TECNIA INSTITUTE OF ADVANCED STUDIES

Master of Business Administration 2010-12 Batch (Semester II) Business Research Course Code: MS 108

OPENING A COFFEE SHOP IN

THE BEST LOCALITY

Submitted To Mr. AJAI PAL SHARMA

Submitted By NIKHIL AGGARWAL Enrollment No.:-09517003910

Assignment Jan-Apr 2011 Class MBA II Subject: Business Research Faculty: Dr. Ajai Pal Sharma
5) You are planning to open a coffee shop in one of two areas in your locality. Conduct a secondary data search on key variables that would allow you to make a logical decision on which area is best suited for your proposed coffee shop.

Given all the competition, is opening a specialty coffee business still viable?
Yes. The demand for specialty coffee is growing every day. Even in the mature coffee markets of Portland, Seattle and San Francisco, opportunity still exists for new coffee businesses. In other parts of the country, there is vast opportunity. Italy, with a population of 60 million, has over 200,000 coffee bars. In comparison, the U.S. has approximately 15,000 coffee bars with a population of 290 million. Do the math!

How do I determine the right location for my coffee shop?

Finding a good location generally requires effort, persistence and patience. Probably one of the hardest things for people to realize is that the right location is worth waiting for. Take time to find the right location, even if it takes six months to a year. Your location considerations will, of course, depend upon your concept. You will need a different type of location for an upscale, sit-down coffee bar than you would for a cart or drive-thru operation. One factor common to all desirable locations, however, is the proximity of a large population of potential coffee drinkers. Your business needs to be in a convenient location for customers - on their way to work in the morning, around the corner from where they work, or in the mall where they shop. Following points should be kept in mind while opening a coffee shop:Firstly, know your market.

Once you have decided you want to open a coffee business, your very first point of call should be to understand your market, and make sure that your idea fits into the marketplace. For example, opening a predominately takeaway coffee shop aimed at the commuter market is unlikely to be desired in a suburban town populated by families, away from any train or bus links. However, it may be popular in a city suburb close to a well known commuter train station.

Not fitting your business to your area is a classic mistake first time business owners can make.

So how do you know whether your idea will fit into the market place? Thats when the
first stage of research comes in. 1. Identify which is the most important to you first For example, do you want to be situated in a certain geographical area? If so, focus your research on that area what businesses are already there, what is the socio-economic class of the inhabitants, what kind of coffee shop would be required? Then focus your research on creating the right caf for that area. If however, it is the concept which is more important to you (say, for example, you want to open an ice cream parlour and caf), you will need to widen your geographical search so you open your business within an area that it will suit. In the ice cream parlour analogy, this may be an area which sees a lot of tourists, or an area within walkable distance of schools, offices and a high street. 2. Analyze existing businesses Once you have an idea of where you want to open, do some research into other businesses in the nearby area. Will your business fit in? Opening a chic, high end caf bar in an area inhabited by charity shops and service businesses (such as laundrettes and chemists) may be problematic as the local residents may not go to that area for entertainment.

However, opening in an area which is populated by independent boutiques and restaurants will be more successful, as you already have a solvent clientele used to visiting that locality. 3. Dont fear competition Often in the food and drink market, businesses can feed off each other. Bear this in mind when looking for locations. Just because an area already has several types of caf, dont automatically discount a suitable spot. Social venues attract people, and people like choice. Instead, ensure you are doing something which makes your business stand out, which maybe is not offered by the neighboring cafes. Dont copy an existing business like for like however, especially in smaller areas such as suburbs or small towns. Make sure your coffee menu is unique and different, and prove to your customers and the existing businesses that you can all work together. This will help create a more neighborly feel, which will in turn benefit you all. 4. Its good to talk The best way to find out what people want is to go and talk to them! Your best research will be that which involves you going into the marketplace and talking to your potential customers. Find out what they want from a caf, what theyd like to see on the menu, what opening hours theyd like. Dont try to implement all the ideas, but use them as the framework for your business plan, and as a guide for your decision making. 5. Focused differentiation strategy It seeks to provide high perceived product/service benefits justifying a substantial price premium, usually to selected market segment. In many markets there are described as premium products and are usually heavily branded. Broad differentiation strategy which seeks to provide product or service that offer benefits different from competitors and that are widely valued by buyers. The aim is to achieve advantage by offering better products or services at same or higher price. A failure strategy is one which does not provide perceived value-for-money in terms of product features, price or both. In my opinion, the position of Starbucks (it is a leading retailer, roaster and brand of specialty coffee and owns thousands of coffee shops all over the world) is between a broad differentiation strategy and a focused differentiation strategy.

6. Budget Dont be tempted to overspend. Keeping your set up and running costs as low as possible gives you a better chance of making a profit. Spend the money in the right places; on the dcor, good quality equipment, sturdy furniture spend only what you have to on rent deposits, business rates and legal bills. 7. Attend training courses There are dozens of training courses, consultancies and barista trainers who can help you stand out in the marketplace. If you have no previous experience, get some from the experts! 8. Understand your product If you are new to the industry, research your products. Coffee is the worlds second biggest traded commodity, and there are a wealth of books, documentaries, websites and even competitions in the world based around the bean. Where does it come from? How is it grown and traded? What is ethical trading? Have an understanding of coffee beyond serving it. 9. Premises and premises use The right premises can make or break the venture. Consider your business plan when looking for premises, make sure your location matches it. Also consider the use which has been applied to the premises by the council. Cafes selling basic food usually require A3 premises usage. General shop units are A1, and if you wish to open a caf in what has previously been a shop you may have to apply for change of use. There are also no guarantees it will be permitted, so try to look for property which already has A3 if possible. If not, befriend the local planners on the council and invite them to look round any potential unit you want a change of use on a friendly chat can often save you time and expense.

9. Caf layout In every premises you look round do a rough sketch of where your serving area will go, how many tables you can fit in and how many covers you can fit in. This will help you work out how many staff you need and what kind of income is realistic (as mentioned earlier). Pay attention to space for your customers to queue and move around. Plan your kitchen area with military precision every inch of space must be utilized well. Like your kitchen at home, always ensure you have a perfect triangle between coffee machine, sink and fridge.

How do I compete with the large chain operation that might be opened across the street from my caf?
Quality products and service are where the small operator can really compete against the chains. First, you can take more care in hiring your employees than the chains. Then, you can put your staff through a careful training program instead of the quick cookie-cutter course that many chains use. That will assure they know how to prepare the best drinks. What big chain executives can't do is interact with customers each day to gain a feeling for the pulse of the community. There is no way they can offer the personal touch that you can as a local owner. This is your biggest competitive edge, so take advantage of it.

Thanks