Business Plan for a Coffee House Essay
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Business Plan for a Coffee House
- Overview
The coffee house will be located in a prominent location within the local area. It will offer customers a wide array of choices, including all types of coffee (from latte to expresso) and tea (from flavoured to English varieties). Additionally, the café will offer non-alcoholic beverages along with alcoholic drinks like wine and beer. Simple pastries will also be sold, and these will vary depending on seasons; however, the main ones will be bread, muffins, rolls, scones, and cookies. The pastries will be supplied every day by a bakery of choice. The café will be open from Monday to Saturday, and on Sundays, it will be closed.
Expertise
According to Turner and Endres (2017), when starting a business, it is important to have the skills needed to meet contemporary demands. The business owner has had experience working as a manager in a coffee shop for some years and has learned how to get supplies for the coffee shop, such as the coffee beans, tea and pastries from local suppliers. Later, the business owner worked as a business developer in a regional restaurant chain that offered him first-hand experience in the food and beverage industry. Therefore, the owner managed to learn the steps needed to establish new locations and finding the most appropriate one that will guarantee the generation of profit as well as give a business a competitive advantage.
Gap in the Market
The coffee house has been considered because most of the relaxation or entertainment spots in the area are limited and only focus on selling food rather than fulfilling the need of the formal workers around the area, which is an opportunity to work as they enjoy a snack. At the same time, the surrounding food joints do not provide Wi-Fi to their customers, which is a limiting factor for most of the formal workers who want to read and respond to their emails as they eat. Furthermore, formal workers need a place to relax once their working hours are over, and some prefer having alcoholic drinks as a way of unwinding. This is why the coffee house will also be serving alcoholic drinks and remain open to late hours compared to the other eateries and food joints so that a wider customer base will be attracted.
Location of the Business
The business will be located at a storefront on a busy walkway because this is the best place to be visible, and the business hours will be more flexible than having it in a mall where the business hours are controlled by the building’s management. The parking will also need to be considered because accessibility is set to attract more customers to the store. Therefore, this location will be highly visible and have plenty of packing so that customers can find it comfortable to come to the coffee shop.
Report Content and Structure
The report will include market analysis, which highlights how the market has been analyzed and the marketing plan that shows how customers will be attracted to the shop.
2. Market Analysis
2.1 Overview of Industry
Recently, the UK has had a surge in coffee demand, and the profit from the sales made in coffee cafes has reached £3 billion (Douglas et al., 2018). There are just over 20,000 coffee shop outlets in the UK, and evidently, there has been a considerable growth in sales in 2019 by around 10 percent compared to 2018 (Douglas et al., 2019). The market has grown considerably over the past, and the market has expanded by 28 percent; this was predicted to go up by another 26 percent by 2020 (Douglas et al., 2020).
Research by Pan (2020) suggests that more than half of the people in the UK prefer to buy hot drinks from coffee shops. Furthermore, it has been found that age is a factor when it comes to the customer’s preference to buy coffee from a coffee shop. Lee et al. (2017) revealed that 81 percent of individuals aged between 16 to 34 are more likely to buy hot drinks than those aged between 65 and above (67 percent). Most of the buyers purchase hot drinks based on their quality. Therefore, the surge in coffee demand does not only mean that it is a good business opportunity, but it has also increased competition due to innovative tactics. Seemingly, coffee drinkers want an artisanal, unique, and high-quality experience; if this is put into consideration, then a coffee shop can gain a competitive edge by exploring new ways of attracting customers.
3. Customer Analysis
3.1 Target Market
The target customers will be between the ages of 20 to 34 years old. These will be individuals that work and have an income capacity of between $15 000 to $100,000 every year. They will either be living or working within five miles of the coffee house. They will have white-collar jobs (professional, managers, and so on) with dispensable income. Their education level will vary from post-graduate to college, along with others that are getting higher income but have not reached this level of education. Most of the customers will entail individuals that enjoy a calming atmosphere and like socializing.
3.2 Customer Segmentation
One of the customer segments will include local workers who are individuals that are working in the surrounding offices. It is expected that they will visit the coffee shop frequently before they head to their offices in the morning, during their lunch breaks, and in the evening as they leave their workplaces. Also, during these times, they will be using the Wi-Fi to do some of their office work, and this will keep them in the shop, and they will prefer it as their ideal location to focus on their work as they have a snack. The second segment will be couples; it is expected that they will prefer the coffee shop as a location to meet before and between mealtimes. The third segment will include shoppers because the store will be located at the storefront on the main street; shoppers coming from town are expected to visit once they get tired from walking or if they need to have a snack when they are window shopping.
4. Competitive Analysis
4.1 Indirect and Direct Competitors
According to Turner and Endres (2017), a competitive analysis needs to point out indirect and direct competitors. The indirect competitors include the other options that the customers need to buy from you, which do not include direct competitors. Examples of this include supermarkets, restaurants, and clients that prefer to make their own coffee at home. Pan (2020) recommends that this type of competition needs to be mentioned to create an understanding that there is a segment of customers that do not visit a coffee house frequently and prefer not to have coffee. On the other hand, direct customers include the coffee shops surrounding the area that also target similar customers.
The other coffee shops that surround the area are a distance away from the location chosen for this coffee shop, which means that there is a competitive advantage. One of the coffee shops provides lunch, which influences the customers to take a meal break; however, their beverage options are limited. This coffee shop is also in the town outskirts and deals mainly with commuters that are going into town to work. Therefore, it is not specialized as a sit-down shop because it focuses on taking out services.
Starbucks is also a major competitor in the UK, and it has one of its branches at one of the shopping malls near the area. It is important to note that Starbucks is a successful franchise and has established itself over the years (Douglas et al., 2018). Furthermore, visitors that arrive from outside the town will often prefer a coffee shop that has a familiar name. In this case, the coffee house has an advantage over Starbucks because it will offer a rotating menu that includes flavoured tea and coffee, it will offer higher-quality house blends, and it is more personalized. Therefore, it is expected that more customers will come to the coffee house because it will be offering higher quality ingredients and have a unique product selection.
Lee et al. (2017) state that there is strong competition in the coffee house industry based on competition for prime locations and so on. However, in general, the industry is crowded, stable, and settled, and this allows competitors to foster lucrative margins (40 – 60 percent).
4.2 Barriers to Entry
The entry barriers are minimal, which makes it easier to open a coffee house. Nonetheless, for larger chain players, the entry barriers are higher because they need higher investment to expand their customer base. At the same time, since the coffee shop will be independent, more investment needs to be placed on marketing and advertising in order to create brand awareness, enhance brand recognition and ensure customer retention.
4.3 Competitive Advantage
The coffee house has several benefits as compared with its competitors. One of them is that it will use high-quality ingredients by working with the ideal local suppliers for pastries, teas, and coffees, as well as to conduct market tests that will attract gourmet coffee drinkers. Secondly, the management team will include individuals that have years of marketing and business experience, which will allow appropriate marketing to customers in a way that is more sophisticated as compared to the competitors. Thirdly, innovative practices will be incorporated, including the introduction of Wi-Fi, relaxing music and ideal artistic seats that create an environment to work and socialize at the same time.
5. Marketing Plan
5.1 Promotions Strategy
The coffee house brand will concentrate on the unique value proposition of the business, which includes providing high-quality pastries and beverages, providing a unique coffee blend, providing a convenient location which incorporates both take-out or eat-in options, offering excellent customer service, and providing an environment to work through good Wi-Fi connection and longer opening hours.
Since the target customers of the coffee house are people that work within three miles of the coffee house’s location and living within the same radius, some of the promotions strategies that will be used to reach them include:
- Direct Mail
The coffee house will take on neighbourhoods that surround the location by sending direct mails. The mails will offer overall information on the coffee house, provide discounts and other inducements so that people can visit the café frequently.
- Public Relations
All area and local newspapers, as well as television stations, will be contacted and a press release sent to them describing the coffee house’s value proposition.
- Advertising
The coffee house will start by advertising through sponsored community events and local newspapers to gain awareness. At the same time, the coffee house will initially-hand out free samples to the potential customers so that they can taste the house blend’s quality and learn more about the shop.
- Pricing Strategy
The coffee house will apply moderate prices so that the clients can feel that they are receiving greater value from the café at an affordable price. The pricing will be on par with the biggest competitors.
In conclusion, this business plan is set to give an overview of what the coffee house should expect in the market and how they can apply different marketing strategies in order to reach their target market. It is important to consider marketing strategies because they are essential in guaranteeing the success of a start-up and helps it gain a competitive advantage. The overview of the market also shows what unique aspects should be added to the business to ensure that it becomes successful.
References
Douglas, J., Douglas, A., Cano, M. and Moyes, D., 2018. Investigating the success of Independent Coffee Shops and Cafes in the UK: Findings from a Pilot Study. In proceedings of the 21st Excellence in Services International Conference, Paris.
Douglas, J., Douglas, A., Cano, M. and Moyes, D., 2019, September. Factorial structure for independent coffee shops and cafes ‘success factors: A UK study. In The 22nd Excellence in Services International Conference (pp. 219-235).
Lee, S., Lee, K.S., Chua, B.L. and Han, H., 2017. Independent café entrepreneurships in Klang Valley, Malaysia–Challenges and critical factors for success. Journal of Destination Marketing & Management, 6(4), pp.363-374.
Pan, H.Y., 2020. Preliminary Study on Key Success Factors of Independent Cafe Operation in Taiwan. Advances in Management and Applied Economics, 10(3), pp.1-11.
Turner, S. and Endres, A., 2017. Strategies for enhancing small business owners’ success rates. International Journal of Applied Management and Technology, 16(1), p.3.
