Business Plan – Library with Coffee Shop

1. Industry Analysis

Café have emerged as the most dynamic category in the year 2016 in the UAE and the home grown concept has been catching the maximum attention of the consumers. The café operators compete with the specialist coffee shops as they provide wide range of menu variety (Euromonitor International, 2017) . According to the statistics the market value of speciality coffee shops in the UAE form 2010 to 2015 can be seen from the figure 1 shown below (STatista, 2016).

Figure 1: Market Value of speciality coffee shops and juice bars in the United Arab Emirates from 2010 to 2015 (STatista, 2016)

In the year 2015 the market value found of the specialty coffee shops in the United Arab Emirates was a round 450 million USD. With 3.4 billion cups of coffee being consumed per day, it is the most popular beverage across UAE. IN the international markets the UAE holds 35^th position in relation to consumption of coffee and it is growing at the rate of 30% annually. It is expected that the intake of coffee will be reaching the mark of Dh 409million by 2017 and this will be driven by the key factors like robust hospitality, expanding tourism as well as changing lifestyles. According to a study by 2020, the emerging markets for coffee, out of which many are in GCC nations, will be touching 50% of the global consumption, thus making the Gulf region quite attractive for the coffee entrepreneurs (Godinho, 2015) .

2. Description of the Company

2.1Brief Overview

The Library Café is a new business venture that has been started by me and it has been developed for the local coffee addicts for whom this will be dream place where they can escape the everyday stress in life as well as find a comfortable place to grab a book and read or meet their friends , all in one.

2.2 Mission Statement

The Library Café will be making best efforts to develop a unique place where the customers can easily socialise in a relaxing as well as comfortable environment, while reading books and sipping a cup of favourite coffee. We will be helping the customers to get rid of their daily stress by providing them some of the classic books and novels to read in a convenient location, friendly customer service as well as giving high quality products.

2.3 Products and Services

The Library Café will be having two main products : First is the books and magazines along with a small selection of audio and audio-visual materials for example audio books as well as movies . The maximum space will be occupied by the hardback as well as paperback books that will be grouped in major categories like children, fiction and non-fiction. The second main product line will be the speciality coffee of various flavours and various cup sizes.

2.4 Legal Status and Ownership

The Library Café will be wholly owned by me and it will be a proprietorship firm.

3. Market Analysis

3.1 Market Segmentation

The main focus of Library Café will be on the marketing activities so that it can reach out maximum number of the University students as well as faculty, along with the people who work in the offices that are located close to the Library Café as well as on the highly sophisticated teenagers . According to our market research these customer groups will most likely buy speciality coffee along with reading their favourite books. It has been found that the speciality coffee’s consumption is universal across various income categories as well as largely depends on level of higher education, so the closeness to the University campus will be providing an easy access to the targeted customer audience.

Figure 2: Market Segmentation for the Library Cafe

3.2 Target Market Selection

The main target market for the company will be the people who want their daily cup of coffee to be special one with a great taste and a favourite book in a completely relaxing atmosphere. These customers will be both males and females and they will vary in age , since the location is very close to the University campus so the large number of customers will be either the faculty or the university students.

3.3 Buyer Behaviour

The buying behaviour will be mainly impulse buying within the bookstore and the important motivator in this case will be the lesser price for the used books. In the fiction category paperbacks will be preferred as compared to the hard copies as their pricing is less. Thus pricing as well as impulse buying are the two factors which will be governing the buyers behaviour.

3.4 Competitor Analysis

Some of the key competitors for the Library Café will be:

Book Munch Café

Address: Jumeirah Branch

AL Wasl Square on Al Wasl

Road: Opposite AL reef

Lebanese Bakery

https://www.bookmunchcafe.com/

The Book Munch cafe believes that there exists a special connection between eating as well as reading. Thus it provides a unique combination of food along with a reading room environment that attracts as well as entertains large number of customers of all ages. It has also won many awards and opened a second store in 2016. It is a community café that has a live cooking kiosk (Bookmunch Cafe, 2018) .

Kuttab Cafe

It has been launched by a local publishing company called Kuttab Publishing and it teams up a café with a bookstore and there one can find an array of Arabic language texts from all genres ranging from the light hearted fiction to the children books, to religious texts as well as some serious philosophy. Here one can find some English language texts too which aims at learning more Arabic. then there is a gorgeous café with a stylish living room, it is located in Uptown Midriff (Walsh, 2013).

4. Economics of the Business

4.1 Revenue Drivers and Profit margins

The main revenue drivers for the Library Café will be the library membership fees or the books purchased and the number of coffee cups sold to the customers visiting the café. The company will try to maintain 65% gross profit margins as well as reasonable operating expenses thus the net profit margins will be growing from AED 100,000 to AED 125,000 in the same period.

4.2 Fixed and Variable Costs

The fixed costs will include the rent paid for the library café and will be a major expense, staff cost will also be a fixed cost that will also include the payroll taxes, payroll accounting services. other additional fixed costs will include the professional fees paid to consultants, utilities, advertising, maintenance of the shop, its equipment’s and the licenses (Lander, 2018) . The variable costs will include the cost that will be coming from the container as well as the product which it holds. the costs will keep on varying on the basis of the kind of products being served as well as on the quantity which goes into the drinks, so it will be tough to predict on overall basis (Lander, 2018) .

4.3 Operating Leverage and Its Implications

It is basically the measurement of the fixed costs in the form of percentage of its total costs; It is useful in evaluating the breakeven point of the Library Café along with the likely profits obtained on the individual sales.

4.4 Start-up Costs

The start-up expenses for the Library Café will include:

· Legal expenses to obtain the licenses and permits and the accounting services

· Consultant fees for assisting to set up the coffee bar

· Insurance coverage including general liability, property causality as well as worker’s compensation.

· Premises remodelling

· Marketing and promotional expenses for the opening of the Library Café and flyer printing.

· Pre-paid rental expenses for one month

· Other start-up expense that include phone, utility deposits as well as stationary.

4.5 Overall Economic Model

The economic model which the Library Café will be adopting is to make money by selling things that includes both the books and the coffee at the same time. It might happen that when a customer will read one book then he/ she might purchase number of cups of coffee so one book sold will bring along the sale of multiple cups of coffee.

4.6 Breakeven Chart

Considering the average monthly fixed costs of AED 20,300 in the financial year 2018 along with an average profit margin of 65%, the Library Café’s break even sales volume will be around AED 31,300 per month. This is evident that the company needs to generate the sales volumes from the very start only.

BREAK-EVEN ANALYSIS
Monthly Revenue Break-even	AED 31,247
Assumptions:
Average Percent Variable Cost	35%
Estimated Monthly Fixed Cost	AED 20,311

4.7 Profit Durability

The profit durability is quite high because the profit stream appears to be quite solid with the large number of regular customers coming from the university itself.

5. Marketing Plan

5.1 Overall Marketing Strategy

The marketing strategy of the Library Café will be mainly focussing on getting new customers as well as retaining the existing customers, along with getting the customers to pay more so that they come back to the library café more often. It will establish a loyal customer base

5.2 Product Strategy

The product strategy will include offering the library membership for one month or membership for one year. The customers can also purchase the books if they want. The menu offerings will be supplemented with free books as well as magazines which the customers can read within the Library Café.

5.3 Price Strategy

The pricing will be competition base pricing thus the pricing for the books will be following the model of other library shops. The volunteers working in the café will be getting discounts.

5.4 Promotions Strategy

Around 2,000 flyers will be distributed in the neighbourhood as well as in the University campus, in the selected office buildings. The promotional campaign will include a grand opening and the main target is the library users as well as visitors so the promotional activities will try to attract the customers and it will be focussed on the library

5.5 Distributions

No distribution strategy is required because both the library and café both are located at the same place where customers will visit themselves.

5.6 Sales Process and Sales tactics

The sales transactions will be handled by the Library café only, and to increase the speed of customer service two employees will be dedicated towards servicing the clients and one employee will be taking the orders from the customers. All the sales related data will be logged in the point-of-sale terminal which is computerised. To increase its client base it will use fliers as well as banners and make use of customer referrals as well as cross-promotion programs with various other business communities will be used.

6. Product / Service Design and Development Plan

6.1 Development Status and Tasks

First the library will be set up followed by the speciality coffee kiosk where all the equipment’s will be installed. Books will be then sourced for the library on the basis of the sections in the library.

6.2 Challenges and Risks

There can be some regulatory challenges or some kind of legal compline issues which the company might have to face. The only risk that the company will be facing is the risk of failure and for that we have planned the exit strategy where all the assets will be sold out.

7. Operations Plan

7.1 General Approach to Operations

Currently the most important factor for the company to run successfully is to attract large number of customers.

7.2 Business Location

Since most of the Library café’s in Dubai is located in Uptown Midriff, we have chosen the location near the HCT University so that the large number of university students and faculty can be attracted.

7.3 Facilities

It will be providing a user friendly environment which will be very relaxing along with best books and speciality coffee.

7.4 Equipment’s required

The equipment’s that will be needed will include : espresso machine, coffee maker, coffee grinder, food service equipment’s, storage hardware, counter area equipment , serving area equipment, office equipment’s, and other miscellaneous expenses.

8. Management Team and Company Structured

8.1 Management team

The company will be solely owned by me and there will be the management team that will consist of the shop manager, the shop coordinator and other employees for the café. The shop manager will be coordinating the efforts of the whole team along with directing the operations as well as management activities of the shop.

8.2 Board of Director’s

The board of directors will be just me and I will act as the sole individual who will be overseeing the management of the firm.

8.3 Board of Advisors

The board of advisors will include the panel of experts who will be providing counsel as well advice to the management on the regular basis.

9. Overall Schedule

The following milestones will be accomplished:

Milestone	Date
Securing the occupancy and location for Library Café	30^th April 2018
Improvements and changes in the building	31^st May 2018
Purchase the equipment’s and décor	15^th June
Assemble and hire the human resources	June 2018 end
Advertising through promotional campaigns	July mid 2018
Opening of the Business	July end 2018

10. Financial Projections

10.1 Sources and Uses of Funds Statements

The funding for the company will be coming from the two major sources that will include the investments done by the owner along with securing bank loans from Emirates NBD bank. The owner will be contributing roughly AED 100,000. the investors will also be making some contribution.

Source and Use of funds	Amount in AED
Sources of funds
Owner’s injection	AED 100,000
Loans from the bank	AED 30,000
Investors	AED 40,000
Total source of funds	AED 170,000

10.2 Pro forma Income Statements

The estimated profit and loss for the Library Café will include:

PRO FORMA PROFIT AND LOSS ( all in AED)
	Year 1	Year 2	Year 3
Sales	584,000	642,400	706,640
Direct Cost of Sales	204,400	224,840	247,324
Other	0	0	0
TOTAL COST OF SALES	204,400	24,840	247,324
Gross Margin	379,600	417,560	459,316
Gross Margin %	65.00%	65.00%	65.00%
Expenses
Payroll	124,600	143,800	155,144
Sales and Marketing and Other Expenses	25,800	27,600	31,000
Depreciation	5,400	5,500	5,500
Rent	48,400	52,800	52,800
Rent	6,000	6,000	6,000
Maintenance	5,840	6,424	7,066
Utilities/Phone	9,000	9,500	10,000
Payroll Taxes	18,690	21,570	23,272
Other	0	0	0
Total Operating Expenses	243,730	273,194	290,782
Profit Before Interest and Taxes	135,870	144,366	168,534
EBITDA	141,270	149,866	174,034
Interest Expense	2,821	2,326	1,618
Taxes Incurred	33,740	35,510	42,424
Net Profit	99,308	106,530	124,491
Net Profit/ Sales	17.00%	16.58%	17.62%

10.3 Pro Forma Balance Sheet

It is expected that the net worth of the company will be increasing from approx. AED 212,000 by the end of FY 2018 to approximately AED 443,000 in FY 2020. The table shown below provides a summary of the project balance sheet for this period.

PRO FORMA BALANCE SHEET ( ALL FIGURES IN AED)
	Year 1	Year 2	Year 3
Assets
Current Assets
Cash	195,358	296,358	417,648
Inventory	21,175	23,293	25,622
Other Current Assets	0	0	0
TOTAL CURRENT ASSETS	216,533	319,651	443,270
Long-term Assets
Long-term Assets	59,170	61,170	63,170
Accumulated Depreciation	5,400	10,900	16,400
TOTAL LONG-TERM ASSETS	53,770	50,270	46,770
TOTAL ASSETS	270,303	369,921	490,040
Liabilities and Capital	Year 1	Year 2	Year 3
Current Liabilities
Accounts Payable	31,974	31,947	34,836
Current Borrowing	6,700	3,400	100
Other Current Liabilities	0	0	0
SUBTOTAL CURRENT LIABILITIES	38,674	35,347	34,936
Long-term Liabilities	20,000	16,415	12,454
TOTAL LIABILITIES	58,674	51,762	47,390
Paid-in Capital	140,000	140,000	140,000
Retained Earning	(27,680)	71,628	178,159
Earnings	99,308	106,530	124,491
TOTAL CAPITAL	211,628	318,159	442,650
TOTAL LIABILITIES AND CAPITAL	270,303	369,921	490,040
Net Worth	211,628	318,159	442,650

10.4 Pro Forma Cash Flows

As can be seen form the table shown below the company will try to maintain a healthy position in its cash flows and this will help it in on-time debt servicing as well as make available the funds for future development of the company.

PRO FORMA CASH FLOW
	Year 1	Year 2	Year 3
Cash Received
Cash from Operations
Cash Sales	584,000	642,400	706,640
SUBTOTAL CASH FROM OPERATIONS	584,000	642,400	706,640
Additional Cash Received
Sales Tax, VAT, HST/GST Received	0	0	0
New Current Borrowing	0	0	0
New Other Liabilities (interest-free)	0	0	0
New Long-term Liabilities	0	0	0
Sales of Other Current Assets	0	0	0
Sales of Long-term Assets	0	0	0
New Investment Received	0	0	0
SUBTOTAL CASH RECEIVED	584,000	642,400	706,640
Expenditures	Year 1	Year 2	Year 3
Expenditures from Operations
Cash Spending	124,600	143,800	155,144
Bill Payments	327,865	388,715	420,945
SUBTOTAL SPENT ON OPERATIONS	452,465	532,515	576,089
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	0	0	0
Principal Repayment of Current Borrowing	3,300	3,300	3,300
Other Liabilities Principal Repayment	0	0	0
Long-term Liabilities Principal Repayment	0	3,585	3,961
Purchase Other Current Assets	0	0	0
Purchase Long-term Assets	0	2000	2,000
Dividends	0	0	0
SUBTOTAL CASH SPENT	455,765	541,400	585,350
Net Cash Flow	128,235	101,000	121,290
Cash Balance	195,358	296,358	417,648

10.5 Ratio Analysis

The business ratios of the company have been outlined below:

RATIO ANALYSIS
	Year 1	Year 2	Year 3	INDUSTRY PROFILE
Sales Growth	0.00%	10.00%	10.00%	7.60%
Percent of Total Assets
Inventory	7.83%	6.30%	5.23%	3.60%
Other Current Assets	0.00%	0.00%	0.00%	35.60%
Total Current Assets	80.11%	86.41%	90.46%	43.70%
Long-term Assets	19.89%	13.59%	9.54%	56.30%
TOTAL ASSETS	100.00%	100.00%	100.00%	100.00%
Current Liabilities	14.31%	9.56%	7.13%	32.70%
Long-term Liabilities	7.40%	4.44%	2.54%	28.50%
Total Liabilities	21.71%	13.99%	9.67%	61.20%
NET WORTH	78.29%	86.01%	90.33%	38.80%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	65.00%	65.00%	65.00%	60.50%
Selling, General & Administrative Expenses	47.94%	48.47%	47.37%	39.80%
Advertising Expenses	2.26%	2.18%	2.26%	3.20%
Profit Before Interest and Taxes	23.27%	22.47%	23.85%	0.70%
Main Ratios
Current	5.60	9.04	12.69	0.98
Quick	5.05	8.38	11.95	0.65
Total Debt to Total Assets	21.71%	13.99%	9.67%	61.20%
Pre-tax Return on Net Worth	62.87%	44.64%	37.71%	1.70%
Pre-tax Return on Assets	49.22%	38.40%	34.06%	4.30%

Bibliography

Bookmunch Cafe, 2018. Home. [Online] Available at: https://www.bookmunchcafe.com/ [Accessed 17 APril 2018].

Euromonitor International, 2017. Cafés/Bars in the United Arab Emirates. [Online] Available at: http://www.euromonitor.com/cafes-bars-in-the-united-arab-emirates/report [Accessed 17 April 2018].

Godinho, R., 2015. The rise of speciality coffee in the UAE. Khaleej Times, 11 Nov.

Lander, S., 2018. Coffee Shop Cost Analysis. [Online] Available at: http://smallbusiness.chron.com/coffee-shop-cost-analysis-76311.html [Accessed 17 APril 208].

STatista, 2016. Market value of specialty coffee shops and juice bars in the United Arab Emirates from 2010 to 2015 (in million U.S. dollars). [Online] Available at: https://www.statista.com/statistics/719809/uae-market-value-of-specialty-coffee-shops-and-juice-bars/ [Accessed 17 APril 2018].

Walsh, P., 2013. Library cafes in Dubai. [Online] Available at: http://www.timeoutdubai.com/gallery/45306-library-cafes-in-dubai?image=6 [Accessed 17 April 2018].

Business Plan – Library with Coffee Shop UAE

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