Business Plan of Cafe
1 Executive Summary 1.
1Company and Product Information OpenHearts Cafe is a recreational cafe company that aims to provide NTU students with a meaningful experience of their university life. Apart from providing food and beverages, our cafe aims at providing a place for relaxation and fun for students, a place where they can temporarily forget about their academic workload and other stresses. Our cafe solves the pain-point of NTU students not having a place to freely be loud and celebrate with their friends, which is an essential part of university life.Located slightly away from residential and academic areas, OpenHearts Cafe offers an easy solution to this problem. 1.
2Opportunity Considering that there is currently no such place in NTU where students can behave like children, and ‘let go’ for a while, our team believes that there is tremendous opportunity for such a cafe. 1. 3Competitive Advantage Since we ourselves are NTU students, we have an edge over external cafes who might want to open up branches in NTU, as we understand the problems faced by NTU students, and what will be preferred most by them.We are also in a position to communicate directly with students, who will be our customers, to understand what exactly they want. 1. 4Market Strategy Our marketing strategy will be to provide a unique service, catered specifically to meet the needs of NTU students.
To achieve an edge over competitors, and provide the best service to our customers, we will provide an ambience that is not available elsewhere on campus. We will also aim at providing ‘More for Less’ through competitive pricing. We will mainly use social media and posters/flyers on campus to promote OpenHearts Cafe. . 5Financial Projections The start-up cost of the business will be around $200,000, which we expect to secure from NTU Ventures, SPRING Singapore and some other venture capitalists. With this investment, we start earning positive cash flows in the first month of operations, and expect to break-even and earn a profit after 9 months of operations.
The Return on Equity is expected to be around 99% in year 3. 1. 6Exit Strategy Our business has been planned for a long-term period, and not just for the EN105 course.Our team plans to control the cafe for at least a period of 3-4 years, and then sell off the company to either students who are interested in buying the cafe, or external companies who want to take over the company. 1. 7Management Team Our Management Team comprises of 6 individuals from diverse academic backgrounds, ensuring that each one of us contributes effectively to decision making.
Each of us knows our job scope well and thus make up an efficient and balanced team. 2Company Information OpenHearts Cafe is set up by six NTU undergraduates who aim at providing NTU students with a wholesome university life.Our company is strongly committed to ensuring that at NTU, every student feels at home. 2. 1Management Team The management consists of six individuals from diverse academic backgrounds and strong team dynamics that add to the overall efficiency of the company. Each one of us is very dedicated and constantly strives to achieve better performance.
2. 2Company Structure 3Industry Analysis 3. 1PEST Analysis 3. 1. 1Political The political environment in Singapore is quite stable, and our cafe shouldn’t face any issues on a political front.
Moreover, the political structure of NTU is quite open to entrepreneurship, and quite supportive of new ideas and student initiatives. 3. 1. 2Economic The economic condition will have an impact on OpenHearts cafe’s functioning. A period of recession can be harmful to OpenHearts, as students will be more careful in spending their money.
However, our services are competitively priced, so students will not have to be too hesitant in spending at our cafe. 3. 1. 3Social Today’s society has seen an increasing tendency of young consumers to hang out in various places.Even if youngsters have nothing to do, they prefer to spend time with their friends.
Also, students have reported to not wanting to study all the time. All these social factors support OpenHeart Cafe’s mission. 3. 1. 4Technological The technological environment will not have much of an impact on OpenHearts Cafe, since it is not a technology related business.
However, our cafe can have the latest gadgets and games such as the Playstation 3 and Wii, to attract more and more customers, provided funds are available. 3. 2Michael Porter’s Five Forces 4Market Analysis 4. 1Market Segmentation, Targeting and Positioning 4. 1.
Market Segmentation and Targeting The NTU student population is huge and keeps growing every year. We can segment this market into those studying in NTU and NIE and those studying outside. We can further segment these students into those who have spare time and need a place to relax in between classes, and those students who go back home after classes or who prefer to study during breaks. Students studying in NTU and NIE, and those who want to relax and take their mind off studies will be our target market. Our cafe aims at those students who like to have fun with their friends but are not able to do so easily on campus.
With the growing number of students in NTU, we expect our target market to expand in the coming years. 4. 1. 2Market Positioning OpenHearts Cafe aims to position itself in the minds of students as a meeting point for friends to get together and have a good time. Unlike other canteens and SAC which are considered as study areas, OpenHearts cafe is a stress-free zone intended solely for the purpose of recreation.
4. 2Competitive Analysis There are a large number of cafes in Singapore that cater to young students. Our direct competitors on campus include Starbucks and the canteens in NTU.However, these cafes and canteens aim at primarily providing food for students, and don’t focus on their ambience. They provide places for students to study.
OpenHearts Cafe aims at creating a ‘no-study’ environment for students, where they can not only hang out with their friends, but also make noise and play games. Our indirect competitors may be students themselves, who may either try to set up similar cafes, or insist that they prefer sitting with their friends at their halls/ residences. However, such ‘competitors’ cannot provide the same ambience and services that OpenHearts cafe provides. Overall Marketing Strategy 5. 1Product Strategy The core product of OpenHearts cafe is basically an ambience for customers (i.
e. NTU and NIE students) to relax and unwind. OpenHearts cafe is a stress – free zone where customers can have fun and forget about their studies for a while. It is a place to socialize and meet new people as well as a place to catch up and spend time with old friends. As part of the actual product, OpenHearts cafe will contain a large variety of board games for customers to rent out and play.
There will also be the provision of food and drinks at affordable rates.Food items available in the cafe will mostly be snacks and finger food, especially snacks from various countries all over the world. Customers can also book the entire cafe in advance and host private parties. The cafe will be furnished with tables surrounded by comfortable couches and has a capacity of 70 people at a time. The decor will be youth oriented with graffiti and darts boards on the walls. 5.
2Pricing Strategy Keeping in mind that our customers are students who may not have a lot of spare cash on hand, we plan to offer a ‘More for Less’ price, by keeping the rates as affordable as possible.We also have to align our food prices according to those of the canteens on campus so that we don’t seem overpriced. The charge for renting board games is $10 per group. The charge for food will be around $1-$3 for drinks and around $3-$5 for snacks. OpenHearts Cafe will also have offers and discounts for frequent customers.
5. 3Promotion Strategy The promotional strategy of OpenHearts cafe aims at portraying it as a happening and cool place to hangout. We will implement this strategy in two ways. Firstly, we will make effective use of social media especially Facebook to popularise the cafe before it is even opened.We will create a Facebook page and make full use of our online network of friends so that a large number of NTU and NIE students come to know about our cafe.
Our fellow students will get a better picture of the cafe if it is popularised by other students. Secondly we will host parties and other events such as ‘karaoke nights’ within the cafe especially during our opening period. Students can buy tickets for these events and attend them. Attendees of these events will be exposed to our cafe and the facilities we offer and can become potential customers as well as provide word of mouth publicity.Other forms of promotion would be by providing offers and discounts to frequent visitors of the cafe.
We will also have food sampling stalls in spine to popularise the snacks from different countries that we will be serving in OpenHearts cafe. We can also get campus newspapers such as Nanyang Chronicle and Tribune to cover the opening of our cafe so that most students are aware of OpenHearts cafe. 5. 4Place Strategy The location we have chosen for the cafe is on 36 Nanyang Avenue where the International Student’s Centre is located.This place is away from Halls of Residence so there shouldn’t be any complaints if we play loud music in the cafe.
It is also between north and south spine so that all students can access it easily. NTU’s free shuttle bus D stops exactly in front of where we plan to locate our cafe, which ensures easy access. 5. 5Market Research Strategy We will continually conduct market research on our services, and what customers want to ensure that our customers are served in the best possible way. We aim to continually improve our services, and cater our products and services to meet customer requirements.Our team believes in never being complacent, and we will regularly communicate with customers to maintain our edge over competitors.
6Company Analysis 6. 1 SWOT Analysis 6. 2. 1Strengths Understanding Customers Since OpenHearts Cafe will be run by students, we will know what exactly our customers, NTU students, want and what is most convenient for them. We will also be in a position to directly interview our customers for purposes of research in improving our services.
We can understand what are the problems faced by students, and can try to come up with ways to effectively solve such problems.A Place to Chill Students have no place on campus that offer them a ‘no study’ environment. All other canteens and cafes in school are often occupied by students studying. However, we understand that at times students just want to take their mind off academics and need a place to ‘chill’, which is exactly what our cafe offers. Location Since our cafe will be located away from halls of residences, students are allowed to play loud music, and make noise with their friends, at the same time ensuring that offices, schools and residents aren’t disturbed.
6. 2. 2Weaknesses Vacation PeriodOur main weakness is that since we aim at targeting NTU students, we can expect slow business in the vacation period. However, there are many students who stay back in the vacations as well as those who live near NTU who will frequently visit our cafe due to limited options nearby. Time Constraints Another problem is that students are often in a rush, which may result in a low turnout of customers for our cafe.
However, most students have a 2-3 hour break between classes, and would prefer to relax in that break and be fresh for their next class instead of studying throughout the day. Limited CapacityFinally, our capacity is expected to accommodate around 70 students at a time, which can be limited especially during peak hours. With more funds, we can probably expand more. 6. 2. 3Opportunities NTU’s Outlook NTU is aiming to become a more ‘happening’ and vibrant campus, as is seen with the plans to open a pub and cinema on campus.
OpenHearts cafe provides NTU students with a more happening twist to their day, and ensures that they have something to look forward to apart from classes. Thus, NTU’s attitude towards a more balanced and fun campus life can aid OpenHearts cafe in reaching great heights.Increasing customer base NTU’s population is steadily growing, more and more courses are being offered, and consequently more students are being taken in. This provides us with a larger target audience to pitch our service to. Customer Mindset Another opportunity is the mindset of youngsters. Most undergraduates want to make the most of their time at university, and don’t want to study all the time, which is evident from the large number of students participating in extra-curricular and hall activities.
OpenHearts cafe taps on this mindset of youngsters. 6. 2. 4Threats CompetitorsA major threat to our cafe is that there are a large number of competitors in this sector. Starbucks is a major competitor, especially after it has come to campus. There are also a lot of food options available on campus, which customers might prefer over OpenHearts Cafe.
However, as stated earlier, the unique selling point of OpenHearts Cafe will be its ambience, which will drive customers to visit us again and again. Such ambience and ‘no study’ environment are not offered by any other cafe on campus, including Starbucks. Our food will also be competitively priced to ensure that it is affordable to students.Low Barriers to Entry Another threat is that there are very low barriers to entry in such an industry, and it is easy for other companies or cafes to copy our idea. However, once we have got the first mover advantage, we will have an edge over other cafes that might try to imitate OpenHearts. Problems with Offices Finally, we might face some problems with authorities and offices if we play loud music or make too much noise.
However, to avoid this, we will ensure that our cafe is located in an area that is not too close to such buildings. 6. Critical Risk Factors A major risk factor is the threat of being imitated by competitors. Since there are low barriers to entry, it is quite easy to copy and provide such a cafe to NTU students. Students have tremendous options in Singapore, though not on campus. However, by differentiating our services, we believe that we will be able to capture a large market share and gain the first mover advantage, thus having an edge over competitors.
Since our cafe supports a ‘no study’ environment, we may face problems encouraging such an idea in the university.However, our cafe aims to provide students with a break from studies, and does not intend to encourage them to totally neglect their studies. The intention of our cafe is to promote a sense of belongingness among students. Another risk factor is the unpredictable nature of consumers. Though students may want a place to relax and take their mind off studies, there is no guarantee that they will come to our cafe, especially if it is located far off from schools and halls.
Finally, a major risk is that students may come to the cafe just for the ambience, and my not buy any food or drinks, or rent board games.In such a situation, it may not be possible to ask the students to leave. However, since students are expected to come for periods of 2-3 hours between their classes, there is a high chance that they might want something to eat or drink, even if they don’t want to play board games. 7Operations Plan Since we want the ambience of our cafe to be its unique selling point, a considerable amount of time has to be spent on renovation, which includes ensuring that the place is properly lit up and painted to create a lively atmosphere.The first three months, January to March 2012 will be spent in renovating the cafe. Our operations start from April.
April will be a testing period to gather feedback and improve upon the cafe’s services. Moreover, since it will be a new start-up, we expect relatively low traffic in our cafe. The cafe will also experience low traffic between May to July, being a vacation period. However, there will be some students staying back for the summer holidays, and some students living near NTU who would probably come to the cafe for a while.The cafe will be open for about 6-7 hours during vacations. Our operations will finally take flight starting from August.
This will be an opportunity to us because many freshmen will enter university, and be willing to explore different options for recreation on campus, rather than going outside. We initially expect about 100 customers per day, and expect this to increase to about 350 per day by the next year. 8Financial Projections Our team has estimated the profitability of OpenHearts Cafe based on estimates of future profits and cash flows, over a period of three years. . 1Breakeven Analysis Based on our future cash flow estimates, our team expects to start earning cash (without considering any amount borrowed from investors) after 2 years 7 months. However, if we succeed at getting around S$200,000 from investors, we earn a positive cash flow in the first month itself.
Our team expects to earn a positive profit starting from year 2. 8. 2Financial Ratios Our cafe’s gross profit margin is expected to be around 65% at the end of year 1. This is expected to shoot up to about 90% by the end of year 3.Though we incur a net loss of 127% at the end of year 1, we expect to be able to overcome this by year 2 with a net profit of 20%, and with a net profit of 40% by the end of year 3. Our main ways of achieving higher gross and net profit will be through increasing our customer base, and reducing cost of sales.
The return on equity will be a negative 83% in the first year, but climbs up to a positive 35% by year 2 and to a whopping 105. 35% by year 3. We plan not to maintain any current liabilities in the first 3 years. At most, the current liabilities will be salaries payable to us, the owners, in the event of a cash shortfall. .
3Valuation of Business The current value of our business taken at a WACC of 8. 1% (industry average) using the discounted earnings method is $73,663. 64. The value of our business is expected to increase steadily after that. 9Exit Strategy Our business has been planned not with EN105 in mind, but with an aim to carry it on for a long period.
Our team plans to carry out the business for a period of 3-4 years at least, and then we plan to sell off our business to either interested students who want to continue running the cafe,