificial Turf Soccer Centre. The SaskTel
Soccer Centre is a great magnet for ancillary business development
in this area. Since 1998, the SaskTel Soccer Centre has been home
to more almost 10,000 soccer players. Provincially, Saskatchewan
Soccer Association enjoys approximately 30,000 members including
players, coaches, referees, managers, administrators, clubs,
leagues, and districts. There are approximately 178 adult teams in
the indoor season alone, or over 4,200 adult games. There
approximately 200 youth teams with over 8,000 youth games. There
are 7,000 registered players in Saskatoon. Second Cup is quite
confident that it has identified a location that provides an
important prerequisite for success when it comes to the food
service business. This location offers has great visibility, high
traffic pattern, convenient access, established retail shops in the
area, enabling Second Cup to consolidate its already well-known
brand supported by its well-known line of fresh African, Colombian,
and Brazilian coffee beans and other beverages served in cleanest
equipment, premium serving containers, and consistent
flavours.
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Product and Service Features Second Cups franchise products are
well established. Its product line has also grown from simple whole
bean coffee to more than 30 premium coffees Line 1: Specialty
Coffee & Lattes Line 2: Flavoured Lattes Line 3: Specialty Tea
Line 4: Hot Chocolate Line 5: Hot Milk Steamers Line 6: Cider Line
7: Soda Line 8: Blended Sensations Line 9: Creamy Fruit Smoothies
Line 10: Coffee Chillers Line 11: Chocolate Chillers Line 12: Tea
Chillers Line 13: Chocolate Vanilla Chillers Line 14: Athletic
Power Smoothies Line 15: Specialty dry cake, desserts muffins,
pastries, sandwiches
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Product Quality Second Cup prides itself for product quality
based on the authentic sources of its coffee beans. It will offer
highly differentiated coffee blends sourced from prime coffee
growing regions. Ethiopian Limu Roast Rwandan Cup of Hope Roast.
Asian blends such as Sumatra Mandheling, Latin American blends La
Minita Tarrazu from Costa Rica La Minita Tarrazu is exclusive to
Second Cup in Canada. La Minita Tarrazu is one of the most
carefully processed and highly sought-after coffees in the world
Others are: Panama (El Toucan), Brazil (Fazenda Vista Alegre),
Colombia (San Agustin and Colombia Supremo; Continental Dark,
Colombian Supremo Swiss Water Decaf) The Decaf blends are gently
decaffeinated using a 100% chemical-free method of decaffeination
without removing the coffee flavour Multi-region blends are
intended to integrate flavours from the four regions.
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Pricing Strategy Second Cup prices will be competitive and
comparable to major competitors such as Starbucks and Tim Hortons
Highly differentiated nature of its product based on product origin
and target, location advantage, and image will provide distinctive
value-added benefits to Second Cup customers Pricing structure is
confidential for now Credit terms will be offered only in the form
of valid credit card purchases such as Visa or MasterCard
Slide 21
Promotion Strategy Product launch introduce inaugural First
Second Cup Soccer Tournament Low cost but effective advertising and
promotion campaign and forge strong relationships with the
Saskatoon Soccer Association, schools, charitable organizations,
civic organizations, and corporations by offering programs that
support Saskatoon communities Advertise in the local newspapers,
direct mail ads A "frequent drinkers club" discount Second Cup
merchandize will be offered at the store and via the web site.
These include coffee mugs, soccer balls, caps, T-shirts, bunny
hugs, sweatshirts. Marketing Expenses Advertising
Royalty52,78559,45766,97275,43884,97395,714 Local Advertising9,285
Total Expenses62,07068,74276,25784,72394,258104,999
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Slide 23
SWOT ANALYSIS Strengths (Internal Factors) Strong brand
identity Canadian leader, with more than 400 coffee houses, 43 of
them in Quebec Robust financial performance Large scale of
operations Agreements with Air Canada, Via Rail and Delta Hotels,
under which it serves over 26 million cups of coffee a year
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Weaknesses (Internal Factors) Second Cup prefers franchises or
owner-operators who pay royalties on sales. Owner-operators may
have difficulty raising required start-up equity financing, unlike
Starbucks which usually prefers to set up company-owned outlets,
sometimes in partnership. Second Cup has signed a long-term
agreement with a coffee multi-national for supply of coffee beans.
Competitors like Van Houtte and Starbucks have their own roasting
plants. Narrow product mix. Any reduction in consumer consumption
of coffee for any reason would have a negative impact companys
performance. High dependence upon a single product represents a
commercial risk
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Opportunities (External Factors) New markets Growing specialty
coffee market Growing demographic segment in new location Prime
location close to highly visible and active residential area New
health benefits of coffee Organic coffee segment Speciality teas
expected to attain strong sales growth. Currently, specialty teas
account for only a small share of consumer purchases.
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Opportunities (External Factors) Intense competition from
established players like Starbucks: Over 13,000 locations in 39
countries More than 44 million customer visits per week Revenues of
$7,787 million in 2006 against its competitors like Diedrich Coffee
($59.5 million) and GMCR ($225.3 million) during the same period.
Large economies of scale provide a cost advantage to Starbucks in
the marketplace and pose a threat to Second Cup Highly volatile
coffee commodity prices Coffee industry faces social and
environmental concerns associated with coffee supplies, including
child labour in developing countries and exploitative prices paid
to developing country coffee producers. Corporate image can be
eroded. Emergence of low cost of brewers such as coffee presses
(Bodum), mocha coffee-makers and filter coffee systems (Melitta)
will likely influence the purchase of whole beans and speciality
coffees by prime target market of the 18 50 year age group. Rivalry
reaction from multinational coffee companies (e.g. Kraft and Nestl)
who have implemented a strategy to reposition themselves more
aggressively in the gourmet coffee market. The sale of coffee beans
in grocery stores from major-league players like Kraft, Proctor
& Gamble (Folgers) and Nestl. Kraft and Starbucks announced the
formation of a long-term partnership to sell Starbucks brand coffee
beans and ground coffee in stores throughout the U.S. and possibly
internationally. Strong competition and market leadership in the
tea segment by the multinationals such as Unilever and Nestl that
dominate the market. (Unilever and Nestl).
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Financial Plan Sales, Gross Margin, Net Income
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Operation Expenses
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Summary of Financial Results Year200820092010201120122013 Sales
527,850594,570669,724754,377849,730957,136 Cost of Goods Sold
192,948222,141250,220281,847317,473357,602 Gross Margin
334,902372,429419,504472,530532,257599,535 Expenses
326,483314,233362,615393,928427,938464,934 Income Before Taxes
8,42058,19656,88978,601104,319134,601 Income Taxes
1,3899,6029,38712,96917,21322,209 Net Income(Loss)
7,03048,59447,50265,63287,106112,392 Net Present Value of Equity
Investment176,326 Internal Rate of Return on Equity Investment at
20%94.4%
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Risk Analysis
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Net Income
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Long Term Debt
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Questions? Thank You, Edward Mupondwa Josephine McKay Robert
Daniels Shankar Das
