Dens Coffee shop is set to become a central part of the lives of coffee addicts in Tower Hamlets, London. It will offer the perfect environment for people to meet or just waste the day away as they sip a cup of coffee. The coffee shop will have 1200 square foot sit down space adjacent to a busy street. The location has been purchased by the company and the necessary structures set up.
Dens coffee will provide coffee to different customers who long take their daily cups of perfectly made coffee in a relaxing atmosphere (Bent, Mett & Skamaris).
Dens coffee shop has the following objectives that should be achieved within the first year of operation.
- Become a preferred coffee shop in the area
- Turn in high profits from the time operations begin
- Uphold a high gross margin throughout
A feasibility study carried out between June and August 2010 to establish whether it will be good idea to set up a coffee shop at Buxton Street, Tower of Hamlet borough, London. The Tower of Hamlets is recognised as one of the most ethnically diverse boroughs in London (Kenneth 2001). This was indeed required to ensure that finance and other efforts that are committed to the project do not go to waste.
It’s important to note that coffee is a favourite beverage among many city dwellers. The proposed location has several institutions with large number of students that will make a big part of the targeted market. There is no other coffee shop with the same locality and thus there will be no competition. The customers will vary in age due to the diversity of this locality. Most of the customers are however expected to be students and research indicates that such customers are often attracted by good tasting coffee.
The retail coffee industry is generally flourishing across the UK (Kenneth 2001). The climatic conditions that have longer cold and rainy periods make it very conducive for people to consume coffee and other non-alcoholic drinks that are served hot. Consumption of hot drinks may reduce during the summers but people are still expected to come for the iced drinks.
Dens coffee will focus on gaining new customers while retaining the existing ones. It will also aim at getting customers to spend more and come back more often (Bent, Mett & Skamaris 2005). In order to gain a competitive advantage over other beverage shops, Dens coffee will set itself in a way that it will not only provide perfect coffee to its customers but also provide a comfortable environment. A comfortable sitting environment, proper lighting and nice music will give patrons a proper place to relax after a stressful day.
Sales at Dens coffee shop will be handled by the baristas. In order to ensure efficiency at the coffee shop, at least three workers will be attending to the clients, one preparing a client’s order, while another handling the sales transaction.
In order to develop a strong clientele base, Dens coffee will make use of banners, fliers and customer referrals, and cross promotions with other businesses in the area (Pinson 2004).
Likely future scenarios
The future for the Dens coffee shop is expected to be as projected, however, optimistic and pessimistic scenarios are still possible. The capital will not be spend wholly on the start up activities, thus in case of any future shocks, mainly within the first year of operation, the available finances will be used to correct the situation.
In case the sales perform better than forecasted then plans will be made to expand the coffee shop sitting area and the drive through. Another shop might also be established within a reasonable distance.
Cash flow at the Dens coffee shop will be monitored carefully. It is assumed that after the initial investment and start up costs are recouped, the coffee shop will be able to sustain itself (Siegel, Brian & Ford 1993). Some fluctuations are however expected to follow the seasonal dips that might be witnessed.
The initial capital including financing is expected cushion the coffee shop during the first year of operation. Dens coffee shop is expected to show a marked increase in net worth in the second or third year of operation. The sales projection is based on the data that was collected during the feasibility study. The cash flow projection includes interest that will be paid at 7% per annum.
The projections reflect three likely scenarios (pessimistic, optimistic and projected) as indicated in the excel files.
Bent, F., Mett, K., Skamris, H., 2005. How Inaccurate Are Demand Forecasts in Projects. Journal of the American Planning, 71(2):131-14.
Kenneth, D., 2001. Coffee: A guide to Buying Brewing and Enjoying. New York: St. Martin’s Griffin.
Pinson, L,. 2004. Anatomy of a Business Plan: A Step-by-Step Guide to Building a Business and Securing Your Company’s Future. Dearborn Trade: Chicago
Siegel, E., Brian, R., Ford, J., 1993. The Ernst and Young Business Guide. New York :John Wiley and Sons