- Maintain its goal of a 68% target operation
- Produce a profit by its second month of operation
- Be identified as a rising star in the restaurant world in Minnesota restaurant guide
1.2 Keys to Success
- Customer retention
- Effective target marketing
- Efficient and quality service
- A significant and complete understanding of all offered products
1.3 Mission Statement
Mugs aims to create a unique and relaxing experience for all of its customers while simultaneously providing an array of different products ranging from coffee, espresso, pastries, and an arrangement of other products.
Mugs will do everything in its power to create an environment for all of its customers that allows the stress of their daily struggles to melt away through the combination of kind customer service, a welcoming atmosphere, and a commitment to high-quality products.
The profits that Mugs enjoys will be used to keep employee satisfaction and morale high while also providing returns to its shareholders. It will also spend a portion of its profits on local charitable causes around the community.
Product Overview
Mugs coffee shop will pride itself on offering not only the best coffee but also the best pastries in the local area. All of our ingredients will be of the highest quality to ensure peak flavor and quality standards.
The products offered will include different forms of prepared coffee such as lattes, cappuccinos, and espressos, as well as tea and other refreshments.
Mugs will also offer gourmet bakery products such as muffins, donuts, cakes, and cookies.
All of which will be used to help draw the customer in and to increase profits and overall customer experience.
2.1 Products Description
Mugs will be focusing on the needs of all customers with a build your own drink style of service. We will be offering a large number of toppings and other items to include in the products to create the customer’s desired taste.
These toppings and other items will include things such as milk (skim and soy), caramel, whipped cream, a variety of coffee creamers, vanilla extract, cinnamon, and other similar products.
All coffee will be made black with a basic coffee machine and the barista will then follow the desired orders of the customer as to what they want in their drink. There will also be drink ideas on the menu to help customers who are not experienced in the coffee world.
Market Analysis Summary
Recent market analysis has shown that the United States is on the path to maintaining a 4.2% growth rate in the field of coffee consumption.
The most recent data shows that citizens of the Midwest region of the United States consumed on average, 2.08 cups per day.
With its long and harsh winters, the citizens of Minnesota are known to be fond of a warm cup of coffee when they can get their hands on one. Mugs will do everything in its power to assure that the citizens of Minnesota choose us for their daily coffee needs.
3.1 Market Segmentation
Mugs will focus most of its marketing activity on the millennial generation, who, studies show, spend the most on coffee and coffee products outside of the home.
As a result, we will need to focus a significant amount of resources to try and draw college students from nearby campuses to Mugs to greatly increase our customer base,
3.2 Target Market Segment Strategy
As a direct result of the millennial generation being considered the greatest spenders on coffee products outside of the home, Mugs will be focusing much of its market advertising on the local millennial generation.
This will include a large number of internet-based advertisements, including ads being placed on Facebook, Instagram, Youtube, and other social media sites to draw in those seeing them.
Mugs will also focus heavily on keeping in touch with its customers by creating an online presence through sites such as Facebook, Instagram, and Snapchat, as well as maintaining a blog about coffee and coffee products.
Mugs will also advertise healthier options for its products to help draw in millennials who as a generation are more concerned about living a healthy lifestyle compared to other generations.
4.3 Industry Analysis
Over the last decade in the United States, coffee consumption has shown a steady 2.5% growth rate. This rate is only expected to continue its path and will likely reach a higher growth rate sometime over the next few years.
The Midwest of the United States is enjoying much of this success, as the variable climate of Rochester Minnesota, which is what most of the midwest experiences, is ideal for coffee sales.
This is a result of the Midwest’s long and harsh winters which drive people inside looking for a warm environment and a warm beverage which is essentially what a coffee shop is designed to be.
The Midwest also experiences fairly hot and humid summers, which is when coffee shops switch many of their resources to making iced drinks, perfect for anyone looking to cool down while still enjoying the benefits of coffee products.
4.4 Competition
The city of Rochester is a fairly competitive area when it comes to coffee sales and consumption offering over two dozen separate coffee shops in the city which holds a population of about 116,000 people.
The main competitors will be Starbucks and Panera Bread, as both are chain companies with massive resources and fantastic brand name recognition.
However, recent studies have shown that a great percentage of the population is beginning to prefer smaller shops, especially when they are shopping locally.
Management Summary
The majority of Mugs is owned by Mr. Rockefeller who has a bachelor’s degree in business management from XYX University. He has years of experience overseeing projects similar to this one and will be in charge of conducting management training.
A professional experienced manager will be hired to oversee all bar operations and will be paid a salary of $32,500 yearly. The manager will also be in charge of hiring two full-time baristas to help bar operations, each being paid $12 per hour.
The manager will be in charge of hiring any additional staff as well, the salaries of which will be discussed with ownership.
Management will be responsible for all bar operations, employee management, inventory operations, ordering supplies, and working with ownership to create a marketing strategy.
Financial Plan
Mugs plans to capitalize on the need for a relaxing environment and an escape from the harsh Minnesota winter and warm Minnesota summer.
The owners have provided the company with sufficient funds to serve as start-up capital, and management will aim to provide a returning customer base to keep cash flow consistent.
The is that within 18 months, Mugs will see its profits double. Mugs will also aim to maintain a 68% measure of gross margin during that same period.
6.1 Projected Cash Flow
Over the first three years of operations, Mugs is anticipating its net profit to increase from $220,000 in the first year to approximately $315,000 in the third year.
This will be done through customer retention, effective marketing schemes, and overall effective management.
6.2 Break-Even Analysis
Mugs are expected to see an average monthly cost of about $12,500. That, combined with its average margin of about 68%, Mugs will require about $17,000 monthly to break even in terms of equaling all of its expenses.
Based on current projections, Mugs should have no issues reaching this goal one opening.
6.3 Costs and Expenses
Mugs will experience about $12,500 in monthly expenses.
These expenses will consist of employee salaries, product costs, building rent, utility, and equipment costs, as well as marketing costs.
These costs and expenses will be altered annually to keep up with changes happening to the business.
Frequently Asked Questions
How often should a business plan be updated?A business plan should be updated based on the needs of your company. As a result, your plan may only need to be updated once every couple of years.
Why is a business plan important?
However, it is recommended that your plan be revised at least once annually. This will allow the goals of your company as well as the other information in the business plan to be as accurate as possible.
Your updates should include things such as any changes in costs you may have sustained, your current profit margins, any new employees, and other possible changes that may have occurredA business plan is important because it essentially will serve as the outline of your businesses.
It will hold all the necessary information you may need to ensure that your business will succeed.
Without it, you will essentially be relying on dumb luck to ensure that your business succeeds, and in case you didn’t know, luck isn’t the most reliable thing.
Instead, by having a business plan, you ensure that you and everyone else around you know exactly how your business plans to function, where all the money will come from, and any other information that may be crucial to the success of your business.To learn more about how much coffee shops make, click here.
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Hi! I’m Shawn Chun
My adventure in coffee began when I first launched my first coffee shop back in the early 2000s. I had to figure out so many things on my own and to make it worse within 2 years of opening two large corporate coffee chains moved in just blocks away from me!
As I saw smaller and even some larger coffee shops in the neighborhood slowly lose customers to these giant coffee chains and slowly close up shop, I knew that I had to start getting creative…or go out of business.
I (like you may be) knew the coffee industry well. I could make the best latte art around and the foam on my caps was the fluffiest you have ever seen. I even had the best state-of-the-art 2 group digital Nuova Simonelli machine money could buy. But I knew that these things alone would not be enough to lure customers away from the name brand established coffee shops.
Eventually, through lots of trial and error as well as perseverance and creativity I did find a way to not only survive but also thrive in the coffee/espresso industry even while those corporate coffee chains stayed put. During those years I learned to adapt and always faced new challenges. It was not always easy, however, in the end, I was the sole survivor independent coffee shop within a 10-mile radius of my location. Just two corporate coffee chains and I were left after that year. All told the corporate coffee chains took down over 15 small independent coffee shops and kiosks and I was the last one standing and thriving.
Along the years I meet others with the same passion for coffee and I quickly learned that it is not only “how good a barista is” that makes a coffee shop successful, but the business side of coffee as well.
Hence why I started this website you are on now. To provide the tools and resources for up and coming coffee shop owners to gain that vital insight and knowledge on how to start a coffee shop successfully.
Stick around, browse through my helpful blog and resources and enjoy your stay! With lots of LATTE LOVE!
