Sales Projections for Café Delight Organic Coffee Shop, Research Paper Example

The Café Delight Organic Coffee Shop will be a new venture that serves novel blends of organic coffee as well as their signature blend of teas, various soft drinks, a diverse array of pastries, and deli sandwiches.  The location will offer breakfast and lunch service, but oven-warmed food will be available during all business hours and Wireless Hotspot internet access will be available to customers at no charge.  The establishment will present a welcoming ambiance with soft music from CDs offered for sale in a nearby display and recess lighting in select areas with limited seating in keeping with the trend of modern chain cafés.  Patrons have the option to walk up to the counter, order, and wait for their order at the counter or take a seat, if available, and wait for their order on an informal first-come-first-serve basis.  This proposal will detail the expected sales projections for the new Café Delight Organic Coffee Shop, including sales forecasts and the requisite venture capital.

Sales Description

The intended locale for the Café Delight Organic Coffee Shop does not currently have a Starbuck’s or other similar establishment within several miles and the store will be positioned in a zone that currently has extensive foot traffic.  As a new venture, the Café Delight Organic Coffee Shop will incur start-up expenses that are anticipated to be offset by the first years’ sales revenue once the establishment is open for business.

The Café Delight Organic Coffee Shop will offer six diverse beverages groups including coffee, cocoa, tea, international sodas, smoothies, and fruit juices with several choices available for each group to provide greater variety the local competition with drinks that are easy to prepare.  The food offerings for breakfast services will include muffins, scones, cookies, cakes, and breads while lunch service will offer sandwiches, Paninis, wraps, and salads.  The store will also offer merchandise for consumer purchase which includes bags of coffee grounds, reusable travel coffee cups, gift cards, and a variety of other items offered in the displays placed strategically by the counter so customers will notice the items as they wait for their orders.

Based on the analysis of average sales for the closest Starbucks and the assessment of consumer traffic in the area, the Café Delight Organic Coffee Shop can expect to service about 300 patrons per day where the average customer spends $4.05 per visit for coffee, amounting to about $0.48 in profit per sale (Clark, 2015).  This amounts to $1,215 in sales per day with an estimated $144 in daily profits.  Additionally, sales for the foods served are estimated to be approximately 11,000 units in the first year, priced at about $4.34 per meal for a total of $47,740 in annual food sales (Clark, 2015).

Formulating comparative histories is a proactive method of assessment that utilizes existing data based on market analysis to determine current trends that maybe used to predict the feasibility of a venture (de Motta & Ortega, 2013).  Through this method, data is provided regarding the former successes and failures of past ventures relative to the company’s current status to determine whether projects should be modified or even abandoned due to perceived risks (Kendrick, 2009).

The start-up costs for the Café Delight Organic Coffee Shop are detailed in Table 1, which includes the associated expense of construction of a new store, legal expenses, and marketing costs for advertisement of the new location, office supplies, and the necessary store equipment that includes a partnering relationship with a coffee supplier.

Start-up expenses are in line with those of other coffeehouse chains that build-out a new store location with expenses estimated at $147,788 and $25,000 for opening inventory and the total requirement is estimated at $300,000 so there will be ample operating capital.

The Sales Forecast

The start-up requirements also include $68,388 of short and long-term assets, as allocated in Table 2 and Table 3below.

Acquiring venture or investment capital can be extremely difficult due to the unique challenges encountered through the process of building and staining new businesses (Gervais, Heaton, & Odean, 2011).  As noted by differences governing commercial markets, the significant relative impacts on the formation of the capital structure established by new as well as existing companies have determined the capital needs of the Café Delight Organic Coffee Shop (de Motta & Ortega, 2013).

Conclusion

The establishment of the Café Delight Organic Coffee Shop will strongly depend on the location and consumer traffic the company is able to draw in (Rivas, 2011).  Although competition can diminish profits, the lack of other similar businesses in the target area place optimistic views on the anticipated sales, which are quite modest for this type of venture.

References

Clark, T. (2015, November 5). Starbucked: A double tall tale of caffeine, commerce, and culture. Retrieved from Fast Company: http://www.fastcompany.com/60995/coffee-cash

de Motta, A., & Ortega, J. (2013, Winter). Incentives, capital budgeting, and organizational structure. Journal of Economics & Management Strategy, 22(4), 810-831.

Gervais, S., Heaton, J. B., & Odean, T. (2011, October). Overconfidence, compensation contracts, and capital budgeting. The Journal of Finance, LXVI(5), 1735-1777. doi:10.1111/j.1540-6261.2011.01686.x

Kendrick, T. (2009). Identifying and Managing Project Risk (2nd ed.). New York, NY, USA: American Management Association.

Rivas, J. (2011). Diversity & internationalization: The case of boards and TMT’s. International Business Review. doi:10.1016/j.ibusrev.2010.12.001