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1| P a g e

Student: Dai, Darren

6/16/2016

2016Fun Coffee House

Fun Coffee House

Table of ContentsExecutive Summary.....................................................................................................................................3

Operation................................................................................................................................................3

Human Resource.....................................................................................................................................3

Marketing................................................................................................................................................4

Finance....................................................................................................................................................4

Introduction.................................................................................................................................................5

1.1 Industry Overview.............................................................................................................................5

1.2 Mission Statement.............................................................................................................................5

1.3 Vision Statement...............................................................................................................................5

1.4 Goals and Objectives.........................................................................................................................5

Industry Analysis..........................................................................................................................................6

Operation Plan.............................................................................................................................................6

2.1 Site Location......................................................................................................................................6

2.2 Floor Plan...........................................................................................................................................7

2.4 Description of Operations..................................................................................................................8

2.5 Main Suppliers and Service Provider.................................................................................................9

2.6 Capital Budget.................................................................................................................................10

2.7 Cost of Goods Sold...........................................................................................................................11

2.8 Profit Margin....................................................................................................................................11

2.9 Operating Expenses.........................................................................................................................11

2.10 Working Capital.............................................................................................................................12

2.10.1 Cash........................................................................................................................................12

2.10.2 Inventories..............................................................................................................................13

2.10.3 Accounts Receivable and Accounts Payable...........................................................................13

Human Resource Plan...............................................................................................................................13

3.1 Organizational Structure..................................................................................................................13

3.2 Job Descriptions...............................................................................................................................13

3.3 Employee Salaries and Compensation.............................................................................................14

Marketing Plan..........................................................................................................................................15

4.1 Value Statement..............................................................................................................................15

Darren Dai | P a g e

Fun Coffee House

4.2 Target Market..................................................................................................................................16

4.3 Logo Design.....................................................................................................................................16

4.4 Competitors.....................................................................................................................................16

4.5 Marketing Mix.................................................................................................................................17

4.5.1 Product.....................................................................................................................................17

4.5.2 Price..........................................................................................................................................17

4.5.3 Place.........................................................................................................................................18

4.5.4 Promotion.................................................................................................................................18

4.6 Marketing Expense..........................................................................................................................19

Financial Plan.............................................................................................................................................19

5.1 Capital Requirement........................................................................................................................20

5.2 Summary of Projected Income........................................................................................................20

5.3 Dividend Policy................................................................................................................................22

5.4 Summary of Projected Cash Balances..............................................................................................22

5.5 Break Even Analysis.........................................................................................................................23

5.5 Critical Indicators.............................................................................................................................24

5.6 Owners Compensations...................................................................................................................24

5.7 Sensitivity Analysis...........................................................................................................................24

Conclusion.................................................................................................................................................25

Appendices................................................................................................................................................26

Appendix 1 Café Manu..........................................................................................................................26

Appendix 2 Financial Budget.................................................................................................................28

Bibliography...............................................................................................................................................29


Fun Coffee House

A List of TablesTable 2.6 Fun Coffee House Capital Budget Schedule 11

Table 2.7 Cost of Goods Sold 12

Table 2.8 Profit Margin Projection 12

Table 2.9 Operating Expenses 13

Table 3.2 Employee Salaries and Compensation 16

Table 4.6 Marketing Expense 21

Table 5.2.1 Projected Income 22

Table 5.2.2 Income Statement 22

Table 5.3 Dividend Policy 23

Table 5.4 Projected Cash Flows 24

Table 5.5 Critical Indicators 25

Table 5.6 Owners Compensation 26

Table 5.6 Owners Compensation 26

A List of FiguresFigure 2.1.1 New Preston Crossing Development 7

Figure 2.1.2 Site plan 8

Figure 2.2 Fun Coffee House Floor Plan 9

Figure 3.1 Organizational Structure 14

Figure 3.2 Working Hours 15

Figure 4.3 Fun Coffee House Logo 17

Figure 4.5.2 Fun Coffee House Membership Card 19

Figure 5.5 Break-even Analysis 25


Fun Coffee House

Executive SummaryFun Coffee House is a place where customers can play table games and have drinks in

Saskatoon, Saskatchewan. Fun Coffee House wishes our clients can have a chance to put down

their phones and engage face-to-face game environment. Besides, Fun Coffee House will serve

high-quality coffee and snacks. Fun Coffee House should locate in two industries: Coffee and

Hobby, Toy and Game Stores industry which still have a potential market in Canada. Fun Coffee

House will be at Preston Crossing. After analyzing this business comprehensively, we can state

that this business feasible and profitable.

Operation The initial investment for the firm totals $150,000 which is totally from personal equity and

family financing. The strategy can avoid high loan interest and increase business’s feasibility

profitability. Fun Coffee House will be 1205sq which can serve 50 customers at the same time.

$66,650 will be invested for installing equipment, buying furniture and decoration. The whole

store will be in a board game astrosphere.

Fun Coffee House will operate 300 days a year. Our operation time will be as below:

Days Service Time

Sunday 12 pm to 12 am

Monday Closed

Tuesday 12 pm to 12 am

Wednesday 12 pm to 12 am

Thursday 12 pm to 12 am

Friday 12 pm to 2 am

Saturday 12 pm to 2 am


Fun Coffee House

Human ResourceFun Coffee House will operate by owners and a full-time manager. In addition to a full-time

manager, two full-time employees will be hired for covering kitchen and cleaning duties. If it is

necessary, multiple numbers of part-time staff can be employed.

Marketing Marketing is critical to Fun Coffee House. Fun Coffee House is pretty sensitive to some

customers per day and average purchase price. Its principal marketing strategies are as below:

Posters and Flyers - Tournament

Discount Coupon

Facebook Ads

Website – online community

Finance This part will show if Fun Coffee House is feasible and profitable. Net income will be $75,000 in

year five. Average net income in first five years is $38,842. We estimate that we will have about

$96,366 cash on hand in year five, so the owner can choose to start a new store if we can get

some debt financing. Owner’s compensation will be above $100,000 in year five, so this

business is still attractive to the proprietor.


Fun Coffee House

Introduction 1.1 Industry Overview Fun Coffee House should be a unique design boutique and premium coffee destination. Darren

Dai is the only shareholder in this company. It is a place where customers can play table games

and have drinks in Saskatoon, Saskatchewan. So, Fun Coffee House’s service include two

primary segments which are specialty coffee and favorite table games. Fun Coffee House tries to

provide our customers a place which people can get together and enjoy fun table games with

families and friends. I wish that Fun Coffee House can give people a chance to put down their

phones and get to know people face-to-face. If board games become popular in Saskatoon, I

would start selling board games, which is my long-term goal. Fun Coffee House should locate in

two industries: Coffee and Hobby, Toy and Game Stores industry. These two industries are

flourishing and still many potentials in Canada. With the city of Saskatoon still expanding, a

larger market of coffee drinkers, and an increase in the demand for an alternative entertainment

method, Fun Coffee House has the potential to be a profitable and feasible business.

1.2 Mission Statement“To create relax and competitive atmosphere, where customers can have the conversation and

have fun with families and friends by playing board games. To make the client feel at home. By

organizing the tournament, players can build a friendship in a competitive atmosphere.”

1.3 Vision Statement“Our vision is to be best board game café in Saskatoon. We want every customer has a unique

experience in our store.”

1.4 Goals and ObjectivesThe aims and purposes of Fun Coffee House are as follows:

Become a feasible and profitable business

By organizing tournaments, let crazy board game players freed their passions

Provide a channel of retailing board games


Fun Coffee House

Industry AnalysisFun Coffee House should be in Coffee Industry and Hobby, Toy and Game Stores industry in

Canada. These two industries are profitable and flourishing in Canada. Though sales of non-

homemade coffee decrease 3% in 2015 (CBC News , 2015), we still believe this is a temporary

flotation, and demand for coffee is still stable. On the other hand, revenues generated by non-

chain board game stores was $510.1 million in 2012. However, it was$474.2 million in 2011

(Government of Canada, 2016).


Fun Coffee House

Operation Plan2.1 Site LocationFun Coffee House will be in Preston West, which is 1701 Preston Avenue North, Saskatoon. It is

a perfect place since there is no other similar game coffee house in that Preston Crossing area.

Nearest competitors are on 22nd and 8th street. Fun coffee house’s major customers who are

university students can take number 4 and 13 buses to come to Fun Coffeehouse. Furthermore, a

plenty of parking spots can guarantee that the clients can have an excellent visiting experience.

The location also has a diverse business atmosphere which makes sure our customers can do

shopping or go to a restaurant after playing games in my store. This synergy between Fun Coffee

House and other businesses can create additional benefits for all of us. The map below, Figure

2.1.1 and Figure 2.1.2 shows the location of Fun Coffee House.

Figure 2.1.1 New Preston Crossing Development


Fun Coffee House

Figure 2.1.2 Site plan

2.2 Floor PlanI want to create a comfortable, competitive and fun for my customers. Since playing table games

will be a core value of this business, the floor plan is fairly basic and straightforward. So, I will

do a few changes on decoration. Board games will be on shelves which near the walls. Different

kinds of table games will be on various shelves, which can make customers find what they like

effectively. A smaller kitchen or bar will be there because we need to prepare drinks and snacks

for customers. Our cash register will be right on the bar desk. Because we do not have the

waitress in the shop, so customers will take snacks and drinks by themselves. This arrangement

will not only reduce operation cost bust also create a home atmosphere for our clients.

Furthermore, there is a small black shelf in the back to store any necessary inventory, but more

likely cleaning supply and the like.

In the store, we will have ten square tables for customers actually to play in the store. Each table

has four chairs, and additional chairs can be there if necessary. Furthermore, tables can be

combined to create a big enough place for large group.


Fun Coffee House

The whole store will be two major parts; first part contains four tables, and second room contains

six tables. There are two reasons for that. Firstly, when we are organizing tournaments in the

store, we may not use all ten tables, so the other room can be used to serve other normal

customers. Secondly, during the non-rush hours and tables are vacant, we can close one of room

for saving utility cost.

There is are two bathrooms which for males and females. Figure 2.2 demonstrates what the

proposed floor plan for Fun Coffee.

Figure 2.2 Fun Coffee House Floor Plan

2.4 Description of OperationsFun Coffee House operation hours is as below:

Days Service TimeSunday 12 pm to 12 amMonday ClosedTuesday 12 pm to 12 amWednesday 12 pm to 12 amThursday 12 pm to 12 amFriday 12 pm to 2 amSaturday 12 pm to 2 am

Table 2.4 Operation Hours

My full-time employee will be four people. I will divide them into two shifts, which are day shift

and night shift. Each shift has a store manager who is responsible for guiding customers and

collecting cash. What’s more, a bar stuff is in charge of preparing drinks, which mostly are


Fun Coffee House

coffee, and snacks. They also should do the cleaning job. For Sunday through Thursday, store’s

operation hours will be from 12 pm to 12 am; although we will close on Monday. Day shift is

from 12 pm to 6 pm; so, night shift is from 6 pm to 12 am. For holidays and Friday through

Saturday, the operation time will be 12 pm to 2 am. Both of day and night shifts will work for

seven hours for these days. Furthermore, if the traffic increases in the evening, and part-time

employees will likely join.

Each customer has to pay $5 for tickets when they decide to play in the store. Then they can go

to shelves and look for board games which they are interested. Store managers can provide the

professional guide about which games are popular, and how to play them. Customers have to go

to the bar and tell bar staff what they what to drink and eat; then customers will get an order

number. When drinks and snacks are ready, bar staff will tell the client which order is ready, and

customers pick up by themselves.

We provide basic kinds of coffees and teas. No premium beverages are available because it

requires first class coffee makers and skilled coffee cook. What’s more, we think board game

should be core activities. Snacks are ready-to-eat healthy snacks which do not require the further

cooking process. That’s because we do not have a complete kitchen in the store, even we have

some necessary kitchen equipment. However, customers still can choose just to drink coffees and

not play games in the room; then, tickets are not required.

2.5 Main Suppliers and Service ProviderSupplier: Colony Coffee & Tea

Supplies: Coffee & Tea

Colony Coffee & Tea is a local company which has an office in Saskatoon, Regina and Moose

Jaw. I choose this company because they have an excellent reputation in this industry. 30-year

experience is a definite guarantee for a new café. They will cover a plenty of services, include

helping us choosing perfect brewing system, installing and repairing equipment. Their

professional experience can make sure that I can provide high-quality drinks to customers.

Supplier: Harlan’s


Fun Coffee House

Supplies: Snacks

I will choose Harlan’s as my meal supplier is a local company which has over 80-year

experience, and it builds a solid reputation in this city. Harlan’s allowed customers lease food

prepare equipment. Leasing enables us to get started without excessive up-front costs. When

equipment has some problem. They will provide professional repairing service.

2.6 Capital BudgetAs below, the total capital budget is $67,457.9, which is reasonable for a café. Decoration

expense is $36,150. I estimate decoration expense is 30$ per square, and total area are 1205 so.

Equipment expense including kitchen equipment, like grill and hood, and board games. Furniture

including tables, chairs and cash register. I estimate $500 each table and four chairs, and we have

ten tables in the store. The cash register is $500.

Working inventory is calculated by dividing the cost of goods to each day. Working capital is

one week cost of goods sold.

Year 2017 2018 2019 2020 2021DescriptionDecoration 36,150.0 - - - Eqipments (Kitchen and Board Games) 25,000.0 - - - Furniture (Table, Chairs and Cash Register) 5,500.0 - - - - Subtotal 66,650.0 Working CapitalInventory 825.9 994.6 1,115.9 1,195.1 1,280.0 Acc Pay - - - - -

Number of DaysInventory 7.0 7.0 7.0 7.0 7.0 Acc Pay - - - - - Total Capital Budget 67,475.9 994.6 1,115.9 1,195.1 1,280.0

Capital Budget

Table 2.5 Fun Coffee House Capital Budget Schedule

2.7 Cost of Goods SoldTable 2.7 shows expected Cost of Goods Sold for the first year is $35,397. The average cost of

goods sold is $54,245 for next five years. This estimation is based on revenues of $212,798 and a

profit margin of 100% for tickets, 80% for drinks and 70% for snacks. Please check attachment

for more details.


Fun Coffee House

2017 2018 2019 2020 2021Gross Profit MarginTickets 100% 100% 100% 100% 100%Drinks 80% 80% 80% 80% 80%Snacks 70% 70% 70% 70% 70%

Cost of goods SoldTickets - - - - - Drinks 11,885 17,173 19,268 20,636 22,102 Snacks 23,513 33,976 38,121 40,827 43,726 Total Cost of Goods Sold 54,245 35,397 51,149 57,389 61,464 65,828

Cost of Goods Sold

Table 2.7 Cost of Goods Sold

2.8 Profit MarginThe following table shows the summary of profit margins. For the first five years, the profit

margin is over 80%.

For the year ended 2017 2018 2019 2020 2021

Sales 212,798 307,493 345,007 369,503 395,738 COGS 35,397 51,149 57,389 61,464 65,828 Gross Profit 177,401 256,344 287,618 308,039 329,910

83% 83% 83% 83% 83%

Table 2.8 Profit Margin Projection

2.9 Operating ExpensesFigure 2.7 shows the Fun Coffee House’s operating costs for next five years. Detail description

as below:

Accounting and Legal – for the first years, I may need

Advertising (Marketing) – website, social media, signage, and posters

General Supplies – include toilet paper, receipt paper and cleanser and so on

Insurance – to avoid unusual accidents like fire hazard and so on

Lease Expense - rent bill

Telephone

Utilities – water and elasticities

Repair and Maintenance – budget for unplanned repair cost.

Wages and Salaries – total expense for hiring employees

Employee Benefits (salaries) – employee’s payroll


Fun Coffee House

Employee Benefits (compensation) – employee’s compensation; Starting in 2017 the EI

rate is 2.24%; CPP is 4.95%; Hol Pay is 5.77%; WC is 1%; then it is 13.96% in total.

Misc Variable Costs % Sales - extra expense for the miscellaneous occurrence.

Capital Cost Allowance – depreciation cannot be avoided

Debt Interest – no debt

Date 2017 2018 2019 2020 2021Description Accounting and Legal 2,000 2,040 2,081 2,122 2,165 Advertising (Marketing) 6,700 1,600 1,632 1,632 1,632 General Supplies 1,000 1,020 1,040 1,061 1,082 Insurance 2,500 2,550 2,601 2,653 2,706 Lease Expense 38,560 39,331 40,118 40,920 41,739 Telephone 100 102 104 106 108 Utilities 5,423 5,531 5,642 5,754 5,869 Repair and Maintenance 1,000 1,020 1,040 1,061 1,082 Wages and Salaries 138,800 142,675 151,138 157,897 165,137 Employee Benefits (salaries) 6,552 6,683 6,817 6,953 7,092 Employee Benefits (Compesation) 8,208 8,526 9,480 10,191 10,964 Misc Variable Costs % Sales 1,064 1,537 1,725 1,848 1,979 Capital Cost Allowance 1,273 2,407 2,152 1,940 1,761 Debt Interest - - - - - Total Operating Expenses 213,180 215,022 225,570 234,139 243,317

Operating Expenses

Table 2.9 Operating Expenses

2.10 Working Capital 2.10.1 Cash

Cash is important because make sure company has enough working capital and keep liquidity.

My initial $150,000 investment make sure company has enough cash to avoid bankruptcy.

According to cash flow analysis, we will have positive cash flow from the second year. Though

we have negative cash flow in the first year, we can easily get positive cash in the second year

because of increased sales volume. It makes sure we have the ability to pay our bills and

employee’s payroll. Dividends will be paid then Fun Coffee House generated cash more than

$20,000 on balance.

2.10.2 Inventories

Based on my budget analysis, new inventory will be ordered on a weekly basis. Since most of

the inventory is snack or beverage inventory, it will be carefully monitored. If the store is facing


Fun Coffee House

a shortage of stocks, it’s manager’s job to order new supplies. After a period of operation, we

will discuss if we should increase stock volume or change it to bi-weekly basis.

2.10.3 Accounts Receivable and Accounts PayableThere will be no accounts receivable since Fun Coffee House make payments by debit, credit

card, or cash. We also have no creditors, because we will buy our inventories and supplies by

cash. The reason is the volume of inventories and supplies is relatively small.

Human Resource Plan3.1 Organizational Structure Fun Coffee House will be owned solely. As the owner, I will also engage in daily operating

activities as one of store managers. What’s more, each shift will have a full-time employee and a

part-time employee if necessary.

Figure 3.1 Organizational Structure

3.2 Job DescriptionsManagers

Two managers will be responsible for both day and night shifts each day. As the owner of this

store, I will be the night shift manager. What’s more, managers will be responsible for the

following:

Hiring and training staff

Ordering and monitoring inventory


Fun Coffee House

Booking and collecting cash; Night shift managers will be responsible for close every

day.

Marketing efforts, like organizing tournaments.

Dealing with suppliers

Monitoring customer service quality

Store owner will review monthly sales and other financial goals

Operating cash register

Providing guide about how to play games

Full-Time & Part-Time Employees

Full-time and part-time employees have the same job description because these two positions

have same job requirement but different working hours. All full-time and part-time employees

will be required to perform the following duties:

Taking customer orders, prepare drinks and food;

Putting orders together and calling customer numbers

Be passionate about our products

Clearing and wiping down tables

Light cleaning around the shop

Employee’s working hours are as below,

Owner/Manager 38Full-Timer 38Part-Timer Depends on Customer Volume

Working Hours per Week

Table 3.2 Working Hours

3.3 Employee Salaries and Compensation Our wage expense is relatively higher than the industry average, as each employee including

part-time ones takes a huge plenty of duties during the working time. We have the confidence of

covering this expense because our high sales volume and optimal industry overview. Table 3.2

is a summary of employee expense for the first five years.


Fun Coffee House

Number of Employees:Manager (full time) 2 2 2 2 2 Full time staff 2 2 2 2 2 Part time staff 150,000 - 0.05 0.30 0.46 0.64

Salaries/WagesManager Salary 40,000 40,800 41,616 42,448 43,297 Full time staff (wage rate/hr) 15.00$ 15.30$ 15.61$ 15.92$ 16.24$ Part time staff (wage rate/hr) 11.00$ 11.22$ 11.44$ 11.67$ 11.91$

Salary and Wage CostsManager 80,000 81,600 83,232 84,897 86,595 Full time staff 58,800 59,976 61,176 62,399 63,647 Part time staff - 1,099 6,730 10,601 14,895 Total Salaries and Wages 138,800 142,675 151,138 157,897 165,137

Table 3.2 Employee Salaries and Compensation

Marketing Plan4.1 Value StatementAs technology developing so fast in modern society, people have a lot of entertainment option by

using the electric equipment. Computer, PlayStation, and even cell phone can create an excellent

entertainment experience for players. It seems like old-fashioned games, like board games, are

out of time.

However, these new having fun methods cause a serious social problem. They widen the distance

between family and friends. Teenagers play video games all the day and have no chance to talk

to parents when they are staring at the screen. Friends have meals together, but nobody talk but

stare at their cell phones. We are losing primary goal of life for chasing temporary happiness.

Fun Coffee House is helping our customers create happy time and memory with families and

friends. Board games are a core value for the store. Fun Coffee House is to build relax and

competitive atmosphere, where customers can have the conversation by discussing how to play

board games. Customers will build a healthy relationship with each other by face to face

conversations. What’s more, passionate board game players can find new friends who have a

common goal.


Fun Coffee House

What’s more, Fun Coffee House is to provide a place for students to gather together. Students

usually do not have personal and enough room to invite friends to come. It kindly influences

their social networking. Fun Coffee House is the perfect solution for this.

4.2 Target MarketFun Coffee House is a family friendly environment; it is welcoming and will provide services to

any customer who wishes to engage in table game world. Fun Coffee House’s target market that

Fun Coffee House is relatively narrow and restrict because of the small customer base. It

includes but is not exclusive to adults aged 18-35, students, the university communities and

young professionals. Though small. Client base is stable. There are over 20000 students in

college every year and 60000 young people in this city.

4.3 Logo Design To match company’s theme, we create a logo with table game element. Having a common

among various table top games is hard. However, a joker face can quickly make customers know

that we are providing a unique entrainment in our café.

Figure 4.3 Fun Coffee House Logo

4.4 CompetitorsKing Me Boardgamery and Café

Direct competitors with Fun Coffee House. They are also a board game café which provides

hundreds of games to choose. Because we have limited start-up financial investment, we cannot

provide as many as games they have. However, we will have most favorite games recently; it can

meet customer’s demand reasonably. As business developing, we will buy more games and catch

up trends.


Fun Coffee House

Dragon's Den

Dragon's Den has a large back room and allowed players playing games in there with little

expense. They are selling identical products, including table games and role-play games. Fun

Coffee House is not going to sell games until we make sure this city has enough demand for

table games. This market should be big enough for two same type of sellers. It is on Louise Ave,

which far away from our stores.

4.5 Marketing Mix4.5.1 ProductFun Coffee House can provide a hundred of board games for customers to play. A board game is

also tabletop games, and it requires players play cards and cheese according to specific rules

which match game theme. Some games require players’ competition strategy. Players have to

constrain other players’ performance and make sure allies win. They may contain lucky elements

which increase game’s uncertainty and interest.

A plenty of beverage and food available. It includes most popular types of coffee and teas.

Healthy snacks help a player can totally focus on gaming and no need to avoid starvation.

Customers can order the coffee or other drinks while they are playing.

We are trying to provide a comfortable atmosphere which is also an important aspect of what we

offer. Though we have defined our place as a board game arena, we still welcome that our

customers to define us.

4.5.2 PriceFun Coffee House’s competitive pricing strategy is important. We are the only place which let

customer play board games in the city’s north area. Preston Cross has enough parking spot and

convenient public transportation. It is a distinct advantage. Pricing competitively, which is also

price penetration strategy, allows us to satisfy customers while still being profitable.

We are going to price our products similarly but cheaper than our direct competitor, King me.

Cheaper Price and even better service quality can create a competitive advantage for us.

Although tickets are $5 which equal to King me’s tickets, however, we have unique pricing


Fun Coffee House

strategy for kids under 12. They ask for $2.5 for children; however, it is entirely free for kids

under 12 when they come to store. Revenues from selling drinks and food to kids can cover our

unit operation cost, so we do not worry it will cause loss.

We also offer our customer's membership card. One year membership is $80; half year

membership is $50. This strategy is 20% cheaper than competitor’s offer, which will lead

customers to our store.

Figure 4.5.2 Fun Coffee House Membership Card

4.5.3 PlaceAs mentioned before, Fun Coffee House will be in Preston West, which is 1701 Preston Avenue

North, Saskatoon. It is a perfect location since there is no other similar game coffee house in that

Preston Crossing area. What’s more, the free parking spot is a definite advantage, as customers

have to pay for parking when they are visiting our direct competitor. A more comprehensive

business area can allow customers to arrange more diverse daily leisure.

4.5.4 Promotion Fun Coffee House tends to implement some low cost but efficient promotions. The core

advertising area will be in university campus area, but will also include to other popular places

such as downtown bus station.

Firstly, posters and flyers of Fun Coffee House will be sent to those famous places. The flyers

will contain store profile, location, operation hours. Posters and flyers will be spread out in high

traffic area, like arts tunnel, on campus. As time goes on, this strategy may be necessary after us

creating reputation on campus. Community game nights and school tournaments will be


Fun Coffee House

organized for creating a competitive atmosphere and board game fever. The game tournament

can be arranged on campus and at our store. Because on-line game tournament used to be held on

campus, so I have confidence on that board game tournament can be allowed on campus. We

have $1000 budget for providing a prize to final winners. There is no better way than building a

“board game Kingdom” in this city. People in this “Kingdom” will invite individuals who are

not interested in this area to get in.

The second promotion is intended to have customer’s attention and motive them to come to Fun

Coffee House. Customers who have flyers on hand will have a fair discount. For the first three

months, each flyer will have a discount coupon on the bottom right corner. Every customer who

has coupon can have a free ticket.

The third promotion will be Facebook advertising strategy. Social media, like Facebook, is a

useful development method. Facebook Ads is easy for business and customers. Facebook Ads be

used directly to target group, who is young people in Saskatoon. It is also easy to control

marketing cost since I choose how much I spend on that every day. What’s more, Customers can

find Fun Coffee House’s Facebook page and communicate with us. We can collect customers’

opinions and improve service quality, which can be a new kind of mouth to mouth marketing.

What’s more, we are going to build our website. We are going to make our website an online

community. We are going to provide a guide of how to lay different table top games. What’s

more, we encourage players to communicate with each other and even organize tournament by

themselves on our website.

Finally, due the fact that we are on the Preston Crossing, we will create a larger signage on the

outside of our store. It will attract customers who come to visit other stores in Preston Crossing.

Overall outside look will make customers know this café is related to board gaming.

4.6 Marketing Expense

Our marketing expenses can be seen in Table 4.6 which shows just exactly how much we are

planning on spending to complete our marketing strategy.


Fun Coffee House

Date 2017 2018 2019 2020 2021DescriptionSignage 2500Website and Social Media 4500 1500 1500 1500 1500 1500Posters/Flayers 200 200 200 200 200 200Tournament and others 1000 1000 1000 1000 1000 1000Total 8200 2700 2700 2700 2700 2700

Table 4.6 Marketing Expense

Financial Plan5.1 Capital RequirementTo adequately finance this business, Fun Coffee House will seek 100% equity financing. It is

because the small requirement of funding source and high-interest rate. All equity will be from

owner’s personal saving and love money from equity. Fun Coffee House’s net income can go

straight back into the business, and if retained earnings are enough, dividends will be paid out.

5.2 Summary of Projected Income

Our revenues are from 50 customers per day for the first year. The number of customer growth

rate is 25% for the second year, 10% for the third year, and 5% for the second year. We assume

that each client will play games at our store and buy one drink and snacks. So, we project that

average purchase price of each customer will be $14.19. It is a reasonable forecast as we are in a

busy business area. A lot of foot traffic make us be able to cover our cost. The following is Table

5.2 which illustrates our projected Revenue.


Fun Coffee House

2017 2018 2019 2020 2021

Number of Customers/day 50 63 69 72 76Break-even Number of Customer 61 59 59 59 59

Number of Days/year 300 340 340 340 340Average Purchase/customer 14.19$ 14.47$ 14.76$ 15.05$ 15.36$ Total Sales 212,798 307,493 345,007 369,503 395,738

Growth Rate Number of Customers 25% 10% 5% 5%

Average Purchase/customer detailsTickets 5.00$ Drinks 3.96$ Snacks 5.23$

RevenuesTickets 35% 75,000 108,375 121,597 130,230 139,476 Drinks 28% 59,423 85,866 96,342 103,182 110,508 Snacks 37% 78,375 113,252 127,069 136,090 145,753 Total Revenues 100% 212,798 307,493 345,007 369,503 395,738

Table 5.2.1 Projected Income

In Table 5.2.2, we will have a negative net income in the first year as we do not have enough

customers in the first year. However, as marketing strategies beginning to attract customers in

next few years, net income will be $75,000 in year five. Average net income in first five years is

$38,842.


Sales 212,798 307,493 345,007 369,503 395,738 COGS 35,397 51,149 57,389 61,464 65,828 Gross Profit 177,401 256,344 287,618 308,039 329,910

83% 83% 83% 83% 83%Operating ExpensesAccounting and Legal 2,000 2,040 2,081 2,122 2,165 Advertising (Marketing) 8,200 2,700 2,754 2,809 2,865 General Supplies 1,000 1,020 1,040 1,061 1,082 Insurance 2,500 2,550 2,601 2,653 2,706 Lease Expense 38,560 39,331 40,118 40,920 41,739 Telephone 100 102 104 106 108 Utilities 5,423 5,531 5,642 5,754 5,869 Repair and Maintenance 1,000 1,020 1,040 1,061 1,082 Wages and Salaries 138,800 142,675 151,138 157,897 165,137 Employee Benefits (salaries) 6,552 6,683 6,817 6,953 7,092 Employee Benefits (Compesation) 8,208 8,526 9,480 10,191 10,964 Misc Variable Costs % Sales 1,064 1,537 1,725 1,848 1,979 Capital Cost Allowance 1,273 2,407 2,152 1,940 1,761 Debt Interest - - - - - Total Operating Expenses 214,680 216,122 226,692 235,316 244,550

Taxable Income (37,279) 40,222 60,927 72,724 85,360 Income Taxes - 368 7,616 9,090 10,670 Net Income 38,842 (37,279) 39,854 53,311 63,633 74,690


Fun Coffee House

Table 5.2.2 Income Statement

5.3 Dividend PolicyFun Coffee House will pay dividends to the shareholder, who is the owner of this store when

retained earnings are over $20,000. This dividend policy will make Fun Coffee House contain

enough cash on cash which is for purchasing supplies and new board games; on the other hand; it

ensures shareholder has enough compensation.

Beg RE - (37,279) (23,943) (12,725) (4,433) Net Income (37,279) 39,854 53,311 63,633 74,690 Dividends 20,000 - 26,518 42,093 55,342 65,494 End RE (37,279) (23,943) (12,725) (4,433) 4,763

Table 5.3 Dividend Policy

5.4 Summary of Projected Cash Balances

The following Table 5.4 illustrates the projected ending cash balances for the first five years of

business. This business will have a relatively high positive cash flow for first flow; even Fun

Coffee House start paying dividends from the second year. With enough cash on hand, Fun

Coffee House can choose to start retailing board game when we think we are ready. What’s

more, we estimate that we will have about $96,366 cash on hand in year five, so we can choose

to start a new store if we can get some debt financing.


Fun Coffee House


Net Income (37,279) 39,854 53,311 63,633 74,690 CCA 1,273 2,407 2,152 1,940 1,761 Operating Cash Flow (36,006) 42,261 55,463 65,573 76,451

Changes in Working CapitalInventories (826) (169) (121) (79) (85) Accounts Payable - - - - - Total (826) (169) (121) (79) (85)

Investment ActivitiesLand (36,150) - - - - Buildings (25,000) - - - - Furniture and Fixtures (5,500) - - - - Total (66,650) - - - -

Financing ActivitiesLong Term debt - - - - - Common Shares 150,000 - - - - Dividends - (26,518) (42,093) (55,342) (65,494) Total 150,000 (26,518) (42,093) (55,342) (65,494)

Net Cash Flow 46,518 15,575 13,249 10,152 10,872 Cash Bal Beg of Year - 46,518 62,093 75,342 85,494 Cash Bal End of Year 46,518 62,093 75,342 85,494 96,366

Table 5.4 Projected Cash Flows

5.5 Break Even Analysis

During the financial analysis of this business, I conducted a break-even analysis which would

determine when the amount of customers necessary to break-even in profits. As shown in Figure

5.5 the break-even number of customers is very close to the actual amount of customers, and in

the first year, Fun Coffee House is in fact under the break-even which reflects the negative net

income in the first year.


Fun Coffee House

Figure 5.5 Break-even Analysis

5.5 Critical IndicatorsThere are a few ways of measure if a business is successful. Table 5.5 will show you some

critical indicators, like payback for next 20 years, the value of equity and NPV of Fun Coffee

House. These indexes mean that Fun Coffee House is a possible and profitable business.

Payback Gross 2,043,968 Net 1,893,968

Average 5 -year Net Income 38,842

Value of the Equity 331,737

Net Present Value 181,737

Table 5.5 Critical Indicators

5.6 Owners Compensations

The following illustration shows average owner’s compensation for next five years. Dividends

will be paid from the second year. For next five-year, owner’s compensation will be $79,522,


Fun Coffee House

which is not bad. As you can see, owner’s compensation will be above $100,000 in year five, so

this business is still attractive to the proprietor.

Owner Salary 40,000 40,800 41,616 42,448 43,297 Dividends - 26,518 42,093 55,342 65,494 Total Owners' Compensation 79,522 40,000 67,318 83,709 97,790 108,791

Table 5.6 Owners Compensation

5.7 Sensitivity Analysis We can see from the sensitivity Analysis that the number of customers per day, the higher the

average five-year profit, net payback, IRR and year five owner compensation. The more average

purchase for the customers, the higher the average five-year profit, net payback, IRR and year

five owner compensation.

When ROI is 20%, we can figure out which factor will influence business’s profitability more

hugely. Overall, the numbers are quite close by using two different variables for the sensitivity

analysis. However, we still can find out when the number of customers increases from 40 to 60,

which is 50%, average five-year owner compensation will increase by 136%.

When the average purchase per person increases from 13 to 15, which is 15%, average five-year

owner compensation can increase by 50%.

Therefore, we knew that average purchase per customer influence significantly more than

average customer per day. Thus, the major risk is if we can make consumers buy more drinks

and food in our store. However, it 's hard to avoid this danger by directly increase price of drinks

and food, because we have to keep the price competitive. So, we still have to focus on how to

attract more customers to come to our store. This variable is more easily to be changed.


Fun Coffee House

Average 5 Average 5 Year Number Cust/day year Profit Net Payback IRR Owner Comp

40 (2,648) 745,916 16.7% 46,256 0.550 ( Base) 38,842 1,893,968 38.8% 79,552 1.36

60 77,572 3,125,514 60.4% 109,183 2.72

Average Purchase per Person13 14,976 1,107,866 25.2% 61,448 0.15

14 ( base) 35,080 1,770,383 36.7% 76,680 0.5015 55,204 2,432,900 48% 91,912 3.22

Figure 5.6 Owners Compensation

ConclusionAfter doing business analysis, we can say that Fun Coffee House is a feasible and profitable

business. Fun Coffee House will provide an excellent experience which our customer will not

forget. Fun Coffee House still facing a few risks like lacking enough number of clients every day

and low average purchase. It increases pressure on our marketing strategies. This business can be

successful only when our marketing tools can touch and attract target market.


Fun Coffee House

Appendices

Appendix 1 Café Manu


Fun Coffee House


Fun Coffee House

Appendix 2 Financial BudgetPlease refer to attached financial budget to see full financial projections (Excel document).


Fun Coffee House

BibliographyCBC News . (2015, March 04). Coffee sales down 3%, but Canadians still love their coffee shops.

Retrieved from CBC News: http://www.cbc.ca/news/business/coffee-sales-down-3-but-canadians-still-love-their-coffee-shops-1.2981866

Government of Canada. (2016, April 20). Hobby, Toy and Game Stores (NAICS 45112) : Retail Revenues and Expenses. Retrieved from Government of Canada: https://www.ic.gc.ca/app/scr/sbms/sbb/cis/revenues.html?code=45112&lang=eng


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