A BUSINESS DEVELOPMENT PLAN

ON

“THE COFFEE HOUSE”

SUBMITTED BY:

Rishabh Sarawagi

Sanchita Aryal

SUBMITTED TO:

Mr Sohan Babu Khatri

Course: MGT547 Business Development Plan

ACE INSTITUTE OF MANAGEMENT

MAY 2022
 STATEMENT OF PURPOSE

MBA, in our opinion, is more than a degree; it is a platform for learning various tips
and techniques as well as generating ideas with structured views on how to proceed.
Studying for an MBA necessitates a particular level of character demonstration and
strength. In recent years, the global business sector has become increasingly
intertwined. MBA would assist me in achieving my career goals. Our education has
provided us with the ideal foundation for understanding and learning, as well as the
ability to focus on solutions rather than becoming bogged down by obstacles. It would
allow us to channel my conceptual skills towards analyzing and resolving business
issues, as well as comprehending many issues that affect an organization's strategy,
structure, and system.

This Business Development Plan is created by Sanchita Aryal & Rishabh Sarawagi,
students of MBA evening at Ace Institute of Management, Kathmandu. The main
purpose of this BDP is to make a concrete plan of our business, and to draw our
Business Idea is a proper documented form, which can be presented to the Investors /
Banks for the purpose of funding / Investment / Loan. This BDP consists of the
detailed plan on how & where we will start / run this business, including the resources
required, partners, financial / operational plans & everything necessary. Another
purpose for this BDP is to be presented at the final submission under our course that
we are studying. And is to be presented to our course instructor Mr. Sohan Babu
Khatri.

ii
 DECLARATION

The business development plan has been prepared as an assignment required for the
course of MBA Pokhara University. This report is to be submitted to the Ace Institute
of Management purely for academic purpose.

There are not any market research agencies and other reliable sources for research and
development for the business plan of The Coffee House.

…………………………………..

Rishabh Sarawagi

MBAe

Ace Institute of Management

Pokhara University

…………………………………..

Rishabh Sarawagi

MBAe

Ace Institute of Management

Pokhara University

iii
 ACKNOWLEDGEMENT

We would like to express our sincere gratitude to ACE College, New Baneshwor for
providing us this wonderful opportunity to learn and understand the concept of
Business Development Plan.

This business plan project “The Coffee House” would not have been possible without
the kind support, help and guidance of many individuals. We would like to extend our
sincere thanks to all of them.

We are deeply indebted to our course instructor Mr. Sohan Babu Khatri, for his
inspiring guidance, encouragement, suggestions and constructive comments regarding
this business plan. We would like to thank him for his support, co-operation and
incessant patience for our inquiries.

We would like to thank the college faculty members and our colleagues who have
helped us with their support on shaping the business plan. We would like to
acknowledge and appreciate the support of all the individuals who has directly and
indirectly helped us in writing this business development plan.

Thanking You.

Rishabh Srawagi & Sanchita Aryal

iv
Table of Contents

STATEMENT OF PURPOSE........................................................................................ii
DECLARATION..........................................................................................................iii
ACKNOWLEDGEMENT............................................................................................iv
CHAPTER – 1................................................................................................................1
BUSINESS HIGHLIGHTS............................................................................................1
CHAPTER – 2................................................................................................................3
EXECUTIVE SUMMARY............................................................................................3
CHAPTER – 3................................................................................................................5
INTRODUCTION..........................................................................................................5
3.1. Vision..................................................................................................................6

3.2. Mission................................................................................................................6

3.3. Values..................................................................................................................6

3.4. Objectives (Short Medium | Long Term goals)...................................................7

3.5. Building Blocks of Business Models..................................................................7

3.5.1. Value Proposition.........................................................................................7

3.5.2 Target Customer Segment........................................................................7

3.1.1. Key Activities...........................................................................................8

3.1.2. Key Resources..........................................................................................8

3.1.3. Key partners.............................................................................................8

3.1.4. Customer Relationship.............................................................................8

3.1.5. Channel....................................................................................................9

3.1.6. Cost Structure...........................................................................................9

3.1.7. Revenue structure.....................................................................................9

3.1.8. Key to success..........................................................................................9

CHAPTER - 4..............................................................................................................10
PRODUCT AND SERVICES......................................................................................10
4.1. PRODUCTS AND SERVICES.........................................................................10

4.1.1. Espresso Drinks..........................................................................................10

4.1.2. Iced Coffee.................................................................................................10

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 4.1.3. Blended Beverage.......................................................................................11

4.1.4. Coffee alternatives......................................................................................11

4.1.5. Bakery items...............................................................................................11

4.2. Product Attributes and benefits to the customers..............................................12

CHAPTER – 5..............................................................................................................13
BUSINESS ENVIRONMENTAL ANALYSIS............................................................13
5.1. Industry Structure and market characteristics...................................................13

5.2. Market Trend.....................................................................................................15

5.3 Market Segmentation....................................................................................16

5.4 Market Needs and Growth............................................................................16

5.5 Target Market................................................................................................17

5.6. SWOT Analysis.................................................................................................17

5.6.1. Strength......................................................................................................17

5.6.2. Weakness....................................................................................................18

5.6.3. Opportunities..............................................................................................18

5.6.4. Threats........................................................................................................18

5.7. PEST Analysis...................................................................................................18

5.7.1. Political and Legal Environment................................................................18

5.7.2. Economic Environment..............................................................................19

5.7.3. Social Environment....................................................................................20

5.7.4. Technological environment........................................................................20

5.8. Five Forces of Market and its state in this industry..........................................20

5.8.1. Level of rivalry - very high........................................................................21

5.8.2. Entry potential - very high.........................................................................21

5.8.3. Power of suppliers - moderate....................................................................21

5.8.4. Power of customer - high...........................................................................22

5.8.5. Substitute products - high...........................................................................22

5.9. COMPETITOR ANALYSIS.............................................................................22

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CHAPTER – 7..............................................................................................................24
BUSINESS STRATEGY.............................................................................................24
7.1. SWOT Analysis.................................................................................................24

7.2 Value Chain Analysis.........................................................................................25

7.3 Strategy Diamond...............................................................................................26

CHAPTER – 8..............................................................................................................27
MARKETING PLAN..................................................................................................27
8.1. Marketing Objective..........................................................................................27

8.2 Consumer Analysis.............................................................................................28

8.3. Marketing Strategy............................................................................................30

8.4. Positioning.........................................................................................................30

8.5. Competitive Advantage.....................................................................................31

8.6. Survival, Competition and Growth in the Market Sustainably.........................31

8.7. Marketing Mix..................................................................................................32

8.7.1. Product.......................................................................................................32

8.7.2. Price............................................................................................................32

8.7.3. Place...........................................................................................................32

8.7.4. Promotion...................................................................................................32

8.7.5. People.........................................................................................................33

8.7.6. Physical evidence.......................................................................................33

8.7.7. Process........................................................................................................33

8.8. Sales Strategies, Management and Techniques.................................................33

CHAPTER – 9..............................................................................................................35
PRODUCTION | OPERATIONAL PLAN..................................................................35
9.1. Location.............................................................................................................35

9.2. Procurement......................................................................................................36

9.3. Value Chain.......................................................................................................36

ANNEXURE................................................................................................................60

vii
viii
 ACRONYMS
Pvt.- Private

Ltd.- Limited

i.e. – That is

NGO – Non-governmental Organization

INGO – International Non-governmental Organization

MBA – Master of Business Administration

EBDIT- Operating Profit Before Depreciation

NPV- Net Present Value

EBIT- Operating Profit After Depreciation

PBT- Profit Before Tax

NPAT- Net Profit After Tax

IRR- Internal Rate of Return

ix
 CHAPTER – 1
BUSINESS HIGHLIGHTS

The average people of Kathmandu spend more than 30 percent of their monthly income
on quality time alternatives with friends and family. To capitalize on this increasing
trend, we have planned on commencing a coffee shop entitled The Coffee House. It will
be located in Mangalbazar, Lalitpur near The Durbar Square. Around this location,
numerous banks, souvenir market, fabric shops and also handicraft shops can be found.
Also, it is considered as the must-go destinations in the Valley which makes it a prime
location for the tourists and even local coffee lovers. It will be open seven days a week
along with free wi-fi service.

Name of the company : The Coffee House

Nature of Business : Restaurant

Legal status of Business : Startup (Not Yet Registered)

Location : Mangalbazar, Lalitpur

Contact : 9814060377 | 9844697106

Major Product | Services : Coffee | Bakery Items |

Target Customers : Coffee Lovers | Office / Collage going people

Major Market : Kathmandu Valley

Capacity :

Working Schedule :

Number of shareholders :

Total Investment

• Investment in Fixed Assets

• Investment in Working/Operating Assets

Capital Structure (Debt: Equity)

• D:E Ratio

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• Total Equity

• Total Debt (information about Debt and Cost of Debt / Interest Rate)

Q. Bank and Loan Structure

• Short Term

• Long Term

R. Milestones of achievements (time plans of key milestones to be achieved)

S. Key Performance Indicators (the variables can differ as per the business model)

• Years of Loss / from when Profit would be made

• Net Income/Profit Margin

• Total Assets Turnover

• Fixed Assets Turnover

• Return on Assets

• Return on Invested Capital

• Return on Equity

• Breakeven Point (Sales / Number of Units)

• Payback Period

• Net Present Value

• Internal Rate of Return

Registration : Office of Registrar, Tripureshwor

Founder : Rishabh Sarawagi | Sanchita Aryal
Date & Place of Registration :
Website : www.thecoffeehouse.com.np
Email : info@thecoffeehouse.com.np

2
 CHAPTER – 2
EXECUTIVE SUMMARY

This report aims to outline the plan to startup of The Coffee House. The report has been
subdivided into various chapters with each chapter targeting a different aspect about the
operation of the business. The business concept, the business model, the idea, the
marketing strategy, operation plan, financial plan, risk and contingency plan, exit
strategy, organizational structure, etc. has been discussed in detail in this report. A
feasibility study has also been carried which involved a market as well as a financial
feasibility as well. SWOT analysis, PESTEL analysis, Porters five force model has been
used to analyze the market and industry scenario.

THE COFFEE HOUSE is a manufacturing company that will prepare the specialty
Coffee to the consumers. THE COFFEE HOUSE will be producing variety of espresso
drinks, iced coffees, Blended beverages and some coffee alternatives to its customer. It
aims to provide the superior quality coffee with good ambience where customer can
enjoy their leisure time. THE COFFEE HOUSE will be operating by 4 promoters each
having their specialization in different sector that will help the company to grow easily.

Started with the initial capital of Rs. 22,86,000 /-, the company plans to start its business
in Mangalbajar area. Targeting the tourists visiting the Durbar Square, the college going
teenagers, and the faculty of the colleges, the local people in the Durbar Square Area the
company is to be established.

To differentiate from its competitors The Coffee House will be acting as a facilitator of
the customized cake in the lalitpur area of Bakern’s Den, which is situated in
Bhatbhateni. It also plans to give the busy scheduled coffee lovers with the Drive-thru
facility.

The Coffee House will position itself as unique coffee bar where its patrons can not only
enjoy a cup of perfectly brewed coffee but also spend their time in an ambient
environment. Building a brand image by providing personal attention to the customers
and offering quality coffee products along with fast service would be the prime focus of
The Coffee House.

3
The Coffee House will be promoted using various ways. Above the line promotions
include advertising, consumer promotions (schemes, discounts, contests), while below
the line include trade discounts, freebies, and awards and so on. Further, we also
motivate our family, friends, and relatives to convey the positive word of mouth to other
peoples. Similarly, there will be a website, Facebook page and an Instagram account of
The Coffee House. There will be paid promotion of the pages and café in the digital
media. Newspaper advertisements will be displayed during the opening of the café and
also during special occasions.

In order to tell the customer that we are open to provide the service in that area The
Coffee House will be using various promotional strategies like advertisement in Print
Media, like the daily Newspaper, Magazines. The growing trend of use of Facebook will
be utilized by the company. Similarly, company also plans to provide some discount
coupons to the regular customer. In the initial phase, the company will use the promotion
material like the flyers.

A detail study of different situations affecting the business of the company and the
market trend analysis has been done, which includes calculation of its estimated
financial statements too. Going through the figures of the financial statement, the food
truck business The Coffee House seems to be profitable as it has positive cash flows
every year and the income generation from the business is promising.

The total investment for the establishment of the café is Rs 22,860,000, out of which
60% is funded by two partners and remaining 40% will be financed through loan @ 14%
interest from NIC Asia Bank. The café will start earning the profit in the second year.

The Coffee House operates with a belief that customers have their own taste and choice
just our responsibility is to pay them back with the satisfied service. It will come with a
complete solution for the people who are searching a new way of enjoying their every
moment.

4
 CHAPTER – 3
INTRODUCTION

In Nepal, as western culture has been taking over, consumer are gradually switching the
drinking habit in favor of specialty coffee and espresso-based drinks. This trend has been
increasing tremendously among the younger consumers due to growing middle class and
young populations.

“For young people, coffee represents a variety of experiences around. Coffee shops are
now very linked to technology (wifi for the internet) and spaces for studying, allowing
young people to come and sit to do two things at the same time,” Lacouture, president of
Proexport, said. According to her, “Consumers are not only drinking coffee anymore,
but looking for different experiences. In addition, coffee consumption is increasingly
becoming a status issue: it is not simply going to a coffee shop to sit and drink a coffee
cup, but the experience behind the cup.”

Nepalese market is an emerging market because it does not have standard trend set as of
yet. It is heavily influenced by the western trend. Over the last few years, coffee
consumption trend has been rising. Consumers are willing to pay more for the
convenience. Coffee is regarded as the highest consumed beverage in developed and
developing countries.

Traditionally Nepalese are more tea-people than coffee-people. There are tea-stalls in
virtually every nook and corner of the country and it is still the favorite national drink for
the rich as well as the poor. But over the last couple of years, the habit of coffee
consumption has shot up dramatically, particularly in Kathmandu and other urban
centers, with youngsters and foreign-returned professionals as the primary consumers.
Earlier considered as the drink of tourists and foreigners, coffee, is finding its place on
restaurant menus. Not only the tourist-centered and five star hotel restaurants, even the
common eateries along the sidewalks now consider coffee as a ‘must’ for their menus.
These days, White Mochas, Cappuccinos, Lattes, Café Mocha, Americano and Espressos
are what are on everybody’s lips, literally and figuratively.

5
According to industry insiders, the market for coffee is growing at the rate of around 15-
20 percent per year, and this growth has been fuelled mainly because of the changing
lifestyle of the people and increasing per capita income. Today, coffee houses are
popular meeting places for business and other social activities. They give people a place
where they feel like they belong where they see the familiar faces regularly. It is also a
place where people like to hang out other than their home and work place. People may
not go to their favorite restaurant on a daily basis, but they may visit a coffeehouse every
day. Nowadays, coffee is replacing alcohol as the social beverage of choice, with people
meeting for coffee instead of cocktails. People can now meet for coffee at any time of
the day, rather than just “cocktail hours”.

Company Overview

Company ownership

The Coffee House will be a partnership business venture. The company will be
incorporated and registered under the provision of the Company Act, 2063.

1. 3.1. Vision
Our vision is be to the premium quality coffee provider at affordable price with efficient
service.”

2. 3.2. Mission
The Coffee House would like to be established as one of the leading coffee house in
Kathmandu. It will be destination for people who are willing to spend some quality time
with a cup of coffee. We would like to encourage our customer of all ages and
background to come and socialize in the coffee house. Our success lies on the maximum
satisfaction to our customer.

The Coffee House will be a great place for a fresh drink, combining an intriguing
atmosphere with excellent and innovative coffee products.

3. 3.3. Values
 Learning never ends in life basic motto.
 Each and every individual are treated on the basis of equal opportunity.
 Customers are treated well and always welcomed their response.

6
 Benignity environment with personal attention provided to every coffee boozer that
enter The Coffee House.

4. 3.4. Objectives (Short Medium | Long Term goals)

 To establish a presence of a successful coffee house in Kathmandu valley and gain a
market shares in this business.
 To continue providing premium quality fresh coffee and efficient service at
affordable price.
 To promote the coffee culture in nation.
 To expand into a number of outlets by year three, and expand the business territory.
 To support Nepalese coffee.
 To facilitate availability of customized cake.

5. 3.5. Building Blocks of Business Models

3.5.1. Value Proposition
The value proposition is the promise of a value to be delivered and a belief from the
customers that value will be delivered and experienced. Putting value in practice creates
long term benefits for its customer, employs and all other stake holders. The value
provided by The Coffee House to its customers can be:

 Unique and surprising coffee drinking experience,

 Variety of food & coffee & Fast service,
 Place with good ambience to spend time,
 Regular price for premium coffee,
 Healthy and hygienic food and coffee.

3.5.2 Target Customer Segment

Demographics: The customer aged 16 to 40 are targeted who want to enjoy unique
coffee experience.

Geographic: The relevant target market is Kathmandu Valley. Selfie cafe will initially
focus to capture the coffee market arena in the valley before moving on to the other
geographic area.
7
Psychographic: Selfie lover who want to experiment and try different ways of enjoying
their coffee are targeted.

3.1.1. Key Activities

 Offering variety of food & coffee,
 Prepare coffee by machine,
 Comfortable seats, good lightning & decoration along with variety of books,
 Quality coffee with pricing similar to the market,
 Maintaining proper Sanitation & Hygiene.

3.1.2. Key Resources

 Human resources - semi skilled & skilled staff,
 Raw Materials - Quality Coffee, Milk , Sugar, Vegetable, Meat, Spices etc,
 Possessing of modern technical equipment,
 Information - Website.

3.1.3. Key partners

 Suppliers of Coffee
 Supplier of equipment
 Raw materials etc
 Bakery
 Ad agency
 Customers
 Designers

3.1.4. Customer Relationship

 Regular customer feedback,
 Quality Maintenance
 Message boards displaying greetings and pictures of customers.
 Loyalty cards | Free samples.

8
 Connecting to customer through social networking sites to ensure effective regular
interaction
3.1.5. Channel
 Direct Sale - Cafe,
 Social media,
 Digital Media Ads,
 Word of Mouth,
 Official website.

3.1.6. Cost Structure

 Fixed cost: Rent expenses (store), Salaries (staff), Furniture & Equipment,
 Variable cost: Materials, Advertising cost, Tax expenses, Repair &
maintenance

3.1.7. Revenue structure

 Sales of Variety of Coffee
 Sales of Food items.

3.1.8. Key to success

 Creation of unique, innovative and upscale atmosphere will be features of attraction.
 Establish a coffee house as a community center for socialization and entertainment.
 Quality, timely service to the customer.
 Modification on product as per the latest trend and requirement.
 Giving the emphasis on staff as important resource.
 Providing good working environment for employees.
 Incorporating technology for product development and delivery.
 Experienced barista to enrich the taste of coffee.

9
 CHAPTER - 4
PRODUCT AND SERVICES

6. 4.1. PRODUCTS AND SERVICES

The Coffee House will start is operation primarily by providing four different varieties of
coffee products and its alternatives and also bakery items that are highly demanded by
the customers as per our market survey. Along with these products The Coffee House
will also be facilitating easy access to the customer with customized cake. The variety
will include the Espresso drinks, iced coffees, some blended beverage and also some
alternatives to the coffee. These varieties of coffee will satisfy the needs of the customers
by providing them superior quality of coffee at affordable price.

The menu offerings will be supplemented by free books and magazines that customers
can read inside the coffee bar.

4.1.1. Espresso Drinks

Some of the Espresso drinks available at The Coffee House are:

 ESPRESSO: A very strong coffee brewed rapidly one ounce at a time.

 CARAMEL MACCHIATO: Espresso with caramel and dollop foam decorates
with caramel drizzle.
 CAFÉ AMERICANO: Espresso with hot water, simply the best cup of coffee.
 CAPPUCCINO: Serving of espresso with equal part of milk and Creamy Velvet
foam
 CAFÉ LATTE: A combination of espresso, steam milk and dollop of Velvet
foam.
 CAFÉ MOCHA: Espresso served with chocolate, milk and topped with fresh
whipped cream.
 WHITE CHOCLATE MOCHA: Serving of espresso, white served with chocolate
syrups, liquid desserts.

4.1.2. Iced Coffee

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Iced Coffee is hand crafted favorites, served over ice in 16oz glass. The Coffee House
will provide following Iced Coffees:

 ICED LATTE OR ICED CAPPUCCINO: Freshly pulled espresso and creamy

foam poured with cold milk over ice.
 ICED MOCHA: Rich espresso and drink chocolate are mixed well and poured
with cold milk over ice.
 ICED AMERICANO: Double shot of ristretto over chilled water and ice.
 ICED CARAMEL MACCHIATO: Shot of espresso over ice cube, chilled milk
foam with rich cream caramel.
4.1.3. Blended Beverage
The added menu for the customer under blended beverage are:

 BLENDED MOCHA: Espresso shots and java’s secrets chocolate mix blended
over ice with chocolate stick and whipped cream. It is Java’s highly
recommended drinks.
 BLENDED VANILLA MOCHA: Blended mocha serves with vanilla syrup and
topped with vanilla ice cream.
 BLENDED CARAMEL MACCHIATO: Espresso, caramel and milk blended
over ice and caramel drizzle
 BLENDED LEMONADE: It is brain freezing blended lemonade
 BLENDED OREO COOKIES SHAKES: Oreo cookies blend with a scoop of
vanilla ice cream, cold milk, ice-cubes and sugar syrup then topped with whipped
cream and decorate with a piece of Oreo cookie.

4.1.4. Coffee alternatives

To satisfy the customer need and take care of the demand of the customer The Coffee
House’s menu will also include some of the alternatives to the coffee. They are:

Cold Drinks | Seasonal Juices | Lassi / Shakes

4.1.5. Bakery items

The Coffee House tries to understand the customer need to full extend. Therefore, in
order to satisfy the customer needs and to pair up the coffee with the best taste. The
Coffee House will have some bakery item to please the customer.

11
 7. 4.2. Product Attributes and benefits to the customers
Though there is a mass number of cafes and restaurants in whole over the Kathmandu
valley, there is something missing when it comes to something new or different. Here is
what the The Coffee House will come out with, totally new, unique, and innovative for
the consumers in this place. What it is offering is something totally new to the market. In
Kathmandu, when it comes to cafe, people experience the same category of coffee and
food items with the same taste almost at all place along with not much more difference
in the menu too. Therefore, The Coffee House will come up with a great solution for all
those consumers.
The Coffee House will be providing unique and surprising coffee drinking experience by
providing them a unique blend of coffee with amazing presentation on the layer of the
coffee. The presentation | art on top can be customized as per the requirement of the
customer. There will be varieties of coffee like Americano, cappacino, latte, mocha and
so on. Not only coffee, The Coffee House will be serving varieties of food with fast
service. The coffee and foods served will be very hygienic and healthy.
Similarly, The Coffee House will be providing the proper ambience where the customer
can feel relaxed and entertained at the same time. The theme of the interior will be a
photogenic and colorful environment that blends with the mood and ambiance

12
 CHAPTER – 5
BUSINESS ENVIRONMENTAL ANALYSIS

8. 5.1. Industry Structure and market characteristics

The coffee industry is built upon an intricate web of economic relationships and
transactions. The majority of the global coffee trade is supplied by Brazil; therefore, any
change in their supply has a monumental global effect on the global coffee prices and
industry. Although coffee is an extremely important commodity, the roaster-grower
relationship is characterized by a monopsony, which has created a cycle of
underpayment and debt in the producing countries. Starbucks for example has proven
how each decision that a firm makes, from their logo to in-store experience, affects their
success in a highly competitive market. There is an increasing demand for the coffee as
global consumption rises, but the global supply does not match the projected demand.
Therefore, the industry will be faced with a challenge as the global supply struggles to
meet the increasing global demand for coffee in the future.

Looking at the trend of Nepalese expenditure for the restaurants & fast foods in
Kathmandu valley gives a great positive vibes to all the entrepreneur who wants to open
up restaurant here in Kathmandu. We can analyze in the current market scenario, the
coffee lover are constantly increasing which directly means that the industry of coffee is
gradually improving and enhancing. The industry and market of food and beverage is
constantly enhancing and growing as according to time need and situation of demand.

Analyzing the market characteristics of business.

ECONOMIC FACTOR

 Rise in purchasing power of the customer,

 Willingness to spend more money on food and drinks
 Modernization

13
BEHAVIORAL & PSYCHOLOGICAL FACTOR

 For relaxation
 People want to experience new way to enjoy their food and drinks,
 New trend of celebrating events,
 People spending more time on restaurant
 Coffee Consumption Pattern
Nepalese coffee consumption has shown steady growth, with gourmet coffee having the
strongest growth. Coffee drinkers in the urban parts of the country are among the most
demanding ones. They favor well-brewed gourmet coffee drinks and demand great
service. The Coffee House will strive to build a loyal customer base by offering a great
tasting coffee in a relaxing environment of its coffee bar located close to the bustling
Patan Durbar Square. As per the National Tea and Coffee Development Board
(NTCDB), the following are the data of the annual production and consumption of
coffee in Nepal. Out of the total production approximately 60% is exported and the
remaining is used as domestic consumption.

Domestic consumption
Fiscal Year Production (Mt) Export (Mt)
(Mt)
2000/01 88.7 53.22 35.48
2001/02 139.2 83.52 55.68
2002/03 187.5 112.5 75
2003/04 217.5 130.5 87
2004/05 250 150 100
2005/06 391 234.6 156.4
2006/07 270 162 108
2007/08 265 159 106
2008/09 334 200.4 133.6
2009/10 429 237.6 158.4
2010/11 502 274.8 183.2
2011/12 523 313.8 209.2
2012/13 457 272.2 182.8

14
 Table 2: Coffee Production and Consumption (Source: NTCDB)

The graphical representation of the table is:

Coffee Production & Consumption in Nepal

Production (Mt) Domestic consumption (Mt)
600
Production and Consumption

500
400
300
200
100
0
2000/ 2001/ 2002/ 2003/ 2004/ 2005/ 2006/ 2007/ 2008/ 2009/ 2010/ 2011/ 2012/
01 02 03 04 05 06 07 08 09 10 11 12 13

Fiscal Year

Figure 2: Coffee Production and Consumption

9. 5.2. Market Trend

Traditionally Nepalese are more tea-people than coffee-people. But over the last couple
of years, the habit of coffee consumption has shot up dramatically, particularly in
Kathmandu and other urban centers, with youngsters of the new generation and foreign-
returned professionals as the primary consumers. Earlier considered as the drink of
tourists and foreigners, coffee, primarily instant, is finding its place on kitchen counters
and restaurant menus. Not only the tourist-centered and five star hotel restaurants, even
the common eateries along the sidewalks now consider coffee as a ‘must’ for their
menus.

A cursory look in and around the ‘ten plus two’ schools and colleges is enough to prove
that the generational shift in coffee drinking has been very swift. Only a few years ago,
exclusive coffee shops were next to non-existent. Now there are many such spots in
Kathmandu.

According to industry insiders, the market for coffee is growing at the rate of around 15-
20 percent per year, and this growth has been fuelled mainly because of the changing
lifestyle of the people and increasing per capita income along with an increase in the
number of coffee outlets.

15
 10. 5.3 Market Segmentation
The market segmentation is done according to the customer behavior. The Coffee House
will focus its marketing activities on reaching the students and faculty, people working in
offices located close to the coffee shop, foreigners and on sophisticated teenagers. Our
market research shows that these are the customer groups that are most likely to buy
coffee products. Since coffee consumption is universal across different income
categories and mostly depends on the level of higher education, proximity to the World
heritage site will provide access to the targeted customer audience. Also, there are books,
magazines and music playing to make one feel comfortable, even if alone.

11. 5.4 Market Needs and Growth

Our market is made up of consumers who have busy schedules, a desire for quality, and
disposable income. As much as they would like the opportunity to sit in an upscale
coffee house and sip a uniquely blended coffee beverage and read the morning paper,
they don't have the time. However, they still have the desire for the uniquely blended
beverage as they hurry through their busy lives. Additionally, such factors as desire for
small indulgencies, for something more exotic and unique, provide a good selling
opportunity for coffee houses.

Due to increasing influence of the Western trend, Nepalese people too are seen to be
demanding customized cakes for numerous occasions. They want their design delivered
on the cakes they order. Local people have to reach Naxal or Baneshwor to order the
customized cakes, if we can facilitate these services, we can tap in the opportunity which
can contribute on our income.

According to industry statistics, the consumption of coffee is growing rapidly. The

segment of that market we are targeting is the commuter and coffee lovers, and that
number is increasing. It is estimated that there are well over hundreds commuters driving
to and from work and people searching for quality leisure time each day in our market.
Statistically, at least 50% of those are coffee or tea drinkers that give Beans N Cream a
significant daily target for its products.

16
 12. 5.5 Target Market
The Coffee House will cater to people who want to get their daily cup of great-tasting
coffee in a relaxing atmosphere. Such customers vary in age since most of our clientele
will be college going crowd, faculty, jobholders and tourists. These are discerning
customers that gravitate towards better tasting coffee. Furthermore, a lot of college
students consider coffee bars to be a convenient studying or meeting location, where
they can read or meet with peers without the necessity to pay cover charges. This will
provide a unique possibility for us to build a loyal client base. The Coffee House would
also cater to mobile individuals who have more money than time, and excellent taste in a
choice of beverage, but no time to linger in a café. Thus,

The Coffee House will cater its service to:-

 College going crowd and faculty

 Urban adults
 Teenagers
 Commuters going to and from work
 Tourists

13. 5.6. SWOT Analysis

A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classifies as
strength (S) or weakness (W) and those external to the firm can be classifies as
opportunities (O) or threats (T). The SWOT analysis for The Coffee House is done
below:

5.6.1. Strength
 Fresh coffee provider
 Benignity
 Premium coffee at a reasonable price
 Discount card to regular customers
 Personal attention to every coffee boozers
 Customized cake facilitator

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 Exclusive location

5.6.2. Weakness
 Higher price than the tea-stalls
 Requires extra precaution for apt proportion
 Requires special attention while storing coffee beans
 High dependence on Barista

5.6.3. Opportunities
 Increasing number of people are willing to spend money on quality
 Coffee is replacing alcohol as the social beverage of choice
 Expansion opportunities in other part of the Valley
 Wider range of coffee products
 Over the last couple of years, coffee consumption habit has shot up dramatically and
has found its place on kitchen counters and restaurant menus.

5.6.4. Threats
 Many competitors in the coffee business.
 Threats of substitute product: There are tea stalls in virtually every nook and corner
of the country.
 The Coffee House is exposed to rises in the cost of coffee and dairy products.

14. 5.7. PEST Analysis

PEST analysis is a scan of the external macro environment in which the firm operates.
The environment in which the organization operates cannot be controlled but it tries to
present the organization with great opportunities as well as treats. The following
environment analysis has been carried out on the external environment that may
influence The Coffee House.

5.7.1. Political and Legal Environment

Nepal has undergone numerous ups and downs with different government formalities in
the past few years. Its political scenario is unstable and very volatile. The political

18
situation of a country has a direct impact on their business companies. It may hamper the
business in certain aspects such as frequent strikes resulting in decrease in working days
that may cause the business to lose its operation. If the political environment of the
country is established and supportive, it presents as a reward to the business organization
for its full and healthy operation.

Even though the political instability is always prevailing in our country, the new
constitution of the country is being drafted which has been seen as an indication of hope
for the new ventures to execute their business plan. However, until there is political
stability in the country and the Government sketches the constitution, the business
environment of the country cannot be termed as favorable.

Another most essential factor is the legal environment. The legal procedure and
framework that every institution must obey should be friendly. Well in context of Nepal,
the regulation to start a business is favorable. In order to start up a business we need to
get registered in the Inland Revenue and Municipality Permission to operate.

To register the company under the name of “The Coffee House” we need to do some
legal formalities which are as follows:

An application form is submitted along with Rs 5 stamp at the Office of Registrar which
is situated at Tripureshwor. Besides, the citizenship certificate of the partners and the
company register stamp is provided to the office of the registrar.

Once the company is registered next step is to take the PAN (Permanent Account
Number) from Inland Revenue Department which is situated at Lalitpur. The necessary
documents for this procedure are: application form, copy of citizenship certificates of the
partners, copy of the firm registration certificate, two passport size photos of the
partners, and hand drawn sketch of the business location.

5.7.2. Economic Environment

The economic environment of Nepal is partially supportive towards the coffee business.
The banks and financial institutions are willing to invest in coffee houses as they have
the potential to assess the overall development objectives of the country. The Coffee
House will help to boost up the economy of the Nepal. It creates the job opportunity to
the locals as well as experts from across the country, hence, improving social as well as
economic status.

19
The life style of people is getting busier day by day. So, instant and readymade products
appear to be their first preference however, they prefer healthy products as more people
are increasingly being conscious about their health. In addition the increase in the arrival
of foreigners has also boosted the economy of the country with several businesses being
established increasing the inflow of the foreign currency in Nepal. This has increased the
employment along with the income. The increased income has enhanced the spending
pattern of people which has improved the living standard of the citizens. This is the good
opportunity for businesses like us.

5.7.3. Social Environment

Nepal is country with many social and cultural regulations. Earlier, Nepalese people
didn’t have the habit of eating outside the home but the changing socio-cultural aspect of
the society is a great opportunity. As the world is changing towards the globalization,
people are changing too. Due to better job opportunities abroad more and more people
are opting for foreign employment. The manpower drain is causing difficulty for
companies to find the skilled manpower. As per the official figure more than 1000 people
per day are living country to find job abroad.

In addition, people are magnetized to the western lifestyle. They are moving to different
taste of western food and beverages from the traditional food. The youngsters are further
influenced by westernization. Nowadays, there is a trend where people have their
breakfast in the restaurant and even celebrate many special occasions like birthdays and
anniversaries outside the home.

5.7.4. Technological environment

Our coffee house depends very much on the technological environment. Machines and
new technologies for carrying out the work activities help us to provide personalized and
superior services. Adaptation to the changing technologies keeps us at par with the
changing customer’s expectation and needs. Furthermore, we plan on reaching our
customer through social networking.

15. 5.8. Five Forces of Market and its state in this industry
There exist several forces in the environment that acts as potential threats to the
businesses. It is important to pay attention to these forces as they are the major threats
the organization will encounter and have to respond to in order to generate profits.

20
 Figure 6.3 Porters five force model

5.8.1. Level of rivalry - very high

Level of Rivalry refers to the amount of competition within the industry. It can be said
that the more competition within the industry, the hard it will be generate profits. There
are many competitors within the industry who have fierce loyalty among consumers. The
coffee industry has high industry concentration ratios, low levels of product
differentiation, relatively low production cost, and high strategic stake. What reduces the
rivalry a little in specialty coffee is that it has fast market growth, low inventory storage
cost, and offers low exit barriers. The Coffee House also has many competitor in the
market arena but the unique coffee experience of amazing ambiance with the purity of
coffee & its quality gives major competitive advantage to us.

5.8.2. Entry potential - very high

Potential for Entry refers to the ease of access to entering a market or industry. The
easier it is to enter, the lower the prices will have to be making it harder to generate a
profit. Due to many consumers brewing their own coffee and purchasing package coffee
for home brewing, threat for new entrants is very high.

21
5.8.3. Power of suppliers - moderate
Power of suppliers refers to how many suppliers are in the market. The more suppliers in
the market, the lower the supply costs will be. The Coffee House will deal with many
dealer for various product and has moderate level of risk from its suppliers.

5.8.4. Power of customer - high

Power of customers indicates how many buyers there are and the size of them. It can be
said that if there are only a few large buyers, that customers can bargain down prices.
Due to many suppliers being able to meet the demand, buying power is high.

5.8.5. Substitute products - high

Substitute products refer to the ability to purchase other products that are similar and can
replace the item. The more substitutes available in a market, the lower the prices will be
making it harder to generate a profit. There are many different competitors that offer
warm/hot liquids (i.e. - tea, hot lemon), creating a large threat. Also, the majority of
coffee drinkers brew their own coffee with packaged coffee for home brewing, creating a
high threat for substitutes.

The five forces model analysis shows that The Coffee House is part of a highly
competitive industry where supply and rivalry power is high. The company has the
potential to grow and expand its operations as a whole tapping into product
differentiation and customer loyalty characteristics.

16. 5.9. COMPETITOR ANALYSIS

There are many coffee shops in Kathmandu but one of the major competitors of The
Coffee House is Himalayan Java & Red mud. As Himalayan Java is one of the popular
coffee shop in Nepal, it's very important for The Coffee House to have competitive
advantage by providing unique product and services to the customer.

The Coffee House will have both Direct as well as indirect competitors. Direct
competitors are other coffee shops, and indirect competitors are other options that
customers have to purchase from us that aren’t direct competitors. This includes
restaurants, supermarkets and customers making coffee themselves at home. We need to
mention such competition to understand that not everyone who drinks coffee frequents a
coffee house each day.

22
With regards to direct competition, we want to detail the other coffee shops with which
we compete. Most likely, our direct competitors will be coffee shops located inside
Kathmandu value

STRENGTHS
The Coffee House Himalayan Java Redmud
 Pure | Delicious & Tasty  Recognized brand  Recognized brand
coffee. of market of market
 Use of quality Arabica  Good Ambience  Huge menu list of
Coffee  Many branch in food and coffee
 Ambience is fantastic with Kathmandu  Good Ambience
its premium appeal.  Loyal customers  Many branch in
 Huge menu list of coffee  Good customer Kathmandu
and other food items. retention  Loyal customers
 Highly motivated  Good market share  Good customer
workforce. retention
 Better experience and  Good market share
services in similar price of
the competitors.
 Parking facility for both
two wheelers and four
wheelers.
WEAKNESS
 No brand recognition.  No unique selling  No unique selling
 High product cost. proposition proposition
 No presence in the large  High product cost  High product cost
market.
 High training cost.

Table:

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 CHAPTER – 7
BUSINESS STRATEGY
17. 7.1. SWOT Analysis
The SWOT analysis shows the Strengths, Weaknesses, Opportunities and Threats of our
business. The strengths and weakness are the internal factors whereas the opportunities
and threats are the external factors. A SWOT analysis will help us identify areas of our
business that are performing well. These areas are our critical success factors and they
give our business its competitive advantage. Identifying these strengths can help us make
sure that we maintain them so we don't lose our competitive advantage.

The SWOT analysis of The Coffee House is as following:

Strength Weakness
Use of high quality Coffee Beans New business in the market so there will be
Ambience is fantastic with its premium no brand recognition.
appeal. High product cost.
Huge menu list of coffee and other food No presence in the large market.
items. High training cost.
Highly motivated workforce.
Better experience and services in similar
price of the competitors.
Parking facility for both two wheelers and
four wheelers.

24
Opportunity
Growing coffee culture.
Market is receptive to new things so
uniqueness can attract many consumers.
Can be expanded in many other places of
Kathmandu valley.
18. 7.2 Value Chain Analysis
Threats
Can be easily copied by the competitors.
Many competitors in the market like
Himalayan Java, Red mud, Road house café
and so on.
Local tea, coffee shop popularity.
Negative publicity about the health hazards
of food coloring.
Probability of high employee turnover.

PRIMARY ACTIVITIES

 Inbound logistics – Sourcing coffee from best coffee beans producers is one of
the important aspect for the The Coffee House. Not only coffee but also other various
product are brought by the cafe with the supplier with whom we have great relationships.
Store keeper brings all the product and is responsible for the product to get into storage
room to be managed properly.
 Operations – The focus is on providing the desired food and delicious coffee as
desired by the customer. The food and coffee is made as desired by the customer.
 Outbound logistics – The product and service is delivered to customer in real
time once the order of the customer is prepared as desired by them.
 Marketing and Sales – Being a service sector concern; The Coffee House doesn't
need to market its product as it needs to get consumed in real time.

25
 Service – The Coffee House is not a manufacturing concern rather it provides
service in real time as demanded by the customer. Service here means after sale services
which is particularly is not delivered by the cafe. Rather The Coffee House will provide
supreme level of customer service to the consumers in real time.

SUPPORT ACTIVITIES

 Firm Infrastructure – The Coffee House currently has a large well designed,
aesthetically pleasing cafe.
 Human Resource Management – Proper recruitment, selection and effective
training and development is provided to the employees of the cafe. Great benefits,
employee empowerment and amazing corporate culture makes The Coffee House drive
efficient management of human capital.
 Technology development – Investments in innovative technologies like food
coffee machines for quick better and tasty office
 Procurement – The Coffee House procures its products from a diverse group of
supplier and has fixed contracts with some of the suppliers.

19. 7.3 Strategy Diamond

How will we be active?

High quality coffee
Food lovers
Working professionals
unique coffee experience

What will be the sequence How to get there?

and speed of move?
Maintaining Quality
Maintaining Consistent
Addition of more outlet Training & Development
Highly customized menu Research & Development

How will return be 26

obtained?

Customer retention How will we win?

 Unique selling proposition

CHAPTER – 8
MARKETING PLAN

20. 8.1. Marketing Objective

Defining a set of marketing objectives along with a positioning strategy for their
achievement enables the firm to enjoy a sustainable competitive advantage in the market
place. Marketing is everything that a firm does to reach and persuade prospects i.e.
prospective buyers. Small, cozy, air conditioned and exuding lounge atmosphere, coffee
outlets have become the place for restoring one’s sanity after or in the middle of a hectic
day of work. Coffee consumption has also emerged as a fashion, a show off tendency,
among teenagers which is slowly changing into an addiction. Also, as more and more
people are getting busy, they can’t manage enough time to prepare a perfect brewed
coffee. They’d rather spend extra bucks on an instant service delivery than to have it
prepared themselves.

Marketing Objectives and Goals

Short term marketing objective:

 Use aggressive promotion tools to reach large number of potential customers.

 Create brand awareness.
 Cater 100+ customers a day in year 1.

Medium term marketing objective:

 Build Customer Loyalty

 Achieve Specific Measurable Financial Goals.

Long term marketing objective:

 Launch new products or services.

 Target new group of consumers and expand market reach.

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21. 8.2 Consumer Analysis
The target consumers are the people aged from 16 to 40. The consumers inside
Kathmandu valley are mostly targeted. Similarly, the people who love coffee and is their
go to drink, are the major target. Along with that the coffee lovers and frequent
restaurant visitors are also targeted.

The consumer persona is presented below:

Background of the persona

The Persona Ms. Ankita Barwal is a native of Kathmandu and currently lives in her own
house at Sinamangal with her parents and a younger sister. She is a very hardworking
professional, for whom family and work matter the most. She works for a commercial
bank as an assistant.

Ankita not only being a hard working professional but also loves to socialize. Like most
of the youth, she also loves to click selfies and photograph and post it in social
networking sites. She frequently visits restaurants and cafes with her family, colleagues
and friends. Whenever she visits restaurants, the first thing that she orders is always the
coffee because she is a huge coffee lover.

Every Friday after the office, she and her colleagues visit coffee shop to spend some
quality time together in order to relax and enjoy. She has tried coffee of various shops in
Kathmandu and now she want something different than the regular coffee in terms of
presentation and taste.

SECTION 1: WHO
Persona Name Ms. Ankita Barwal
Back ground  Assistant in NIC ASIA Bank
(Job? Career Path? Family)  Hardworking professional who is
currently pursuing MBS degree and
looking forward for career growth in
BFI's
 Lives with her parents and a younger
sister
Demographics  Female
(Male or Female? Age? Income?  Age- 24
 Income Rs. 30,000+ per month

28
Location)  Thapathali, Kathmandu

Identifiers  Outgoing, extrovert, fun loving

(Demeanors? Communication  Prefers gathering in the weekends,
fond of parties, frequently visits cafes
Preference) and restaurants
 Loves to travel and take a lot of
photos prefers direct method of
communication

SECTION 2: WHAT?
Goals
(Primary Goals? Secondary Goals)
Challenges
Primary Challenge? Secondary Challenge
What can we do?
To help our persona achieve their goals
To help our persona solve their problems
SECTION 3: WHY?
 Unique coffee experience
 Place with good ambience to relax and
entertain
 Available coffee shops provide similar
kind of coffee experience
 No proper information of coffee shops
which provide different kind of
experience
 Unique experience through quality |
taste & experience
 Comfortable seating arrangements,
proper lightning & interior design
 Provides quality coffee at regular
market price
 Providing information through social
media and company website

Real Quotes  Every coffee shop provides coffee

experience but they all are similar to
About goals, challenges
each other
 It's really difficult to find a unique
coffee shop which is typically
different and provide unique coffee
experience here in Kathmandu.
 Even if there is any cafe providing
unique coffee experience, how would
I know about it?
Common Objections  Lack of trust as people may not be
aware of edible food color in printing
Why wouldn’t they buy your products/
 Lack of information as the cafe is
services? totally new in Kathmandu

29
 SECTION 4: HOW?
Marketing Message  Focusing on health of the customer;
we only use only good quality & pure
How should you describe your solution to
coffee
your persona  Advertising about the company
through various social media
marketing and other marketing
campaigns.
 We provide unique coffee experience
at regular market price. The whole
menu can be seen through our
website.

Elevator Pitch  We provide you unique coffee

experience at regular market price
Sell your persona on your solution
along with good ambience in relaxing
environment.

22. 8.3. Marketing Strategy

First and foremost, The Coffee House will be placing its coffee house in location of very
high visibility and great ease of access. The Coffee House will be implementing a low
cost advertising/promotion campaign.

In order to build up its client base, The Coffee House will use online promotion,
advertisements on food magazines; utilize customer referrals and cross-promotions with
other businesses in the community. At the same time, customer retention programs will
be used to make sure the customers are coming back and spending more at the coffee
bar. The Coffee House will provide better value for money through the service delivered
to make a mark on customer experience.

23. 8.4. Positioning

The Coffee House aspires to be established as a quality product and service provider
along with a complimentary ambience. Building a brand image by providing personal
attention to the customers and offering quality coffee products along with fast service
would be the prime focus of The Coffee House. For busy, mobile people whose time is
already at a premium the drive-thru coffee shop will be facilitate quick offering of
perfectly brewed coffee. Thus, we will position itself as a premium quality coffee
provider at a reasonable price with the unique facility of drive through and facilitator of
customized cake.

30
24. 8.5. Competitive Advantage
The Coffee House is one of its kind in the Nepal that will serve a wide variety of coffee
with the amazing taste & presentation. Along with coffee we will be serving varieties of
food too. We will be committed in serving to our customers within a few minutes of the
order being placed. As we all know competition is very high in the restaurant industry, so
in order to exist successfully in the market, we need to have a competitive positioning to
stand out from the crowd.

Its core product i.e Coffee will work as great competitive advantage for us to compete
with our existing as well as new competitors. Not only the presentation of the coffee but
we will also be working on the taste and flavor of the coffee. This specialty of our cafe
will differentiate from others.

Well adopted strategic or competitive advantage will make this restaurant very special
among others in the food industry. Additional value in our service like professional
baristas and chefs, variety of food items in the menu which will totally give a sign of
quality service no doubted will work as the most important part of the competitive edge
over the competitors and rivals. It will completely be an innovative idea of serving the
customers since till now no one has come up the service of offering such printed coffee.
High quality service will be provided to our customers who will ensure to compete
highly with the competitors.

Not only food but our location will also provide us competitive advantage as it will be
located at Manglabazar, Lalitpur, which is one of the prime locations of Kathmandu.
Customers can get access to public vehicles from the main road of the location itself.

25. 8.6. Survival, Competition and Growth in the Market Sustainably

The Coffee House will be located at Manglabazar, Kathmandu. It will adopted an
expansion strategy. After fifth year, it will expand its services from Mid Baneshwor.
And, within the eighth year, it will expand in one more place as at Baudha. It has got a
strategy of overall expansion at two places within 8 years of time.

Also, we have planned to retain 40% of the customer each year that will help in building
strong customer relationship. For this we have the scheme of loyalty card so that in order
31
to get the benefit from it, they will visit quiet often. However, our offerings and services
will be innovative enough to retain our valued customers.

Looking and researching at the customer’s interest and wants, we will be adding much
more features to our service. This will make our restaurant to strong position.

26. 8.7. Marketing Mix

Focusing on the value proposition of the product theme (premium quality Nepalese
coffee provider, facilitator of customized cake with drive-thru facility) a mix of
marketing vehicles will be created to convey presence of The Coffee House, its brand
image and its message.

8.7.1. Product
The product that we are going to provide is various types of Coffee beverages, other cold
drinks (coffee alternatives), cookies and pastries. The food and drinks provided in our
coffee house will be of high quality and will be very hygienic in nature. The Coffee
House would also facilitate customized cake ordering.

8.7.2. Price
The price is reasonable and is increased every year considering factors like inflation. The
price set will be very affordable to the target group that gives the return on our
investment. Price has very high influence in Nepalese market to the customers so price
will be set with minimum of profit as our aim is to attract more patrons as well as retain
them.

8.7.3. Place
The Coffee House will be located in Mangalbazar. The location selected is very suitable
since it’s close to the World Heritage site, residence, office area and educational institute.

8.7.4. Promotion
The promotion strategy The Coffee House is going to take for the café is through online
promotion, advertisements on food magazines like ECS and Food and Wine; utilize
customer referrals and cross-promotions. Facebook would also be used as it has become
a number one place for people to connect with their loved ones which would help The
Coffee House to connect with large number of people. This will also help to provide
word of mouth advertisement which is a very powerful way to advertise the product. The

32
Coffee House has allocated certain budget for this purpose so that it can stay with the
customer. The detail can be found in Annex 6.

8.7.5. People
An indispensable part of any hospitality industry is its human resources or the people
who work to provide required service to the clients. The Coffee House will recruit the
well qualified Baristas and the right kind of people for delivering an outstanding service.
The staffs at The Coffee House will also be trained in their area of service and provided
technical skills. They will be encouraged to interact with the customers to offer personal
attention. The service presented by the staffs would be worth praising for.

8.7.6. Physical evidence

When the customer walks in The Coffee House they will be welcomed by pleasing
ambience with soothing sound system. Every item from sitting arrangement to setting of
the curtains and color combination of paint on the walls of the café will add to the value
creation of The Coffee House. Other physical aspect like lighting and sound system will
also be properly managed.

8.7.7. Process
The Coffee House will provide efficient process from the customers’ arrival till the time
they depart. The process of taking orders, preparing brewed coffee and placing order on
the table efficiently will be our major concern. The Coffee House aims on providing
prompt and quick service to its clients who have minimum time to be wasted. Thus,
services at the drive-thru would be given high priority.

27. 8.8. Sales Strategies, Management and Techniques

A sales strategy consists of a plan that positions a company's brand or product to gain a

competitive advantage. Successful strategies help the sales force focus on target market
customers and communicate with them in relevant, meaningful ways. As our core
competency is to provide hygienic food in time with good service as well as with cost
effective marketing channel, its sales strategy will fully focus on that.

The Coffee House's baristas will handle the sales transactions. To speed up the customer
service, at least two employees will be servicing clients--while two other employee will

33
be preparing the customer's order, the other one will be taking care of the sales
transaction. All sales data will be logged on the computerized point-of-sale terminal
which will be later analyzed for the marketing and promotional purposes to increase the
level of sales.
There will be several sales strategies put into place, including posting specials on high
profit items at the drive-up window. The Baristas will also hand out discount coupons to
the regular clients. The Coffee House will also develop window sales techniques such as
the cashier asking if the customer would like a bakery items with their coffee.

Our sales strategy requires consistently high quality coffee, food service, speed and good
quantity. This can be accomplished by hiring employees who genuinely enjoy their jobs,
by continually assessing the quality of all aspects, along with the system of interacting
with the customers personally if needed so that they know that their feedback will
directly go to the owner’s desk. Not only this evaluating each dish before serving to the
customers and over all food choices for popularity.

Besides this, The Coffee House will also focus on establishing a strong identity in the
community with a grand opening. All the menu items will be moderately priced for the
area. It will also have the system of special gifts hampers, coupons on the special
occasions and festive seasons and loyalty card system. This may work as an effective
technique to attract more and more customers to The Coffee House.

34
 CHAPTER – 9
PRODUCTION | OPERATIONAL PLAN
28. 9.1. Location
The Coffee House is situated at the prime location, Mangalbazar, Kathmandu. The
advantage of opening restaurant in this area could be: City centered location,

Presence of various organizations, offices, business complex and educational

institutions; which implies presence of ample number of potential customers,

Busy and crowded place, benefit of getting more customer than any other places.

Facility of public vehicles reaching most of the places in Kathmandu & Lalitpur.

Premises

We will take 15 square feet for each person on our restaurant. We have got overall 10
tables and 50 chairs. So, overall we need 1500 square feet of place to provide service.

Time Plan / Work Schedule

Modular kitchen can be setup with an estimated time period of two month. The opening
hours of the restaurant will be from 9 A.M. to 9 P.M. It will be opened seven days a
week.

Machineries & Equipments

The must have machines that are required for effective operation of cafe are Coffee
grinder & maker. Other than that some of the necessary equipment for the cafe are
refrigerator, micro-wave oven, laptop, printer and so on.

Technology

We have used the latest technology in a way to enhance the coffee drinking experience.
It is one of the latest technology all ready and now will also will be introduced in the
Nepali market.

35
Skills Required

The skill required by the worker in the cafe are

Coffee maker should be a certified barista,

Chef should be expert and experienced in culinary art,

Manager should have proper knowledge of finance, marketing and operation

management skills,

Counter staff should have polite way of handling the customer and should be always
ready for solving the queries of the customer,

Waiter should have proper skill of serving food and treating people well.

29. 9.2. Procurement

The raw material needed will be purchased from Royal Everest Coffee Mill, Nepal
Coffee House and various wholesaler and retailers. This will be checked on daily basis
and make available as soon as the stock starts to decrease. The key supplier of the coffee
equipment will be wholesalers and retailers in the market especially Java Trading House.
The customized cake will be ordered from Baker’s Den.

30. 9.3. Value Chain

Suppliers COFFEE Customers

Value chain looks as simple as the above diagram. We will buy the necessary raw
materials like coffee beans, confiscated sugar, syrups, etc. from the suppliers. The barista
team at The Coffee House will prepare a variety of brewed hot beverage in the facility.
These coffee and coffee alternatives along with cookies and pastries will be offered to
the customers.

Transportation of raw materials from suppliers to The Coffee House will be done in
rented van in a monthly basis. Since coffee beans are not a perishable item, we can store

36
beans for few months. Coffee beans will primarily be sourced from Royal Everest
Coffee Mill and Nepal Coffee House. Milk and confiscated sugar will be sourced from
local vendors and departmental stores respectively.

7.3 Capacity

The actual capacity of The Coffee House is 140 orders per day. The Coffee House
baristas can take orders with interval of couple of minutes and serve the orders within 10
minutes in the café but for the drive thru the orders will be served within 5 minutes.

7.4 Quality Management

The Coffee House will follow promptness and cleanliness as the major quality aspect in
the café. We can measure quality with the help of customers’ feedback and improve the
service accordingly. The major quality parameters are as follows:

Response: We will also provide product as per the customer request. We will also look at
the customer’s feedback and improve it.

Timeliness: Our coffee house will provide quick service to customer. We will provide
service to the customer as per the requirement

Courtesy: The staff members will be polite to the customer and greet them when they
make an order. They will also be trained to handle complaints and handle the situation
with a smile.

Supply Chain Management

SUPPLY CHAIN MANAGEMENT OF SELFIE COFFEE

SUPPLIERS

 Coffee Order of
Beans : goods Warehouse
Himalayan
Java Transportatio

 Dairy n
37
items : DDC
 Vegetables
Figure 9.4: Supply chain Management of Selfie Cafe

9.4.1 Order Processing

Customer enters into The Coffee House and steps into the counter,

Counter person makes customer clear about the procedure to be followed to place the
order for The Coffee House. The counter person will show the menu and then ask the
customer to go through the menu and select the items that the customer want to order.

After the customer has decided the choices of the coffee and other food item for
ordering, the counter person will take the final order and then forward that order into the
kitchen, till then the customer can enjoy the free WIFI in the cafe.

The chefs will prepare the food item as ordere.. After the order is completely ready, the
waiters will take it from the kitchen area and serve it to the customer.

Finally the order is placed on the customers table, the customer can then enjoy the
delicious soothing coffee and food they have ordered.

Alternatively,

38
The customer can directly order the coffee by providing their order and after payment
they can directly take their coffee from the counter & enjoy it if they are not ordering
other food item.

9.4.2 Inventory Control

Most of the industries are seen to be ignoring this area in the operation of their business.
It is even more ignored while operating the restaurant business. These business show
carelessness or do it frequently or are totally ignored. Inventory control in The Coffee
House will be done on the basis of following processes:

The inventory will be taken once a month.

Similarly, in order to minimize the fluctuations in the inventory control system, it will be
done on the fixed day and time i.e. Sunday at morning before it opens.

All the inventories will be taken and analyzed before the new order is delivered so that
there is no chance of double counting of the items.

Whole stock areas will be cleaned and organized properly before taking the inventory.
Besides each items and stocks will be updated regularly so that there is no any expired
product left in the store.

Regular rotation of the inventory will be done so that older goods don’t get spoiled and
are used on time.

Over all caring of the store and recording of the inventories will be done by the store
keeper itself as per the time and schedule.

Finally, each and every detail about each items relating to manufacturing dates, expiry
date, prices and results will be regularly updated and controlled on the proper guidance
of the inventory controller or the store keeper.

9.5 Quality Control / Assurance

39
Quality is one of the very essential aspect that will help The Coffee House to sustain in
the market. Compromising in quality is purely compromising the business and leading it
to failure. The Coffee House will makes sure that it does not compromise on the quality
of their products. The barista for making the coffee will be trained ones and the chef will
totally be professional enhancing taste of each and every dish as offered by the cafe.
Besides, the cafe will be cleaned regularly during the closing of outlets (including the
overall kitchen area and eating area). Hygiene will be given most important priority and
will never be compromised in any context.

9.5.1 Responsiveness

Customer satisfaction is what The Coffee House aims to achieve in the competitive
market of Nepal. We sell experience is the motto of the cafe and it is achieved by making
sure each and every customer of the cafe are fully satisfied with the service whether it’s
about the order processing service, customer relationship service or the entire servicing
of the The Coffee House. The overall management and employee at each level will
ensure that the customer are fully satisfied with the service. Especially, management will
ensure that the customer should not wait for more time for their order to get delivered to
them.

9.5.2 Courtesy

All the Employees of The Coffee House will be experienced, skilled and trained. They
will behave properly and will have good communication with the customer and solve all
their query and request politely.

9.5.3 Competence

Competent personnel only will be hired for the organization. Competence in a sense that
the employee will take full responsibility of all their duties and responsibilities given to
them by the management. The employee will be competent enough to save time for the
work they are assigned to be done at each level of hierarchy. Team work will be given

40
due importance and will be ensured each and every employee are working together to
give consumer a better experience from the cafe.

9.5.4 Accessibility

The cafe will be located in a prime location which can be easily accessible by people.
The cafe location is near to various business organization , college and other
corporations which will ensure ease for customer to visit and return to their work. The
service hours will be opened from 9 A.M. to 9 P.M.

9.6 Research and Development

Research and development will be kept in the critical part of the operation. As the cafe
will be based on modern technology it will be necessary for effective testing and
understanding the working mechanism and continuous update of it so that cafe can reap
out maximum benefit from the latest technology.

Similarly, the cafe will be working for the consistent innovation of the technology and
the mechanism used, hence it will be necessary for the cafe to work more properly on
research and development to ensure it can achieve in goal. For research and development
one essential factor will be the customer feedback which will be the given due priority.

41
CHAPTER - 10

ORGANIZATION AND MANAGEMENT TEAM

2.1 Management Team

The business that we are planning to operate would be equally contributed by Four
promoters and that being referred to as a form of private company limited (Co. Ltd) in a
business world. This would be appropriate form of business organization for The Coffee
House as it has limited liability, enjoys corporate juridical personality and has a
perpetual succession. Adequate fund would be collected from four promoters.

All four partners of The Coffee House will equally participate in the operation of it. We
will have one manager who will control and co-ordinate the overall management. Head
Barista will be responsible for the premium quality of cup of coffee to the customer. The
Barista will be responsible for various activities in the company. The utility staff is
essential to maintain the standard of the sanitation in the company.

Owners /
Managers

Accounts Store Keeper Chefs & Cook Cleaners Waiters

cashier/
counter staffs

Figure 10.1: Organization Organogram

10.2 Stakeholder Analysis

The following are the stake holders of Eating House’s business and their interests:

10.2.1 Employees

42
Employees are one of the key stakeholder to any organization as organization success is
largely dependent upon how its employee are performing their works. Selfie Cafe will
gives equal priority to all its employees whether they are chefs, cleaner, storekeeper or
the other helpers. All will be treated equally within the premises of Selfie Cafe. The
overall culture of the Selfie Cafe is built on mutual trust and understanding between all
the member working in it. Employees working conditions, job security along with the
higher wages are always given due consideration. Employees will be given wages as per
the legally mandated minimum wages and allowances.

10.2.2 Customers

Customers are the king of the market. Customer satisfaction is the key to business
success as customer are the ones who will be consuming the product that the
organization offers. Selfie Cafe without its customer will be of no value. The interest of
customer are generally high quality goods and services, good ambience, reasonable price
and so on. Selfie cafe will always try to effectively address the interest of customers.

10.2.3 Suppliers

Suppliers are important aspect as they provide business those essential raw material
through which business can build product and sell it to the customer to earn profit. Selfie
Cafe needs various raw material like coffee beans, dairy products, vegetables etc for
making goods that can be sold to the customers. The interest of the supplier of the cafe is
the compensation and timely payment. Selfie Cafe ensures that the supplier gets their
compensation on time and pay the debts if any on time.

10.2.4 Environment

43
Environment is the place where business exist and is performing in. It is one of the most
important aspect to give due consideration as environmental issue if neglected poses a
serious threat in this modern environmental concuss world. Environmental concern is all
about business don't degrade the environment that it is operating in and will ensure
protection of it. Selfie Cafe does no activity that hampers or degrade any part of the
environment and the activities will be done that have no side effects on the consumers as
well as the whole environment. It will also make sure that the waste is managed properly.

10.2.5 Government

Government is the regulatory body monitoring the activity of the business concern.
Selfie Cafe will ensure that it follows all the rules and regulation set forward by the
government. Tax will be paid as according to rule and no creative auditing will be given
due importance

10.3 HR Planning

10.3.1 Human Resource Requirements

The list of human resource required and their prospective job experience and
minimum qualification requirement for the cafe are as follows:

S.N Designation Reqd Years Minimum Qualification

44
 No.
Head Chef 1 1 Undergraduate in Hospitality/Culinary Arts
or Equivalent (specialization in Hotel
management most preferred)
Should have knowledge in fast foods

Cook 2 1 Specialization in Hotel management most

preferred)
Should know how to make fast foods Mo:Mo
and burger and other various kinds of foods.
Barista 1 2 Should have sound knowledge of coffee
Barista Trained

Waiter 5 1 SLC / +2 passed ,

Related to restaurant business
Fluent in Nepali

Receptionist/ 1 1 +2 / BBA,
Cashier Fluent in Nepali and English
Basic Computer skill

Cleaner 2 - Positive attitude

2.2 Human Resource and Job Description

The educational and professional background and the job analysis of all the members of
the management team are mentioned below:

2.2.1 Promoters

45
The four promoters of The Coffee House are from diverse field. Ms Sanchita Aryal &
Mr. Rishabh Sarawagi, both a fresh MBA graduate from renowned College of valley,
they will be utilizing their management skills those they gained during their regular
classes. Mr. Aditya Rouniyar has the experience of working at CCD for 4 years in India.
She will basically be more focused in placement of the right person at right place. Mr.
Ashish Agrawal is a CA who will basically be looking at the financial part of the
company. Thus, all the promoters have their own field of specialization and interest to
make the company operate effectively.

2.2.2 Manager

The Coffee House will require a manager who can also be called as the store manager.
Following are some of the duties that will be performed by the manager:

Maintaining smooth outlet operation & quality standards for Food & Beverages

Work as a set up team manager for a newly opened outlet and ensure smooth operation

Guide, train, develop and motive subordinates to achieve their objectives and work to
their best potential to perform effectively on the job.

Oversee system transactions opening & cash out procedure, system reconciliation, and
daily banking procedure.

Planning all the marketing and advertising activities

Staff management, ware house ordering receiving & inventory

Ensure good safety and emergency practices

2.2.3 Head Chef

The Head Chef will be dealing with the customer complaints resolving any customer
issue that comes within the store and after purchase. The head Barista will ensure the
best quality of the coffee to be served to the customers as claimed by the company.
Following is the list of duties and responsibility of Head Barista:

Maintain high level of customer satisfaction at the outlet.

46
Report on a daily/weekly basis on all relevant issues to the reporting manager.

Assist the manager in ensuring that the café is effectively and efficiently managed and
provides good value for products and services to its valued customers.

Ensure that Head Barista and the staffs present an appropriate image to customers.

Inform the managers at earliest about financial issues in workplace.

2.2.4 Barista

Barista is a person who makes coffee drinks as a profession. Following are some of the
responsibility of the Barista

Prepare and serve different kinds of beverages and foods ordered by customers.

Always keep seating areas, restrooms and premises, utensils or equipment of coffee shop
clean and sanitize and follow clean as you go policy.

Describe or explain about shop’s menu items to customers and suggest products which
might appeal them to order.

Check order, receive and replenishment of supplies and products.

Provide customers with product details and preparation description if necessary.

Take customer order and convey them to concerned department for preparations, weight,
grind or pack coffee beans for customers.

Set up or restock product displays and look after replenishment.

2.2.5 Utility Staff

To ensure the premium cup of coffee is on the table of the customer. The sanitation part
of the company should also be looked after. Therefore, to take care of that section The
Coffee House will have a utility staff, which will perform following activities:

Handling and moving of objects at right place such as knives, glassware, related utensils.

Washing up dishes, glassware and other related utensils, pots and pans with the help of
dishwashers.

47
Moving and transport the clean dishes, utensils and others to the work areas at right
place.

Unpack and store the materials in the storerooms, refrigerators and other storage areas as
required.

Help in preparation of variety of foods other than cooking.

Performing general physical activities such as cleaning kitchen area, load or unload
products.

Arrange and manage and stock the kitchen material in systematic manner.

HR Development

10.4.1 HR Training & Development

Training is one of the most important aspect for The Coffee House as it will help the
organization to enhance its employees and make them competitive enough and enhance
their skills, behavior and other aspect needed for working effectively and efficiently.

Training will be focused more to receptionist, waiters, and coffee printer as they will be
the ones directly in contact to the customers but all the member of the organization will
be looked after and trained as and when needed

Training for Counter Staffs

Handling customer order properly

Managing cash and daily record keeping of the sales

Handling the customer queue

Maintaining the hygiene and quality of the food outlet

Cleanliness and safety procedures

48
Developing good relations with the consumer

Positive behavior and work attitude

Training for the Waiters

Positive behavior and work attitude

Polite behavior to customers

Controlling the uncertain environment

10.4.2 Retention of employees

Retention of employees will be pushed with the following action plan:

Yearly increment is salary

Giving leave on emergencies

Providing advance salaries in need

Increasing performance by friendly working environment

49
CHAPTER 11

11.1 Financial Objective

Short Term Financial Objectives

Achieve break even sales within the second year.

Medium Term Financial Objectives

Growth in sales amount by 100% with the addition of new outlet after five years of its
establishment.

Long Term Financial Objective

Build a good brand image in the market, gaining trust of customer and enhanced
customer retention by gaining the trust of customers. Organization will focus on opening
new branches in new market.

11.2 Financial Estimations Assumptions

Financial planning is about developing strategies to help manage financial affairs and
meet the organizational goal. This section details the calculations, assumptions and
methodology used as a basis for the projections of the expected financial performance of
The Coffee House

The financial plan of the company are based some of the basic assumptions that were
made. It is assumed that the economy is strong, without major recession, there are no
unforeseen changes in economic policy to make the products and service immediately
obsolete. These financial assumptions are as follows:

Revenue Based on research conducted every

year 5% increment

Expenses 10% increment every year

Salary 15% increment every year

50
 Depreciation rate 25% on all Furniture, Machine &
equipment

Depreciation method Written down value

Debt and equity Total startup cost will be financed

through 60% debt and 40% equity

Cost of goods sold The cost of goods sold as per the

industry average is assumed to be
40%

Loan The cost of loan is 14% according to

current market scenario

Taxation Tax rate applied as per the law of the

land at 25%

Working capital It is estimated to be one month’s

expenses and inventory for 7 days.

COGS 40% of Sales (Industry Average)

Receivable Turnover Ratio 12 times

Inventory Turnover Ratio 12 times

Creditor Turnover Ratio 6 times

8.2 Financial Details of Start-Up Expenses

51
The Coffee House will be started with fixed assets costing Rs. 1,846,600. The detail is
shown in Annex 1, which is financed 70% by Long term Loan which is Rs 1,292,620 and
other by equity capital. 30% of total equity financing i.e. Rs.5, 53, 980. The short term
loan taken is 70% of the working capital which is NRs. 308146. Therefore total initial
investment is Rs. 22, 86,000. The details are shown in Annex 1. All other expenses such
as operating, marketing and preliminary expenses and are shown in Annex 4, 5, 6.

8.3 Sales Forecast and Cost of Goods Sold

The sales revenue is based on the quantity of the products sold. The sales for the
upcoming years are supposed to increase by 10% every year and the cost of goods sold
(COGS) is calculated assuming by adding the cost that raw materials are required to
produce the final product. The COGS is also expected to increase by 10% per year. The
sales of year 1 is Rs 12,211,500. The details of sales revenue and number of items sold
are shown in Annex 12 and the Cost of Goods Sold is in Annex 7.

8.4 Budgeted Loan Repayment Schedule

The start-up long term loan is taken at 10% annual interest rate from Janata Bank Nepal
Limited (JBNL) which is to be paid quarterly 5 years. LTL will be taken from the bank
by keeping the personal asset collateral of the promoters. The annual payment of this
loan is supposed to be NRs. 187,398/-. The loan amortization schedule is shown in
Annex 9.

8.5 Pro-forma Income Statement

Pro forma Income Statements is the projected income statement that is used as a tool for
planning future business operations. The company projects the 5 years income statement
that has helped in predicting the trend of profitability of the business. It also shows the
operating surplus for the coming years. The Preformat Income Statement of The Coffee
House is shown in the Annex. This allows making any operational cost or product price
changes in order to understand the correlation with the profit of the business. The 5 years
following projected net profit are Rs. 5, 032,881, Rs. 5,856,669, Rs.6, 635,332, Rs.7,
473,876, Rs. 8,383,235. The percentage increase of the net income from year 1-2 is
16.38%, 2-3 is 13.29%, 3-4 is 12.63% and 4-5 is 12.16%. This show an increasing trend
in the net profit but in a decreasing rate. The detail of it is in Annex 13.

8.6 Preformat Balance Sheet

52
Balance Sheet is a financial statement that summarizes a company's assets, liabilities and
shareholders' equity at a specific point in time. A balance sheet is a record of what a
company has and how it has come to have it. The opening balance sheet of the company
shows Rs. 1,978,662 of total assets with same level of liabilities and equity and the total
balance at the end of year 5 is Rs.34, 485,299. The overall projected balance sheet of for
five years is shown in Annex 14.

8.7 Preformat Cash flow Statement

The cash flow of the business is continuously increasing from year 1 to year 5. The cash
flow in year 0 year is Rs 102,063 and year 1 is Rs. 2,779,071 and has reached to Rs.
30,153,919 in year 5.

The cash flow statement is the summary of cash inflow and outflow in the firm. Cash
flow statement of Beans N Cream is shown in Annex 15

8.8 Business Financial Ratio

Business Financial Ratios is a powerful tool of financial statement analysis which helps
in identifying financial strength and weakness of the business concern. The major ratios
are Liquidity ratio, Debt Management ratios, and Profitability ratios. It is shown in
Annex 16.

8.8.1 Liquidity Ratios

It is used to judge the ability of the firm to meet short term obligation.

8.8.1.1 Current Ratio: It indicates the extent to which current liabilities are covered
by assets expected to be converted to cash in near future. The current ratio is for year 1 is
6.88 times. It is increasing and reaches to 98.82 times.

8.8.1.2 Quick Ratio: It is also termed as acid-test ratio or liquid ratio, is another
measure of short-term solvency of a firm. Quick assets exclude inventories. The quick
ratio of the company increased from 5.13 times to 93.03 times which means company
has the ability to pay out its obligations.

8.8.2 Debt Management Ratio

It is also called leverage ratio. It indicates the extent to which a firm uses debt financing.

53
8.8.2.1 Debt Ratio: It is debt to total asset ratios. It measures the percentage of funds
provided by creditors. Higher this ratio, the greater financial risk, and vice-versa. Year 1
debt ratio is 16% meaning its creditors have supplied 16% of the total financing. It is
decreasing and reaches to 1% in year 5.

8.8.2.2 Debt to Equity Ratio: Higher this ratio, riskier would the capitalization, lower the
ratio, lower would be the risk. This ratio has direct connection with profitability. Here,
debt to equity ratio is 19% in year 1 and it decreases to 1% in year 5.

8.8.3 Profitability Ratio

Profitability shows the combined effect of combined effects of liquidity and debt
management on operating results.

8.8.3.1 Net Profit Margin Ratio: Net profit margin is the ratio between net
income and sales. The net profit of the store is 41% initially and it is increased to 47% by
the end of fifth year.

8.8.3.2 Return on Asset (ROA): Higher ratio indicates the efficiency a financial
resources invested in the firm’s assets to generate profitability. The company’s ROA is
74% in the initial year and reduces to 24% in fifth year. It is because of the low earning
power and not being able to generate optimum sales through effective utilization of
assets.

8.8.3.3 Return on Equity (ROE): The return on Equity in year 1 is .88 and decreased to
0.25 in the fifth year.

8.9 Other Financial Indicators

NPV (Net Present Value) of the project is difference between present value of cash
inflows and outflows. Net Present Value is Rs. 45,807,443. Hence, it adds more value to
the firm. It compares the present value of money today to the present value of money in
the future, taking inflation and returns into account.

IRR (Internal Rate of Return) is the discount rate at which the present value of all future
cash flow is equal to the initial investment or in other words the rate at which an
investment breaks even. IRR is …%.

Discounted PBP is, years which means that the cost of company is recovered in years.
The calculations are shown in Annex 10.
54
CHAPTER 12

CRITICAL RISKS AND CONTINGENCY

Running a business can be a dangerous occupation with many different types of risk.
Some of these potential hazards can destroy a business, while others can cause serious
damage that can be costly and time consuming to repair. Despite the risks implicit in
doing business, CEOs and/or risk management officers – no matter the size of the
business, from small to corporate giant – can prepare for them if they know what they
are.

If and when risk becomes reality, a well-prepared business can moderate the risk's
impact. Dollar losses, lost time and productivity and the negative impact on customers
can all be minimized

The business environment is basically unpredictable and uncontrollable. To operate and

run a business there are various risk associated with it. The risk can be internal and
external. They are:

9.1 Internal Risk

There could be risk of project delay that could hinder starting up the business venture.
Such delays may increase the cost of the product. Project delay may be caused due to the
following reasons:

Delay in the registration process of the firm.

Unavailability of needed machineries and technologies

Difficulty in obtaining finance.

Delay in delivery and installation of equipment.

9.2 External Risk

There could be following external risk for the venture:

Political instability like strikes may affect distribution.

Inflation may increase the cost of raw materials and hence the price of finished product.

55
Poor economic condition may decrease the demand of the product.

Competitors entering the same location.

Natural Calamities like Earthquake is a risk

Pandemic can also have a harsh effect like CORONA

Risk Management Plan

For startup businesses and established organizations, the ability to identify which risks
pose a threat to successful operations is a key component of strategic business planning.
Business risks are identified using a myriad of methods, but each identifying strategy
relies on a comprehensive analysis of specific business activities that could present
challenges to the company. Under most business models, organizations face preventable,
strategic and external threats that can be managed through acceptance, transfer, reduction
or elimination. Illness or injury among the workforce is inevitable, and is always a
problem. To prevent loss of productivity, assign and train backup personnel to handle the
work of critical employees when they are absent due to a health-related concern. Back up
of power source is available in a way to cope up with the risk associated with the power
outage risks. Proper relation is maintained with employees and supply chain in a way to
cope up with the risks of employee turnover and ineffective performance of supply chain
members. Continuous R&D will be given due priority to ensure the maintained
satisfaction of customer, to ensure new product development and properly address the
concern of TQM.

Contingency Plan

Contingency planning prepares a food business to respond effectively to an unplanned

event. It is made up of three key components – being prepared, responding to an event
and post-event recovery. The unexpected situation that may arise from fire may force to
close up the business for some time and in severe condition may lead to close up for a
long time. In a way to deal with the problem renovation of the cafe should be
undertaken.

56
Similarly, if the business suffers from the losses and becomes difficult to continue, it is
to be sold to other as well as to handle everything relating to the business. The cash
obtained will be used first of all to pay all the debt of the business and then planning will
be done to come up again with something new and unique idea in the market.

57
CHAPTER 13

FUTURE PLAN AND EXIT STRATEGIES

10.1 Future Plan

The Coffee House's future plan is to start a training school of the Barista in Lalitpur area.
So, that it can produce skill manpower in the society. To uplift its business, The Coffee
House plans to start its own customized cake venture. The facilitator role of the cakes
will help us to know the demand of such cakes in this area. Furthermore, the company
plans to open its branches at various other major areas in the city like, Bhaktapur Durbar
Square and Boudha.

10.2 Exit Strategies

The overall performance of the business might get seriously affected if there exist higher
threat in terms of competitors, political unrest, lesser consumer preference and other
risks.

If the business start suffering loss and the management team is unable to come up with
new innovations in products and services provided by The Coffee House then the
business will opt for exit from the market. In doing so, it will exit the coffee business but
use the facility to open up a customized cake shop.

BIBLIOGRAPHY

58
http://www.cafedecolombia.com/bb-fnc-en/index.php/comments/
millennials_an_important_segment_for_coffee_consumption_proexport_says/

http://www.bplans.com/coffee_shop_business_plan/products_fc.php

www.wikipedia.com

Basic Financial Management, Jeevan Bhattrai, Shive Ghimire, Rajendra Maharjhan. (PK
Pustak Bhandar)

Barista Taining Handbook

Interview: Ram Sharan Phuyal, store manager at Himalayan Java Lounge, Civil Mall.

Official website of NTCDB

59
ANNEXURE (Amounts in NRs)

ANNEX 1: LOAN AND EQUITY

Equity Amount
30% of Fixed Assets 5,53,980
30% of Working Capital 1,32,063
Total Equity 6,86,043

Loan Amount
Long term loan (70% of Fixed 12,92,620
Assets)
Short term loan (70% of WC) 3,08,146
Total Loan 16,00,766
INITIAL INVESTMENT 22,86,809

ANNEX 2: TOTAL FIXED ASSETS

S. No Particulars Qty Rate Cost

  Furniture      

1 Showcase Rack 2 6,000 12,000

2 Storeroom Rack 2 10,000 20,000

3 Small Table 3 5,000 15,000

4 Large Table 5 8,000 40,000

5 Chair 21 3,000 63,000

6 Sofa 2 25,000 50,000

60
   Total       200,000

S. No Particulars Qty Rate Cost

  Intellectual Property      

7 Interior 1 100,000 100,000

8 Software 1 50,000 50,000

   Total     150,000

  Equipment      

9 Showcase Fridge 1 115,000 115,000

10 Microwave 1 15,000 15,000

11 Dishwasher 1 100,000 100,000

12 Computer 2 40,000 80,000

13 Printer 1 15,000 15,000

14 Fax 1 10,000 10,000

  Total     3,35,000

  Espresso Bar      

Espresso Machine 625,000

61
15 1 625,000

16 Grinder 1 140,000 140,000

17 Knock Box 1 8,000 8,000

18 Tamp/Mat/Thermometer 1 16,000 16,000

19 Pitcher 1 11,500 11,500

20 Whip cream dispenser 1 12,000 12,000

21 Whip cream dispenser charger 1 1,100 1,100

22 Water Purifier 1 10,000 10,000

  Total     8,23,600

S. No Particulars Qty Rate Cost

  Blended Beverage      

62
 23 Blender 1 18,000 18,000

24 Ice Maker 1 10,000 10,000

  Drip Coffee /Tea Bar      

25 French Press Machine 1 5,000 5,000

26 Crockery   75,000 75,000

27 Generator 1 200,000 200,000

28 Other   30,000 30,000

  Total       3,38,000

  Total Fixed Assets     2,181,600

ANNEX 3: SALARY

Salary per
Particulars Year 1
month

Manager (Basic salary & Food Allowance)-1 18,000 234,000

Head Barista (Basic salary & Food Allowance)-1 10,500 136,500

Staffs (Baristas) (Basic salary & Food Allowance)-

5 32,500 2,112,500

63
 Total Salary 61,000 2,483,000

ANNEX 4: PRELIMINARY EXPENSES

Preliminary Expenses

Amoun
Particulars t

Legal Paper works / Documentation 20000

Installation Charge of telephone and internet 10000

Total 30000

ANNEX 5: OPERATING EXPENDITURE

Rent:

Particulars sq. ft Year 1

Rental Space 500*600 600,000

Total rent   600,000

     

Utility Expenses:

Particulars per month Year 1

Electricity 1500 18000

Water 2000 72000

Telephone   12000

64
 Internet 512 MB 30000

Printing & Stationeries   5000

Total Utility Exp   132000

ANNEX 6: MARKETING EXPENSES

Particulars Rs. Year 1

Advertisement (Newspaper /Magazine/ Web) 5000 60000

Promotion Materials (coupons/flyers ets) 5000 60000

Total   120000

ANNEX 7: COST OF GOODS SOLD

Particulars Rs/unit Year 1

Coffee Beans (1 Kg) 1,500 540,000

Milk (12 Lit) 600 216,000

Condiments (50 cups) 150 54,000

Napkins/wooden stirrers/straws (50 cups) 200 72,000

Ingredients (caramel sauce/powder/syrups) 350 126,000

Food & Pastry 250 90,000

Cost of Goods Sold   1,098,000

65
ANNEX 8: WORKING CAPITAL

AMOUN
PARTICUALRS T

Inventory

Coffee Beans 112500

Cookies 800

Cream Items 9000

122300

Receivables 50184

Operating Activities 277916.67

450401

-
Less: Sundry creditor 10191.667

TOTAL 440209

ANNEX 9: DEPRECIATION SCHEDULE

Furniture

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

11250
Cost 200000 150000 0 84375 63281

Less: Depreciation 50000 37500 28125 21094 15820

NBV at end 150000 112500 84375 63281 47461

           

           

Equipment

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

66
 84183
Cost 1496600 1122450 8 631378 473534

21045
Less: depreciation 374150 280613 9 157845 118383

63137
Net Book Value 1122450 841838 8 473534 355150

           

23858
total Depreciation 424150 318113 4 178938 134204

ANNEX 10: NPV, IRR AND PBP

(Assumed Interest = 15%)

Discounted Cash Cumulative

Year Cash Flow Flow DCF

0 (102,063) (102,063) (102,063)

1 2,779,071 2,416,583 2,314,520

2 8,204,524
67
 6,203,799 8,518,319

3 14,748,416 9,697,323 18,215,642

4 22,037,434 12,599,974 30,815,616

5 30,153,919 14,991,827 45,807,443

Total PV 45,909,506  

NCO -102,063  

NPV 45,807,443  

Discounted Payback
Period 1.04  

IRR   2907%  

68
 ANNEX 11: LOAN AMMORTIZATION

quarter Beginning Paymen interest Principal ending amount

Balance t
           
1
1,292,620 82,918 32,316 50,602 1,242,018
2
1,242,018 82,918 31,050 51,867 1,190,150
3
1,190,150 82,918 29,754 53,164 1,136,986
4
1,136,986 82,918 28,425 54,493 1,082,493
5
1,082,493 82,918 27,062 55,856 1,026,637
6
1,026,637 82,918 25,666 57,252 969,385
7
969,385 82,918 24,235 58,683 910,702
8
910,702 82,918 22,768 60,150 850,552
9
850,552 82,918 21,264 61,654 788,898
10
788,898 82,918 19,722 63,195 725,702
11
725,702 82,918 18,143 64,775 660,927
12
660,927 82,918 16,523 66,395 594,532
13
594,532 82,918 14,863 68,055 526,478
14
526,478 82,918 13,162 69,756 456,722
15

69
 456,722 82,918 11,418 71,500 385,222
16
385,222 82,918 9,631 73,287 311,935
17
311,935 82,918 7,798 75,119 236,815
18
236,815 82,918 5,920 76,997 159,818
19
159,818 82,918 3,995 78,922 80,895
20
80,895 82,918 2,022 80,895 (0)

ANNEX 12: SALES REVENUE YEARLY

Particular Qty per day rate Year 1

Hot Beverage      

Espresso 3 85 89,250

Café Americano 10 100 350,000

Cafe Latte/Honey/caramel 10 165 577,500

Café Mocha 4 160 224,000

Cappuccino 10 120 420,000

Caramel Macchiato 2 120 84,000

Hot Chocolate mocha 8 170

70
 476,000

      2,220,750

Cold Beverage      

Iced Americano 8 135 378,000

Iced Mocha 3 195 204,750

Iced Cappuccino/Latte 9 180 567,000

Iced Caramel Macchiato 1 180 63,000

Iced Tea lemon/peach 5 145 253,750

      1,466,500

Blended Beverage      

Blended Mocha 4 215 301,000

Blended Caramel Macchiato 2 195 136,500

Blended Vanilla Mocha 3 235 246,750

Blended Lemonade 5 155 271,250

Blended Oreo Cookies Shake 6 185 388,500

Blended Smoothies 195

8

71
 546,000

      1,890,000

Coffee Alternatives      

Cold Drinks 2 95 66,500

Seasonal Juices 1 150 52,500

Lassi/shakes 3 140 147,000

      266,000

Bakery items 250 70 525,000

       

Total sales     12,211,500

ANNEX 13: INCOME STATEMENT

Particular Year 1 Year 2 Year 3 Year 4 Year 5

Sales 12,211,500 13,432,650 14,775,915 16,253,507 17,878,857

Less: COGS 1,098,000 1,108,800 1,120,140 1,132,047 1,144,549

Gross Profit 11,113,500 12,323,850 13,655,775 15,121,460 16,734,308

Less          

72
Cash Operating exp 3,335,000 3,613,300 3,917,930 4,251,448 4,616,664

Depreciation 424,150 318,113 238,584 178,938 134,204

Preliminary
expenses 6,000 6,000 6,000 6,000 6,000

Total Operating exp 3,765,150 3,937,413 4,162,514 4,436,386 4,756,868

Operating Profit 7,348,350 8,392,438 9,499,261 10,691,073 11,983,440

Less: Interest 158,520 25,767 20,215 14,108 7,390

NPBT 7,189,830 8,366,670 9,479,045 10,676,965 11,976,050

Less: Tax 2,156,949 2,510,001 2,843,714 3,203,090 3,592,815

NPAT 5,032,881 5,856,669 6,635,332 7,473,876 8,383,235

73
 ANNEX 14: BALANCE SHEET

Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Assets            
Fixed Assets            
Furniture
200,000 150,000 112,500 84,375 63,281 47,460.94
Equipment
1,496,600 1,122,45 841,837 631,378 473,533 355,150
Intellectual
Property 150,000 150,000 150,000 150,000 150,000 150,000
Total Fixed
Assets 1,846,600 1,422,45 1,104,337 865,753 686,814 552,611
0
Preliminary
expenses 30,000 24,000 18,000 12,000 6,000 -
Current            
Assets
Cash
102,062 2,779,07 8,204,523 14,748,41 22,037,433 30,153,918
0 5
A/c receivable
- 1,221,15 1,343,265 1,477,592 1,625,351 1,787,886
0.
Stock
- 1,359,80 1,495,780 1,645,358 1,809,894 1,990,883
0
Total CA
102,062 5,360,02 11,043,56 17,871,36 25,472,678 33,932,687
0 8 5
Total Assets
1,978,662 6,806,47 12,165,90 18,749,11 26,165,493 34,485,299
0 6 8
Liabilities &            

74
 Equity
Equity
686,042 686,042 686,042 686,042 686,042 686,042
Retained  
Earnings 5,032,88 10,889,55 17,524,88 24,998,757 33,381,993
1 0 2
Long Term
Loan 1,292,620 308,146 257,672 202,151 141,078 73,898
Short Term        
Loan - 450,000
Account  
Payable 329,400 332,640 336,042 339,614 343,364
Total
Liabilities and 1,978,662 6,806,47 12,165,90 18,749,11 26,165,493 34,485,299
equity 0 6 8

ANNEX 15: CASH FLOW STATEMENT

Particulars year 0 year 1 year 2 year 3 year 4 year 5

A. Operating
Activities            

Net Income   5,032,881 5856669 6635331 7473875 8383235

Depriciation   424,150 318,113 238,584 178,938 134,204

Preliminary expenses   6,000 6,000 6,000 6,000 6,000

75
(increase)/decrease in
A/R   (1,221,150) (122,115) (134,327) (147,759) (162,535)

increase/(decrease) in
A/P   329,400 3,240 3,402 3,572 3,751

(increase)/decrease in
inventory   (1,359,800) (135,980) (149,578) (164,536) (180,989)

Cash from operating

activities   3,211,481 5,925,927 6,599,413 7,350,091 8,183,666

B. Investing Activities            

Purchase of furniture (200,000)          

Purchase of
Equipment (1,496,600)          

Preliminary Expenses (30,000)          

Intellectual property (150,000)          

Cash flow from

Investing Activities
(B) (1,876,600) -        

C. Financing
Activities            

Increase in capital 686,043          

Long Term loan 1,292,620          

       
Short Term loan
-

76
 450,000

Repayment of short
term loan -   (450,000)      

Repayment of long
Term loan - (984,474) (50,474) (55,521) (61,073) (67,180)

Cash flow from

Financing Activities
(C) 1,978,663 (534,474) (500,474) (55,521) (61,073) (67,180)

Net Change in cash

and Cash
Equivalent(A+B+C) 102,063 2,677,008 5,425,453 6,543,892 7,289,018 8,116,485

Add: Beginning Cash

and Cash Equivalen - 102,063 2,779,071 8,204,524 14,748,416 22,037,434

Ending Cash and Cash

Equivalent 102,063 2,779,071 8,204,524 14,748,416 22,037,434 30,153,919

77
ANNEX 16: RATIO ANALYSIS

Financial Ratio Analysis

Financial Ratio Year 1 Year 2 Year 3 Year 4 Year 5

Liquidity Ratio          

Current Ratio 6.88 33.20 53.18 75.00 98.82

Quick Ratio 5.13 28.70 48.29 69.68 93.03

Assets Management
Ratio          

Fixed Assets
Turnover Ratio 8.58 12.16 17.07 23.67 32.35

Account receivable
turnover ratio 37.07 40.38 43.97 47.86 52.07

Total Assets
turnover Ratio 1.79 1.10 0.79 0.62 0.52

Debt Management
Ratio          

Debt-Asset Ratio 0.16 0.05 0.03 0.02 0.01

Debt-Equity Ratio 0.19 0.05 0.03 0.02 0.01

Profitability Ratio          

Net Profit
Margin(%) 0.41 0.44 0.45 0.46 0.47

Return On
Equity(%) 0.88 0.51 0.36 0.29 0.25

Return On Assets 0.74 0.48 0.35 0.29 0.24

78
(%)

79
ANNEX 16: COFFEE AND FOOD PAIRING

Coffee Food Paring

Espresso Apple pie, Chocolate muffin

Chocolate brownie, Chocolate Cookies, Apple

Espresso Macchiato Bar, Chocolate Muffin

Banana Muffin, Chocolate Muffin, Cheese

Café Latte croissant

Café Mocha, Mocha

Madness Chocolate Cookies, Peanut Butter Cookies,

Cappuccino Chocolate cookies, Chocolate trupple cake

Caramel Macchiato Carrot Cake, peanut cookies

Americano,
Chocolate Brownie, Cheese Cake, Carrot cake, any
kinds of Chocolates

Iced Americano,
Iced Coffee All Kinds of Sandwiches

Iced Latte All Kinds of Sandwiches, Apple pie

Iced Caramel
Macchiato Almond Cookies, Sausage roll and sandwiches

Chocolate trupple Cake, Black forest Cake,

Iced Mocha Choclate muffin

80
81