Coffee Roaster

BUSINESS PLAN

VENEZIA COFFEE ROASTERS

14600 Waterfront Drive
Kennebunk, ME 04043

Two seasoned coffee roasters found their niche in a seemingly saturated market. This plan illustrates that their specialty lies not only in their roasting methods, but also in their socially responsible business practices. Their mission is to balance the needs of their customers, their environment and the coffee growers. Venezia Coffee Roasters' detailed financial tables showcase the preparation needed to make them a competitive small batch coffee roaster in the New England region.

• statement of purpose
• description of business
• goals and objectives
• management
• product and service
• space, equipment and location
• market information/marketing
• competition
• financial data

STATEMENT OF PURPOSE

Venezia Coffee Roasters seeks loans totaling $56,000 to: purchase equipment and inventory, rent working space, and perform the necessary renovations and improvements, and provide adequate working capital. This sum, together with an additional $23,000 investment from friends and family, will be sufficient to launch a profitable small-batch gourmet coffee roasting company. The initial form of organization will be sub-chapter "S" with a buy-sell agreement among the founders. The company's mission is to be known as the premiere small-batch coffee roasting wholesalers in southern Maine.

We have over two years experience in the specialty coffee roasting business. Venezia coffees will include only the best ingredients roasted to perfection with pride and careful attention to detail. Venezia's service will be unparalleled offering weekly interaction with its customers. Venezia will guarantee seven-day-a-week maintenance and repair service. Not only will our packaging be environmentally sensitive but it will ensure optimum freshness which surpasses our competitors. In keeping with our environmental ethics, Venezia will be the only roaster in Maine to employ an afterburner to reduce the air pollutants normally associated with the roasting process. Venezia will be able to offer all these advantages and remain competitively priced.

With the ever increasing demand for specialty coffee, Venezia will fill a specific niche in the market. Venezia coffees will appeal to the discerning coffee drinkers who insist on quality, consistency and affordability. Venezia coffee roasting company will be successful due to steady growth with profitability by the third year accomplished by providing a superior coffee with unequalled service to our customers.

How did we choose the name Venezia? Venezia draws on the Italian influence and history in specialty coffees. It lends itself well to a more sophisticated audience such as our target market.

DESCRIPTION OF BUSINESS

Venezia Coffee Roasting Company will small-batch roast only the finest, top grade beans from around the world. Careful attention will be paid to all stages of the product's development, beginning with purchasing the highest quality beans. We will small-batch roast to assure the optimum peak of flavor when roasted. We will blend coffees which complement each other in acidity and body. We will flavor coffees using the best available extracts and flavorings. State-of-the-art packaging will be used to assure a long shelf life (approximately one year) and attractive and informative labeling will be used to entice and educate the consumer about our product.

Our concern is that we be as environmentally conscious as possible. We will use an afterburner on the roaster to reduce the amount of air pollutants normally associated with the roasting process. Our packaging will be recyclable or made from recycled materials. Our packing material too will be recycled.

We will become involved with the Coffee Children Association to help promote a greater return, financially, to the countries from which the coffee originates.

We want to have a working environment that promotes a feeling of pride and enthusiasm.

Venezia will target four markets:

• Retail Specialty Shops - Gourmet, Gift
• Coffee Brewing Establishments - Bakeries, Coffee Shops, Restaurants
• Mail order
• Office Coffee - Schools, Offices

We will provide coffee to the discerning coffee drinkers. We will be environmentally and socially conscious which will appeal to that same market. We will provide the necessary brewing, grinding and display equipment for the relevant businesses. We will contact a roasters' authorized repair service company to provide the maximum service ford that equipment. We will deliver weekly to provide the end user with the freshest product possible. We will place the expiration date on each bag to further insure freshness. We will roast only what we will sell within that week.

Each account at Venezia will enjoy seven-day-a-week service for all mechanical concerns. Along with the regular weekly contacts with each account by our sales representative Venezia will have a service contract set up with CSX of Portland, Maine, to cover weekends and holidays.

GOALS AND OBJECTIVES

As a seed company, Venezia has secured six accounts averaging 300 pounds per week. Our goal is to close ten accounts by the end of the first year. The total amount of sales per week will be 500 pounds or better. We will do a mailing in the Portland area offering introductory specials to give our name exposure and to entice consumers. We will participate in as many community functions as we can possibly handle in an effort to get name recognition and to educate the consumer about our coffee. Initially, tastings in all retail locations will be held regularly. A mailing for office coffee will be sent to surrounding schools and offices. We will capture some of the Christmas business at the gift shops by offering one-pot portions, ground and whole bean, which sell well in customized gift baskets. We will increase our sales by the end of the second year by approximately ten percent. Our name will have greater recognition by that time providing us with more referrals. By the end of year two we will be able to offer our own gift boxes and baskets for all occasions. We will target several of the surrounding businesses for their Christmas gift business. We will increase business by another 250 pounds per week by the end of the third year. At this time we will have hired an additional sales/delivery person to reach that goal through all the avenues previously described. Special emphasis will be placed on capturing corporate gift business.

MANAGEMENT

Both Maria and Jennifer hold college degrees. Maria owned and operated a successful house painting business for five years. She has strong production skills. Jennifer was head chef and kitchen manager at Pineland Farm Restaurant for six and a half years. She has strong organizational skills. Both Maria and Jennifer have over two years cumulative coffee roasting experience. Jennifer was manager of sales and production at Pawtucket Coffee Roasting Company. Maria was the coffee roaster for ten months at the same place. While employed at P.C.R. both Maria and Jennifer learned all of the different facets of running a coffee roasting wholesale business. Within the fifteen months that Jennifer was manager of P.C.R. she tripled sales, bringing sales up to an average of 750 pounds per week. Maria and Jennifer attend Specialty Coffee Association of America Seminars when possible. They confer with experts such as John Collers, President of the Coffee Association and owner of Collers Office in New York City, and Daniel Krull, owner of Sam Coffee Company in Brooklyn, New York. Jennifer is an active member of the East Coast Women's Network and uses that organization as a business resource. Kim Bonn, office manager of Cromwell Financial Services in Portsmouth, NH, consults with both Maria and Jennifer. Don Shute, a retired executive of IBM and EDS also consults with both women. Both Maria and Jennifer have a working knowledge of IBM and Apple Computers. They have taken adult education classes to better familiarize themselves with these platforms. They feel confident, since they have already successfully run a coffee roasting business, that they can make Venezia a profitable and long lasting business in the area.

We have the required technical and marketing skills to get this company up and running. We have experience in ordering, roasting (production), delivery and most importantly, sales. We anticipate hiring one or two employees in year three. The first position would be as a sales/delivery person. We will split the work duties as it demands. Maria will primarily be responsible for the production end and Jennifer for the service and sales end. Each will fill-in where necessary. Bookkeeping will be shared. We have hired Karen Allen, an enrolled agent to handle taxes, and general accounting-strictly part time. We will consult with lawyers concerning incorporating issues.

Maria and Jennifer have worked together for the past two years in varying degrees. They share similar philosophies about work and life and have discussed in depth where they envision Venezia to go and how it will get there. Between us we have the necessary labor skills. When it comes time to hire new employees we feel confident we can train for any position. We continue to further our skills and knowledge by attending roasting and cupping seminars given by John Ewell, president of the Coffee Corner in Boston, MA.

PRODUCT & SERVICE

We will offer coffee roasted weekly to locations within the New England area. We will offer numerous varietals, blends, and flavored coffees along with nearly as many decaffeinated coffees and blends. Our product will be packaged in an airtight, heat-sealed, one-way air valve, polypropylene bag which will either be produced from recycled plastic or be recyclable. The bags will be hand stamped. Labeling will include information concerning contents about artificial and natural flavorings, origin of beans, and type of roast. Each bag will be freshness dated. We will give our suggestions for best brewing and storage. We will offer one pot portion bags along with half-pound, one-pound and five-pound bags. For brewing establishments we will provide brewers which we will install, maintain and repair as needed. We will offer promotional items such as tee shirts, paper cups, ceramic mugs, travel mugs, home grinders, French press pots, bumper stickers, etc. We will offer a money back guarantee. If for any reason the customer is dissatisfied with our product they need only return the unused portion and we will refund all their money.

Our product is extremely reliable, and safe. Any pesticides or residues from the decaffeination process are burned off in the roasting process.

With all the careful attention paid throughout the development of our product we know that Venezia coffee will yield the best cup of coffee for the end user. Freshness will be our number one concern. We are proud to be a Maine based company and feel it should add to the overall appeal of our product.

We feel that we have developed our product experience during our employment at our packaging, will be radically different from that of P.C.R.'s. Although we have not yet tested this new packaging we know through reading and observing the competition that it will be the future of packaging. We will be using a different kind of roaster than our competition, however, the process will be similar. We are confident that the roasting experience we have will translate to this other kind of roaster. As part of the service provided upon purchasing the roaster we will receive training on the new machine.

Responsibilities

Jennifer will contact each account early in the week to determine amounts and types of varietals to be roasted. Maria would then roast the coffee for those orders, blend, flavor and package the product. Then Jennifer will deliver via a delivery vehicle within the three day turnover that we allow to process an order. Orders that would fall outside of the hundred mile radius will be delivered by UPS.

Once the plant is fully equipped with the roaster we will start production immediately. Generally it takes about three hours to fill an order from raw bean to packaged product. We have five standing accounts waiting for our production facilities to open.

Jennifer will be purchasing the beans, enabling her to have a first hand knowledge of what will be roasted. A small-batch roaster, such as the one we will be using will allow us to keep a close eye on the development of the bean during the roasting process. Each varietal and each crop within that varietal has a different moisture content. It is that water content that determines the amount of roasting time needed. Since we will not have an automated roaster we will be able to adjust each roast accordingly, yielding an even roast which has been allowed to develop to its optimum flavor peak.

Coffee roasting is an exciting and wonderful process. It is simple in theory. The beans must be heated, kept moving so no burning or tipping occurs, and they must be cooled, or quenched at the precise moment to stop the roasting process. Under-roasted coffee tastes pasty, coffee roasted too long and at too high a temperature will be thin-bodied, burned and industrial-flavored. The roaster that we will be using has a drum which rotates above a gas flame. Typically the air in the drum will be heated to about 500 degrees fahrenheit and by manipulating the air flow the temperature can be steadily maintained throughout the roasting process. For the first five minutes or so the beans will tumble around and lose water weight which accounts for the 15%-18% total weight loss. When the internal gases in the beans heat up and the pressure becomes too much for the bean, they will explode creating the first of two snapping sounds heard during the process. Later when the internal temperature of the bean reaches about 400 degrees fahrenheit, the oils in the beans will begin to develop, a process known as pyrolysis. The beans will then begin to show a marked darkening in color and the second snapping will be heard. Allowing a small amount of time for the beans to cool, they will then be emptied into a metal bin where they will be air cooled. The last few minutes of the process can make the difference between a full city roast, a French roast, an espresso roast, or sadly, a worthless roast. By roasting as close to that amount which is actually ordered each week we will be able to maintain the freshness factor. By expiration dating the bags, we will be able to rotate stock accordingly.

Coffee beans can be bought through a number of brokers. There are ports in New York, Louisiana, and California. We will be using Express Freight Service, Inc. for delivery of the beans from port to our business. The average turn around time for delivery of beans is five working days. Labels, flavorings and most other supplies can all be delivered within ten working days. The initial printing of any advertising or labels will take longer to allow time for proofing, but once it is all set up delivery time is reasonable. We will have all the basic printed material ready to go before we open for business.

Orders will generally be delivered in the delivery vehicle, or by UPS. We will have routes to cover the various areas. Generally Jennifer will make the deliveries, since she will be acting as the sales representative. In so doing she can field any questions or problems the customers might have on a weekly basis. While making deliveries she can make sales calls along the way to try and increase the volume for those routes.

Venezia understands the importance of a good working relationship between ourselves and our customers. The service begins the moment we introduce and educate the consumer about our product. We are willing to customize our displays and equipment to accommodate the different space limitations and needs of each customer. We feel it is important to give the customer a working knowledge of specialty coffee and the specific brewing equipment they will be using.

In whole bean retail locations we will conduct regular tastings to introduce our product and educate the end user. We will offer attractive and informative promotional items and strategies to help establish a new customer base for the retailers.

Venezia knows that any down time for our customers due to mechanical problems of our equipment can be expensive for both parties. Venezia will have a regular maintenance program in place to troubleshoot and predict possible problems and take appropriate precautions. In the event that a mechanical problem does arise Venezia's service contract with a Conley authorized repair company will insure prompt attention to and resolution of the problem. In addition to the service contract with Conley, Venezia will employ back-up brewers as a temporary solution. Either way our customers will be provided with round-the-clock service. This service coverage is unrivaled by our local competitors.

Each week the sales representative from Venezia will contact each account not only to take orders but also to field any questions, promote new products and listen for problems.

SPACE, EQUIPMENT AND LOCATION

Space

Initially we would need the space provided by a two car garage (approximately 320 square feet). We would need plumbing with a two bay sink. We would need a gas hook-up, and the ability to vent a six inch pipe. We would require zoning for light industrial.

Equipment

We will need a small batch roaster with an afterburner, scales, a delivery vehicle, shelves, work tables, a telephone, a computer, seven brewers, five grinders, a heat sealer, and office furniture.

Location

We are considering another location somewhere between Portland and Acadia, Maine. We would prefer easy access to the main freeway. The location needs to be zoned for light manufacturing. We have looked at a place which fills all of our criteria while meeting our budget qualifications.

MARKET INFORMATION/MARKETING

The trend in the coffee business now supports Venezia's plan. A big emphasis on gourmet and specialty coffees has been increasing and is reflected in a rapid increase of coffee shops. The West Coast's influence on the coffee market has effected consumer's appreciation of fine coffees making super-market coffees much less appealing. This statement is supported by various newspaper and trade journal articles.

Coastal Coffee Company, which has enjoyed huge success on the West Coast, has recently shown interest in expanding their operations to the East Coast (Boston) thus supporting our conclusion that the gourmet coffee trend is here to stay.

For servicing reasons we will initially focus on the local market, that would encompass an area of approximately one hundred miles in radius extending from mid-coast Maine to the Vermont/New Hampshire border and south to the southern metropolitan Boston area. Over time we will target regional and national markets through a mail-order strategy.

Like some of our competitors we will be using the finest beans and flavorings available. It would be senseless to invest all the time and money into such a fine product and then not protect it. That is why Venezia's one-half-pound, and one-pound bags are constructed of high barrier laminates with a one-way air value to allow the natural by product gas, carbon dioxide, to escape while preventing oxygen, and water contaminates from entering. The bags are heat-sealed but can be easily opened and have resealable zippers. All of these features combined will lengthen the shelf life appreciably. Typically the shelf life of coffee stored in the popular, less expensive, plastic-lined, paper bags only retain their freshness for about six weeks. Venezia's packaging will extend the shelf life to a full year. None of the other local roasters offers such packaging. From a retail perspective, the bag will retain a cleaner appearance over time since no natural oils will seep through and stain the bag.

Venezia's labeling will be very informative, offering advice on brewing and storing techniques as well as describing the type of beans, the flavoring extracts, and the type of roast. Unlike our competitors our coffees will have an expiration date affixed to each bag. This added information will further guarantee freshness to the end user.

In this time of environmental awareness we are proud to be able to offer state-of-the-art packaging that uses 80% less material in its production while offering the consumer a reusable container.

Venezia Target Markets

Primary Markets

1. High volume coffee brewing establishments
   1. Bakeries
   2. Donut Shops
   3. Restaurants
2. Specialty food shops
   1. Gourmet Food Shops
   2. Upper-End Gift Shops

Secondary Markets

1. Offices with an average of twenty five employees
2. Mail Order

Market Description

Venezia will operate in the southern Maine area targeting high volume upper-end bakeries, restaurants, and specialty food shops. The geographic area includes coastal New Hampshire, and southern Maine. As quoted from "The Basis Business and Industry Profile of Specialty Coffee House/Cafes" supplied by Cleveland State University, "according to a recent National Association of the Specialty Food Trade (NASFT) report on the specialty food consumer, gourmet coffee consumers are an educated, affluent group. Overall, 22.1% of Americans purchased specialty coffee. Most gourmet coffee consumers live or work in large urban communities. However, their most significant attribute is education level. Persons with some college education are 11% above average in their consumption of gourmet coffee. Consumers that have completed college are 49% above average in their consumption. Since education is highly correlated to income, it is not surprising that specialty coffee consumers earn above average salaries. Most specialty coffee consumers are affluent, earning above $35,000 per year." We contacted the Bureau of Census whose latest statistics show that the median family income in Portland, ME. is $34,837 and $34,344 in Portsmouth, NH. The percentage of people holding Bachelor's degrees or more in Portland, ME is 29.6 and in Portsmouth, NH is 26.6. According to a researcher for the Maine State Department of Tourism, their major target market is people over fifty five, college educated, and earning over $55,000 per year. This influx of consumers of this profile increases our target market pool.

COMPETITION

Our direct competitors are Pawtucket Coffee Roasting Company in Jamesville, ME, Colling Roasters, in Portsmouth, NH. Also breaking new ground is Mecca Coffee Roasting Company, in Portland, ME and to some extent, Valley Coffee Roasting Company, in Stowe, VT.

Since Venezia is the newest coffee roasting company we obviously lack the name recognition that all the other competitors now enjoy. However, to our advantage, we have learned from them the crucial importance of producing consistent high quality products and delivering superior service. We model ourselves after Coast Coffee Company because they insist on using only the best grade beans with careful attention to every other aspect of the coffee roasting and distribution process. It is evident in all their marketing that they are constantly aware of the value of their excellent image and reputation.

The small roasting companies in this area with whom we are in direct competition have taught us the importance of the service end of the coffee roasting business. It is not enough to produce a good coffee. It is imperative to pay close attention to the needs of the retailers, and to the consumer.

Valley Coffee Roasting Company has shown us how quickly a company can expand. They effectively canvassed the entire New England area. There is hardly a person in the New England area who has not heard of Valley Coffee. Valley was once the exclusive coffee drinkers' coffee, now you can get a cup in any Mobil Gas Station or convenience store in New England. The fallout from their indiscriminate expansion has given companies such as Venezia a new niche to fill. Venezia will offer a quality specialty coffee for retailers catering to a more sophisticated and informed audience. In light of the rapidly expanding specialty coffee market and although there are several coffee roasters in the immediate area there still remains a void Venezia can fill. Our goal is to produce a consistent high quality product and provide our customers with reliable, friendly, and expedient service. We want to protect our image and so we will be discerning about the establishments with whom we will do business. We will have written guidelines to ensure that our image is that of a reliable coffee roaster. Venezia will operate as an environmentally and socially responsible company. We will use an afterburner in the roasting process to reduce air pollutants, a step which none of the aforementioned local competitors have taken. We will recycle and re-use any product possible in producing and shipping our coffee. We will not compromise on quality to reduce costs, that would defeat our mission.

Venezia plans a controlled, and methodical, growth process. In our gradual growth we will be able to fully integrate each new business into ours with as much attention as may be needed without having to sacrifice service to the existing accounts. It has been to our benefit to watch Valley Coffee Roasting Company expand too quickly and show us the downside of unbridled growth.

FINANCIAL DATA

Capital Equipment List

Breakdown of Variable and Fixed Costs

Monthly Breakdown of Cost of Goods Year One

*Raw Bean Quotes Given as of Sept. 1, 1994

Colombian Supremo 154 lb. bag $2.50 lb. Total $385.00
Costa Rican 132 lb. bag $2.63 lb total $347.00
Ethiopian 132 lb bag $3.25 lb Total $429.00
Kenya AA 154 lb bag $2.85 lb Total $440.00
Sumatra Mandehling 132 lb bag $3.30 lb Total $435.00
Decaf Colombian (Meth. Chlor.) 132 lb bag $2.66 lb Total $351.00
Decaf Costa Rican (Meth. Chlor.) 132 lb bag $3.03 lb Total $400.00
Decaf Sumatra Mandehling (Swiss Water) 132 lb bag $3.42 lb Total $452.00

Monthly Breakdown of Bags, Labels and Flavorings — Year One

1/21b Bags = .26, 1 lb Bags = .32, 5 lb Bags = .35, Labels = .06

Pricing Analysis - Calculating the Break-Even

S = FC + VC

Where

FC = Fixed Costs in Dollars
VC = Variable costs in Dollars
X = Projected pounds sold
$6.50 = Average pound selling price

Calculating Break-Even For Year One

S=FC/GM
Where
GM= Gross Margin Expressed As A Percentage of Sales

Cost of Unit ($6.50 - VC of Unit ($2.83)=Gross Margin Per Unit ($3.67)

(17,084) ($6.50)=$111,047.00=Break-Even Dollar Sales

* Note: a 5% increase due to an estimated 5% increase in cost of goods in year two.

Calculating Break-Even For Year Two

S=FC/GM
Where
GM = Gross Margin Expressed As A Percentage of Sales

Cost of Unit ($6.50) - VC Per Pound ($3.00)=Gross Margin Per Unit ($3.50)

Break-Even lbs. = FC $63,668.00= 18,191

Gross Margin Per Unit $3.50

Break-Even Sales in Dollars=(18,191) ($6.50)=$118,241.00

Venezia Monthly Sales Projections in Dollars

Income Statement Three Year Summary

* Includes Pre-Start-Up

Explanation of Categories

Cost of Goods = Raw Beans + Pick-Up Charges + Bags + Labels + Flavorings
Rent/Utilities/Insurance = Rent + Electric + Water + Telephone + Gas + Fuel + Health Insurance + Car Insurance + Business I
Professional Services = Legal + Accounting + Maintenance + Outside Services
Taxes + Federal + Medicare + Social Security + State + Other
Interest and bank loan is based on a $56,000.00 loan at 10% over seven years.
Operating Expenses = Supplies
Capital Purchases = Roaster + Brewers + Grinders + Scales + Heat Sealer + Delivery Vehicle + Computer
Miscellaneous = Subscriptions + Start-Up Costs
Information On Worker's Compensation
Class Code # 8006; Sale of coffee, tea or groceries
Per $100.00 of Payroll = $4.67
Also add 20% surcharge
For year three one part time employee at $7.00/hour 20/hours/week with surcharge = $632.00

Employee Responsibilities

Employee #1 = Managerial/delivery/sales position

Employee #2 = Production

Employee #3 = Delivery/sales position

Employee #4 = Production position

Employee #5 = Bookkeeping/administrative position

Employee #6 = Production position

Anticipated Estimated Sales In Pounds Per Week and Month Year One

Payment Schedule

Balance Sheet Month One Year One

Balance Sheet Month Twelve Year One

Coffee House

BUSINESS PLAN

COFFEE CIRCUS

3005 37th Avenue
Santa Fe, AZ 68002

Coffee Circus' owners are taking advantage of the coffee house rage that has been sweeping the country. Along with taking advantage of this trend, they are also planning for the future. Coffee Circus is also marketing itself as a full service restaurant to maintain stability, in case the coffee trend begins to fizzle.

• executive summary
• mission statement
• purpose of business
• business goals
• description of business
• opportunities and strengths
• critical risks and problems
• marketing
• operations
• management
• financial

EXECUTIVE SUMMARY

The interest by consumers in the coffee house industry is sweeping the country. Coffee Circus is positioned to bring this to the Northwest Santa Fe area. To date it has been confined to the Central and East areas.

Coffee Circus will provide a friendly, comfortable atmosphere where the customer can receive quality food, service and entertainment at a reasonable price. The coffee house will offer a variety of choices to the customers. Coffee and tea of all sorts will be offered. Juice, soda, and non-alcoholic beverages also will be available. Both wine and beer will be on sale. Coffee Circus will serve breakfast, lunch and dinner.

The interior design of the building will focus on projecting a relaxed atmosphere. Coffee Circus will be divided into different areas. Some will have tables and chairs, another will have large antique stuffed couches and chairs, end tables, coffee tables, book shelves filled with books and magazines, tiffany style lamps and braided rugs. A PA system will be installed so that the music and entertainment can be heard throughout. A large selection of table games will be provided.

There will be nightly entertainment featuring acoustic jazz, blues and folk music. On selected nights there will be poetry readings and an open microphone. The walls will be used as an art gallery and from time to time there will be an artist in residence.

The site contains a 3,525 square foot building which was used as a sports bar and restaurant. The building has substantial parking. The site shares the Hart Plaza with Folk Limited and Ryan Sports. Remodeling will consist of removing the existing booths, new carpet and some new furniture. The kitchen and bathrooms will require only minimum remodeling. The property is currently zoned for restaurants.

The area comprising a three mile radius around Coffee Circus is heavily populated with young, upwardly, mobile persons with expendable income. This is complemented by a large number of upper middle class "Baby Boomers" who are a large portion of those persons who frequent coffee houses.

A strength which this business will possess is the ability to change with the times. Rather than limiting the future opportunities by having a small area, Coffee Circus will have 3,525 square feet of space and a kitchen designed for flexibility. As the fad of coffee houses fades, Coffee Circus will be able to change to a full course restaurant or whatever the situation calls for.

The advertising and promotion will take a number of avenues. First, flyers will be distributed in the neighborhood. Ads will be taken out in all of the Catholic church bulletins in the area. Since Coffee Circus will be the first union restaurant in the state, ads will be placed in all of the union newsletters. Ads will also be placed in the target areas of the Burns' Grocery, and the local neighborhood newsletters. For businesses in the area, menus will be distributed and ordering will be available by fax. A customer mailing list will be developed with a calendar of events being mailed on a monthly basis.

Coffee Circus will be operated as a Sole Proprietorship. There will be private investors. However, these investors will be silent investors with a payoff of investment within three years. These investments will be paid twice-yearly in equal installments including interest. The total needed capital for Coffee Circus is $99,900. Owner's cash contribution is $10,000 and other investors and family members is $16,000. The amount needed in loans is $30,800 for equipment, $20,000 for remodeling, and $23,000 for operations. This is a total of $73,800.

Overall management will be the responsibility of the owner. The owner brings to the business over 20 years of business experience including over five years in restaurant management and five years in directing a multifaceted non-profit housing program. The general manager will have a minimum of 10 years experience. A major emphasis of Coffee Circus will be to hire economically disadvantaged or at-risk persons and provide them with job training. The majority of these persons will be identified through the City of Santa Fe Job Training Partnership.

MISSION STATEMENT

To provide a friendly, comfortable atmosphere where the customer can receive quality food, service and entertainment at a reasonable price.

PURPOSE OF BUSINESS PLAN

This document is intended to outline the start-up of the business known as Coffee Circus. The business plan has a two-fold mission. One is to obtain financing. The other is to help define the who, what, where, when and how for the business so that the business will have a clear cut plan and operations map.

BUSINESS GOALS

The goals of the business are to provide a substantial income and to create a business and working environment where both the customer and employee are treated with dignity and respect.

The specific goals of the business are:

Profit - personal income in excess of $50,000 per year within three years

Clientele - create a base clientele of persons who live and work in the area. These persons will like a relaxed atmosphere where they can "hang out"

Employees - Competent employees (at least 51% from low-income neighborhoods) who are committed and loyal

DESCRIPTION OF BUSINESS

Coffee Circus will be a coffee house/restaurant located in the Hart Plaza on the southeast corner of 37th Ave. and Holgate.

The coffee house will offer a variety of choices to the customers. Coffee and tea of all sorts will be offered. The choices of coffee will range from espresso to latte, from regular flavor to raspberry-mocha. The teas will range from English to flavored varieties.

Juice, soda, and non-alcoholic beverages also will be available. For those who want something else to drink, both wine and beer will be on sale. Wine can be ordered by the glass or by the carafe. Bottled micro-brewed beer will be available.

The breakfast menu will feature croissants, muffins, bagels, donuts, french pastries, fruit filled crepes, etc. Except for the crepes, the baked goods will be purchased from The Works. Lunch and dinner will feature sandwiches, salads and seven different soups. In hot weather, a variety of cold soups will be offered. In addition, Coffee Circus will feature a vast array of appetizers. These will include artichokes (Both stuffed or served with butter); stuffed mushrooms; mini loaves of bread served with your choice of a bowl of pesto, queso, or green chile, etc. Desserts will consist of cheesecakes (some fat-free), pastries, pies, fresh fruit and cheese.

The interior design of the building will focus on projecting a relaxed atmosphere. The bottom portion of the walls will be forest green with the upper being eggshell white. The carpeting will be forest green. The table and chairs will be custom made from light oak. The chair coverings will be of forest green material and heavily padded for comfort. The table tops will be a marbleized forest green laminate. Plants will abound in gold pots. The dishes and eating utensils will be mismatched and purchased from antique and thrift stores. The coffee cups will be from the forties and fifties era. They will be provided by a local antique business and will be for sale.

Coffee Circus will be divided into different areas. An advantage to having different areas is that customers can partake in different activities without bothering anyone (i.e., political discussions will not interfere with the music, or the music will not interfere with those playing board games or reading).

The emphasis will be on providing a comfortable environment for the customer where they will want to linger and return many times.

OPPORTUNITIES AND STRENGTHS

The time is right for opening a coffee house in the city of Santa Fe. Coffee houses are having a great deal of success, which is evidenced by the full houses every day of the week. The southeast side of Santa Fe has no such places. The closest competition is the Coffee Club located at Santa Fe Park and Main. In order to reach a coffee house, a customer from our area must drive 20 to 30 minutes. The majority of these establishments are located on the West side of town. A few are beginning to open in the downtown area.

The area comprising a three mile radius around Coffee Circus is heavily populated with young, upwardly, mobile persons with expendable income. This is complimented by a large number of upper middle class "Baby Boomers" who are a large portion of those persons who frequent coffee houses.

An additional strength which this business will possess is the ability to change with the times. Rather than limiting the future opportunities by having a small area, Coffee Circus will have 3,525 square feet of space. The kitchen will be designed for flexibility. As the fad of coffee fades, Coffee Circus will be able to change to a full course restaurant or whatever the situation calls for.

The business will bring with it a strong group of persons with an extensive background in both restaurants and business.

CRITICAL RISKS AND PROBLEMS

There are risks inherent with any business. However, the restaurant business carries with it very unique risks. Most critical is the customers' changing tastes. Another is the economy. Restaurants rely heavily on serving persons who have expendable income. When the economy takes a down turn, people change their spending priorities. There are less trips to restaurants.

A problem also in restaurants is finding dependable help who will stay with the business. Many restaurant employees tend to be younger and are attempting to move into a career. When either their schooling ends or they find their "dream job," they move on. Often servers filling the positions are non-skilled, and tend to be single mothers or lower educated persons. These persons come with specific circumstances which must be accounted for by management. A single mother may experience child-care problems, or a bus person may have problems with reading. A good owner must learn to deal with these problems in a manner which benefits the business as well as the employee.

MARKETING

Goal

Generate monthly sales revenues of $71,000 per month of 3% of the target market within 18 months of opening.

Objectives

• Maintain a high standard of food quality and service
• Provide first-rate live entertainment without a cover charge
• Ensure a friendly comfortable atmosphere
• Place monthly ads in neighborhood publications
• Distribute monthly fliers to neighborhood, businesses and churches
• Offer discount coupons
• Maintain and use a customer mailing list

Target Customer

The customer will be between 18 to 55 years old. The income level is between $20,000 and $100,000 per year. They will live within three miles of Coffee Circus. They will be white collar workers (managers, professionals, etc.) with expendable income. The education level will range from some college to post-graduate work. A limited number (10%) will come from other areas. This 10% will generally be persons who are coming to see a particular entertainer or poetry reading. A majority of the customers will be persons who enjoy a relaxing atmosphere, conversation and table games.

Estimated Market Share and Sales

Based on the customer profile for Coffee Circus the following numbers were compiled. The report used was prepared by Phoenix Real Estate using information obtained through the Facts Report. The report was prepared using Coffee Circus as the focal point and delineating numbers by a one, three and five mile radius. For purposes of determining market share for Coffee Circus, a three-mile radius was used. National statistics show that most persons do not travel more than three miles to eat or to listen to entertainment. The report shows that 162,908 persons live in the three mile radius. The following is the breakdown of target customers.

Formula For Market Share

The formula takes the total population and then multiplies that number by the percentages in order of importance to the Target Customer.

Total Population × Age% × Income% × Education% × Occupation% = Total Market
162,908×47.08%×55.90%×56.78%×50.91% = 12,393 persons

Market Share For Coffee Circus
2.2% Of Market=276 Cust./Day or 17 Cust./Hour
1.8% Of Market=230 Cust./Day or 14 Cust./Hour
1.6% Of Market=202 Cust./Day or 12 Cust./Hour

Occupancy Levels

The occupancy of Coffee Circus is 127 persons. Two different methods can be used to determine occupancy levels.

Hourly - If you estimate percent of occupancy on an hourly basis, the customer rate would be 9.4% of occupancy. 12 cust/hr /127 = 9.4% occupancy per hour

Mealtime - Typically, you will have two turnovers per meal. Based on projections the percentages would be 23% for breakfast, 27% for lunch and 32% for dinner.

Breakfast - 57 cust/2 = 29 cust/127 = 23% occupancy level

Lunch - 67 cust/2 = 34 cust/127 = 27% occupancy level

Dinner - 79 cust/2 = 40 cust/127 = 32% occupancy level

In reality, the true occupancy rate lies somewhere in the middle. Not all of the customers will come in during those dinner times nor will they be spaced evenly throughout the day.

Promotion & Advertising

The advertising and promotion will take a number of avenues. First, flyers will be distributed in the neighborhood. Ads will be taken out in all of the Catholic church bulletins in the area: Holy Martyr, Queen of Peace and St. Christopher's. These ads will offer 10% off, if the parishioner brings the bulletin with them. The restaurant is located one block from Holy Martyr Church and school. The owner's family attend the church and have a son who has been a student in the school for 7 years. Special events will be promoted with a portion of the proceeds going to the school. Since Coffee Circus will be the first union restaurant in the state, ads will be placed in all of the union newsletters offering a 10% discount to anyone showing their union card. Ads will also be placed in the target areas of the Burns' Grocery, and the local neighborhood newsletters. For special entertainment nights, radio and newspaper ads will be placed. Entertainment and food critics will be given an invitation. On opening night we will have an invitation only party, with over 1,200 invitations being sent.

For businesses in the area, menus will be distributed and ordering will be available by fax. A customer mailing list will be developed with a calendar of events being mailed on a monthly basis.

Sales Tactics

Servers will always ask the customer if they want added items, i.e. specialty coffee, soup with the sandwich, appetizers, and dessert. This will not only increase sales for the business but will also increase the amount of money the server makes. Most people tip according to a percentage of the check. The higher the check the greater the tip. The server can control their own income.

All tables also will have "table tents" or advertisements. The tents will describe upcoming events. Also, pictures and descriptions of items for sale, such as micro-brewed beers, desserts, etc., will be on the tents. The menus will provide detailed descriptions of the items available, including a section describing the different types of beers available. For example, the chili beer.

Service/Warranty

If the customer has a complaint, everything will be done to satisfy them. If that does not work, the customer will be given their meal free of charge.

Competition

Chicken Little - Northwest corner of Holgate and 37th Ave. One block north of Coffee Circus.

Provides home-style cooking. Known for their southern style cooking. Pleasant homey surroundings. The restaurant caters to families who want to eat and leave. No live entertainment is provided. Their prices are moderate with little or no variation. They are known for good quality food and service. Extremely clean and well managed. There is little or no product comparison. They have become successful due to location and reputation.

Burger's Joint - Northwest corner of Holgate and 37th Ave.

A well-known fast food franchise with a good presence and marketing plan. The food and prices are about the same as their competition. There is no product comparison.

LaJolla - Southeast corner of 37th Ave. and Holgate

Serves Mexico City style food. The atmosphere is upscale and the food pricing is moderately high. The food is highly specialized and caters to a certain type of clientele. There is no comparison.

Steve's - Northeast corner of 37th Ave. and Holgate

Serves a full course menu. The pricing is moderate, but cheaper than Chicken Little. The quality is fair. Most persons eat there because of pricing and because they are shopping at the store. There is very little competition for Coffee Circus.

OPERATIONS

Goals

Keep cost of goods sold at or below 30%. Provide customers with prompt and courteous service.

Objective

• Provide initial training for all employees
• Hold monthly employee meetings
• Have an open door policy for employee suggestions and concerns
• Implement the use of the Business Plan systems
• Purchase and use the Food Fax software package
• Have clearly defined job descriptions and duties
• Have an employee policy handbook
• Do employee reviews every six months
• Customer suggestion box
• Design kitchen and service area to be efficient

Product Distribution

The product will be distributed in the restaurant by food servers. The food will be cooked on site, except for some of the baked goods. Some of these, such as croissants will be purchased in the raw frozen form and baked daily.

When a customer enters Coffee Circus they will be greeted by a hostess who will seat them and provide them with menus. A server will greet them and give them water. The server will inquire what they would like to drink. The drink order will be prepared by the server. If the drink is either beer, wine or coffee, that will be prepared by the bartender. The drink order will be given to the bartender on a written check, which will be rung up on the register. If the server fixed the drink, it will be rung up on the register by the server. The server will deliver the drinks and then take the food order if the customer is ready. The server will take the food order, ring it up and the order will appear on the cook's computer screen. The cook will prepare the food, in the order the tickets are given. The server will prepare the salads, desserts, hot and cold soups and other items. The cook places the finished food on the window. The server must pick the food up within two minutes. The food is placed on the table and the server will ask if there is anything else which the customer needs. The server will check all the drinks and replenish water, ice tea and plain coffee. The server will ask if the customer needs another drink. Specialty drinks are not refill items. Non-specialty drinks are free refills. The server will familiarize the customer with the operations of Coffee Circus. They will explain to the customer that a number of table games are available if they wish to play. The server will let the customer know about the reading room and present them with a schedule of events. The customer will always be asked if they would like dessert or an after dinner coffee. The server is responsible for checking on the customer in a timely manner. This should be done in an unobtrusive manner. The server will maintain the tables in a clean and sanitary condition. Dirty dishes and plates must be removed immediately. Condiments must be kept full and the containers clean. The server is responsible for presenting the check, payment of the check and returning a receipt to the customer.

The cook is responsible for cooking and preparing all dishes not prepared by the server. The orders will appear on the computer monitor and the cook will prepare them according to the order given. The cook and their assistants are responsible for preparing all items in the morning such as the soups for the day, slicing meat, making specialty items and other dishes for the day. The assistant cooks are responsible for the prep work of all items for the servers and the cooks. This includes stocking all supplies, cutting cheese, fruit, salad items, ice, filling soup tureens, etc.

Cleanliness is required above all else. The servers will keep all of their work areas clean at all times. Spills must be cleaned immediately. After each shift, servers will check the side work chart and have it finished before they leave. This work will be checked by the shift supervisor. The cooking area will be maintained in a clean and sanitary manner. All areas will routinely be wiped down and swept. The cooks and assistants will also have side work which must be completed before leaving. The dishwasher is responsible for keeping the dishes washed and helping with busing the tables if needed. The dishwasher is responsible for mopping the kitchen floor. All employees must read and be knowledgeable of health regulations and follow those rules. Training will be provided by Coffee Circus. Hands must be washed on a routine basis. Smoking is allowed only in designated areas. No smoking is allowed in any food preparation area.

The servers will be required to present a clean appearance. A uniform consisting of an eggshell white polo shirt with Coffee Circus logo, forest green walking shorts or long pants, black sneakers and black ankle socks. The servers must be polite, friendly, and helpful, not only to the customer but to the other staff as well. At no time will employees be allowed to discriminate by remarks, actions or jokes.

Additional regulations are contained in the Employee Handbook.

Cash Register

The cash register system will be Quix 3000 Touchscreen. The built-in system software prints hard or soft guest checks, uses single or multiple remote printers, and reports and tracks data terminal to terminal, or throughout the network. Produces management reports for system, terminal, or revenue center; current and/or to-date totals for:

• Employee/cashier balance reports
• Employee tip reports
• Open and closed check reports
• Time period sales analysis
• Detailed or summarized menu item sales analysis
• Detailed or summarized sales group and category analysis

Pricing

The food price will be in the moderate range and comparable to other coffee houses in the area. The cost will be determined by not only what the going rate in the area is but also by the percentage of actual cost of the food. The price will not only be competitive, but the food will be tasty, well presented, and large portions will be served in a relaxing atmosphere where the customer will be comfortable. The image projected by the pricing will be that the customer will be getting a fair value for their money; that they do not need to be rich to eat at Coffee Circus and anyone can afford to come in. They will be able to use the books and games. In the evening, they will be able to listen to the live entertainment. During the day, music will be played over the PA.

Credit terms will be offered only in the form of credit card service, such as Visa, MasterCard and Discover. Many people who eat out prefer to pay with credit cards, whether it is to keep track of expenditures or for a work expense account.

The cost of the food will be based on a set percentage. Restaurants traditionally keep food costs between 26% to 32%. Based on the type of food to be served and the delivery system, the percentage for Coffee Circus will be an average of 30% of the actual cost of the food. In order to accomplish this, Food Fax software will be utilized. The software contains the following features.

Inventory Accounting System

Calculates cost of goods, provides shelf-order inventory forms, receiving logs, compares actual usage to average usage by item, ranks highest over and under use items. Tracks vendors, allows look-up by name or vendor item codes. Automatic distribution of invoice amounts to general ledger account numbers. Purchase and transaction recap reports, inventory level control reports, price history and fluctuation reports.

Recipe Costing and Sizing

Plate and batch recipes instantly costed as prices change. Sizing and modeling capabilities.

Menu Analysis

Complete menu and sales analysis reporting. Evaluate menu performance, run products by contribution. Product cost reports available by day or any combination of days. Sales mix can be sequenced to follow "Z" tape order for fast data entry.

Ideal Use/Perpetual Inventory

Tightest possible method of inventory control compares actual use to ideal use by item and computes variance. Includes ability to run perpetual inventories and track batch recipe production variances.

Bid and Purchase Order

Built-in bid pricing system allows entry of vendor bids and automatic selection of best price available. Shopping list feature, automatic PO creation, price history reports and more.

POS Interface

Import sales mix data directly from almost any cash register. POS system or polling package.

Accounts Payable Interfaces

Export purchases to accounts payable system.

Suppliers

The suppliers have all been in business for a number of years and have dependable reputations.

The Works

They will supply all of the bread products such as croissants, loaves of bread, pastries, etc. The Works is a major supplier to restaurants in the area.

Genevieve Pie Company

Since 1987, Genevieve Pie Company has been creating a quality line of dessert products satisfying even the most discerning palate. One of their best known customers is The Big Easy.

Genevieve's is also the distributor for Verson Amos. Verson Amos has built a reputation of manufacturing the finest products since 1980. They will supply the cheesecakes.

Southwestern Coffee Roasters

This family owned and operated company has been roasting coffee for almost a decade. They will supply all of the coffee, teas, and equipment. They also provide ongoing barista training for all Coffee Circus employees at no cost.

Lewis Business Systems

Lewis will provide the Purveyor system. For 25 years, Lewis has provided operational solutions to the hospitality industry. Their specialized focus on restaurants, hotels and bars has made them one of the largest dealers of Quix systems in the country.

Powerhouse, Inc.

Powerhouse, Inc. will provide the software package to track the food inventory and pricing. This system was explained in depth previously.

For over a decade, Powerhouse has specialized exclusively in food and beverage management. In addition to its Food Fax software, recognized world-wide as the industry standard, Powerhouse's consulting and training expertise has been utilized by trade associations, publishers, governments and private companies to help operators reduce costs and improve profits.

Brite Lite

Brite Lite will provide the outside signage.

Dirt Out

Dirt Out will lease the dishwashing system to Coffee Circus. The lease includes all servicing, parts, labor, and chemicals. There is never an added charge. Dirt Out builds, guarantees and services its dishwashers. They provide regular and emergency service whenever you need it.

In Line

In Line has been in business for four years doing tenant improvements and design coordination. Clients include, Tasmania Restaurants, Red Bank and St. John's Boats. In Line is versed in all areas of restaurant permitting, design and regulations.

MANAGEMENT

Goal

To have a competent and knowledgeable management staff which functions as a team.

Objectives

• Hire experienced, qualified persons
• Conduct weekly management meetings
• On-going training to include outside classes in food service, management, etc.
• Reviews every six months
• Performance incentives
• Encourage creativity

Organization

Coffee Circus will be operated as a Sole Proprietorship. There will be private investors. However, these investors will be silent investors with a payoff of investment within three years. These investments will be paid twice-yearly in equal installments including interest.

Overall management will be the responsibility of the owner. There will be a general manager and shift supervisors.

Proprietor

As owner, Kirby Pitt brings to Coffee Circus an extensive and varied background. She has been General Manager for two restaurants and has been the Dining Room Captain for a major private club.

Her most recent experience was with a non-profit agency. She was responsible for overseeing three housing programs for the agency and a staff of six persons. Her duties included: monthly reports to Santa Fe Bank, City of Bradford and State Housing Trust Fund; over a $500,000 yearly budget. Ms. Pitt is competent in all areas regarding regulations for the above mentioned organizations, and other government programs.

Also, she performed the grant writing, and was responsible for fundraising and public speaking on behalf of the agency. She worked closely with the Executive Director on purchases of properties for affordable rental from Santa Fe Properties and also wrote the Sante Fe Properties monitoring reports.

In addition, she helped case-work clients, advocated for low income persons, performed housing counseling for persons in danger of foreclosure and worked with union members in need of services.

She serves as a commissioner for the City of Santa Fe Human Service Commission. She is also a member of the executive committee and the community services committee, and serves on the advisory board for the Oasis Family Service Center. In 1984, she was appointed by Mayor Gilda Raye to the Southwestern Village Planning Committee and is a registered lobbyist.

General Manager

Qualifications

This position has not been filled. The requirements of the position require 10 years experience in restaurants, at least five of those years in some type of supervisory position. A bachelor's degree in hotel and restaurant management is preferable. The candidate for this position will be required to submit a resume and verifiable references. The candidate will be interviewed and hired by the proprietor.

Job Description

The general manager will report directly to the owner. They will be responsible for the overall management of the staff. They will work in conjunction with the owner in ordering supplies, maintaining inventory, handling customer complaints and scheduling staff. Other duties would include ensuring staff coverage for all shifts and reports to the owner.

Shift Supervisor

Qualifications

Must have five years experience in restaurant work. At least three years as a server. They must be at least 21 years old. They must possess a friendly and outgoing personality and have good personal hygiene.

The candidate for this position will be required to submit a resume and applications.

The candidate will be interviewed and hired by the proprietor and general manager.

Job Description

They will be responsible for the oversight of the servers, bus person and hostess on their shift. They will work under the general manager.

The shift supervisor also works in the capacity of a server and is responsible for waiting on tables, taking the customers' food and drink orders and acting as cashier for their customers. They are responsible for helping to keep the serving area and the customer areas clean and sanitary. They are responsible for helping the assistant cook keep the service area stocked. At the end of their shift, they will be required to complete all side work as assigned.

Cook

Qualification

The cooks must have a minimum of five years experience, three of which must be as a cook not an assistant. They must have at a minimum a GED or high school diploma.

The cook will submit a resume and fill out an application. They will be interviewed and hired by the owner and general manager.

Job Description

The cook is responsible for cooking food served in the restaurant. They also are responsible for preparing food items in advance and seeing that the service area is kept stocked. Their responsibility is to see that the kitchen is kept in a clean, sanitary and working order. They oversee and train the assistant cook.

Assistant Cook

Qualifications

The assistant cook must at a minimum have a GED or be attending school or a training program. They must be at least 18 years of age.

Will be required to submit an application. Will be interviewed and hired by the cook, general manager and owner.

Job Description

The assistant cook is responsible for assisting the cook in his duties. He/she is responsible for helping to keep the kitchen clean and sanitary. When needed will help with dishwashing duties. He/she is responsible for keeping the service area stocked.

Server

Qualification

The servers must have at a minimum a GED or be attending school or a training program and one year's experience working in a restaurant. They must be at least 21 years of age. They must possess a friendly and outgoing personality and have good personal hygiene.

Will be required to submit an application. Will be interviewed and hired by the shift supervisor, general manager and owner.

Job Description

The server is responsible for waiting on tables, taking the customers' food and drink orders and acting as cashier for their customers. They are responsible for helping to keep the serving area and the customer areas clean and sanitary. They are responsible for helping the assistant cook keep the service area stocked. At the end of their shift, they will be required to complete all side work as assigned.

Hostess

Qualifications

The hostess must have at a minimum a GED or be attended school or a training program. She must be at least 18 years of age and must possess a friendly and outgoing personality and have good personal hygiene.

Will be required to submit an application. Will be interviewed and hired by the shift supervisor, general manager and owner.

Job Description

The hostess is responsible for greeting customers as they arrive at the restaurant and seating them. She is required to take reservations and answer the phones. Also to assist with busing tables or assisting the servers when available. Duties include keeping the lobby area clean.

Bus Person

Qualifications

The bus person must be attending school or a training program, must be at least 16 years of age and have good personal hygiene.

Will be required to submit an application. Will be interviewed and hired by the shift supervisor, general manager and owner.

Job Description

The bus person is responsible for keeping dirty dishes off the tables. When customers leave they must clean the table and prepare it for future customers. They are to help the servers with getting non-alcoholic drinks. They also are responsible for helping the servers. They are responsible for helping the assistant cook keep the service area stocked. At the end of their shift, they will be required to complete all side work as assigned.

FINANCIAL

To maintain costs of goods sold to 30% or less. To increase sales within an 18 month period to 3% of the target market. To maintain financial records according to GAAP.

Goals

Objectives

• Purchase and use Food Fax software
• Train employees proper food handling to prevent waste
• Maintain a weight and portioning system for food
• Check for quality of food from suppliers when food is delivered
• Maintain storage equipment in proper working condition
• Hire an experienced and qualified accounting firm
• Contract out payroll
• Purchase a personnel computer
• Utilize Business Plan equipment Use Accounting software

Financing Plan and Exit Strategy

The total needed capital for Coffee Circus is $99,000. Owner's cash contribution is $10,000 and other investors and family members is $16,100. The amount needed in loans is $30,800 for equipment, $20,000 for remodeling, and $23,000 for operations. This is at total of $73,800.

An acceptable exit strategy for Coffee Circus is to sell the business to another company. The restaurant business is booming in Santa Fe.

The least desirable plan would be to sell the equipment, furniture and other assets. The remaining balance would have to be renegotiated and a payment plan worked out.

Advertising Schedule

Cost Analysis

Capital Equipment

Mortgage Schedule

Coffee Industry

PRODUCTION, TRADE, AND PRICES

THE POLICY ENVIRONMENT

FACTORS INFLUENCING THE INDUSTRY’S LONG-TERM OUTLOOK

BIBLIOGRAPHY

The coffee plant is a woody perennial evergreen belonging to the Rubiaceae family. There are two types of coffee, arabica (Coffea arabica ) and robusta (Coffea canephora ). Arabica, which accounts for about two-thirds of global output, is grown at high altitudes in Latin America and northeastern Africa. It has more aroma and less caffeine than robusta, which is grown in humid areas at low altitudes in Asia and western and southern sub-Saharan Africa. The coffee plant can grow up to 10 meters high, but it is usually kept at about 3 meters. It takes two to three years for the coffee plant to produce cherries. Scientific evidence indicates that arabica is indigenous to Ethiopia, while robusta is indigenous to Uganda. It appears that coffee was produced in Ethiopia at a larger scale and then spread to other parts of Africa. Coffee cultivation was introduced to Java by Dutch traders in 1699. A few years later the French introduced coffee to Martinique. Coffee was first cultivated in Brazil in 1727.

Although the origins of the coffee drink are unknown, the usefulness of coffee beans was probably recognized as early as 1000 CE by Arab traders who chewed coffee beans in order to suppress their appetite and stay awake, thus helping them cross large distances in the desert. The world’s first coffee shop reportedly opened five centuries later in Constantinople (now Istanbul, Turkey). Coffee was introduced to the West by Italian traders in the early seventeenth century, with the first coffee shops opening in London and Paris later in that century.

The processing of coffee involves several steps. After harvesting, the skin of the cherry is removed, and the bean is cleaned to become a green bean, the internationally traded commodity. The green beans are roasted, giving them a dark brown color. Following the grinding of roasted beans, consumers use various brewing techniques to convert the ground beans into a beverage. In Europe, most coffee is consumed in espresso-like form, whereas in North America coffee is mostly consumed in drip form (although that practice has been changing since the beginning of the “Starbucks revolution” during the 1990s). In Asia, most people drink instant coffee. Scandinavian countries lead the world with per capita consumption of almost 10 kilograms of coffee per year from 2000 to 2005. The European Union average during this period was 5.0 kilograms, followed by the United States (4.1 kilograms), and Japan (3.2 kilograms), according to U.S. Department of Agriculture estimates (USDA 2006).

PRODUCTION, TRADE, AND PRICES

Most tropical countries produce coffee. Latin America accounts for 60 percent of global output, followed by Asia (24%) and Africa (16%). From 2001 to 2006, more than half of world output was produced in three countries: Brazil (35%), Vietnam (11%), and Colombia (10%). Other significant producers were Indonesia (5%) and Ethiopia, India, and Mexico (4% each). Coffee in some countries, notably Brazil, is produced on large farms with modern equipment, including irrigation, tractors, and even coffee harvesters. In other regions, especially Central America, Africa, and Asia, coffee is produced by smallholders. In some Africa countries, smallholders own as little as one-quarter of a hectare of land. In this setting, the key input is labor and, to a limited extent, chemicals. In some East African countries there are also coffee estates that use large numbers of permanent workers.

More than 80 percent of coffee is traded internationally and consumed mainly by high-income countries. In some years, coffee is the second most-traded commodity after crude oil, generating about $15 billion in export revenue. The United States accounts for about 18 percent of global consumption, followed by Brazil (13%), Germany (9%), Japan (6%), and France and Italy (5% each).

Coffee is traded in green bean form. Although there are numerous coffee trading companies, most coffee trade is handled by five or six large multinationals. Coffee prices are determined in futures exchanges. Highly-liquid coffee futures contracts are traded at the New York Board of Trade for arabica and at the London International Financial Futures and Options Exchange for robusta. Less-liquid contracts are traded at the Commodity Exchanges of São Paulo, Singapore, and Bangalore.

Coffee prices are generally highly volatile (much more so than other commodity prices). This volatility reflects the fact that Brazil, the dominant supplier, suffers occasional frosts, thus subjecting its coffee output to considerable fluctuations. Hedge funds also play a role in price volatility, especially in the short term. Beginning in 2000, coffee experienced one of the most dramatic price declines in the history of the industry (an episode referred to as the coffee crisis ). In October 2001 arabica averaged $1.24 per kilogram, a nine-year low, while in January 2002 robusta dropped to $0.50 per kilogram (the lowest nominal level since the price of $0.49 per kilogram set in May 1965). The main factor behind the price collapse was oversupply, especially in Brazil, which averaged a record output of thirty-three million bags of coffee during the previous four seasons, and in Vietnam, which emerged as the dominant robusta producer, overtaking Colombia as the world’s second-largest coffee producer. The oversupply, caused by lower-cost producers, led some to argue, convincingly, that the coffee crisis was a market-driven outcome of the coffee industry adjusting to new global market realities (Lindsey 2003).

THE POLICY ENVIRONMENT

The coffee market has been subject to considerable policy interventions both at national and international levels. Takamasa Akiyama (2001) reported that only fifteen of the world’s fifty-one coffee-producing countries had private marketing systems in 1985. Twenty-five countries sold coffee through state-owned enterprises, while another eleven had mixed state- and private-sector marketing bodies. By 2007 the coffee sectors of most countries were operating with private-sector marketing arrangements.

The coffee market has also been subject to a series of coffee agreements administered by the International Coffee Organization (ICO), which was established in 1962 to stabilize coffee prices by dictating how much coffee each producer could export. Research has shown that coffee prices were higher under the ICO than they would have been otherwise (Gilbert 1995). There were likely political reasons behind the ICO’s supply measures. According to Robert Bates (1997), the United States, a powerful ICO member, used the organization during the 1960s and 1970s to increase the income of Central American coffee-producing countries in the hope that this action would contain the spread of communism in the region. Similarly, western European countries viewed ICO-induced high coffee prices as a way to provide aid to their former African colonies.

Most coffee-producing countries (accounting for 90 percent of global output) and almost all developed coffee-consuming countries were members of the ICO (interestingly, communist countries, which were not members of the ICO, bought coffee under free trading arrangements). The last international coffee agreement was effective from September 1980 to July 1989, after which the ICO was abandoned. A more recent attempt to regulate supplies through another organization, the Association of Coffee Producing Countries, failed.

FACTORS INFLUENCING THE INDUSTRY’S LONG-TERM OUTLOOK

In the absence of new international initiatives or domestic policies by dominant producers, the outlook for the coffee market depends entirely on supply-and-demand forces. Vietnam’s emergence as a major robusta producer is likely to influence robusta prices for many years. In 1980 Vietnam produced 140,000 60-kilogram bags of coffee—less than 0.2 percent of world production. In 2001 Vietnam exceeded 13.3 million bags—more than 11.4 percent of world production. Vietnam is a low-cost producer, and as of 2007 its coffee trees were very young and had yet to reach maximum yields. Brazil has been able to maintain unprecedented output levels, averaging more than 39 million bags during 2003-2006. Extensive mechanization of coffee harvesting has lowered production costs, while better varieties with higher yields have been developed and adopted. Shifting production north, away from frost-prone areas in the south, has reduced the likelihood of weather-related supply disruptions. And the extensive use of irrigation has stabilized and sustained yields.

On the demand side, the coffee industry faces growing competition from the soft drink industry. For example, the 1970 annual per capita consumption of soft drinks in the United States was 86 liters; by 1999, annual per capita consumption had exceeded 200 liters, according to U.S. Department of Agriculture data.

Numerous other factors are likely to influence the coffee industry’s long-term outlook. First, new technologies enable roasters to eliminate the harsh taste of some coffees, essentially achieving a higher level of quality from lower-quality beans. Second, roasters have been more flexible in their ability to make short-term switches between coffee types, implying that the premia of certain types of coffee cannot be retained for long. Third, a small segment of the market has emerged that focuses on product differentiation, such as organic, gourmet, and shade coffee. The implication of these developments is that the demand outlook is likely to differ from one coffee producer to another. Specifically, any expansion in coffee demand is likely to occur at the two ends of the spectrum: lower-quality beans (reflecting improved technology) and specialty coffees (reflecting expansion to niche markets).

Several new patterns have emerged in coffee promotion and distribution as well. Coffee promotion used to take the form of national brands, represented by the familiar Juan Valdez campaign of the National Federation of Coffee Growers of Colombia. Other types of promotions were undertaken by coffee-trading companies, such as Maxwell House’s “Good to the Last Drop” campaign. The market and trade setting has shifted considerably since the mid-1980s.

In 2007 as much as 10 percent of coffee is branded according to such characteristics as subnational origin (e.g., Kilimanjaro coffee rather than Tanzanian coffee, or Harare coffee rather than Ethiopian coffee); social aspects (e.g., fair trade coffee, which ensures a minimum price to growers); and organic, shade, or bird-friendly production (which ensures compliance with certain environmental criteria).

A second emerging pattern is the development of direct relationships between major coffee retailers, such as Starbucks, and producer organizations that can ensure that the coffee these retailers sell adheres to certain social criteria. Initially, it was believed that, in addition to offering more choices to consumers, these new marketing and branding mechanisms would provide a boost to the income of small coffee growers. While this was the case initially, research has shown that the premia received by coffee growers have declined and are likely to shrink even more as increasing numbers of producers join the specialty coffee marketing channels (Kilian et al. 2006).

SEE ALSO Addiction; Agricultural Industry; Colonialism

BIBLIOGRAPHY

Akiyama, Takamasa. 2001. Coffee Market Liberalization since 1990. In Commodity Market Reforms: Lessons of Two Decades, eds. Takamasa Akiyama, John Baffes, Donald Larson, and Panos Varangis, 83-120. Washington, DC: World Bank.

Baffes, John, Bryan Lewin, and Panos Varangis. 2005. Coffee: Market Setting and Policies. In Global Agricultural Trade and Developing Countries, eds. M. Ataman Aksoy and John C. Beghin, 297-310. Washington, DC: World Bank.

Bates, Robert H. 1997. Open-Economy Politics: The Political Economy of the World Coffee Trade. Princeton, NJ: Princeton University Press.

Gilbert, Christopher L. 1995. International Commodity Control: Retrospect and Prospect. Policy Research Working Paper 1545. Washington, DC: World Bank, International Economics Dept., Commodity Policy and Analysis Unit.

Kilian, Bernard, Connie Jones, Lawrence Pratt, and Andrès Villalobos. 2006. Is Sustainable Agriculture a Viable Strategy to Improve Farm Income in Central America? A Case Study on Coffee. Journal of Business Research 59 (3): 322-330.

Lindsey, Brink. 2003. Grounds for Complaint? Understanding the “Coffee Crisis.” Trade Briefing Paper no. 16. Washington, DC: Cato Institute Center for Trade Policy Studies. http://www.freetrade.org/pubs/briefs/tbp-016.pdf.

United States Department of Agriculture. 2006. Tropical Products: World Markets and Trade. Foreign Agricultural Service, Circular Series, FTROP 4-06. http://www.fas.usda.gov/psdonline/circulars/tropical.pdf.

John Baffes

coffee a tree, its seeds, and the beverage made from them. The coffee tree, a small evergreen of the genus Coffea, has smooth, ovate leaves and clusters of fragrant white flowers that mature into deep red fruits about 1/2 in. (1.27 cm) long. The fruit usually contains two seeds, the coffee beans. C. arabica yields the highest-quality beans and provides the bulk of the world's coffee, including c.80% of the coffee imported into the United States. The species is thought to be native to Ethiopia, where it was known before AD 1000.

Coffee's earliest human use may have been as a food; a ball of the crushed fruit molded with fat was a day's ration for certain African nomads. Later, wine was made from the fermented husks and pulps. Coffee was known in 15th-century Arabia; from there it spread to Egypt and Turkey, overcoming religious and political opposition to become popular among Arabs. At first proscribed by Italian churchmen as a heathen's drink, it was approved by Pope Clement VIII, and by the mid-17th cent. coffee had reached most of Europe. Introduced in North America c.1668, coffee became a favorite American beverage after the Boston Tea Party made tea unfashionable.

Coffee owes its popularity in part to the stimulative effect of its caffeine constituent. Caffeine, a bitter alkaloid, can also contribute to irritability, depression, diarrhea, insomnia, and other disorders. Decaffeinated coffees, developed in the early 1900s, account for c.18% of the U.S. market. For those without the time or the inclination to brew their own, there are instant or soluble coffees, introduced in 1867, which account for c.17% of U.S. coffee sales.

Coffee Plant Cultivation

The coffee plant prefers the cool, moist, frost-free climate found at higher altitudes in the tropics and subtropics. Optimum growing conditions include: temperature of about 75°F (24°C); well-distributed annual rainfall of about 50 in. (127 cm) with a short dry season; and fertile, deep, well-drained soil, especially of volcanic origin. While coffee can be grown from sea level to c.6,000 ft (1,830 m), and C. robusta is produced at low elevations in West Africa, the better arabica grades are generally produced above 1,500 ft (460 m). Strong winds limit coffee production; coffee is often grown in the shelter of taller trees. A coffee tree yields its maximum sometime between its fifth and tenth year and may bear for about 30 years.

Preparation and Types of Coffee

After the outer pulp is removed, coffee seeds are prepared by roasting, which develops the aroma and flavor of their essential oils. Longer roasting produces darker, stronger coffee. The variety of recipes and prescriptions for roasting, brewing, and serving coffee reflects the diversity of consumer tastes and cultural preferences. All techniques begin with properly roasted, freshly ground coffee; freshly boiling water; and absolutely clean utensils. Turkish coffee, a strong, unfiltered brew of finely powdered coffee and sugar, is popular in Greece, Turkey, and Arabia. Italian-style espresso, or expresso, is brewed by forcing hot water under pressure through finely powdered, often darkly roasted coffee. Most other coffees are filtered. Café au lait, coffee mixed with scalded milk, is a traditional French breakfast drink, as is café con leche in countries where Spanish is spoken. Coffee flavored with chicory is a specialty of New Orleans. Connoisseurs pay dearly for Mocha from the Yemen region of Arabia, Blue Mountain from Jamaica, Kona from Hawaii, or other so-called specialty coffees from Africa, Indonesia, or Latin America—all premium arabica varieties.

Coffee in Commerce

Varieties of C. arabica are important export crops in many countries, especially in South America and East Africa. Brazil is the leading producer. The only other species of commercial importance is C. robusta, a West African native also widely grown in Central Africa and Asia. Fluctuations in supply and demand have historically played havoc with world coffee markets and with the economies of individual growers and exporting countries. Efforts to stabilize the markets began with a 1940 agreement, administered by the Inter-American Coffee Board, allocating U.S. coffee imports from Latin America. A global agreement under the International Coffee Organization, a body of 70 coffee-producing and -consuming countries, expired in 1989.

In many cultures throughout its history, coffee has been served in coffeehouses, cafés, and other places of public refreshment, often as an aid and accompaniment to political or artistic activity, gambling, or gossip, or to solo rumination. Coffee's popularity in the United States peaked in 1962, when three-quarters of people over 10 years of age drank at least a cup a day; in 1992 only about half did. Beginning about 1990 U.S. consumers became increasingly interested in premium coffees and stronger, richer brews.

Classification of the Coffee Plant

Coffee is classified in the division Magnoliophyta , class Magnoliopsida, order Rubiales, family Rubiaceae ( madder ).

Bibliography

See G. Dicum and N. Luttinger, The Coffee Book (1999); M. Pendergrast, Uncommon Grounds (1999).

COFFEE

COFFEE. The coffee plant attracted human interest and consumption as early as 800 a.d. in the Kaffe region of Ethiopia. By the fifteenth century the plant was cultivated in Yemen and a beverage made from its beans was sold in Arabian coffeehouses. Constantinople's first coffeehouses had opened by the middle of the sixteenth century. The beverage spread eastward to India and via Mocha on the Arabian Peninsula back to Holland. Venice had a coffeehouse by 1645. The students of Oxford soon follow suit, discovering by 1650 the academic advantages of a beverage that sharpens the wits. Before 1800 much of Europe had coffeehouses and also had witnessed governmental attempts to close them as sources of sedition. Those same governments soon taxed rather than prohibited coffee consumption. Coffeehouses became social and business centers where merchants and shippers gathered to exchange information and make deals. By the late 1660s coffee consumption had spread to North America; New York City's first coffeehouse, The King's Arms, opened in 1696.

Arab coffee cultivators and merchants attempted to monopolize the trade by preventing export of the coffee plant, but by the seventeenth century, the Dutch had acquired coffee plants that they planted in Ceylon. Other Europeans planted coffee in East Asian and, later, Latin American colonies. In the early twenty-first century, milder arabica beans are grown primarily in Latin American and the Caribbean, while more bitter robust a beans come primarily from African and Asian producing countries. Green coffee beans are among the highest-value commodities legally traded in today's world. The Green Coffee Association of New York City formed in 1923 to encourage standard contracts. Much of the product is traded on the Coffee, Sugar, and Cocoa Exchange, now a subset of the New York Board of Trade, and on the London, Tokyo and Brazilian commodity exchanges.

New processing techniques eased preparation of the beverage in the field during the U.S. Civil War. Military demand again hastened easy preparation when Maxwell Coffee developed an instant beverage in 1941, building on Swiss producer Nestle's Nescafe, which that the company had created for Brazilian growers in 1938. In modern production, the exported green beans are precisely roasted and blended in importing countries to produce the flavor that consumers desire; because oxidation causes bitter flavor, the processed coffee must be used quickly or packaged carefully.

Price inelasticity of demand for coffee leads to sharp price fluctuations. To counter these fluctuations, producing countries established the International Coffee Association in 1963 primarily to control price through export quotas; price stability, however, has not been achieved.

With economies of scale in production and distribution, a few firms and their brands dominated U.S. and world production of roasted coffee in the second half of the twentieth century. These companies have distributed their brands primarily through grocery stores. Per capita consumption has fallen in traditional coffee markets, but is rising in such nontraditional markets as Japan and, more recently, China and South Korea; there, as in Great Britain, instant coffee is making inroads into the tea market. In the 1970s specialty coffee producers began to challenge the preeminence in traditional markets of the multinationals and have constituted the most rapidly growing segment of the coffee market in mature economies. These specialty forms of coffee, sold primarily through coffeehouses and gourmet shops, are relatively expensive, differentiated blends processed on a smaller scale. This development echoes the early days of coffee consumption; an increasingly affluent middle class is willing to spend on luxury beverages consumed in inviting shops.

BIBLIOGRAPHY

Commodity Research Bureau. The CRB Commodity Yearbook 2001. New York: Wiley, 2001.

Dicum, Gregory, and Nina Luttinger. The Coffee Book: Anatomy of an Industry from the Crop to the Last Drop. New York: New Press, 1999.

Paige, Jeffry, Coffee and Power: Revolution and the Rise of Democracy in Central America. Cambridge, Mass.: Harvard University Press, 1997.

Ann HarperFender

coffee A beverage produced by roasting the beans from the berries of two principal types of shrub: Coffea arabica (arabica coffee) and C. canephora (robusta coffee); Liberian coffee (C. liberica) grows in tropical regions, but quality is inferior and it accounts for less than 1% of world coffee trade. Reputedly discovered in the ninth century in southern Ethiopia by a goatherd whose goats became frisky after eating the berries. Niacin is formed during the roasting process, and coffee can contain 10–40 mg of niacin per 100 g, depending on the extent of roasting, thus making a significant contribution to average intakes of niacin.

Instant coffee (invented by Satori Kato of Chicago, 1901) is dried coffee extract which can be used to make a beverage by adding hot water or milk. It may be manufactured by spray‐drying or freeze‐drying. Coffee essence is an aqueous extract of roasted coffee; usually about 400 g of coffee/L.

Coffee contains caffeine. Decaffeinated coffee is coffee beans (or instant coffee) from which the caffeine has been extracted with solvent (e.g. methylene or ethylene chloride), carbon dioxide under pressure (supercritical CO₂), or water. Coffee decaffeinated by water extraction is sometimes labelled as ‘naturally’ decaffeinated. The first decaffeinated coffee was introduced by German coffee importer Ludwig Roselius, who received a shipment of beans that had been soaked by seawater during a storm, under the trade name of Sanka (from the French sans caffeine), 1903.

COFFEE

Coffee is the world's most common source of CAFFEINE, providing a little more than half of all caffeine consumed daily. In the United States, coffee is usually a beverage made by percolation or infusion from the roasted and ground or pounded seeds of the coffee tree (genus Coffea ), a large evergreen shrub or small tree, which was native to Africa but now is grown widely in warm regions for commercial crops. Caffeine from coffee accounts for an estimated 125 milligrams of the 211 milligrams of U.S. caffeine consumed per capita per day. Recent estimates suggest that more than 50 percent of the adolescents and adults in the United States consume some type of coffee beverage. Coffee is one of the main natural commodities in international trade, ranking second only to petroleum in dollar value. Approximately fifty countries export coffee and virtually all of those countries rely on it as a major source of foreign exchange. An estimated 25 million people make their living in the production and distribution of coffee products.

In addition to caffeine, roasted coffee contains at least 610 other chemical substances, which may contribute to its smell, taste, and physiological effects. Nevertheless, coffee's primary psychoactive ingredient is caffeine. The amount of caffeine in an individual cup of coffee varies considerably, depending on the type and amount of coffee used, the form of the final coffee product (e.g., ground roasted or instant), and the method and length of brewing. On average, a 6-ounce (177 milliliters) cup of ground roasted coffee contains about 100 milligrams caffeine; the same amount of instant coffee typically contains about 70 milligrams caffeine. However, the caffeine content of any given 6-ounce cup of coffee can vary considerably and can reach as much as 210 milligrams. Drip coffee typically contains more caffeine than percolated; decaffeinated coffee contains a small amount of caffeine, approximately 4 milligrams in a 6-ounce cup. Individual servings of caffeinated coffee contain amounts of caffeine that have been shown experimentally to produce a range of effects in humans including the alteration of mood and performance and the development of physical dependence with chronic daily use.

Coffee cultivation probably began around 600 A.D. in Ethiopia, but the drink was spread into the Middle East and Europe. Today, much of the world's coffee is grown in South and Central America, particularly Brazil and Colombia, and in several African countries. Coffee beverages derive primarily from the seeds of two species of Coffea plants, Coffea arabica and Coffea canephora var. robusta. Robusta coffees contain approximately twice as much caffeine as Arabicas. Arabica beans are used in the majority of the coffee consumed today, particularly in the higher quality coffees. Since processing for instant and decaffeinated coffee extracts flavor components from the bean, the stronger flavored beans, typically Robusta beans, are used for these coffee products. Caffeine extracted in the decaffeination process is sold for use in soft drinks and medications.

The coffee bean, covered with several layers of skin and pulp, occupies the center of the coffee berry. During the first part of coffee production, the outer layers of the coffee berry are removed, leaving a green coffee bean. The beans are then roasted, removing between 14 and 20 percent of their water and changing their color from green to various shades of brown; generally, the beans get darker as more water is extracted. The beans are then ground and ready for use. To produce instant coffee, roasted and ground coffee is percolated to produce an aqueous coffee extract. That extract is dehydrated by spray or freeze-drying to produce water-soluble coffee extract solids. Since this process removes flavor and aroma from the coffee, compounds are added to the extracts at the completion of the process to restore the lost characteristics.

BIBLIOGRAPHY

BARONE, J. J., & ROBERTS, H. (1984). Human consumption of caffeine. In P. B. Dews (Ed.), Caffeine. New York: Springer-Verlag.

SPILLER, G.A. (ED.). (1984). The methylxanthine beverages and foods: Chemistry, consumption, and health effects. New York: Alan R. Liss.

Kenneth Silverman

Roland r. Griffiths

Coffee Bean Plant/Exporter

BUSINESS PLAN     SILVERA & SONS LTDA

Ouro Fino
Minas Gerais, Brazil

This company prepares coffee beans grown in Brazil for export to U.S. specialty roasters and Brazilian wholesalers. Company success is determined largely by their reputation for being a provider of the highest quality Arabica beans in the world. Since demand for their coffee beans exceeds current production, they plan to bring their facility to maximum production to meet this need. This business plan was compiled using Business Plan Pro™, by Palo Alto Software, copyright © 2000.

• executive summary
• company summary
• products
• market analysis summary
• strategy and implementation summary
• management summary
• financial plan

EXECUTIVE SUMMARY

Silvera & Sons prepares green Arabica coffee beans grown in Brazil for exportation to American specialty roasters and sells to wholesalers on the Brazilian market. We will expand production capacity from 72,000/60kg bags per year to 120-160,000/60kg per year. Our coffee stands out from that of the competition. We prepare the top five percent, in terms of quality standards, of all Arabica beans on the market. Our customers seek this product as it provides them with a point of differentiation to specialty roasters. In the past six years, demand for our coffee has exceeded the amount we are able to supply and we have been forced to refuse requests for larger shipments.

We predict growth of thirty percent in the first year with sales exceeding ($BRL) 26,208,000. In year three the plant will run at maximum capacity and based on the current price of coffee we expect profits of ($BRL) 1.5 million. We have positive indicators from current importers that the additional amount of beans will be sold.

Our keys to success are:

1. Establishing and maintaining working relationships and contractual agreements with American importers and Brazilian coffee brokers and wholesalers.
2. Bringing the new facility to maximum production within three years of operation.
3. Increasing our profit margin to seventeen and one-half percent (17.5%) with the use of improved technology in the new facility.
4. Effectively communicating to current and potential customers, through targeted efforts, our position as a differentiated provider of the highest quality Arabica beans in the world.

Objectives

The objectives of Silvera & Sons:

• Increase production and sale from 78,000/60kg bags per year to approximately 100,000/60kg bags per year in the first year of operation at the proposed facility and reach maximum capacity of 120,000/60kg bags per year by year three.
• Increase sales from ($BRL) 17.9 million to ($BRL) 26.2 million in the first full year of operation.
• Establish strategic relationships with 10-15 American importers in Los Angeles, San Francisco, and Seattle.
• Increase gross margins from fifteen percent (15%) to seventeen percent (17%) in the next three years.

Mission

Silvera & Sons Ltda. seeks to serve coffee importers and enthusiasts by exceeding minimum acceptable quality standards and by providing the highest quality product at the lowest possible price. We value our relationships with current and future customers and hope to communicate our appreciation to them through our outstanding, guaranteed product quality, personal service, and efficient delivery. Our commitment to our customers and the country of Brazil will be reflected through honest and responsible business.

COMPANY SUMMARY

Silvera & Sons buys and prepares raw coffee in parchment (pergamino), or coffee in its post-harvest stage. The finished product, green Arabica coffee beans, are packaged in 60kg sacks and sold on the U.S. and Brazilian market. Our customers are primarily American importers and Brazilian wholesalers who provide high-quality beans to the specialty roasting market.

Company Ownership

Silvera & Sons Ltda. is a private, family owned preparer and exporter of Brazilian-grown, green Arabica coffee beans. It is owned and operated by Marco Silvera Sr. and his sons, Marco Silvera Jr. and Antonio Silvera.

Silvera & Sons is in its sixth year of operation. The current plant has been in operation for 15 years and for 12 of those years was managed by Marco Silvera Sr. who was then an employee of the former owner, Cafe Fina. Since the plant was purchased, Silvera & Sons has maintained maximum production and sales. It is currently operating at maximum capacity.

Company History

Company Locations and Facilities

The Silvera & Son's main warehouse and office is located in Ouro Fino. The warehouse has the capacity to prepare approximately 6,000 60kg bags of exportable coffee beans. The proposed new warehouse and preparation facility site is also located in Ouro Fino. The new facility will be 3,500m² and will have 30 selecting machines with capacity to prepare 40,000 bags for exportation and 80,000 bags for storage. The proposed facility will also handle shipping.

PRODUCTS

Silvera & Sons deals exclusively in green coffee, grown in the southern states of Brazil and one-hundred percent Arabica. Beans in parchment are purchased directly from growers and are de-husked and packaged into 60kg sacks in the Silvera & Sons plant. The final product is suitable for sale and exportation.

Competitive Comparison

In order to differentiate our product, coffee, which is a commodity, from the product offering of competitors, all beans are guaranteed fresh and are shipped within seven days of preparation. In addition, all beans are sorted at ninety-five percent screen 18 and above compared to the industry standard ninety percent screen of 17 and above. The beans shipped by Silvera & Sons are therefore larger than most and are guaranteed fresh. In addition, all of the farms from which Silvera & Sons purchases coffee adhere to environmentally sound farming practices and avoid the use of pesticides and chemicals in crop production.

There are approximately ten competitors who offer a product similar to ours. Our research indicates that with the additional capacity we would become one of the top four providers, in terms of quantity. We have the advantage of established distribution channels and reputation. In addition, improvements to our marketing efforts will further separate us from the larger market and from our close competitors.

Sales Literature

Silvera & Sons currently works with two importers in the United States who handle all of our shipments. Likewise, we have dealt with the same Brazilian wholesalers, for internal sales, each year. Sales to this point have been handled through personal selling. Additional sales literature will include a website, direct mail to specialty roasters and importers, and print advertising in several trade publications including Coffee Times, a monthly publication which targets American business dealing with issues relevant to the coffee industry.

Sourcing

Both the existing and the proposed facilities are ideally located in Ouro Fino, in the state of Minas Gerais. Minas Gerais is the largest coffee producing state in Brazil and beans produced in the region are of the highest quality. With additional financing, we would be able to buy larger volumes at lower prices. We now buy from one or more of six private growers or grower cooperatives. Contracts are secured six months in advance of harvest.

Technology

Improvements in technology will include the use of partially automated selecting machines which will allow for increased production capacity with a lower machine-to-operator ratio than we currently employ.

Additional storage capabilities will decrease shipping charges and will reduce the need for permanent shipping employees by thirty-five percent. High-technology information system upgrades will improve all aspects of business, especially inventory control, tracking of shipments, and communication with clients in import countries.

Future Products

Silvera & Sons sells only the finest Arabica coffee beans. This is an important distinction in evaluating our coffee because the alternative to the Arabica bean, Coffea Robusta, though it shares some similarities with the Arabica bean, is very different. Coffea Robusta is grown at lower elevations and has a higher yield per plant as well as being more resistant to disease. It also has up to twice the caffeine level as its cousin, the Arabica Bean. Due to the lower cost and larger market amount of Robusta coffee, it is found primarily on supermarket shelves. The Arabica species grows at much higher elevations, better soil rich areas, and is the source of the world's finest coffees.

By providing the finest species of coffee, Silvera & Sons has taken the first step towards a differentiated product. To further distinguish our coffee, we adhere to higher quality standards than approximately ninety-five percent of the market. In addition, all of our beans are of the Bourbon Santos variety. The "Bourbon" strain is considered one of the finest Brazil has to offer. It is grown in the mountains surrounding Sao Paulo and is highly sought after by specialty roasters from around the world. We have assumed the position of a specialized provider of this exceptional coffee. Our customers, American and Brazilian specialty roasters, recognize Silvera & Sons for our ability to provide the type of beans they require to produce award-winning coffee.

MARKET ANALYSIS SUMMARY

Coffee is the second largest commodity market next to oil and Brazil has remained the largest producer of coffee in the world for two centuries. Imports of Arabica coffee in the United States have increased ninety-four percent in the past five years and consumption of coffee within Brazil has seen similar increases. In addition, demand for green coffee is above the market clearing level, and market price and crop yield estimates are at an all-time high.

The increase in the number of independent specialty roasters in the United States and Brazil has contributed to and is an indicator of the increased demand for coffee. Within the larger coffee market is our target market, the specialty roaster. These discerning customers want the highest quality coffee beans. They serve the growing "gourmet" coffee market and are represented by large American companies like Starbucks and thousands of smaller specialty roasters. The Arabica bean is considered to be the best in the world and as such, the demand for Arabica beans is high on the specialty roaster market. Specialty roasters are willing to pay more for Arabica beans and attempt to distinguish themselves via the characteristics of the bean they use, i.e., the location in which it was grown, farming methods, bean size, etc. The final consumer is relatively price insensitive if the coffee is good, has won awards, or is compatible with a popular trend. We estimate that specialty roasting in the U.S. alone is a ($USD) one-billion market.

Market Segmentation

The potential customer groups for Silvera & Sons are:

• American importers of green Arabica beans: Market research suggests that there are approximately 200 importers of green Arabica coffee on the West and East coasts of the United States that would be able to handle the quantities of our shipments and are in our target market. Combined, they import a total of four to five million/60kg bags of Brazilian coffee per year.
• Brazilian green coffee wholesalers: This market serves as a safety valve for our export business. By maintaining relationships with Brazilian wholesalers we have an alternative market with established distribution channels.
• Brazilian specialty roasters: As we move towards maximum capacity we will plan to more aggressively target this audience. We hope to eventually reduce transactions with wholesalers and capture their value-added costs as profit. We anticipate that this effort will begin approximately four years into operation of the new facility.

Market Analysis

Industry Analysis

Coffee has been a growing industry for the past five years. The most notable growth has been in the American market where imports have increased almost one hundred percent and the market price has nearly doubled. The number of specialty roasters has increased from a handful of well known companies to thousands of independent entities. There is a constant struggle within this market to produce the best coffee and serve one or more niches within the larger market. Brazilian coffee producers and exporters have made great efforts to improve agricultural techniques, processing methods, and distribution in order to better serve this growing market. Demand for Brazilian coffee is currently greater than supply.

Industry Participants

Silvera & Sons deals exclusively in the exportation and sale of green Arabica beans. There are approximately 150 Brazilian businesses in this market. However, approximately 30 companies account for approximately eighty percent of the total amount of green Arabica exports. In addition, many of these companies prepare, export, and sell, to the Brazilian market, other coffee products. Additional products include:

Green Robusta (Conillon) beans: The Robusta bean is produced in far less quantity in Brazil than the Arabica and is considered an inferior species. The Robusta market represents less than ten percent of all coffee produced in Brazil.

Soluble coffee products: These are instant (water soluble) coffees and are either decaffeinated or not. Sales of soluble coffee products account for approximately twelve percent of the total market.

Roasted and ground coffee: Approximately eighty-five percent of all roasted and ground coffee (decaffeinated and non-decaffeinated) goes to internal consumption and represents approximately twenty-seven percent of the total coffee market.

Primary competitors include: Golden Brazil, Bramazonia, Comexim, and Nicchio Cafe.

Distribution Patterns

All of the coffee produced for exportation by Silvera & Sons and approximately eighty-five percent of all coffee produced for exportation in Brazil is shipped from Porto de Santos. Prepared coffee is shipped via rail and/or truck from the Silvera & Sons plant in Ouro Fino to Porto de Santos. From the port it is then shipped, in 40 foot containers to the port of Miami via cargo ship. Distribution charges are assumed by Silvera & Sons up to the arrival of the shipments in Miami whereupon importers assume responsibility, as detailed in contract, of the shipment and additional distribution charges.

Competition and Buying Patterns

The purchase decision for our customer is based on trust in our process and bean selection. We have established relationships with our customers which extend beyond that of the buyer/seller. The Silvera & Sons label means that the product has been chosen and prepared with the highest quality standards in mind. Our beans are priced up to nine percent higher than similar products. Our customers are willing to pay more for our product because they are familiar with us and trust in the quality of our beans. This is the result of their success in the marketplace with our product.

Main Competitors

There are approximately 150 exporters of green Arabica beans in Brazil. According to the Brazilian Coffee Exporters Association, ABECAFE, fifty percent (50%) of all green coffee exports come from their 45 members. Approximately eighty percent (80%) of these exports come from 20 ABECAFE members. Market contributions of individual exporters are held in strict confidence and are not available to the public. However, based on this information and given the large number of remaining exporters not affiliated with ABECAFE who account for the remaining sixty percent (60%) of all exports, we assume that many of the largest competitors are among the ABECAFE members. They are:

Agro Food, Allcoffee, Bramazonia,
Cafe do Ponto, Cafeeira Carolina, Cargill Agricola,
Casas Sendas, Cocam, Comexim,
Comercial Ben, Compel, Cooxupe,
Cotia Trading, Custudio Forzza, Esteve,
Eurobrasil, Fazenda da Serra, Guaxupe,
Inter-Continental, JR Exportadora, MC Coffee,
Melitta, Mitsui Alimentos, Nicchio Cafe,
Nova America, N.S. da Guia, Ottoni & Filhos,
Porto de Santos, Ref. Oleos Brasil, R & G,
Rio Doce, Tres Coracoes, Volcafe.

STRATEGY AND IMPLEMENTATION SUMMARY

Silvera & Sons' strategy is to expand production capabilities in order to fulfill the requests of importers with whom we currently deal for larger orders which we are unable to currently fulfill. In addition Silvera & Sons seeks to establish additional contracts with importers on the West Coast of the United States and increase the volume of green coffee sold on the Brazilian market. We intend to first maximize quantity of coffee sold within existing channels and second, establish additional accounts through targeted marketing efforts.

Strategy Pyramids

Our main strategy is to communicate the unique and desired attributes of our coffee to larger segments of the American and Brazilian markets. We sell a superior product, yet one that can be considered a commodity. It is therefore important that we effectively communicate the unique aspects which make it ideally suited for a niche market.

The unique aspects of our products include superior product selection and preparation, quality assurance, and efficient distribution. These are things we have done since we started doing business. The tactics we will use to communicate these strengths include, personal selling, targeted print advertising, and improved communication capabilities via information system improvements and a sophisticated website.

As tactics below the pyramid, we have identified three specialty publications in the United States and two in Brazil in which we will run print ads. We also plan to increase personal selling efforts to additional American importers. Part of the personal selling will include invitations to importers to visit our facilities, at our expense.

Competitive Edge

Silvera & Sons' competitive edge comes from the advantage of having established relationships with American importers, and Brazilian coffee growers, green coffee brokers and wholesalers. Silvera & Sons has received affirmation of the demand for their product in the form of requests from importers for larger product shipments. Ours is a superior product offering because of the larger average size of the bean and because we purchase from growers who rely on the use of chemicals and pesticides less than two percent of the time. In addition, prompt preparation and shipment provides importers with a product that is up to one month fresher than beans sold by many exporters.

Marketing Strategy

Silvera & Sons marketing strategy will include the use of targeted print media advertising and direct selling to importers in the United States who provide green coffee to specialty roasters. We will capitalize on existing relationships with importers who have stated their willingness to contact West Coast affiliates and recommend Silvera & Sons coffee. We have positioned ourselves as a differentiated provider of the highest quality Arabica beans. The primary goal of all marketing efforts will be to communicate this to existing and potential customers.

Positioning Statements

For American importers of Brazilian coffee who use our coffee to supply specialty roasters, Silvera & Sons coffee beans are the highest quality and largest beans available. Unlike many exporters, our beans exceed the minimum acceptable quality standards and are shipped within one week of preparation to ensure the largest and freshest beans on the market. Our products are perfectly suited for the specialty roasting market which constantly strives to offer award-winning coffee.

Pricing Strategy

Because Silvera & Sons adheres to higher quality standards, the price of our coffee is slightly higher (four to nine percent) than the market average. The import market largely determines the price of imported coffee in the United States. Beans that do not meet Silvera & Sons quality standards are resold on the Brazilian market at the current market price. Green coffee, on the import market, now sells for US$ 213.56/60kg bag. According to Silvera & Sons' pricing strategy, Silvera & Sons coffee would sell for approximately US$ 224/60kg bag. Importers to this point have been willing to pay the additional cost.

Promotion Strategy

Relationships are key to success in the export business. Importers in Florida have on several occasions visited the Silvera & Sons facility, family home, and farms from which coffee is purchased. Additional accounts and contacts with West Coast importers have all been established and maintained through personal contact. Personal selling will remain our most important means of promotion. Marco Silvera Jr. will continue to lead this effort. In addition to personal selling, Silvera & Sons has identified several specialty publications within which print advertisements will run. Direct mail, in the form of personal letters will also be used to communicate with existing and potential clients. Our budget for promotion activities is as follows:

• Personal Selling which includes phone expenses, travel for Silvera & Sons employees and for importers who we invite to Brazil: ($BRL) 35,000 annually.
• Print Advertising in three specialty publications and direct mail: ($BRL) 12,000 monthly.
• World Wide Web presence: ($BRL) 125,000 to produce a new site and $2,500 annually to maintain the site.

Distribution Strategy

Distribution is one of the greatest challenges faced by Silvera & Sons. The distribution system of Brazil is largely outdated and inefficient. Moreover, taxes, specifically excise taxes, are high. Distribution costs for internal sales are absorbed by the customer but distribution costs for exports are absorbed by us. Increasing the volume of our exports makes us eligible to receive reduced fees and helps ensure that trucks and rail cars are running at maximum capacity.

Marketing Programs

Our most important marketing program is an increase in personal selling combined with targeted direct mail and print advertising. Marco Silvera Jr. will be responsible, with a budget of ($BRL) 35,000 and a milestone date of May 30, 1999. The program is intended to establish contractual agreements with 10 additional importers, increase brand awareness of our product in the United States, and communicate our position as a provider of the highest quality green Arabica beans on the market.

Another key marketing program is the development of a sophisticated website. The goal of this program is to increase our presence on the world wide web and provide additional means of communication and customer data collection. The website will cost ($BRL) 125,000.

Sales Strategy

Silvera & Sons' strategy focuses first on meeting the increased demand from importers with whom we have established relationships for larger orders. These importers are critical to our ability to acquire additional accounts on both the East and West coasts of the United States without having to spend a great deal on sales efforts. Secondly we will focus on increasing the volume, while maintaining the percentage of sales, of beans sold to the internal Brazilian market. When we have reached maximum sales to existing channels we can then shift the majority of our focus to securing additional import accounts.

Sales Forecast

The following table and chart show our present sales forecast. We project sales to grow approximately forty percent in 1999, increase again by twenty percent in 2000, and reach maximum for production capacity in 2001 representing a thirty-three percent growth over the previous year.

Sales Programs

Personal selling: Through personal contact we need to confirm in writing orders for larger quantities of our product from American importers and Brazilian wholesalers. In addition we need to establish sales agreements with at least six, possibly ten, additional American importers. Marco Silvera Jr. is responsible and the due date is May 30, with a budget of ($BRL) 24,000.

Strategic Alliances

Our most valued alliances are those we have developed with American importers. They have the ability and willingness to purchase larger quantities of our products and recommend us to other importers. Additional alliances with trucking contractors and the Porto de Santos Cafe Commission are currently established.

The accompanying table shows specific milestones, with responsibilities assigned dates, and budgets. The milestones represented in this plan are those which we have determined to be the most important.

MANAGEMENT SUMMARY

Silvera & Sons' management consists of four full-time employees. Additional assistance is acquired on a part-time basis and/or through the use of consultants, specifically in legal matters. Detailed descriptions are found in the following section.

Management Team

Silvera & Sons is organized into three functional areas: product sourcing, sales, and marketing; production and shipping; and finance and administration.

Marco Silvera, Sr.: CEO/President in charge of finance and administration. Marco Silvera, Sr., 57, has worked in the coffee export business for 30 years. Before starting Silvera & Sons he was the Chief Financial Officer and general manager of the Cafe Fino coffee company. He began working for Cafe Fino after he finished an accounting degree at the University of Southern California. The current Silvera & Sons plant was formerly owned by Cafe Fino and was sold to Mr. Silvera who had decided to "retire" and wanted to run a small business. Cafe Fino had purchased larger facilities and no longer needed the plant.

Marco Silvera, Jr.: Vice president in charge of product sourcing, sales, and marketing. Marco Silvera Jr., 32, completed his M.B.A. at Syracuse University and worked for several years on the Brazilian stock and commodities market as a broker. He later took a position as an International Sales and Marketing Representative for a major agricultural brokerage and supply firm in Sao Paulo. He is expected to succeed his father as CEO of Silvera & Sons Ltda.

Antonio Silvera: Vice president in charge of production and shipping. Antonio Silvera, 29, worked as a civil engineer for two years for the Brazilian government after completing an engineering degree at the University of Brazil, Sao Paulo. He is responsible for the supervision of all plant employees.

Additional Management:

• Ralph Henzo, CFO
• Gracie, Renoldo, & Fertado Attorneys at Law, Sao Paulo

Management Team Gaps

We currently lack a full-time professional who can deal with the changing legal and financial aspects of international business. We have relied on legal consultants but are now analyzing the possibility of adding an additional position to deal exclusively with international issues. In addition, as we continue to grow and hire more personnel, we may hire a controller.

Personnel Plan

The personnel plan requires an increase in plant employees from 11 to 17-20 within the next three years. Additional employees will also be added to increase administrative and accounting support. One additional employee will be added to the sales and marketing division. We will retain all current employees as they will not have to relocate.

FINANCIAL PLAN

We want to finance growth through a combination of long-term debt and cash flow. Purchase of the larger facility and equipment will require approximately eighty percent debt financing. Additional technology will be primarily financed with cash-flow. Inventory turnover must remain at or above four or we run the risk of backing up orders and jeopardizing our freshness guarantees. We have had no problems with accounts receivable and we expect to maintain our collection days at 30 with thirty percent of sales on credit.

In addition, we must achieve gross margins of thirty-five percent and hold operating costs no more than sixty-five percent of sales.

Important Assumptions

Important assumptions for this plan are found in the following table. These assumptions largely determine the financial plan and require that we secure additional financing.