Wednesday, December 11, 2019
Evaluation of Business Plan Reuben Hills
Question: Discuss about theEvaluation of Business Planfor Reuben Hills. Answer: Introduction Reuben Hills has been determined to become one of the leading coffee shops situated in the heart of Sydney. A coffee shop is a place where people from different age groups come to distress themselves either to read a book or meet a close friend. The main target audience of Reuben Hills would be the young couples, students from the nearby universities to have a cup of coffee which is prepared from the best of the coffee beans. The coffee bar also compliments its target audience with brownies along with free books which their customers can read and enjoy the visit to the coffee bar (Ford, Bornstein, Pruitt Siegel, 2007). The main objective of Reuben Hills is to become one of the best - selling coffee shops in the area. Secondly, to maintain its gross profit by more than 60% and churn profits from the first month operation. The mission of Reuben Hills is to create a unique place where customers can come have a good time with their friends. The management head at Reuben Hills is to distress its customers in regards to friendly customer interaction, great ambience, providing best quality products convenient location (Young, 2007). It shall be seen that, Reuben Hills will invest its profits in order to increase the satisfaction amongst the employees have stable return for their shareholder. Market Analysis: Industry analysis: Coffee consumption has shown a rise of approximately 2.5% as compared to last decade. It has been witnessed that, retail of coffee is flourishing in Sydney. The local climate at Sydney helps the customers to have non - alcoholic beverages. Drinking coffee has become a status symbol part of the lifestyle in Sydney (Smith, 2016). Market Segmentation: Reuben Hills has focused mainly on the marketing activities in order to reach out to one of the largest audiences i.e. college students followed by the faculty members, people working in offices teenagers (Stutely, 2002). The following chart depicts the market segmentation of Reuben Hills: (Source: Ingram, 2016) Target Market Segmentation: The main target markets for Reuben Hills are those who want to sip a cup of coffee in a relaxed atmosphere. The segregation amongst customers can be made on the basis of age, occupation, location their taste and preferences (Quora.com, 2016). Coffee bar has been referred to as one of the favourite places for college students as they can meet their friends, read a book or study in some a beautiful atmosphere surrounded by the smell of the coffee beans. Market Needs: It has been evaluated that, the current market trends towards the consumers in Sydney also plays an important role in the growth of the coffee industry. Some of the factors which lead to an increase in the opportunity of coffee bars are small indulgencies for something exotic unique (McKeever, 2012). Competition Buying Patterns: The major competitors for Reuben Hills which have been witnessed in Sydney are Starbucks, Reuben Hills, Single origin roasters, Coffee Alchemy, Sample Coffee, Brewtown newton, Gumption and John Smith caf. Reuben Hills has made its place in the heart of the customers by the best - selling coffee beverage, cozy home like atmosphere to sit and relax (Lau, 2005). It has attained competitive edge by serving the body and mind of the customers. This will have helped Reuben Hills to grow its market share. One of the main reasons why a customer comes back to a specific coffee shop is because of its tasty coffee, home like atmosphere and prompt customer service. Selling premium and rich coffee has helped Reuben Hills to build a strong clientele base for near future (Morris, Heyer LaFlamme, n.d.). Marketing: Products: Reuben Hills offer its customers with the bestselling coffee beverage in its area. It shall be seen that, high quality coffee beans and products are utilised by the same. The store layout, menu cards other activities are focused to maximise the sales of the beverage along with coffee other refreshments such as brewed coffee, tea, brownies, sandwiches salads (Ingram, 2016). The customers would be given a complimentary free book or a magazine to read it inside the coffee bar. Product description: The main product offered by any coffee shop is espresso based coffee such as Latte, cappuccinos mochas. The product will be prepared with either wholesome, soy skimmed milk (Ghandour, 2014). The coffee beverages are prepared in the espresso machines by forcing hot water at a high pressure. These shots are then mixed with milk to make it the best - selling espresso. Sales techniques: Approximately 2,500 flyers have been distributed in the neighbourhood areas such as shopping malls, office buildings, etc. before the grand opening of Reuben Hills (Fullen, 2005). Strategies and Tactics The main focus of any business model is to earn levels of profits, get new customers, retain the existing ones get more customers who spend more and come back quite often. At Reuben Hills, the competitive edge has been attained by the following ways i.e. comfortable sofas and seating arrangements, dim lighting and relaxing music will help the customers to distress themselves from day to day arrangements (Ford, Bornstein, Pruitt Siegel, 2007). Another tactic which is used by Reuben Hills is to speed up the customer service Sales Forecast Sale forecast for Reuben Hills is depicted as follows: Sales forecast Year 1 Year 2 Year 3 Sales Beverage 300,400 370,440 431,984 Coffee beans 90,600 97,260 100,000 Others (brownies, sandwiches, etc.) 193,000 174,700 174,656 Total Sales 584,000 642,400 706,640 Direct Cost of Sales (DCOS) Beverage 90,600 97,260 100,000 Coffee beans 44,000 48,200 51,900 Others (brownies, sandwiches, pastries, etc) 69,800 79,380 95,424 Direct cost of sales subtotal 204,400 224,840 247,324 Financial Plan Some of the start-up expenses to be borne by Reuben Hills have been listed as under: To attain license permits along with various accounting services will amount to AUD 1,300 Promotional expenses for the opening of the Reuben Hills would amount to AUD 3,500 along with printing of the flyers @ AUD 0.04 (Abrams, 2003) Fees for the consultant who would help to set the Reuben Hills would be AUD 3,000. Other petty expenses such as stationery items utility deposits Some of the start-up assets which have been attained by Reuben Hills as follows: Operating capital worth AUD 67,123 (inclusive of employee own salaries) Inventory costs such as AUD 16,000 (which includes 12 different types of coffee beans; retail supplies such as cleaning material, paper napkins, trays, serving plates, spoons, glasses coffee mugs) Total amount reserved for equipment to be used at Reuben Hills such as espresso machine, coffee maker, grinder, other service equipments such as microwave, refrigerator, dish washer, toaster and other miscellaneous expenses (Abrams, 2003). There are two main ways from which Reuben Hills will procure its funds i.e. loans from bank investments from its owners. It shall be seen that, the plan to operate coffee bar in Sydney has been completed within the desired budget. This marks the success of the business plan. It shall also be evaluated that, the coffee bar had started to churn profits from the first month of its operations. There are certain assumptions which have been made by Reuben Hills which have been depicted as under: General Assumptions 1st year 2nd year 3rd year Current interest rate 9.8% 9.8% 9.8% Long term interest rate 10% 10% 10% Tax rate 25% 25% 25% Cash Flow: Based upon the evaluation of Cash Flow for Reuben Hills the following cash position for the same has been witnessed. (Source: Abrams, 2003) As we look at the cash flow chart, it is seen that the company has maintained healthy cash flow which will help them to pay off its debt and use the funds in the best possible manner. Cash Flow (AUD) 1st year 2nd year 3rd year Cash sales 584,000 642,000 706,640 Cash from operations 584,000 642,000 706,640 Sales Tax 0 0 0 Borrowings 0 0 0 Cash received 584,000 642,000 706,640 Expenditure Cash Spent 130,000 153,800 170,144 Bill payments 322,465 378,715 405,945 Spending on operations 452,465 532,515 576,089 Current borrowings 3000 3000 3000 Long term liabilities 0 4885 4761 Purchase long term assets 0 1000 1500 Cash spent 455,465 541,400 585,350 Net cash flow 128,235 101,000 121,290 Critical Risks There are various types of risks when starting a coffee shop some of them have been discussed as under: Choice of an unsustainable location: Location plays an important role in success of any business model. The location of the coffee bar shall be in close proximity of its target audience. The coffee bar shall be easily located by the target group in all weather conditions. Renting a property on busy streets might look attractive but the rent for the same will be a major constraint. Therefore, it is not always a good idea to have a business location on such streets (Barrow, Barrow Brown, 2008). Inefficient espresso workstation: A proper space shall be utilised by the baristas to carry out their high demand work in the best possible manner. It is an important task to ensure less movement in that particular area (Morris, Heyer LaFlamme, n.d.). Breakdown and spoilt food: Coffee bars are known for its cooking and use of various equipments. The owners of the coffee bars shall be prepared for unexpected fail of the equipment (Daniels, 2002). For example, fire insurance is one of the main insurance which shall be catered to in any restaurant or coffee business. Failing refrigerators can also lead the perishable items to go waste. Food poisoning: Legal action can be taken in case a customer suffers from food poisoning from the meal provided by your business. Such types of costs are referred to as hard hitting for the caf. Therefore, product liability insurance comes into place for such type of business model (Barrow, Barrow Brown, 2008). While operating such businesses one should take care of proper hygiene and food handling practices. Fire damage: It shall be kept in mind that, in case of restaurant/ caf business fire can occur from any of the electrical equipments which are used in the business. Fire insurance shall be done by the business owner to cover any type of fire damage during various events such as rain, hail storms, etc (Abrams, 2003). Injuries to customer: Injuries to customer in form of illness or damage to customer by spilling or falling due to wet floor are some common instances which occur while operating caf businesses. In such cases, public liability has been referred to as a crucial factor in caf businesses. Some of the costs which are covered under the same are medical expenses, legal fees and other compensation for damaged property (Cooper, McNeill, Floody Cooper, 2005). Recommendations Conclusion Some of the recommendations to Reuben Hills have been listed as follows. They are as under: Loyalty programs: Loyalty programs are a must for coffee shops. Loyalty program in coffee shops can be as simple as a free cup of coffee for a coffee lover. This will help to enhance the customer experience and he/she will cherish this moment always. Offering a free Wi-Fi connection refers to another example of loyalty program at the coffee shop. Promotional advertising: Use of various advertising promotional activities together will help to enhance the shopping experience in a coffee shop. Free coupons in the local newspaper magazines shall be used in order to make the presence felt by the target group. In house advertising: In house advertising refers to clear visible store signage, people walking on the road, etc. Selection of the name of the coffee shop also plays an important role in enhancing the coffee experience. References Abrams, R. (2003).The successful business plan. 1st ed. Palto Alto, Calif.: Planning Shop. Barrow, C., Barrow, P. and Brown, R. (2008).The business plan workbook. 1st ed. London: Kogan Page. Cooper, B., McNeill, G., Floody, B. and Cooper, B. (2005).Start and run a restaurant business. 1st ed. Bellingham, Wash.: Self-Counsel Press. Daniels, P. (2002).Restaurant business start-up guide. 1st ed. Chino Hills, Calif.: Venture Marketing. Ford, B., Bornstein, J., Pruitt, P. and Siegel, E. (2007).The Ernst Young business plan guide. 1st ed. Hoboken, N.J.: J. Wiley Sons. Fullen, S. (2005).Opening a restaurant or other food business starter kit. 1st ed. Ocala, Fla.: Atlantic Pub. Group. Ghandour, A. (2014). 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