You are a student at AAC College. The college has decided to open a coffee shop on the ground floor that will be run by AAC students allowing them to apply knowledge and skills learnt in classroom to practice and gain some valuable work experience.
The coffee shop will target students at AAC as their major customer and will attempt to attract staff working for other companies within the building.
Based on the hours of operation (Monday to Friday only) it was decided that the coffee shop will have to employ 1 full time manager that will take care of all the admin, operational and bookkeeping duties and 3 part-time student employees.
AAC coffee shop will be similar to its four main competitors in the area for price and products offered, however, it will distinguish itself by being the coffee vendor that is open till late, has the best atmosphere, and offers the most promotions to its customers.
The coffee shop will provide coffee, tea, hot chocolate only. Market research identified one significant trend in the last fifty years – an increase in coffee consumption amongst young (18-24) people. Coffee is no longer just seen as a morning drink while the parents read the newspaper, instead has developed its own culture throughout the different age groups. This coffee culture has changed the design of coffee shops today. Coffee shops today offer more than just hot/cold drinks they also serve as a place for customers to relax, socialise, or even a place to work.
AAC Coffee shop will distinguish itself from other coffee shops by being a shop that opens till late, has the best atmosphere, and runs a number of promotions for its customers. The coffee shop will be run by AAC students which will increase the chances of winning other students as major customers. The coffee shop will be the best in the business for being able to understand what their customers desire. In addition to its prime location, the coffee shop offers its guests an environment ideal for studying and meeting with group members. The shop is designed to have a relaxing atmosphere with small and large tables for individuals and groups. The AAC coffee shop will offer its customer’s re-usable coffee mugs. If a customer uses its re-usable coffee mug that the shop distributes they will receive 10% discount on their beverage. The goal of this promotion is to support environmentally friendly practices, save money on one time use cups, and increase awareness of the coffee shop from advertising the brand name on the coffee mugs.
“AAC coffee Bucks”
“AAC coffee Bucks” are coupons that the shop will introduce, customers will be able to save one dollar on their purchases. The shop manager in cooperation with the AAC trainers will be in charge of distributing “AAC coffee Bucks” to all faculty members on the AAC College Campus. “The AAC coffee Bucks” are to be handed out to students rewarding them for their hard work or good deeds done in the classroom (i.e. getting a good grade on a test, participating, or helping others). This promotion will not only drive sales and awareness of the coffee shop, but also develop a positive brand attitude with its customers and make students feel good.
The coffee shop will provide small, regular and large coffee, tea and hot chocolate only, with the average unit price being $3.5 and the average unit variable cost being $0.49.
The AAC coffee shop will employ one full-time manager (yearly salary is $55,000 plus super) and part-time staff: 3 baristas (yearly salary is 23,500 plus super each).
Other expenses look as follow:
- Rent $2,000 to be paid monthly and bond of $4,000 (already paid)
- Advertising and promotion $200 to be paid monthly
- Supplies (stock – in – trade) $3,100 to be paid monthly
- Telephone $300 to be paid monthly
- Other utilities (electricity, gas, etc.) $500 to be paid monthly plus a bond of $400 (already paid)
- Insurance $300 to be paid monthly
- Miscellaneous (including cleaning materials) $250 to be paid monthly
- Interest $460 to be paid monthly
- Legal and Professional fees (including accounting) $250 be paid monthly
- Fixtures and Fittings comprising of desks, chairs, couches, a sink and counter – $15,000
- Plant and Equipment: a coffee machine, coffee grinder, fridge, dishwasher and cash register – all totalling to $40,000. Please note that the AAC coffee shop is planning to expand its operation and buy a soft drink refrigerator valued at $1,800 in the second year of operation.
- Starting inventory $3,000 (already paid)
- Legal Fees $2,750 plus registration, licenses and permits $1,000 (already paid)
- Advertising and promotion for opening $2,000 (already paid)
- Loan establishment fee $250 (already paid)
AAC College decided to invest $55,000 into the Coffee shop as a start-up capital. All the necessary expenses paid prior to the opening were paid out of this capital.
For the first year of operation the company expects the following sales. Due to the fact that this is a cash operating business the company expects to have sales from the first day of operation. However, sales during first two months of operation are expected to be very low.
July $14,500 January $22,500
August $16,000 February $23,000
September $20,500 March $24,500
October $22,900 April $24,500
November $24,500 May $25,000
December $23,500 June $25,500
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