A BUSINESS DEVELOPMENT PLAN

ON

“THE COFFEE HOUSE”

SUBMITTED BY:
Rishabh Sarawagi
Sanchita Aryal

SUBMITTED TO:
Mr Sohan Babu Khatri

Course: MGT547 Business Development Plan

ACE INSTITUTE OF MANAGEMENT

MAY 2022
 STATEMENT OF PURPOSE

MBA, in our opinion, is more than a degree; it is a platform for learning various tips
and techniques as well as generating ideas with structured views on how to proceed.
Studying for an MBA necessitates a particular level of character demonstration and
strength. In recent years, the global business sector has become increasingly
intertwined. MBA would assist me in achieving my career goals. Our education has
provided us with the ideal foundation for understanding and learning, as well as the
ability to focus on solutions rather than becoming bogged down by obstacles. It would
allow us to channel my conceptual skills towards analyzing and resolving business
issues, as well as comprehending many issues that affect an organization's strategy,
structure, and system.

This Business Development Plan is created by Sanchita Aryal & Rishabh Sarawagi,
students of MBA evening at Ace Institute of Management, Kathmandu. The main
purpose of this BDP is to make a concrete plan of our business, and to draw our
Business Idea is a proper documented form, which can be presented to the Investors /
Banks for the purpose of funding / Investment / Loan. This BDP consists of the
detailed plan on how & where we will start / run this business, including the resources
required, partners, financial / operational plans & everything necessary. Another
purpose for this BDP is to be presented at the final submission under our course that
we are studying. And is to be presented to our course instructor Mr. Sohan Babu
Khatri.

i
 DECLERATION
The business development plan has been prepared as an assignment required for the
course of MBA Pokhara University. This report is to be submitted to the Ace Institute
of Management purely for academic purpose.

There are not any market research agencies and other reliable sources for research and
development for the business plan of The Coffee House.

…………………………………..

Rishabh Sarawagi | Sanchita aryal

MBA spring 2019

Ace Institute of Management

Pokhara University

ii
 ACKNOWLEDGEMENT

We would like to express our sincere gratitude to ACE College, New Baneshwor for
providing us this wonderful opportunity to learn and understand
Business Development Plan.

This business plan project “The Coffee House” would not have been possible
without the kind support, help and guidance of many individuals. We would like to
extend our sincere thanks to all of them.

We are deeply indebted to our course instructor Mr. Sohan Babu Khatri, for his
inspiring guidance, encouragement, suggestions and constructive comments regarding
this business plan. We would like to thank him for his support, co-operation and
incessant patience for our inquiries.

We would like to thank the college faculty members and our colleagues who have
helped us with their support on shaping the business plan. We would like to
acknowledge and appreciate the support of all the individuals who has directly and
indirectly helped us in writing this business development plan.

Thanking You.
Rishabh Srawagi & Sanchita Aryal

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Table of Contents
STATEMENT OF PURPOSE.........................................................................................i
DECLERATION............................................................................................................ii
ACKNOWLEDGEMENT............................................................................................iii
ACRONYMS.................................................................................................................x
CHAPTER ONE............................................................................................................1
CHAPTER TWO............................................................................................................3
2. EXECUTIVE SUMMARY..........................................................................3
CHAPTER - THREE.....................................................................................................5
INTRODUCTION..........................................................................................................5
Company Overview.......................................................................................................6
CHAPTER - 4......................................................................................................10

PRODUCT AND SERVICES......................................................................................10

4.1 Products and Services...................................................................................10

4.1.1 Espresso Drinks.....................................................................................10

4.1.2 Iced Coffee.............................................................................................10

4.1.3 Blended Beverage...................................................................................11

4.1.4 Coffee alternatives.......................................................................................11

4.1.5 Bakery items................................................................................................11

4.1.6 Other services..............................................................................................12

BUSINESS ENVIRONMENTAL ANALYSIS............................................................13

Coffee Consumption Pattern....................................................................................14

5.2 Market Trend.................................................................................................15

5.3 Market Segmentation....................................................................................16

5.4 Market Needs and Growth............................................................................16

5.5 Target Market................................................................................................17

5.1 SWOT Analysis.............................................................................................17

5.1.1 Strength..................................................................................................17

5.1.2 Weakness................................................................................................18

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 5.1.3 Opportunities..........................................................................................18

4.1.4 Threats....................................................................................................18

4.2 PEST Analysis..............................................................................................19

4.2.1 Political and Legal Environment............................................................19

4.2.2 Economic Environment..........................................................................20

4.3.3 Social Environment................................................................................20

4.2.4 Technological environment....................................................................21

SWOT Analysis........................................................................................................24

7.2 Value Chain Analysis.........................................................................................25

 7.3 Strategy Diamond........................................................................................28

..................................................................................................................................28

MARKETING PLAN AND STRATEGY...................................................................29

6.1 Marketing Objective......................................................................................29

Marketing Objectives and Goals..............................................................................29

8.2 Consumer Analysis.............................................................................................30

6.2 Marketing Strategy........................................................................................31

6.3 Positioning....................................................................................................31

6.5. Survival, Competition and Growth in the Market Sustainably.....................32

6.4 Marketing Mix...............................................................................................32

6.4.1 Product...................................................................................................33

6.4.2 Price........................................................................................................33

6.4.3 Place:......................................................................................................33

6.4.4 Promotion...............................................................................................33

6.4.5 People.....................................................................................................33

6.4.6 Physical evidence...................................................................................34

6.4.7 Process....................................................................................................34

6.5 Market Segmentation.....................................................................................34

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6.6 COMPANY STRATEGY..............................................................................34

6.7 Pricing Strategy.............................................................................................35

6.8 Sales Strategy................................................................................................37

A sales strategy consists of a plan that positions a company's brand or product to

gain a competitive advantage. Successful strategies help the sales force focus on
target market customers and communicate with them in relevant, meaningful ways.
As our core competency is to provide hygienic food in time with good service as
well as with cost effective marketing channel, its sales strategy will fully focus on
that............................................................................................................................37

The Coffee House's baristas will handle the sales transactions. To speed up the
customer service, at least two employees will be servicing clients--while two other
employee will be preparing the customer's order, the other one will be taking care
of the sales transaction. All sales data will be logged on the computerized point-of-
sale terminal which will be later analyzed for the marketing purposes. There will be
several sales strategies put into place, including posting specials on high profit
items at the drive-up window. The Baristas will also hand out discount coupons to
the regular clients. The Coffee House will also develop window sales techniques
such as the cashier asking if the customer would like a bakery items with their
coffee........................................................................................................................37

Our sales strategy requires consistently high quality coffee, food service, speed and
good quantity. This can be accomplished by hiring employees who genuinely enjoy
their jobs, by continually assessing the quality of all aspects, along with the system
of interacting with the customers personally if needed so that they know that their
feedback will directly go to the owner’s desk. Not only this evaluating each dish
before serving to the customers and over all food choices for popularity................38

9.1 Location..........................................................................................................38

Premises...............................................................................................................39

Time Plan / Work Schedule......................................................................................39

Modular kitchen can be setup with an estimated time period of two month. The
opening hours of the restaurant will be from 9 A.M. to 9 P.M. It will be opened
seven days a week....................................................................................................39

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 Machineries & Equipments..................................................................................39

Technology...........................................................................................................39

Skills Required.....................................................................................................39

7.1 Procurement...................................................................................................40

7.2 Value Chain...................................................................................................40

7.3 Capacity.........................................................................................................41

7.4 Quality Management.....................................................................................41

9.4.1 Order Processing.........................................................................................42

9.4.2 Inventory Control........................................................................................43

9.5 Quality Control / Assurance...............................................................................44

9.5.1 Responsiveness...........................................................................................44

9.5.2 Courtesy......................................................................................................45

9.5.3 Competence.................................................................................................45

9.5.4 Accessibility................................................................................................45

9.6 Research and Development................................................................................46

CHAPTER - 10............................................................................................................47
ORGANIZATION AND MANAGEMENT TEAM....................................................47
2.1 Management Team.........................................................................................47

10.2 Stakeholder Analysis........................................................................................48

10.2.1 Employees.................................................................................................48

10.2.2 Customers..................................................................................................48

10.2.3 Suppliers....................................................................................................49

10.2.4 Environment.............................................................................................49

10.2.5 Government..............................................................................................49

10.3 HR Planning....................................................................................................50

10.3.1 Human Resource Requirements................................................................50

2.2 Human Resource and Job Description...........................................................51

2.2.1 Promoters...............................................................................................51

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 2.2.2 Manager.................................................................................................52

2.2.3 Head Chef...............................................................................................52

2.2.4 Barista...................................................................................................53

2.2.5 Utility Staff..................................................................................................53

HR Development......................................................................................................54

10.4.1 HR Training & Development....................................................................54

Training for the Waiters........................................................................................55

10.4.2 Retention of employees.............................................................................55

CHAPTER 11...............................................................................................................56
11.2 Financial Estimations Assumptions..................................................................56

8.2 Financial Details of Start-Up Expenses.........................................................58

8.3 Sales Forecast and Cost of Goods Sold.........................................................58

8.4 Budgeted Loan Repayment Schedule............................................................59

8.5 Pro-forma Income Statement.........................................................................59

8.6 Preformat Balance Sheet...............................................................................59

8.7 Preformat Cash flow Statement.....................................................................59

8.8 Business Financial Ratio...............................................................................60

8.8.1 Liquidity Ratios......................................................................................60

8.8.2 Debt Management Ratio.........................................................................60

8.8.3 Profitability Ratio...................................................................................61

8.9 Other Financial Indicators.............................................................................61

CHAPTER 12...............................................................................................................62
CRITICAL RISKS AND CONTINGENCY................................................................62
9.1 Internal Risk..................................................................................................62

9.2 External Risk.................................................................................................63

CHAPTER 13...............................................................................................................65
FUTURE PLAN AND EXIT STRATEGIES...............................................................65
10.1 Future Plan.................................................................................................65

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 10.2 Exit Strategies............................................................................................65

BIBLIOGRAPHY........................................................................................................66
ANNEXURE................................................................................................................67
ANNEX 1: LOAN AND EQUITY......................................................................67

ANNEX 2: TOTAL FIXED ASSETS..................................................................67

ANNEX 3: SALARY...........................................................................................69

ANNEX 4: PRELIMINARY EXPENSES...........................................................69

ANNEX 5: OPERATING EXPENDITURE........................................................69

ANNEX 6: MARKETING EXPENSES..............................................................70

ANNEX 7: COST OF GOODS SOLD................................................................70

ANNEX 8: WORKING CAPITAL......................................................................70

ANNEX 10: NPV, IRR AND PBP.......................................................................71

ANNEX 11: LOAN AMMORTIZATION...........................................................73

ANNEX 12: SALES REVENUE YEARLY........................................................74

ANNEX 13: INCOME STATEMENT.................................................................75

ANNEX 14: BALANCE SHEET........................................................................76

ANNEX 15: CASH FLOW STATEMENT..........................................................77

ANNEX 16: RATIO ANALYSIS.........................................................................79

ANNEX 16: COFFEE AND FOOD PAIRING....................................................80

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.

ACRONYMS
Pvt.- Private

Ltd.- Limited

i.e. – That is

NGO – Non-governmental Organization

INGO – International Non-governmental Organization

MBA – Master of Business Administration

EBDIT- Operating Profit Before Depreciation

NPV- Net Present Value

EBIT- Operating Profit After Depreciation

PBT- Profit Before Tax

NPAT- Net Profit After Tax

IRR- Internal Rate of Return

x
 CHAPTER ONE
1. Business Highlights
The average people of Kathmandu spend more than 30 percent of their monthly income
on quality time alternatives with friends and family. To capitalize on this increasing
trend, we have planned on commencing a coffee shop entitled The Coffee House. It will
be located in Mangalbazar, Lalitpur near The Durbar Square. Around this location,
numerous banks, souvenir market, fabric shops and also handicraft shops can be found.
Also, it is considered as the must-go destinations in the Valley which makes it a prime
location for the tourists and even local coffee lovers. It will be open seven days a week
along with free wi-fi service.

 Name of the company: The Coffee House

 Nature of Business : Restaurant
 Legal status of Business : Startup (Not Yet Registered)
 Location: Mangalbazar, Lalitpur
 Contact : 9814060377 | 9844697106
 Major Product | Services : Coffee | Bakery Items |
 Target Customers : Coffee Lovers | Office / Collage going people
 Major Market : Kathmandu Valley
 Capacity :
 Working Schedule :
 Number of shareholders:
 Total Investment
• Investment in Fixed Assets

• Investment in Working/Operating Assets

Capital Structure (Debt: Equity)

• D:E Ratio

• Total Equity

• Total Debt (information about Debt and Cost of Debt / Interest Rate)

Q. Bank and Loan Structure

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• Short Term

• Long Term

R. Milestones of achievements (time plans of key milestones to be achieved)

S. Key Performance Indicators (the variables can differ as per the business model)

• Years of Loss / from when Profit would be made

• Net Income/Profit Margin

• Total Assets Turnover

• Fixed Assets Turnover

• Return on Assets

• Return on Invested Capital

• Return on Equity

• Breakeven Point (Sales / Number of Units)

• Payback Period

• Net Present Value

• Internal Rate of Return

 Registration: Office of Registrar, Tripureshwor


 Founder: Rishabh Sarawagi | Sanchita Aryal
 Date & Place of Registration
 Website: www.thecoffeehouse.com.np
 Email: [email protected]

2
 CHAPTER TWO
EXECUTIVE SUMMARY

This report aims to outline the plan to startup of The Coffee House. The report has been
subdivided into various chapters with each chapter targeting a different aspect about the
operation of the business. The business concept, the business model, the idea, the
marketing strategy, operation plan, financial plan, risk and contingency plan, exit
strategy, organizational structure, etc. has been discussed in detail in this report. A
feasibility study has also been carried which involved a market as well as a financial
feasibility as well. SWOT analysis, PESTEL analysis, Porters five force model has been
used to analyze the market and industry scenario.

THE COFFEE HOUSE is a manufacturing company that will prepare the specialty
Coffee to the consumers. THE COFFEE HOUSE will be producing variety of espresso
drinks, iced coffees, Blended beverages and some coffee alternatives to its customer. It
aims to provide the superior quality coffee with good ambience where customer can
enjoy their leisure time. THE COFFEE HOUSE will be operating by 4 promoters each
having their specialization in different sector that will help the company to grow easily.

Started with the initial capital of Rs. 22,86,000 /-, the company plans to start its business
in Mangalbajar area. Targeting the tourists visiting the Durbar Square, the college going
teenagers, and the faculty of the colleges, the local people in the Durbar Square Area the
company is to be established.

To differentiate from its competitors The Coffee House will be acting as a facilitator of
the customized cake in the lalitpur area of Bakern’s Den, which is situated in
Bhatbhateni. It also plans to give the busy scheduled coffee lovers with the Drive-thru
facility.

The Coffee House will position itself as unique coffee bar where its patrons can not only
enjoy a cup of perfectly brewed coffee but also spend their time in an ambient
environment. Building a brand image by providing personal attention to the customers
and offering quality coffee products along with fast service would be the prime focus of
The Coffee House.

3
The Coffee House will be promoted using various ways. Above the line promotions
include advertising, consumer promotions (schemes, discounts, contests), while below
the line include trade discounts, freebies, and awards and so on. Further, we also
motivate our family, friends, and relatives to convey the positive word of mouth to other
peoples. Similarly, there will be a website, Facebook page and an Instagram account of
The Coffee House. There will be paid promotion of the pages and café in the digital
media. Newspaper advertisements will be displayed during the opening of the café and
also during special occasions.

In order to tell the customer that we are open to provide the service in that area The
Coffee House will be using various promotional strategies like advertisement in Print
Media, like the daily Newspaper, Magazines. The growing trend of use of Facebook will
be utilized by the company. Similarly, company also plans to provide some discount
coupons to the regular customer. In the initial phase, the company will use the promotion
material like the flyers.

A detail study of different situations affecting the business of the company and the
market trend analysis has been done, which includes calculation of its estimated
financial statements too. Going through the figures of the financial statement, the food
truck business The Coffee House seems to be profitable as it has positive cash flows
every year and the income generation from the business is promising.

The total investment for the establishment of the café is Rs 22,860,000, out of which
60% is funded by two partners and remaining 40% will be financed through loan @ 14%
interest from NIC Asia Bank. The café will start earning the profit in the second year.

The Coffee House operates with a belief that customers have their own taste and choice
just our responsibility is to pay them back with the satisfied service. It will come with a
complete solution for the people who are searching a new way of enjoying their every
moment.

4
 CHAPTER - THREE
INTRODUCTION
In Nepal, as western culture has been taking over, consumer are gradually switching the
drinking habit in favor of specialty coffee and espresso-based drinks. This trend has been
increasing tremendously among the younger consumers due to growing middle class and
young populations.

“For young people, coffee represents a variety of experiences around. Coffee shops are
now very linked to technology (wifi for the internet) and spaces for studying, allowing
young people to come and sit to do two things at the same time,” Lacouture, president of
Proexport, said. According to her, “Consumers are not only drinking coffee anymore,
but looking for different experiences. In addition, coffee consumption is increasingly
becoming a status issue: it is not simply going to a coffee shop to sit and drink a coffee
cup, but the experience behind the cup.”

Nepalese market is an emerging market because it does not have standard trend set as of
yet. It is heavily influenced by the western trend. Over the last few years, coffee
consumption trend has been rising. Consumers are willing to pay more for the
convenience. Coffee is regarded as the highest consumed beverage in developed and
developing countries.

Traditionally Nepalese are more tea-people than coffee-people. There are tea-stalls in
virtually every nook and corner of the country and it is still the favorite national drink for
the rich as well as the poor. But over the last couple of years, the habit of coffee
consumption has shot up dramatically, particularly in Kathmandu and other urban
centers, with youngsters and foreign-returned professionals as the primary consumers.
Earlier considered as the drink of tourists and foreigners, coffee, is finding its place on
restaurant menus. Not only the tourist-centered and five star hotel restaurants, even the
common eateries along the sidewalks now consider coffee as a ‘must’ for their menus.
These days, White Mochas, Cappuccinos, Lattes, Café Mocha, Americano and Espressos
are what are on everybody’s lips, literally and figuratively.
According to industry insiders, the market for coffee is growing at the rate of around 15-
20 percent per year, and this growth has been fuelled mainly because of the changing
lifestyle of the people and increasing per capita income. Today, coffee houses are
5
popular meeting places for business and other social activities. They give people a place
where they feel like they belong where they see the familiar faces regularly. It is also a
place where people like to hang out other than their home and work place. People may
not go to their favorite restaurant on a daily basis, but they may visit a coffeehouse every
day. Nowadays, coffee is replacing alcohol as the social beverage of choice, with people
meeting for coffee instead of cocktails. People can now meet for coffee at any time of
the day, rather than just “cocktail hours”.

Company Overview
3.1. Company ownership

The Coffee House will be a partnership business venture. The company will be
incorporated and registered under the provision of the Company Act, 2063.

3.1. Vision
Our vision is be to the premium quality coffee provider at affordable price with efficient
service.”

3.2. Mission
The Coffee House would like to be established as one of the leading coffee house in
Kathmandu. It will be destination for people who are willing to spend some quality time
with a cup of coffee. We would like to encourage our customer of all ages and
background to come and socialize in the coffee house. Our success lies on the maximum
satisfaction to our customer.
The Coffee House will be a great place for a fresh drink, combining an intriguing
atmosphere with excellent and innovative coffee products.

3.3. Values
 Learning never ends in life basic motto.
 Each and every individual are treated on the basis of equal opportunity.
 Customers are treated well and always welcomed their response.
 Benignity environment with personal attention provided to every coffee boozer that
enter The Coffee House.

6
3.4. Objectives (Short Medium | Long Term goals)
 To establish a presence of a successful coffee house in Kathmandu valley and gain a
market shares in this business.
 To continue providing premium quality fresh coffee and efficient service at
affordable price.
 To promote the coffee culture in nation.
 To expand into a number of outlets by year three, and expand the business territory.
 To support Nepalese coffee.
 To facilitate availability of customized cake.

3.5. Building Blocks of Business Models

 Value Proposition
The value proposition is the promise of a value to be delivered and a belief from the
customers that value will be delivered and experienced. Putting value in practice creates
long term benefits for its customer, employs and all other stake holders. The value
provided by The Coffee House to its customers can be:

 Unique and surprising coffee drinking experience,

 Variety of food & coffee & Fast service,
 Place with good ambience to spend time,
 Regular price for premium coffee,
 Healthy and hygienic food and coffee.

 Target Customer Segment

 Demographics
The customer aged 16 to 40 are targeted who want to enjoy unique coffee experience.

 Geographic
The relevant target market is Kathmandu Valley. Selfie cafe will initially focus to capture
the coffee market arena in the valley before moving on to the other geographic area.

7
 Psychographic
Selfie lover who want to experiment and try different ways of enjoying their coffee are
targeted.

A. Key Activities
 Offering variety of food & coffee ,
 Prepare coffee by machine,
 Comfortable seats, good lightning & decoration along with variety of books,
 Quality coffee with pricing similar to the market,
 Maintaining proper Sanitation & Hygiene.

B. Key Resources
 Human resources - semi skilled & skilled staff,
 Raw Materials - Quality Coffee, Milk , Sugar, Vegetable, Meat, Spices etc,
 Possessing of modern technical equipment,
 Information - Website.

C. Key partners
 Suppliers of Coffee
 Supplier of equipment
 Raw materials etc
 Bakery
 Ad agency
 Customers
 Designers

D. Customer Relationship
 Regular customer feedback,
 Quality
 Message boards displaying greetings and pictures of customers who has visited
the cafe,

8
  Loyalty cards,
 Free samples.
 Connecting to customer through social networking sites to ensure effective
regular interaction

E. Channel
 Direct Sale - Cafe,
 Social media,
 Digital Media Ads,
 Word of Mouth,
 Official website.

F. Cost Structure
 Fixed cost: Rent expenses (store), Salaries (staff), Furniture & Equipments,
 Variable cost: Materials, Advertising cost, Tax expenses, Repair & maintenance

G. Revenue structure
 Sales
o Variety of Coffee,
o Food items.

H. Key to success
 Creation of unique, innovative and upscale atmosphere that will be extra features of
attraction.
 Establish a coffee house as a community center for socialization and entertainment.
 Quality, timely service to the customer.
 Modification on product as per the latest trend and requirement.
 Giving the emphasis on staff as important resource.
 Providing good working environment for employees.
 Incorporating technology for product development and delivery.

9
 Experienced barista to enrich the taste of coffee.

CHAPTER - 4
PRODUCT AND SERVICES

4.1 PRODUCTS AND SERVICES

The Coffee House will start is operation primarily by providing four different varieties of
coffee products and its alternatives and also bakery items that are highly demanded by
the customers as per our market survey. Along with these products The Coffee House
will also be facilitating easy access to the customer with customized cake. The variety
will include the Espresso drinks, iced coffees, some blended beverage and also some
alternatives to the coffee. These varieties of coffee will satisfy the needs of the customers
by providing them superior quality of coffee at affordable price.

The menu offerings will be supplemented by free books and magazines that customers
can read inside the coffee bar.

4.1.1 Espresso Drinks

Some of the Espresso drinks available at The Coffee House are:

ESPRESSO: A very strong coffee brewed rapidly one ounce at a time.

CARAMEL MACCHIATO: Espresso with caramel and dollop foam decorates with
caramel drizzle.

CAFÉ AMERICANO: Espresso with hot water, simply the best cup of coffee.

CAPPUCCINO: Serving of espresso with equal part of milk and Creamy Velvet foam

CAFÉ LATTE: A combination of espresso, steam milk and dollop of Velvet foam.

CAFÉ MOCHA: Espresso served with chocolate, milk and topped with fresh whipped
cream.

WHITE CHOCLATE MOCHA: Serving of espresso, white served with chocolate

syrups, liquid desserts.

10
 4.1.2 Iced Coffee
Iced Coffee is hand crafted favorites, served over ice in 16oz glass. The Coffee House
will provide following Iced Coffees:

ICED LATTE OR ICED CAPPUCCINO: Freshly pulled espresso and creamy foam
poured with cold milk over ice.

ICED MOCHA: Rich espresso and drink chocolate are mixed well and poured with
cold milk over ice.

ICED AMERICANO: Double shot of ristretto over chilled water and ice.

ICED CARAMEL MACCHIATO: Shot of espresso over ice cube, chilled milk foam
with rich cream caramel.

4.1.3 Blended Beverage

The added menu for the customer under blended beverage are :

BLENDED MOCHA: Espresso shots and java’s secrets chocolate mix blended over ice
with chocolate stick and whipped cream. It is Java’s highly recommended drinks.

BLENDED VANILLA MOCHA: Blended mocha serves with vanilla syrup and topped
with vanilla ice cream.

BLENDED CARAMEL MACCHIATO: Espresso, caramel and milk blended over ice
and caramel drizzle

BLENDED LEMONADE: It is brain freezing blended lemonade

BLENDED OREO COOKIES SHAKES: Oreo cookies blend with a scoop of vanilla
ice cream, cold milk, ice-cubes and sugar syrup then topped with whipped cream and
decorate with a piece of Oreo cookie.

4.1.4 Coffee alternatives

To satisfy the customer need and take care of the demand of the customer The Coffee
House’s menu will also include some of the alternatives to the coffee. They are:

Cold Drinks | Seasonal Juices | Lassi / Shakes

11
 4.1.5 Bakery items
The Coffee House tries to understand the customer need to full extend. Therefore, in
order to satisfy the customer needs and to pair up the coffee with the best taste. The
Coffee House will have some bakery item to please the customer.

The food pairing of the coffee and some of the bakery items is kept in Annex 16.

4.1.6 Other services

The Coffee House will also be working as the facilitator of the customized cakes from
Baker’s Den in the Patan area. The Coffee House also will help the busy scheduled
coffee lover with the service of Drive-thru.

12
 CHAPTER – 5
BUSINESS ENVIRONMENTAL ANALYSIS
The coffee industry is built upon an intricate web of economic relationships and
transactions. The majority of the global coffee trade is supplied by Brazil; therefore, any
change in their supply has a monumental global effect on the global coffee prices and
industry. Although coffee is an extremely important commodity, the roaster-grower
relationship is characterized by a monopsony, which has created a cycle of
underpayment and debt in the producing countries. Starbucks for example has proven
how each decision that a firm makes, from their logo to in-store experience, affects their
success in a highly competitive market. There is an increasing demand for the coffee as
global consumption rises, but the global supply does not match the projected demand.
Therefore, the industry will be faced with a challenge as the global supply struggles to
meet the increasing global demand for coffee in the future.

Looking at the trend of Nepalese expenditure for the restaurants & fast foods in
Kathmandu valley gives a great positive vibes to all the entrepreneur who wants to open
up restaurant here in Kathmandu. We can analyze in the current market scenario, the
coffee lover are constantly increasing which directly means that the industry of coffee is
gradually improving and enhancing. The industry and market of food and beverage is
constantly enhancing and growing as according to time need and situation of demand.

Analyzing the market characteristics of business.

ECONOMIC FACTOR

 Rise in purchasing power of the customer,

 Willingness to spend more money on food and drinks
 Modernization

BEHAVIORAL & PSYCHOLOGICAL FACTOR

 For relaxation,
 People want to experience new way to enjoy their food and drinks,
 New trend of celebrating events,
 People spending more time on restaurant

13
Coffee Consumption Pattern

Nepalese coffee consumption has shown steady growth, with gourmet coffee having the
strongest growth. Coffee drinkers in the urban parts of the country are among the most
demanding ones. They favor well-brewed gourmet coffee drinks and demand great
service. The Coffee House will strive to build a loyal customer base by offering a great
tasting coffee in a relaxing environment of its coffee bar located close to the bustling
Patan Durbar Square. As per the National Tea and Coffee Development Board
(NTCDB), the following are the data of the annual production and consumption of
coffee in Nepal. Out of the total production approximately 60% is exported and the
remaining is used as domestic consumption.

Domestic
Fiscal Year Production (Mt) Export (Mt)
consumption (Mt)

2000/01 88.7 53.22 35.48

2001/02 139.2 83.52 55.68

2002/03 187.5 112.5 75

2003/04 217.5 130.5 87

2004/05 250 150 100

2005/06 391 234.6 156.4

2006/07 270 162 108

2007/08 265 159 106

2008/09 334 200.4 133.6

2009/10 429 237.6 158.4

2010/11 502 274.8 183.2

2011/12 523 313.8 209.2

2012/13 457 272.2 182.8

Table 2: Coffee Production and Consumption (Source: NTCDB)

14
The graphical representation of the table is:

Coffee Production & Consumption in Nepal

Production (Mt) Domestic consumption (Mt)
600
Production and Consumption

500
400
300
200
100
0
2000/ 2001/ 2002/ 2003/ 2004/ 2005/ 2006/ 2007/ 2008/ 2009/ 2010/ 2011/ 2012/
01 02 03 04 05 06 07 08 09 10 11 12 13

Fiscal Year

Figure 2: Coffee Production and Consumption

5.2 Market Trend

Traditionally Nepalese are more tea-people than coffee-people. But over the last couple
of years, the habit of coffee consumption has shot up dramatically, particularly in
Kathmandu and other urban centers, with youngsters of the new generation and foreign-
returned professionals as the primary consumers. Earlier considered as the drink of
tourists and foreigners, coffee, primarily instant, is finding its place on kitchen counters
and restaurant menus. Not only the tourist-centered and five star hotel restaurants, even
the common eateries along the sidewalks now consider coffee as a ‘must’ for their
menus.

A cursory look in and around the ‘ten plus two’ schools and colleges is enough to prove
that the generational shift in coffee drinking has been very swift. Only a few years ago,
exclusive coffee shops were next to non-existent. Now there are many such spots in
Kathmandu.

According to industry insiders, the market for coffee is growing at the rate of around 15-
20 percent per year, and this growth has been fuelled mainly because of the changing
lifestyle of the people and increasing per capita income along with an increase in the
number of coffee outlets.

15
 5.3 Market Segmentation

The market segmentation is done according to the customer behavior. The Coffee House
will focus its marketing activities on reaching the students and faculty, people working in
offices located close to the coffee shop, foreigners and on sophisticated teenagers. Our
market research shows that these are the customer groups that are most likely to buy
coffee products. Since coffee consumption is universal across different income
categories and mostly depends on the level of higher education, proximity to the World
heritage site will provide access to the targeted customer audience. Also, there are books,
magazines and music playing to make one feel comfortable, even if alone.

5.4 Market Needs and Growth

Our market is made up of consumers who have busy schedules, a desire for quality, and
disposable income. As much as they would like the opportunity to sit in an upscale
coffee house and sip a uniquely blended coffee beverage and read the morning paper,
they don't have the time. However, they still have the desire for the uniquely blended
beverage as they hurry through their busy lives. Additionally, such factors as desire for
small indulgencies, for something more exotic and unique, provide a good selling
opportunity for coffee houses.

Due to increasing influence of the Western trend, Nepalese people too are seen to be
demanding customized cakes for numerous occasions. They want their design delivered
on the cakes they order. Local people have to reach Naxal or Baneshwor to order the
customized cakes, if we can facilitate these services, we can tap in the opportunity which
can contribute on our income.

According to industry statistics, the consumption of coffee is growing rapidly. The

segment of that market we are targeting is the commuter and coffee lovers, and that
number is increasing. It is estimated that there are well over hundreds commuters driving
to and from work and people searching for quality leisure time each day in our market.
Statistically, at least 50% of those are coffee or tea drinkers that give Beans N Cream a
significant daily target for its products.

16
 5.5 Target Market

The Coffee House will cater to people who want to get their daily cup of great-tasting
coffee in a relaxing atmosphere. Such customers vary in age since most of our clientele
will be college going crowd, faculty, jobholders and tourists. These are discerning
customers that gravitate towards better tasting coffee. Furthermore, a lot of college
students consider coffee bars to be a convenient studying or meeting location, where
they can read or meet with peers without the necessity to pay cover charges. This will
provide a unique possibility for us to build a loyal client base. The Coffee House would
also cater to mobile individuals who have more money than time, and excellent taste in a
choice of beverage, but no time to linger in a café. Thus,

The Coffee House will cater its service to:-

 College going crowd and faculty

 Urban adults
 Teenagers
 Commuters going to and from work
 Tourists

5.1 SWOT Analysis

A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classifies as
strength (S) or weakness (W) and those external to the firm can be classifies as
opportunities (O) or threats (T). The SWOT analysis for The Coffee House is done
below:

5.1.1 Strength
 Fresh coffee provider
 Benignity
 Premium coffee at a reasonable price
 Discount card to regular customers
 Personal attention to every coffee boozers
 Customized cake facilitator

17
  Exclusive location

5.1.2 Weakness
 Higher price than the tea-stalls
 Requires extra precaution for apt proportion
 Requires special attention while storing coffee beans
 High dependence on Barista

5.1.3 Opportunities
 Increasing number of people are willing to spend money on quality
 Coffee is replacing alcohol as the social beverage of choice
 Expansion opportunities in other part of the Valley
 Wider range of coffee products
 Over the last couple of years, coffee consumption habit has shot up
dramatically and has found its place on kitchen counters and restaurant
menus.

4.1.4 Threats
 Many competitors in the coffee business.
 Threats of substitute product: There are tea stalls in virtually every nook
and corner of the country.
 The Coffee House is exposed to rises in the cost of coffee and dairy
products.

4.2 PEST Analysis

PEST analysis is a scan of the external macro environment in which the firm operates.
The environment in which the organization operates cannot be controlled but it tries to
present the organization with great opportunities as well as treats. The following
environment analysis has been carried out on the external environment that may
influence TheCoffee House.

18
 4.2.1 Political and Legal Environment
Nepal has undergone numerous ups and downs with different government formalities in
the past few years. Its political scenario is unstable and very volatile. The political
situation of a country has a direct impact on their business companies. It may hamper the
business in certain aspects such as frequent strikes resulting in decrease in working days
that may cause the business to lose its operation. If the political environment of the
country is established and supportive, it presents as a reward to the business organization
for its full and healthy operation.

Even though the political instability is always prevailing in our country, the new
constitution of the country is being drafted which has been seen as an indication of hope
for the new ventures to execute their business plan. However, until there is political
stability in the country and the Government sketches the constitution, the business
environment of the country cannot be termed as favorable.

Another most essential factor is the legal environment. The legal procedure and
framework that every institution must obey should be friendly. Well in context of Nepal,
the regulation to start a business is favorable. In order to start up a business we need to
get registered in the Inland Revenue and Municipality Permission to operate.

To register the company under the name of “The Coffee House” we need to do some
legal formalities which are as follows:

 An application form is submitted along with Rs 5 stamp at the Office of Registrar

which is situated at Tripureshwor. Besides, the citizenship certificate of the
partners and the company register stamp is provided to the office of the registrar.
 Once the company is registered next step is to take the PAN (Permanent Account
Number) from Inland Revenue Department which is situated at Lalitpur. The
necessary documents for this procedure are: application form, copy of citizenship
certificates of the partners, copy of the firm registration certificate, two passport
size photos of the partners, and hand drawn sketch of the business location.

19
4.2.2 Economic Environment
The economic environment of Nepal is partially supportive towards the coffee business.
The banks and financial institutions are willing to invest in coffee houses as they have
the potential to assess the overall development objectives of the country. The Coffee
House will help to boost up the economy of the Nepal. It creates the job opportunity to
the locals as well as experts from across the country, hence, improving social as well as
economic status.

The life style of people is getting busier day by day. So, instant and readymade products
appear to be their first preference however, they prefer healthy products as more people
are increasingly being conscious about their health. In addition the increase in the arrival
of foreigners has also boosted the economy of the country with several businesses being
established increasing the inflow of the foreign currency in Nepal. This has increased the
employment along with the income. The increased income has enhanced the spending
pattern of people which has improved the living standard of the citizens. This is the good
opportunity for businesses like us.

4.3.3 Social Environment

Nepal is country with many social and cultural regulations. Earlier, Nepalese people
didn’t have the habit of eating outside the home but the changing socio-cultural aspect of
the society is a great opportunity. As the world is changing towards the globalization,
people are changing too. Due to better job opportunities abroad more and more people
are opting for foreign employment. The manpower drain is causing difficulty for
companies to find the skilled manpower. As per the official figure more than 1000 people
per day are living country to find job abroad.

In addition, people are magnetized to the western lifestyle. They are moving to different
taste of western food and beverages from the traditional food. The youngsters are further
influenced by westernization. Nowadays, there is a trend where people have their
breakfast in the restaurant and even celebrate many special occasions like birthdays and
anniversaries outside the home.

20
4.2.4 Technological environment
Our coffee house depends very much on the technological environment. Machines and
new technologies for carrying out the work activities help us to provide personalized and
superior services. Adaptation to the changing technologies keeps us at par with the
changing customer’s expectation and needs. Furthermore, we plan on reaching our
customer through social networking.

F. Five Forces of Market and its state in this industry

There exist several forces in the environment that acts as potential threats to the
businesses. It is important to pay attention to these forces as they are the major threats
the organization will encounter and have to respond to in order to generate profits.

Figure 6.3 Porters five force model

LEVEL OF RIVALRY - VERY HIGH

Level of Rivalry refers to the amount of competition within the industry. It can be said
that the more competition within the industry, the hard it will be generate profits. There
are many competitors within the industry who have fierce loyalty among consumers. The
coffee industry has high industry concentration ratios, low levels of product
differentiation, relatively low production cost, and high strategic stake. What reduces the
rivalry a little in specialty coffee is that it has fast market growth, low inventory storage
cost, and offers low exit barriers. The Coffee House also has many competitor in the

21
market arena but the unique coffee experience of amazing ambiance with the purity of
coffee & its quality gives major competitive advantage to us.

ENTRY POTENTIAL - VERY HIGH

Potential for Entry refers to the ease of access to entering a market or industry. The
easier it is to enter, the lower the prices will have to be making it harder to generate a
profit. Due to many consumers brewing their own coffee and purchasing package coffee
for home brewing, threat for new entrants is very high.

POWER OF SUPPLIERS - MODERATE

Power of suppliers refers to how many suppliers are in the market. The more suppliers in
the market, the lower the supply costs will be. The Coffee House will deal with many
dealer for various product and has moderate level of risk from its suppliers.

POWER OF CUSTOMER - HIGH

Power of customers indicates how many buyers there are and the size of them. It can be
said that if there are only a few large buyers, that customers can bargain down prices.
Due to many suppliers being able to meet the demand, buying power is high.

SUBSTITUTE PRODUCTS - HIGH

Substitute products refer to the ability to purchase other products that are similar and can
replace the item. The more substitutes available in a market, the lower the prices will be
making it harder to generate a profit. There are many different competitors that offer
warm/hot liquids (i.e. - tea, hot lemon), creating a large threat. Also, the majority of
coffee drinkers brew their own coffee with packaged coffee for home brewing, creating a
high threat for substitutes.

The five forces model analysis shows that The Coffee House is part of a highly
competitive industry where supply and rivalry power is high. The company has the
potential to grow and expand its operations as a whole tapping into product
differentiation and customer loyalty characteristics.

22
COMPETITOR ANALYSIS

 SW analysis of your business vs. 3-4 major competitors in the market

 Competitive Profile Matrix can be created – where you compare your business with
existing competitors or alternatives/ substitutes in relation to CSFs (Critical Success
Factors) of the industry.
 Perceptual Mapping can also be done of all the competitors and substitutes/
alternatives – from the perspective of consumers.

DEMAND ANALYSIS

 Projection of Demand of the Industry – roughly give the basis of total available
demand in the market for your business.
 It can be presented in numbers with table
 Give the basis of such consumer demand projection (total demand)

23
 Chapter – 7

BUSINESS STRATEGY
SWOT Analysis

Strength Weakness

 Use of high quality Coffee Beans  New business in the market so there will be
 Ambience is fantastic with its premium no brand recognition.
appeal.  High product cost.
 Huge menu list of coffee and other food  No presence in the large market.
items.  High training cost.
 Highly motivated workforce.
 Better experience and services in similar
price of the competitors.
 Parking facility for both two wheelers and
four wheelers.

Opportunity Threats

 Growing coffee culture.  Can be easily copied by the competitors.

 Market is receptive to new things so  Many competitors in the market like
uniqueness can attract many consumers. Himalayan Java, Red mud, Road house
 Can be expanded in many other places café and so on.
of Kathmandu valley.  Local tea, coffee shop popularity.
 Negative publicity about the health
hazards of food coloring.
 Probability of high employee turnover.
c

24
 7.2 Value Chain Analysis

Primary activities

 Inbound logistics – Sourcing coffee from best coffee beans producers is one of
the important aspect for the The Coffee House. Not only coffee but also other
various product are brought by the cafe with the supplier with whom we have
great relationships. Store keeper brings all the product and is responsible for the
product to get into storage room to be managed properly.
 Operations – The focus is on providing the desired food and delicious coffee as
desired by the customer. The food and coffee is made as desired by the customer.
 Outbound logistics – The product and service is delivered to customer in real
time once the order of the customer is prepared as desired by them.
 Marketing and Sales – Being a service sector concern; The Coffee House doesn't
need to market its product as it needs to get consumed in real time.
 Service – The Coffee House is not a manufacturing concern rather it provides
service in real time as demanded by the customer. Service here means after sale
services which is particularly is not delivered by the cafe. Rather The Coffee
House will provide supreme level of customer service to the consumers in real
time.

Support activities

25
 Firm Infrastructure – The Coffee House currently has a large well designed,
aesthetically pleasing cafe.
 Human Resource Management – Proper recruitment, selection and effective
training and development is provided to the employees of the cafe. Great
benefits, employee empowerment and amazing corporate culture makes The
Coffee House drive efficient management of human capital.
 Technology development – Investments in innovative technologies like food
coffee machines for quick better and tasty office
 Procurement – The Coffee House procures its products from a diverse group of
supplier and has fixed contracts with some of the suppliers.

26
 7.3 Strategy Diamond

How will we be active?

High quality coffee

Food lovers
Working professionals
Unique coffee experience


What will be the sequence How to get there?
and speed of move?
Maintaining Quality
Maintaining Consistent
Addition of more outlet Training & Development
Highly customized menu Research & Development

How will return be

obtained?

Customer retention How will we win?

Trained HR
Competitive pricing Unique selling proposition
Professional HR Wide variety of coffee
Location & convenience Wide variety of food
Higher quality
Customer service
Asset turnover ability
Cleanliness

27
 CHAPTER – 8

MARKETING PLAN

MARKETING PLAN AND STRATEGY

6.1 Marketing Objective

Defining a set of marketing objectives along with a positioning strategy for their
achievement enables the firm to enjoy a sustainable competitive advantage in the market
place. Marketing is everything that a firm does to reach and persuade prospects i.e.
prospective buyers. Small, cozy, air conditioned and exuding lounge atmosphere, coffee
outlets have become the place for restoring one’s sanity after or in the middle of a hectic
day of work. Coffee consumption has also emerged as a fashion, a show off tendency,
among teenagers which is slowly changing into an addiction. Also, as more and more
people are getting busy, they can’t manage enough time to prepare a perfect brewed
coffee. They’d rather spend extra bucks on an instant service delivery than to have it
prepared themselves.

Marketing Objectives and Goals

Short term marketing objective:

o Use aggressive promotion tools to reach large number of potential

customers.
o Create brand awareness.
o Cater 100+ customers a day in year 1.
Medium term marketing objective:

o Build Customer Loyalty

o Achieve Specific Measurable Financial Goals.

 Long term marketing objective:

28
  Launch new products or services.

 Target new group of consumers and expand market reach.

8.2 Consumer Analysis

The target consumers are the people aged from 16 to 40. The consumers inside
Kathmandu valley are mostly targeted. Similarly, the people who love coffee and is their
go to drink, are the major target. Along with that the coffee lovers and frequent
restaurant visitors are also targeted.

The consumer persona is presented below:

Background of the persona

The Persona

Ms. Ankita Barwal is a native of Kathmandu and currently lives in her own house at
Sinamangal with her parents and a younger sister. She is a very hardworking
professional, for whom family and work matter the most. She works for a commercial
bank as an assistant.

Ankita not only being a hard working professional but also loves to socialize. Like most
of the youth, she also loves to click selfies and photograph and post it in social
networking sites. She frequently visits restaurants and cafes with her family, colleagues
and friends. Whenever she visits restaurants, the first thing that she orders is always the
coffee because she is a huge coffee lover.

Every Friday after the office, she and her colleagues visit coffee shop to spend some
quality time together in order to relax and enjoy. She has tried coffee of various shops in
Kathmandu and now she want something different than the regular coffee in terms of
presentation and taste.

29
 6.2 Marketing Strategy

First and foremost, The Coffee House will be placing its coffee house in location of very
high visibility and great ease of access. The Coffee House will be implementing a low
cost advertising/promotion campaign.

In order to build up its client base, The Coffee House will use online promotion,
advertisements on food magazines; utilize customer referrals and cross-promotions with
other businesses in the community. At the same time, customer retention programs will
be used to make sure the customers are coming back and spending more at the coffee
bar. The Coffee House will provide better value for money through the service delivered
to make a mark on customer experience.

6.3 Positioning

The Coffee House aspires to be established as a quality product and service provider
along with a complimentary ambience. Building a brand image by providing personal
attention to the customers and offering quality coffee products along with fast service
would be the prime focus of The Coffee House. For busy, mobile people whose time is
already at a premium the drive-thru coffee shop will be facilitate quick offering of
perfectly brewed coffee. Thus, we will position itself as a premium quality coffee
provider at a reasonable price with the unique facility of drive through and facilitator of
customized cake.

6.4. Competitive Advantage

The Coffee House is one of its kind in the Nepal that will serve a wide variety of coffee
with the amazing taste & presentation. Along with coffee we will be serving varieties of
food too. We will be committed in serving to our customers within a few minutes of the
order being placed. As we all know competition is very high in the restaurant industry, so
in order to exist successfully in the market, we need to have a competitive positioning to
stand out from the crowd.

Its core product i.e Coffee will work as great competitive advantage for us to compete
with our existing as well as new competitors. Not only the presentation of the coffee but
we will also be working on the taste and flavor of the coffee. This specialty of our cafe
will differentiate from others.

30
Well adopted strategic or competitive advantage will make this restaurant very special
among others in the food industry. Additional value in our service like professional
baristas and chefs, variety of food items in the menu which will totally give a sign of
quality service no doubted will work as the most important part of the competitive edge
over the competitors and rivals. It will completely be an innovative idea of serving the
customers since till now no one has come up the service of offering such printed coffee.
High quality service will be provided to our customers who will ensure to compete
highly with the competitors.

Not only food but our location will also provide us competitive advantage as it will be
located at Manglabazar, Lalitpur, which is one of the prime locations of Kathmandu.
Customers can get access to public vehicles from the main road of the location itself.

6.5. Survival, Competition and Growth in the Market Sustainably

The Coffee House will be located at Manglabazar, Kathmandu. It will adopted an
expansion strategy. After fifth year, it will expand its services from Mid Baneshwor.
And, within the eighth year, it will expand in one more place as at Baudha. It has got a
strategy of overall expansion at two places within 8 years of time.

Also, we have planned to retain 40% of the customer each year that will help in
building strong customer relationship. For this we have the scheme of loyalty card so
that in order to get the benefit from it, they will visit quiet often. However, our offerings
and services will be innovative enough to retain our valued customers.

Looking and researching at the customer’s interest and wants, we will be adding much
more features to our service. This will make our restaurant to strong position.

6.4 Marketing Mix

Focusing on the value proposition of the product theme (premium quality Nepalese
coffee provider, facilitator of customized cake with drive-thru facility) a mix of
marketing vehicles will be created to convey presence of The Coffee House, its brand
image and its message.

31
 6.4.1 Product
The product that we are going to provide is various types of Coffee beverages, other cold
drinks (coffee alternatives), cookies and pastries. The food and drinks provided in our
coffee house will be of high quality and will be very hygienic in nature. The Coffee
House would also facilitate customized cake ordering.

6.4.2 Price
The price is reasonable and is increased every year considering factors like inflation. The
price set will be very affordable to the target group that gives the return on our
investment. Price has very high influence in Nepalese market to the customers so price
will be set with minimum of profit as our aim is to attract more patrons as well as retain
them.

6.4.3 Place:
The Coffee House will be located in Mangalbazar. The location selected is very suitable
since it’s close to the World Heritage site, residence, office area and educational institute.

6.4.4 Promotion
The promotion strategy The Coffee House is going to take for the café is through online
promotion, advertisements on food magazines like ECS and Food and Wine; utilize
customer referrals and cross-promotions. Facebook would also be used as it has become
a number one place for people to connect with their loved ones which would help The
Coffee House to connect with large number of people. This will also help to provide
word of mouth advertisement which is a very powerful way to advertise the product. The
Coffee House has allocated certain budget for this purpose so that it can stay with the
customer. The detail can be found in Annex 6.

6.4.5 People
An indispensable part of any hospitality industry is its human resources or the people
who work to provide required service to the clients. The Coffee House will recruit the
well qualified Baristas and the right kind of people for delivering an outstanding service.
The staffs at The Coffee House will also be trained in their area of service and provided

32
technical skills. They will be encouraged to interact with the customers to offer personal
attention. The service presented by the staffs would be worth praising for.

6.4.6 Physical evidence

When the customer walks in The Coffee House they will be welcomed by pleasing
ambience with soothing sound system. Every item from sitting arrangement to setting of
the curtains and color combination of paint on the walls of the café will add to the value
creation of The Coffee House. Other physical aspect like lighting and sound system will
also be properly managed.

6.4.7 Process
The Coffee House will provide efficient process from the customers’ arrival till the time
they depart. The process of taking orders, preparing brewed coffee and placing order on
the table efficiently will be our major concern. The Coffee House aims on providing
prompt and quick service to its clients who have minimum time to be wasted. Thus,
services at the drive-thru would be given high priority.

6.5 Market Segmentation

Market has been segmented on the basis of geographic area, demography and behavioral.
Also market is segmented based on: Demographic segmentation:

The Coffee House is planning to segment on the following demographic basis:

 Income: Focus will be mainly on high and middle class people.

 Age: The Coffee House's target group will be above 15 years of age.

6.6 COMPANY STRATEGY

The Coffee House is going to follow differentiation strategy as it is going to serve its
customers coffee exclusively made from the cherries grown in Nepal. It would position
itself as a coffee bar where patrons can not only enjoy a cup of perfectly brewed coffee
but also as a hangout with an ambient environment. Comfortable lounge, soft lighting
and soothing music will help the customers to relax from the daily stresses and will
differentiate The Coffee House from existing competitors. Thus, we will be in the
business of helping our customers to relieve their daily stresses by providing piece of

33
mind through great ambience, convenient location, friendly customer service, and
products of consistently premium quality. Along with the espresso drinks and brewed
coffee, some refreshment beverages will be sold in the coffee bar. It will also offer its
clients pastries, cookies and sandwiches. Also, books and magazines will be provided in
supplement with the coffee house menu to make one feel comfortable, even if alone.

The café would also be providing free Wi-Fi for the customers who like to stay
connected with their friends. This would enable the clientele to read e-books of their
choice while enjoying the taste of perfectly brewed cup of hot beverage in a peaceful
ambience. In addition, The Coffee House would also facilitate the service of ordering
customized cake where people can order cakes with their personal designs for any
occasions. This would save our customers time as they need not travel all the way to
Baneshwor or Naxal to have their cakes baked.

In the future, The Coffee House plans to expand its operations in other parts of the
valley.

6.7 Pricing Strategy

The price set by The Coffee House will be comparable to the competition,

Particular Rate
Espresso 85
Café Americano 100
Cafe Latte/Honey/caramel 165
Hot Beverage
Café Mocha 160
Cappuccino 120
Caramel Macchiato 120
Hot Chocolate 170
Iced Café Americano 135
Iced Mocha 195
Cold Beverage Iced Cappuccino/Latte 180
Iced Caramel Macchiato 180
Iced Tea lemon/peach 145
Blended Mocha 215
Blended Caramel Macchiato 195
Blended Vanilla Mocha 235
Blended Beverage
Blended Lemonade 155
Blended Oreo Cookies Shake 185
Blended Smoothies 195

34
 Cold Drinks 95
Coffee Alternatives Seasonal Juices 150
Lassi/shakes 140
Bakery items 70

35
6.8 Sales Strategy

A sales strategy consists of a plan that positions a company's

brand or product to gain a competitive advantage.
Successful strategies help the sales force focus on target market
customers and communicate with them in relevant, meaningful
ways. As our core competency is to provide hygienic food in
time with good service as well as with cost effective marketing
channel, its sales strategy will fully focus on that.

The Coffee House's baristas will handle the sales transactions.

To speed up the customer service, at least two employees will be
servicing clients--while two other employee will be preparing
the customer's order, the other one will be taking care of the
sales transaction. All sales data will be logged on the
computerized point-of-sale terminal which will be later
analyzed for the marketing purposes.
There will be several sales strategies put into place, including
posting specials on high profit items at the drive-up window.
The Baristas will also hand out discount coupons to the regular
clients. The Coffee House will also develop window sales
techniques such as the cashier asking if the customer would like
a bakery items with their coffee.

36
 Our sales strategy requires consistently high quality coffee, food
service, speed and good quantity. This can be accomplished by
hiring employees who genuinely enjoy their jobs, by continually
assessing the quality of all aspects, along with the system of
interacting with the customers personally if needed so that they
know that their feedback will directly go to the owner’s desk.
Not only this evaluating each dish before serving to the
customers and over all food choices for popularity.

Besides this, The Coffee House will also focus on establishing a strong identity in the
community with a grand opening. All the menu items will be moderately priced for the
area. It will also have the system of special gifts hampers, coupons on the special
occasions and festive seasons and loyalty card system. This may work as an effective
technique to attract more and more customers to The Coffee House.

CHAPTER – 9

Production | Operational Plan

9.1 Location
The Coffee House is situated at the prime location, Mangalbazar, Kathmandu. The
advantage of opening restaurant in this area could be:

 City centered location,

 Presence of various organizations, offices, business complex and educational
institutions; which implies presence of ample number of potential customers,
 Busy and crowded place, benefit of getting more customer than any other places.
 Facility of public vehicles reaching most of the places in Kathmandu & Lalitpur.

37
 Premises
We will take 15 square feet for each person on our restaurant. We have got overall 10
tables and 50 chairs. So, overall we need 1500 square feet of place to provide service.

Time Plan / Work Schedule

Modular kitchen can be setup with an estimated time period of

two month. The opening hours of the restaurant will be from 9
A.M. to 9 P.M. It will be opened seven days a week.

Machineries & Equipments

The must have machines that are required for effective operation of cafe are Coffee
grinder & maker. Other than that some of the necessary equipment for the cafe are
refrigerator, micro-wave oven, laptop, printer and so on.

Technology
We have used the latest technology in a way to enhance the coffee drinking experience.
It is one of the latest technology all ready and now will also will be introduced in the
Nepali market.

Skills Required

The skill required by the worker in the cafe are

 Coffee maker should be a certified barista,

 Chef should be expert and experienced in culinary art,
 Manager should have proper knowledge of finance, marketing and operation
management skills,
 Counter staff should have polite way of handling the customer and should be
always ready for solving the queries of the customer,

38
  Waiter should have proper skill of serving food and treating people well.

7.1 Procurement

The raw material needed will be purchased from Royal Everest Coffee Mill, Nepal
Coffee House and various wholesaler and retailers. This will be checked on daily basis
and make available as soon as the stock starts to decrease. The key supplier of the coffee
equipment will be wholesalers and retailers in the market especially Java Trading House.
The customized cake will be ordered from Baker’s Den.

7.2 Value Chain

Suppliers COFFEE Customers

Value chain looks as simple as the above diagram. We will buy the necessary raw
materials like coffee beans, confiscated sugar, syrups, etc. from the suppliers. The barista
team at The Coffee House will prepare a variety of brewed hot beverage in the facility.
These coffee and coffee alternatives along with cookies and pastries will be offered to
the customers.

Transportation of raw materials from suppliers to The Coffee House will be done in
rented van in a monthly basis. Since coffee beans are not a perishable item, we can store
beans for few months. Coffee beans will primarily be sourced from Royal Everest
Coffee Mill and Nepal Coffee House. Milk and confiscated sugar will be sourced from
local vendors and departmental stores respectively.

7.3 Capacity

The actual capacity of The Coffee House is 140 orders per day. The Coffee House
baristas can take orders with interval of couple of minutes and serve the orders within 10
minutes in the café but for the drive thru the orders will be served within 5 minutes.

39
 7.4 Quality Management

The Coffee House will follow promptness and cleanliness as the major quality aspect in
the café. We can measure quality with the help of customers’ feedback and improve the
service accordingly. The major quality parameters are as follows:

 Response: We will also provide product as per the customer request. We will also
look at the customer’s feedback and improve it.
 Timeliness: Our coffee house will provide quick service to customer. We will
provide service to the customer as per the requirement
 Courtesy: The staff members will be polite to the customer and greet them when
they make an order. They will also be trained to handle complaints and handle the
situation with a smile.
Supply Chain Management

SUPPLY CHAIN MANAGEMENT OF SELFIE COFFEE

SUPPLIERS

 Coffee Beans :
Order of
Himalayan
goods Warehouse
Java
 Dairy items :
Transportatio
DDC
n
 Vegetables
items:
Kalimati,

Sales
Account Department
Data

Figure 9.4: Supply chain Management of Selfie Cafe

40
 9.4.1 Order Processing

 Customer enters into The Coffee House and steps into the counter,
 Counter person makes customer clear about the procedure to be followed to place
the order for The Coffee House. The counter person will show the menu and then
ask the customer to go through the menu and select the items that the customer
want to order.
 After the customer has decided the choices of the coffee and other food item for
ordering, the counter person will take the final order and then forward that order
into the kitchen, till then the customer can enjoy the free WIFI in the cafe.
 The chefs will prepare the food item as ordere.. After the order is completely
ready, the waiters will take it from the kitchen area and serve it to the customer.
 Finally the order is placed on the customers table, the customer can then enjoy
the delicious soothing coffee and food they have ordered.

 Alternatively,
 The customer can directly order the coffee by providing their order and after
payment they can directly take their coffee from the counter & enjoy it if they are
not ordering other food item.


9.4.2 Inventory Control

 Most of the industries are seen to be ignoring this area in the operation of their
business. It is even more ignored while operating the restaurant business. These
business show carelessness or do it frequently or are totally ignored. Inventory
control in The Coffee House will be done on the basis of following processes:
 The inventory will be taken once a month.
 Similarly, in order to minimize the fluctuations in the inventory control system, it
will be done on the fixed day and time i.e. Sunday at morning before it opens.
 All the inventories will be taken and analyzed before the new order is delivered
so that there is no chance of double counting of the items.

41
  Whole stock areas will be cleaned and organized properly before taking the
inventory. Besides each items and stocks will be updated regularly so that there is
no any expired product left in the store.
 Regular rotation of the inventory will be done so that older goods don’t get
spoiled and are used on time.
 Over all caring of the store and recording of the inventories will be done by the
store keeper itself as per the time and schedule.
 Finally, each and every detail about each items relating to manufacturing dates,
expiry date, prices and results will be regularly updated and controlled on the
proper guidance of the inventory controller or the store keeper.

9.5 Quality Control / Assurance

 Quality is one of the very essential aspect that will help The Coffee House to sustain
in the market. Compromising in quality is purely compromising the business and
leading it to failure. The Coffee House will makes sure that it does not compromise
on the quality of their products. The barista for making the coffee will be trained
ones and the chef will totally be professional enhancing taste of each and every dish
as offered by the cafe. Besides, the cafe will be cleaned regularly during the closing
of outlets (including the overall kitchen area and eating area). Hygiene will be given
most important priority and will never be compromised in any context.

9.5.1 Responsiveness

Customer satisfaction is what The Coffee House aims to achieve in the competitive
market of Nepal. We sell experience is the motto of the cafe and it is achieved by making
sure each and every customer of the cafe are fully satisfied with the service whether it’s
about the order processing service, customer relationship service or the entire servicing
of the The Coffee House. The overall management and employee at each level will
ensure that the customer are fully satisfied with the service. Especially, management will
ensure that the customer should not wait for more time for their order to get delivered to
them.

42
 9.5.2 Courtesy

 All the Employees of The Coffee House will be experienced, skilled and trained.
They will behave properly and will have good communication with the customer
and solve all their query and request politely.


9.5.3 Competence

 Competent personnel only will be hired for the organization. Competence in a sense
that the employee will take full responsibility of all their duties and responsibilities
given to them by the management. The employee will be competent enough to save
time for the work they are assigned to be done at each level of hierarchy. Team work
will be given due importance and will be ensured each and every employee are
working together to give consumer a better experience from the cafe.


9.5.4 Accessibility

 The cafe will be located in a prime location which can be easily accessible by
people. The cafe location is near to various business organization , college and other
corporations which will ensure ease for customer to visit and return to their work.
The service hours will be opened from 9 A.M. to 9 P.M.

9.6 Research and Development

 Research and development will be kept in the critical part of the operation. As the
cafe will be based on modern technology it will be necessary for effective testing
and understanding the working mechanism and continuous update of it so that cafe
can reap out maximum benefit from the latest technology.


43
 Similarly, the cafe will be working for the consistent innovation of the technology
and the mechanism used, hence it will be necessary for the cafe to work more
properly on research and development to ensure it can achieve in goal. For research
and development one essential factor will be the customer feedback which will be
the given due priority.

44
 CHAPTER - 10
ORGANIZATION AND MANAGEMENT TEAM

2.1 Management Team

The business that we are planning to operate would be equally contributed by Four
promoters and that being referred to as a form of private company limited (Co. Ltd) in a
business world. This would be appropriate form of business organization for The Coffee
House as it has limited liability, enjoys corporate juridical personality and has a
perpetual succession. Adequate fund would be collected from four promoters.

All four partners of The Coffee House will equally participate in the operation of it. We
will have one manager who will control and co-ordinate the overall management. Head
Barista will be responsible for the premium quality of cup of coffee to the customer. The
Barista will be responsible for various activities in the company. The utility staff is
essential to maintain the standard of the sanitation in the company.

Owners /
Managers

Accounts Store Keeper Chefs & Cook Cleaners Waiters

cashier/
counter staffs

Figure 10.1: Organization Organogram

45
 10.2 Stakeholder Analysis

The following are the stake holders of Eating House’s business and their interests:

10.2.1 Employees
Employees are one of the key stakeholder to any organization as organization success is
largely dependent upon how its employee are performing their works. Selfie Cafe will
gives equal priority to all its employees whether they are chefs, cleaner, storekeeper or
the other helpers. All will be treated equally within the premises of Selfie Cafe. The
overall culture of the Selfie Cafe is built on mutual trust and understanding between all
the member working in it. Employees working conditions, job security along with the
higher wages are always given due consideration. Employees will be given wages as
per the legally mandated minimum wages and allowances.

10.2.2 Customers

Customers are the king of the market. Customer satisfaction is the key to business
success as customer are the ones who will be consuming the product that the
organization offers. Selfie Cafe without its customer will be of no value. The interest of
customer are generally high quality goods and services, good ambience, reasonable
price and so on. Selfie cafe will always try to effectively address the interest of
customers.

10.2.3 Suppliers

Suppliers are important aspect as they provide business those essential raw material
through which business can build product and sell it to the customer to earn profit.
Selfie Cafe needs various raw material like coffee beans, dairy products, vegetables etc
for making goods that can be sold to the customers. The interest of the supplier of the
cafe is the compensation and timely payment. Selfie Cafe ensures that the supplier gets
their compensation on time and pay the debts if any on time.

46
 10.2.4 Environment
Environment is the place where business exist and is performing in. It is one of the most
important aspect to give due consideration as environmental issue if neglected poses a
serious threat in this modern environmental concuss world. Environmental concern is all
about business don't degrade the environment that it is operating in and will ensure
protection of it. Selfie Cafe does no activity that hampers or degrade any part of the
environment and the activities will be done that have no side effects on the consumers as
well as the whole environment. It will also make sure that the waste is managed properly.

10.2.5 Government
Government is the regulatory body monitoring the activity of the business concern.
Selfie Cafe will ensure that it follows all the rules and regulation set forward by the
government. Tax will be paid as according to rule and no creative auditing will be given
due importance

10.3 HR Planning

10.3.1 Human Resource Requirements

The list of human resource required and their prospective job experience and
minimum qualification requirement for the cafe are as follows:

47
S.N Designation Reqd Years Minimum Qualification
No.

1. Head Chef 1 1  Undergraduate in

Hospitality/Culinary Arts or
Equivalent (specialization in Hotel
management most preferred)
 Should have knowledge in fast foods

2. Cook 2 1  Specialization in Hotel management

most preferred)
 Should know how to make fast foods
Mo:Mo and burger and other various
kinds of foods.
3. Barista 1 2  Should have sound knowledge of
coffee
 Barista Trained
4. Waiter 5 1  SLC / +2 passed ,
 Related to restaurant business
 Fluent in Nepali

5. Receptionist/ 1 1  +2 / BBA,
Cashier  Fluent in Nepali and English
 Basic Computer skill

6. Cleaner 2 -  Positive attitude



48
 2.2 Human Resource and Job Description

The educational and professional background and the job analysis of all the members of
the management team are mentioned below:

2.2.1 Promoters
The four promoters of The Coffee House are from diverse field. Ms Sanchita Aryal &
Mr. Rishabh Sarawagi, both a fresh MBA graduate from renowned College of valley,
they will be utilizing their management skills those they gained during their regular
classes. Mr. Aditya Rouniyar has the experience of working at CCD for 4 years in India.
She will basically be more focused in placement of the right person at right place. Mr.
Ashish Agrawal is a CA who will basically be looking at the financial part of the
company. Thus, all the promoters have their own field of specialization and interest to
make the company operate effectively.

2.2.2 Manager
The Coffee House will require a manager who can also be called as the store manager.
Following are some of the duties that will be performed by the manager:
Maintaining smooth outlet operation & quality standards for Food & Beverages

Work as a set up team manager for a newly opened outlet and ensure smooth operation

Guide, train, develop and motive subordinates to achieve their objectives and work to
their best potential to perform effectively on the job.

 Oversee system transactions opening & cash out procedure, system reconciliation,
and daily banking procedure.
 Planning all the marketing and advertising activities
 Staff management, ware house ordering receiving & inventory
 Ensure good safety and emergency practices

49
 2.2.3 Head Chef
The Head Chef will be dealing with the customer complaints resolving any customer
issue that comes within the store and after purchase. The head Barista will ensure the
best quality of the coffee to be served to the customers as claimed by the company.
Following is the list of duties and responsibility of Head Barista:
Maintain high level of customer satisfaction at the outlet.

Report on a daily/weekly basis on all relevant issues to the reporting manager.

Assist the manager in ensuring that the café is effectively and efficiently managed and
provides good value for products and services to its valued customers.

Ensure that Head Barista and the staffs present an appropriate image to customers.

Inform the managers at earliest about financial issues in workplace.

2.2.4 Barista
Barista is a person who makes coffee drinks as a profession. Following are some of the
responsibility of the Barista

 Prepare and serve different kinds of beverages and foods ordered by customers.
 Always keep seating areas, restrooms and premises, utensils or equipment of coffee
shop clean and sanitize and follow clean as you go policy.
 Describe or explain about shop’s menu items to customers and suggest products
which might appeal them to order.
 Check order, receive and replenishment of supplies and products.
 Provide customers with product details and preparation description if necessary.
 Take customer order and convey them to concerned department for preparations,
weight, grind or pack coffee beans for customers.
 Set up or restock product displays and look after replenishment.

2.2.5 Utility Staff

To ensure the premium cup of coffee is on the table of the customer. The sanitation part
of the company should also be looked after. Therefore, to take care of that section The
Coffee House will have a utility staff, which will perform following activities:
50
 Handling and moving of objects at right place such as knives, glassware, related
utensils.
 Washing up dishes, glassware and other related utensils, pots and pans with the help
of dishwashers.
 Moving and transport the clean dishes, utensils and others to the work areas at right
place.
 Unpack and store the materials in the storerooms, refrigerators and other storage
areas as required.
 Help in preparation of variety of foods other than cooking.
 Performing general physical activities such as cleaning kitchen area, load or unload
products.
 Arrange and manage and stock the kitchen material in systematic manner.

HR Development

10.4.1 HR Training & Development

Training is one of the most important aspect for The Coffee House as it will help the
organization to enhance its employees and make them competitive enough and enhance
their skills, behavior and other aspect needed for working effectively and efficiently.

Training will be focused more to receptionist, waiters, and coffee printer as they will be
the ones directly in contact to the customers but all the member of the organization will
be looked after and trained as and when needed

Training for Counter Staffs

 Handling customer order properly

 Managing cash and daily record keeping of the sales
 Handling the customer queue
 Maintaining the hygiene and quality of the food outlet
 Cleanliness and safety procedures
 Developing good relations with the consumer
 Positive behavior and work attitude

51
 Training for the Waiters

 Positive behavior and work attitude

 Polite behavior to customers
 Controlling the uncertain environment


10.4.2 Retention of employees

Retention of employees will be pushed with the following action plan:

 Yearly increment is salary

 Giving leave on emergencies
 Providing advance salaries in need
 Increasing performance by friendly working environment

52
 CHAPTER 11
11.1 Financial Objective

 Short Term Financial Objectives

Achieve break even sales within the second year.

 Medium Term Financial Objectives

Growth in sales amount by 100% with the addition of new outlet after five years of its
establishment.

 Long Term Financial Objective

Build a good brand image in the market, gaining trust of customer and enhanced
customer retention by gaining the trust of customers. Organization will focus on
opening new branches in new market.

11.2 Financial Estimations Assumptions

Financial planning is about developing strategies to help manage financial affairs and
meet the organizational goal. This section details the calculations, assumptions and
methodology used as a basis for the projections of the expected financial performance of
The Coffee House

The financial plan of the company are based some of the basic assumptions that were
made. It is assumed that the economy is strong, without major recession, there are no
unforeseen changes in economic policy to make the products and service immediately
obsolete. These financial assumptions are as follows:

 Revenue  Based on research conducted

every year 5% increment
 Expenses  10% increment every year

 Salary  15% increment every year

 Depreciation rate  25% on all Furniture, Machine &
equipment

53
 
 Depreciation method  Written down value

 Debt and equity  Total startup cost will be
financed through 60% debt and
40% equity

 Cost of goods sold  The cost of goods sold as per the
industry average is assumed to be
40%

 Loan  The cost of loan is 14%
according to current market
scenario
 Taxation  Tax rate applied as per the law of
the land at 25%

 Working capital  It is estimated to be one month’s
expenses and inventory for 7
days.
 COGS  40% of Sales (Industry Average)
 Receivable Turnover Ratio  12 times
 Inventory Turnover Ratio  12 times
 Creditor Turnover Ratio  6 times

8.2 Financial Details of Start-Up Expenses

The Coffee House will be started with fixed assets costing Rs. 1,846,600. The detail is
shown in Annex 1, which is financed 70% by Long term Loan which is Rs 1,292,620 and
other by equity capital. 30% of total equity financing i.e. Rs.5, 53, 980. The short term
loan taken is 70% of the working capital which is NRs. 308146. Therefore total initial

54
investment is Rs. 22, 86,000. The details are shown in Annex 1. All other expenses such
as operating, marketing and preliminary expenses and are shown in Annex 4, 5, 6.

8.3 Sales Forecast and Cost of Goods Sold

The sales revenue is based on the quantity of the products sold. The sales for the
upcoming years are supposed to increase by 10% every year and the cost of goods sold
(COGS) is calculated assuming by adding the cost that raw materials are required to
produce the final product. The COGS is also expected to increase by 10% per year. The
sales of year 1 is Rs 12,211,500. The details of sales revenue and number of items sold
are shown in Annex 12 and the Cost of Goods Sold is in Annex 7.

8.4 Budgeted Loan Repayment Schedule

The start-up long term loan is taken at 10% annual interest rate from Janata Bank Nepal
Limited (JBNL) which is to be paid quarterly 5 years. LTL will be taken from the bank
by keeping the personal asset collateral of the promoters. The annual payment of this
loan is supposed to be NRs. 187,398/-. The loan amortization schedule is shown in
Annex 9.

8.5 Pro-forma Income Statement

Pro forma Income Statements is the projected income statement that is used as a tool for
planning future business operations. The company projects the 5 years income statement
that has helped in predicting the trend of profitability of the business. It also shows the
operating surplus for the coming years. The Preformat Income Statement of The Coffee
House is shown in the Annex. This allows making any operational cost or product price
changes in order to understand the correlation with the profit of the business. The 5 years
following projected net profit are Rs. 5, 032,881, Rs. 5,856,669, Rs.6, 635,332, Rs.7,
473,876, Rs. 8,383,235. The percentage increase of the net income from year 1-2 is
16.38%, 2-3 is 13.29%, 3-4 is 12.63% and 4-5 is 12.16%. This show an increasing trend
in the net profit but in a decreasing rate. The detail of it is in Annex 13.

55
 8.6 Preformat Balance Sheet

Balance Sheet is a financial statement that summarizes a company's assets, liabilities and
shareholders' equity at a specific point in time. A balance sheet is a record of what a
company has and how it has come to have it. The opening balance sheet of the company
shows Rs. 1,978,662 of total assets with same level of liabilities and equity and the total
balance at the end of year 5 is Rs. 34, 485,299. The overall projected balance sheet of for
five years is shown in Annex 14.

8.7 Preformat Cash flow Statement

The cash flow of the business is continuously increasing from year 1 to year 5. The cash
flow in year 0 year is Rs 102,063 and year 1 is Rs. 2,779,071 and has reached to Rs.
30,153,919 in year 5.

The cash flow statement is the summary of cash inflow and outflow in the firm. Cash
flow statement of Beans N Cream is shown in Annex 15

8.8 Business Financial Ratio

Business Financial Ratios is a powerful tool of financial statement analysis which helps
in identifying financial strength and weakness of the business concern. The major ratios
are Liquidity ratio, Debt Management ratios, and Profitability ratios. It is shown in
Annex 16.

8.8.1 Liquidity Ratios

It is used to judge the ability of the firm to meet short term obligation.

8.8.1.1 Current Ratio: It indicates the extent to which current liabilities are covered
by assets expected to be converted to cash in near future. The current ratio is for year 1 is
6.88 times. It is increasing and reaches to 98.82 times.

8.8.1.2 Quick Ratio: It is also termed as acid-test ratio or liquid ratio, is another
measure of short-term solvency of a firm. Quick assets exclude inventories. The quick
ratio of the company increased from 5.13 times to 93.03 times which means company
has the ability to pay out its obligations.

56
 8.8.2 Debt Management Ratio
It is also called leverage ratio. It indicates the extent to which a firm uses debt financing.

4. 8.8.2.1 Debt Ratio: It is debt to total asset ratios. It measures the

percentage of funds provided by creditors. Higher this ratio, the
greater financial risk, and vice-versa. Year 1 debt ratio is 16%
meaning its creditors have supplied 16% of the total financing. It is
decreasing and reaches to 1% in year 5.

5. 8.8.2.2 Debt to Equity Ratio: Higher this ratio, riskier would the
capitalization, lower the ratio, lower would be the risk. This ratio
has direct connection with profitability. Here, debt to equity ratio is
19% in year 1 and it decreases to 1% in year 5.

8.8.3 Profitability Ratio

Profitability shows the combined effect of combined effects of liquidity and debt
management on operating results.

8.8.3.1 Net Profit Margin Ratio: Net profit margin is the ratio between net
income and sales. The net profit of the store is 41% initially and it is increased to 47% by
the end of fifth year.

57
6. 8.8.3.2 Return on Asset (ROA): Higher ratio indicates the efficiency
a financial resources invested in the firm’s assets to generate
profitability. The company’s ROA is 74% in the initial year and
reduces to 24% in fifth year. It is because of the low earning power
and not being able to generate optimum sales through effective
utilization of assets.

7. 8.8.3.3 Return on Equity (ROE): The return on Equity in year 1

is .88 and decreased to 0.25 in the fifth year.

8.9 Other Financial Indicators

NPV (Net Present Value) of the project is difference between present value of cash
inflows and outflows. Net Present Value is Rs. 45,807,443. Hence, it adds more value to
the firm. It compares the present value of money today to the present value of money in
the future, taking inflation and returns into account.

IRR (Internal Rate of Return) is the discount rate at which the present value of all future
cash flow is equal to the initial investment or in other words the rate at which an
investment breaks even. IRR is …%.

Discounted PBP is, years which means that the cost of company is recovered in years.
The calculations are shown in Annex 10.

CHAPTER 12
CRITICAL RISKS AND CONTINGENCY
Running a business can be a dangerous occupation with many different types of risk.
Some of these potential hazards can destroy a business, while others can cause serious
damage that can be costly and time consuming to repair. Despite the risks implicit in
doing business, CEOs and/or risk management officers – no matter the size of the
business, from small to corporate giant – can prepare for them if they know what they
are.

58
If and when risk becomes reality, a well-prepared business can moderate the risk's
impact. Dollar losses, lost time and productivity and the negative impact on customers
can all be minimized

The business environment is basically unpredictable and uncontrollable. To operate and

run a business there are various risk associated with it. The risk can be internal and
external. They are:

9.1 Internal Risk

There could be risk of project delay that could hinder starting up the business venture.
Such delays may increase the cost of the product. Project delay may be caused due to the
following reasons:

 Delay in the registration process of the firm.

 Unavailability of needed machineries and technologies
 Difficulty in obtaining finance.
 Delay in delivery and installation of equipment.

9.2 External Risk

There could be following external risk for the venture:

 Political instability like strikes may affect distribution.

 Inflation may increase the cost of raw materials and hence the price of finished
product.
 Poor economic condition may decrease the demand of the product.
 Competitors entering the same location.
 Natural Calamities like Earthquake is a risk
 Pandemic can also have a harsh effect like CORONA

Risk Management Plan

For startup businesses and established organizations, the ability to identify which risks
pose a threat to successful operations is a key component of strategic business planning.

59
Business risks are identified using a myriad of methods, but each identifying strategy
relies on a comprehensive analysis of specific business activities that could present
challenges to the company. Under most business models, organizations face preventable,
strategic and external threats that can be managed through acceptance, transfer, reduction
or elimination. Illness or injury among the workforce is inevitable, and is always a
problem. To prevent loss of productivity, assign and train backup personnel to handle the
work of critical employees when they are absent due to a health-related concern. Back up
of power source is available in a way to cope up with the risk associated with the power
outage risks. Proper relation is maintained with employees and supply chain in a way to
cope up with the risks of employee turnover and ineffective performance of supply chain
members. Continuous R&D will be given due priority to ensure the maintained
satisfaction of customer, to ensure new product development and properly address the
concern of TQM.

Contingency Plan

Contingency planning prepares a food business to respond effectively to an unplanned

event. It is made up of three key components – being prepared, responding to an event
and post-event recovery. The unexpected situation that may arise from fire may force to
close up the business for some time and in severe condition may lead to close up for a
long time. In a way to deal with the problem renovation of the cafe should be
undertaken.

Similarly, if the business suffers from the losses and becomes difficult to continue, it is
to be sold to other as well as to handle everything relating to the business. The cash
obtained will be used first of all to pay all the debt of the business and then planning will
be done to come up again with something new and unique idea in the market.

60
 CHAPTER 13
FUTURE PLAN AND EXIT STRATEGIES

10.1 Future Plan

The Coffee House's future plan is to start a training school of the Barista in Lalitpur area.
So, that it can produce skill manpower in the society. To uplift its business, The Coffee
House plans to start its own customized cake venture. The facilitator role of the cakes
will help us to know the demand of such cakes in this area. Furthermore, the company
plans to open its branches at various other major areas in the city like, Bhaktapur Durbar
Square and Boudha.

10.2 Exit Strategies

The overall performance of the business might get seriously affected if there exist higher
threat in terms of competitors, political unrest, lesser consumer preference and other
risks.

If the business start suffering loss and the management team is unable to come up with
new innovations in products and services provided by The Coffee House then the
business will opt for exit from the market. In doing so, it will exit the coffee business but
use the facility to open up a customized cake shop.

61
 BIBLIOGRAPHY

 http://www.cafedecolombia.com/bb-fnc-en/index.php/comments/
millennials_an_important_segment_for_coffee_consumption_proexport_says/
 http://www.bplans.com/coffee_shop_business_plan/products_fc.php
 www.wikipedia.com
 Basic Financial Management, Jeevan Bhattrai, Shive Ghimire, Rajendra Maharjhan.
(PK Pustak Bhandar)
 Barista Taining Handbook
 Interview: Ram Sharan Phuyal, store manager at Himalayan Java Lounge, Civil
Mall.
 Official website of NTCDB


62
 ANNEXURE (Amounts in NRs)

ANNEX 1: LOAN AND EQUITY

Equity Amount
30% of Fixed Assets 5,53,980
30% of Working Capital 1,32,063
Total Equity 6,86,043

Loan Amount
Long term loan (70% of Fixed 12,92,620
Assets)
Short term loan (70% of WC) 3,08,146
Total Loan 16,00,766
INITIAL INVESTMENT 22,86,809

ANNEX 2: TOTAL FIXED ASSETS

S. No Particulars Qty Rate Cost
  Furniture      
6, 12,
1 Showcase Rack 2 000 000
10, 20,
2 Storeroom Rack 2 000 000
5, 15,
3 Small Table 3 000 000
8, 40,
4 Large Table 5 000 000
3, 63,
5 Chair 21 000 000
25, 50,
6 Sofa 2 000 000
200,
  Total       000

S. No Particulars Qty Rate Cost

  Intellectual Property      
100, 100,
7 Interior 1 000 000
50, 50,
8 Software 1 000 000
150,
   Total     000

63
  Equipment      
115,
9 Showcase Fridge 1 115,000 000
1 15,
0 Microwave 1 15,000 000
1 100,
1 Dishwasher 1 100,000 000
1 80,
2 Computer 2 40,000 000
1 15,
3 Printer 1 15,000 000
1 10,
4 Fax 1 10,000 000
  Total     3,35,000
  Espresso Bar      
1 625,
5 Espresso Machine 1 625,000 000
1 140,
6 Grinder 1 140,000 000
1 8,
7 Knock Box 1 8,000 000
1 16,
8 Tamp/Mat/Thermometer 1 16,000 000
1 11,
9 Pitcher 1 11,500 500
2 12,
0 Whip cream dispenser 1 12,000 000
2 1,
1 Whip cream dispenser charger 1 1,100 100
2 10,
2 Water Purifier 1 10,000 000
  Total     8,23,600

S. No Particulars Qty Rate Cost

  Blended Beverage      

64
 18, 18,
23 Blender 1 000 000
10, 10,
24 Ice Maker 1 000 000
  Drip Coffee /Tea Bar      
5, 5,
25 French Press Machine 1 000 000
75, 75,
26 Crockery   000 000
200, 200,
27 Generator 1 000 000
30, 30,
28 Other   000 000
3,38,00
  Total       0
2,181,6
  Total Fixed Assets     00

ANNEX 3: SALARY
Salary
Particulars Year 1
per month
18,0 234,
Manager (Basic salary & Food Allowance)-1 00 000
10,5 136,
Head Barista (Basic salary & Food Allowance)-1 00 500
Staffs (Baristas) (Basic salary & Food Allowance)- 32,5 2,112,5
5 00 00
61,0 2,483,0
Total Salary 00 00

ANNEX 4: PRELIMINARY EXPENSES

Preliminary Expenses
Amoun
Particulars t
Legal Paper works / Documentation 20000
Installation Charge of telephone and internet 10000
Total 30000

ANNEX 5: OPERATING EXPENDITURE

Rent:
Particulars sq. ft Year 1

65
 600,
Rental Space 500*600 000
600,
Total rent   000
     

Utility Expenses:
Particulars per month Year 1
Electricity 1500 18000
Water 2000 72000
Telephone   12000
Internet 512 MB 30000
Printing & Stationeries   5000
Total Utility Exp   132000

ANNEX 6: MARKETING EXPENSES

Particulars Rs. Year 1
Advertisement (Newspaper /Magazine/ Web) 5000 60000
Promotion Materials (coupons/flyers ets) 5000 60000
Total   120000

ANNEX 7: COST OF GOODS SOLD

Particulars Rs/unit Year 1
1,5 540,
Coffee Beans (1 Kg) 00 000
216,
Milk (12 Lit) 600 000
54,
Condiments (50 cups) 150 000
72,
Napkins/wooden stirrers/straws (50 cups) 200 000
126,
Ingredients (caramel sauce/powder/syrups) 350 000
90,
Food & Pastry 250 000
1,098,0
Cost of Goods Sold   00

ANNEX 8: WORKING CAPITAL

AMOUN
PARTICUALRS T
Inventory

66
 Coffee Beans 112500
Cookies 800
Cream Items 9000
122300
Receivables 50184
Operating Activities 277916.67
450401
-
Less: Sundry creditor 10191.667
TOTAL 440209

ANNEX 9: DEPRECIATION SCHEDULE

Furniture
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
11250
Cost 200000 150000 0 84375 63281
Less: Depreciation 50000 37500 28125 21094 15820
NBV at end 150000 112500 84375 63281 47461
           
           
Equipment
Particulars Year 1 Year 2
Year 3 Year 4 Year 5
84183
Cost 1496600 1122450 8 631378 473534
21045
Less: depreciation 374150 280613 9 157845 118383
63137
Net Book Value 1122450 841838 8 473534 355150
           
23858
total Depreciation 424150 318113 4 178938 134204

ANNEX 10: NPV, IRR AND PBP

(Assumed Interest = 15%)

67
 Discounted Cash Cumulative
Year Cash Flow Flow DCF
(102,06 (102,06
0 (102,063) 3) 3)
2,416,58 2,314,52
1 2,779,071 3 0
6,203,79 8,518,31
2 8,204,524 9 9
9,697,32 18,215,64
3 14,748,416 3 2
12,599,97 30,815,61
4 22,037,434 4 6
14,991,82 45,807,44
5 30,153,919 7 3
Total PV 45,909,506  
NCO -102,063  
NPV 45,807,443  
Discounted Payback
Period 1.04  
IRR   2907%  

68
 ANNEX 11: LOAN AMMORTIZATION
quarte Beginning Paymen interest Principal ending
r Balance t amount
           
1
1,292,620 82,918 32,316 50,602 1,242,018
2
1,242,018 82,918 31,050 51,867 1,190,150
3
1,190,150 82,918 29,754 53,164 1,136,986
4
1,136,986 82,918 28,425 54,493 1,082,493
5
1,082,493 82,918 27,062 55,856 1,026,637
6
1,026,637 82,918 25,666 57,252 969,385
7
969,385 82,918 24,235 58,683 910,702
8
910,702 82,918 22,768 60,150 850,552
9
850,552 82,918 21,264 61,654 788,898
10
788,898 82,918 19,722 63,195 725,702
11
725,702 82,918 18,143 64,775 660,927
12
660,927 82,918 16,523 66,395 594,532
13
594,532 82,918 14,863 68,055 526,478
14
526,478 82,918 13,162 69,756 456,722
15
456,722 82,918 11,418 71,500 385,222
16
385,222 82,918 9,631 73,287 311,935
17
311,935 82,918 7,798 75,119 236,815
18
236,815 82,918 5,920 76,997 159,818
19
159,818 82,918 3,995 78,922 80,895
20
80,895 82,918 2,022 80,895 (0)

69
 ANNEX 12: SALES REVENUE YEARLY
Particular Qty per day rate Year 1
Hot Beverage      

Espresso 3 85 89,250

Café Americano 10 100 350,000

Cafe Latte/Honey/caramel 10 165 577,500

Café Mocha 4 160 224,000

Cappuccino 10 120 420,000

Caramel Macchiato 2 120 84,000

Hot Chocolate mocha 8 170 476,000

      2,220,750
Cold Beverage      

Iced Americano 8 135 378,000

Iced Mocha 3 195 204,750

Iced Cappuccino/Latte 9 180 567,000

Iced Caramel Macchiato 1 180 63,000

Iced Tea lemon/peach 5 145 253,750

      1,466,500
Blended Beverage      

Blended Mocha 4 215 301,000

Blended Caramel Macchiato 2 195 136,500

Blended Vanilla Mocha 3 235 246,750

Blended Lemonade 5 155 271,250

Blended Oreo Cookies Shake 6 185 388,500

Blended Smoothies 8 195 546,000

      1,890,000

70
 Coffee Alternatives      

Cold Drinks 2 95 66,500

Seasonal Juices 1 150 52,500

Lassi/shakes 3 140 147,000

      266,000

Bakery items 250 70 525,000

       
12,211,5
Total sales     00

ANNEX 13: INCOME STATEMENT

Particular Year 1 Year 2 Year 3 Year 4 Year 5

Sales 12,211,500 13,432,650 14,775,915 16,253,507 17,878,857

Less: COGS 1,098,000 1,108,800 1,120,140 1,132,047 1,144,549

Gross Profit 11,113,500 12,323,850 13,655,775 15,121,460 16,734,308

Less          

Cash Operating exp 3,335,000 3,613,300 3,917,930 4,251,448 4,616,664

Depreciation 424,150 318,113 238,584 178,938 134,204

Preliminary
expenses 6,000 6,000 6,000 6,000 6,000

Total Operating exp 3,765,150 3,937,413 4,162,514 4,436,386 4,756,868

Operating Profit 7,348,350 8,392,438 9,499,261 10,691,073 11,983,440

Less: Interest 158,520 25,767 20,215 14,108 7,390

NPBT 7,189,830 8,366,670 9,479,045 10,676,965 11,976,050

Less: Tax 2,156,949 2,510,001 2,843,714 3,203,090 3,592,815

NPAT 5,032,881 5,856,669 6,635,332 7,473,876 8,383,235

71
 ANNEX 14: BALANCE SHEET
Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Assets            
Fixed Assets            
Furniture
200,000 150,000 112,500 84,375 63,281
Equipment
1,496,600 1,122,45 841,837 631,378 473,533 355,150
Intellectual
Property 150,000 150,000 150,000 150,000 150,000 150,000
Total Fixed
Assets 1,846,600 1,422,45 1,104,337 865,753 686,814 552,611
0
Preliminary
expenses 30,000 24,000 18,000 12,000 6,000 -
Current            
Assets
Cash
102,062 2,779,07 8,204,523 14,748,41 22,037,433 30,153,918
0 5
A/c receivable
- 1,221,15 1,343,265 1,477,592 1,625,351 1,787,886
0.
Stock
- 1,359,80 1,495,780 1,645,358 1,809,894 1,990,883
0
Total CA
102,062 5,360,02 11,043,56 17,871,36 25,472,678 33,932,687
0 8 5
Total Assets
1,978,662 6,806,47 12,165,90 18,749,11 26,165,493 34,485,299
0 6 8
Liabilities &            
Equity
Equity
686,042 686,042 686,042 686,042 686,042 686,042
Retained  
Earnings 5,032,88 10,889,55 17,524,88 24,998,757 33,381,993
1 0 2
Long Term
Loan 1,292,620 308,146 257,672 202,151 141,078 73,898
Short Term        
Loan - 450,000
Account  
Payable 329,400 332,640 336,042 339,614 343,364
Total
Liabilities and 1,978,662 6,806,47 12,165,90 18,749,11 26,165,493 34,485,299

72
 equity 0 6 8

ANNEX 15: CASH FLOW STATEMENT

Particulars year 0 year 1 year 2 year 3 year 4 year 5

A. Operating
Activities            

Net Income   5,032,881 5856669 6635331 7473875 8383235

Depriciation   424,150 318,113 238,584 178,938 134,204

Preliminary expenses   6,000 6,000 6,000 6,000 6,000

(increase)/decrease in
A/R   (1,221,150) (122,115) (134,327) (147,759) (162,535)

increase/(decrease) in
A/P   329,400 3,240 3,402 3,572 3,751

(increase)/decrease in
inventory   (1,359,800) (135,980) (149,578) (164,536) (180,989)

Cash from operating

activities   3,211,481 5,925,927 6,599,413 7,350,091 8,183,666

B. Investing
Activities            

Purchase of furniture (200,000)          

73
Purchase of
Equipment (1,496,600)          

Preliminary Expenses (30,000)          

Intellectual property (150,000)          

Cash flow from
Investing Activities
(B) (1,876,600) -        

C. Financing
Activities            

Increase in capital 686,043          

Long Term loan 1,292,620          

Short Term loan - 450,000        

Repayment of short
term loan -   (450,000)      

Repayment of long
Term loan - (984,474) (50,474) (55,521) (61,073) (67,180)
Cash flow from
Financing Activities
(C) 1,978,663 (534,474) (500,474) (55,521) (61,073) (67,180)
Net Change in cash
and Cash
Equivalent(A+B+C) 102,063 2,677,008 5,425,453 6,543,892 7,289,018 8,116,485

Add: Beginning Cash

and Cash Equivalen - 102,063 2,779,071 8,204,524 14,748,416 22,037,434

Ending Cash and

Cash Equivalent 102,063 2,779,071 8,204,524 14,748,416 22,037,434 30,153,919

74
 ANNEX 16: RATIO ANALYSIS
Financial Ratio Analysis
Financial Ratio Year 1 Year 2 Year 3 Year 4 Year 5
Liquidity Ratio          

Current Ratio 6.88 33.20 53.18 75.00 98.82

Quick Ratio 5.13 28.70 48.29 69.68 93.03

Assets Management
Ratio          
Fixed Assets
Turnover Ratio 8.58 12.16 17.07 23.67 32.35
Account receivable
turnover ratio 37.07 40.38 43.97 47.86 52.07
Total Assets
turnover Ratio 1.79 1.10 0.79 0.62 0.52
Debt Management
Ratio          

Debt-Asset Ratio 0.16 0.05 0.03 0.02 0.01

Debt-Equity Ratio 0.19 0.05 0.03 0.02 0.01

Profitability Ratio          
Net Profit
Margin(%) 0.41 0.44 0.45 0.46 0.47
Return On
Equity(%) 0.88 0.51 0.36 0.29 0.25
Return On Assets
(%) 0.74 0.48 0.35 0.29 0.24

75
 ANNEX 16: COFFEE AND FOOD PAIRING

Coffee Food Paring

Espresso Apple pie, Chocolate muffin
Chocolate brownie, Chocolate Cookies, Apple
Espresso Macchiato Bar, Chocolate Muffin
Banana Muffin, Chocolate Muffin, Cheese
Café Latte croissant
Café Mocha, Mocha
Madness Chocolate Cookies, Peanut Butter Cookies,
Cappuccino Chocolate cookies, Chocolate trupple cake
Caramel Macchiato Carrot Cake, peanut cookies
Americano, Chocolate Brownie, Cheese Cake, Carrot cake, any
kinds of Chocolates
Iced Americano,
Iced Coffee All Kinds of Sandwiches
Iced Latte All Kinds of Sandwiches, Apple pie
Iced Caramel
Macchiato Almond Cookies, Sausage roll and sandwiches
Chocolate trupple Cake, Black forest Cake,
Iced Mocha Choclate muffin

76