Java Culture

BUSINESS PLAN
September 2017

Robert Johnson
Partner
Java Culture
1234 Main Street
Eugene, Oregon 97402
530 345-6789
RJ@*javacoffeeculture*.com
*javacoffeeculture*.com
 JAVA CULTURE

I. Executive Summary
Business Overview
Java Culture, an Oregon limited liability company, sells coffee, other beverages and snacks in its
2,300 square feet premium coffee bar located near the University of Oregon campus. Java
Culture's major investors are Robert Johnson and Sam Smith who cumulatively own over 70%
of the company. The start-up loss of the company is assumed in the amount of $27,680.

Products / Services Offered

Java Culture will offer its customers the best tasting coffee beverages in the area. This will be
achieved by using high-quality ingredients and strictly following preparation guidelines. The
store layout, menu listings and marketing activities will be focused on maximizing the sales of
higher margin espresso drinks. Along with the espresso drinks, brewed coffee and teas, as well
as some refreshment beverages, will be sold in the coffee bar. Java Culture will also offer its
clients pastries, small salads and sandwiches. For the gourmet clientele that prefers to prepare
its coffee at home, Java Culture will also be selling coffee beans.

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

Success Factors
Java Culture is uniquely qualified to succeed due to the following reasons:

• Products and/or Services: Our Products and/or Services are superior to our competitors
because: The menu of the Java Culture coffee bar will be built around espresso-based
coffee drinks such as lattes, mochas, cappuccinos, etc. Each of the espresso-based
drinks will be offered with whole, skimmed, or soy milk. Each of these coffee beverages
is based on a 'shot' of espresso, which is prepared in the espresso machine by forcing
heated water through ground coffee at high pressure.

• Marketing: We have unique marketing skill sets that enable us to attract new
customers at a low cost. Java Culture will cater to people who want to get their daily
cup of great-tasting coffee in a relaxing atmosphere. Such customers vary in age,
although our location close to the University campus means that most of our clientele
will be college students and faculty. Our market research shows that these are
discerning customers that gravitate towards better tasting coffee.

1
 JAVA CULTURE

II. Company Overview

Below is a snapshot of Java Culture since its inception:

• Date of formation: 01-01-2018

• Business is not yet operational
• Legal Structure: Limited Liability Company

Company Locations and Facilities

Java Culture coffee bar will be located on the ground floor of the commercial building at the
corner of West 13th Avenue and Patterson Street in Eugene, OR. The company has secured a
one-year lease of the vacant 2,500 square feet premises previously occupied by a hair salon.
The lease contract has an option of renewal for three years at a fixed rate that Java Culture will
execute depending on the financial strength of its business.
The floor plan will include a 200 square feet back office and a 2,300 square feet coffee bar,
which will include a seating area with 15 tables, a kitchen, storage area and two bathrooms.
The space in the coffee bar will be approximately distributed the following way--1,260 square
feet (i.e., 55% of the total) for the seating area, 600 square feet (26%) for the production area,
and the remaining 440 square feet (19%) for the customer service area. This property is
located in a commercial area within a walking distance from the University of Oregon campus
on the corner of a major thoroughfare connecting affluent South Eugene neighborhood with
the busy downtown commercial area. The commercially zoned premises have the necessary
water and electricity hookups and will require only minor remodeling to accommodate the
espresso bar, kitchen and storage area. The coffee bar's open and clean interior design with
modern wooden decor will convey the quality of the served beverages and snacks, and will be
in-line with the establishment's positioning as an eclectic place where people can relax and
enjoy their cup of coffee. The clear window displays, through which passerby will be able to see
customers enjoying their beverages, and outside electric signs will be aimed to grab the
attention of the customer traffic.

2
 JAVA CULTURE

III. Industry Analysis

Industry Overview
Java Culture operates in the Coffee Shop market.

• Total monetary sales in this industry last year: $14,000,000,000

• Operators that were in this industry last year: 31,490
• Industry's key product and service segments: College students and faculty
• Key market trends: Coffee consumption has shown a steady 2.5% growth rate in the
United States over the last decade. In 1994, total sales of coffee were approximately
$7.5 billion with gourmet coffee representing 33% (or $2.5 billion) of that. The retail
coffee industry is flourishing in the U.S. Pacific Northwest. The local climate, with a long
rainy season, is very conducive for the consumption of hot non-alcoholic beverages. At
the same time, hot dry summers drive people into cafes to order iced drinks. Further,
coffee has really become a part of the lifestyle in the Pacific Northwest. Its discerning
coffee drinkers are in favor of well-prepared, strong coffee-based beverages, which they
can consume in a relaxing environment.

Relevant Market Size

Our relevant market size is the annual revenue that our company could attain if we owned
100% market share.

Our relevant market size is calculated as follows:

• Number of customers who might be interested in purchasing our products and/or

services each year: 5,500
• Amount these customers might be willing to spend, on an annual basis, on our products
and/or services: $250
• Our relevant market size: $1,375,000

As the analysis shows, our relevant market is large enough for our company to enjoy
considerable success.

3
 JAVA CULTURE

IV. Customer Analysis

Below is a description of who our target customers are, and their core needs.

Target Customers
Below is a profile of our target customers:

• Age: 18-25
• Location: Near a major university
• Occupation: Students, faculty and university employees

Customer Needs
Below is a profile of the needs that our target customers have:

• Quality: A desire for small indulgencies, for something more exotic and unique, provide
a good selling opportunity for coffee bars
• Location: Near a university
• Comfort: Java Culture 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

4
 JAVA CULTURE

V. Competitive Analysis
The following is an overview of Java Culture's competitors.

Direct Competitors
The following companies are our direct competitors.

• Direct Competitor #1: Starbucks

o Products/services offered: Coffee, sandwiches, bakery items
o Location(s): 2456 Main St., Eugene Oragon
o Competitor's key strengths: National Brand Recognition
o Competitor's Overview: strong financial position and established marketing and
operational practices

• Direct Competitor #2: Cafe Roma

o Products/services offered: Coffee and related food items
o Location(s): 4567 Main St., Eugene Oregon
o Competitor's key strengths: Environment and pricing
o Competitor's key weaknesses: Located on the left side of the street for inbound
morning traffic
o Competitor's Overview: Independent establishments that offer cozy atmosphere
and good coffee at affordable prices

5
 JAVA CULTURE

VI. Marketing Plan

Our marketing plan, included below, details our products and/or services, pricing, promotions
plans and distribution strategy.

Promotions Plan
Java Culture will use the following tactics to attract new customers:

• Blimps, Banners, and/or Billboards: banner will be placed at at strategic locations

• Coupons: cross promotions
• Flyers: flyers will be distributed locally

Java Culture's marketing strategy will be focused at getting new customers, retaining the
existing customers, getting customers to spend more and come back more often. Establishing a
loyal customer base is of a paramount importance since such customer core will not only
generate most of the sales but also will provide favorable referrals.

6
 JAVA CULTURE

VII. Operations Plan

Our Operations Plan details:

1. The key day-to-day processes that our business performs to serve our customers
2. The key business milestones that our company expects to accomplish as we grow

Key Operational Processes

The key day-to-day processes that our business performs to serve our customers are as follows:

• Customer Service: Java Culture baristas will handle the sales transactions. To speed up
the customer service, at least two employees will be servicing clients--while one
employee will be preparing the customer's order, the other one will be taking care of
the sales transaction.

Milestones
The key business milestones that our company expects to accomplish as we grow include the
following:

• 1. To Be Completed By : 2018-01-01
o Accomplishment #1: Business/Marketing Plan
o Accomplishment #2: Secure Funding
o Accomplishment #3: Secure lease
• 2. To Be Completed By : 2018-01-10
o Accomplishment #1: Health Dept.
o Accomplishment #2: Select construction contractor
o Accomplishment #3: Select point of sale system
• 3. To Be Completed By : 2019-01-20
o Accomplishment #1: Secure name licensing
o Accomplishment #2: Marketing plan
o Accomplishment #3: Structure company type
• 4. To Be Completed By : 2019-02-15
o Accomplishment #1: Select Suppliers
o Accomplishment #2: Hire Staff
o Accomplishment #3: Obtain Insurance
• 5. To Be Completed By : 2019-03-01
o Accomplishment #1: Grand Opening

7
 JAVA CULTURE

VIII. Management Team

Our management team has the experience and expertise to successfully execute on our
business plan.

Management Team Members

• Name : Robert Johnson
o Title: Partner
o Background: 25 years in restaurant management
• Name : Sam Smith
o Title: Business Manager/Bookkeeper
o Background: Accountant
• Name : Carol Jones
o Title: Director of Marketing
o Background: Retail Marketing manager

8
 JAVA CULTURE

IX. Financial Plan

Revenue Model
Java Culture generates revenues via the following:

• Sales of products/services: Coffee and related items

Summary
Below is an overview of our expected financial performance over the next five years:

FY 1 FY 2 FY 3 FY 4 FY 5
Revenues $602,819 $633,623 $666,002 $700,036 $735,808
Direct Expenses $145,508 $152,943 $160,759 $168,974 $177,608
Gross Profit $457,311 $480,680 $505,243 $531,061 $558,199
Gross Profit (%) 75.9% 75.9% 75.9% 75.9% 75.9%
Other Expenses $238,454 $246,495 $254,821 $263,442 $272,371
EBITDA $218,856 $234,184 $250,422 $267,619 $285,828
Depreciation $28,000 $28,000 $28,000 $28,000 $28,000
Amortization $0 $0 $0 $0 $0
Interest Expense $2,515 $2,515 $2,515 $2,515 $2,515
Income Tax Expense $65,919 $71,284 $76,967 $82,986 $89,359
Net Income $122,421 $132,385 $142,939 $154,117 $165,953

Funding Requirements/Use of Funds

To successfully execute on our business plan, we require $170,000 in outside funding.

The primary uses of this funding include:

• Marketing: $3,580
• Rent: $4,400
• Other is defined as: Equipment, Inventory and Cash - $142,320

9
 JAVA CULTURE

Financial Projections
Projected Sales, Gross Profit & Net Income

800000

700000

600000

500000

400000

300000

200000

100000

0
FY 1 FY 2 FY 3 FY 4 FY 5

Revenues Gross Profit Income

10
 JAVA CULTURE

5 Year Annual Income Statement

FY 1 FY 2 FY 3 FY 4 FY 5

Revenues

Revenues $602,819 $633,623 $666,002 $700,036 $735,808

Total Revenues $602,819 $633,623 $666,002 $700,036 $735,808

Direct Costs

Direct Costs $145,508 $152,943 $160,759 $168,974 $177,608

Total Direct Costs $145,508 $152,943 $160,759 $168,974 $177,608

GROSS PROFIT $457,311 $480,680 $505,243 $531,061 $558,199

GROSS PROFIT % 75.9% 75.9% 75.9% 75.9% 75.9%

Other Expenses

Salaries $169,899 $175,054 $180,365 $185,837 $191,475

Marketing
$24,271 $25,007 $25,766 $26,548 $27,353
Expenses
Rent/Utility
$39,126 $41,119 $43,214 $45,415 $47,729
Expenses

Other Expenses $5,157 $5,314 $5,475 $5,641 $5,812

Total Other Expenses $238,454 $246,495 $254,821 $263,442 $272,371

EBITDA $218,856 $234,184 $250,422 $267,619 $285,828

Depreciation $28,000 $28,000 $28,000 $28,000 $28,000

Amortization $0 $0 $0 $0 $0

EBIT $190,856 $206,184 $222,422 $239,619 $257,828

Interest Expense $2,515 $2,515 $2,515 $2,515 $2,515

PRETAX INCOME $188,341 $203,669 $219,907 $237,104 $255,313

Net Operating
$0 $0 $0 $0 $0
Loss
Use of Net
$0 $0 $0 $0 $0
Operating Loss

Taxable Income $188,341 $203,669 $219,907 $237,104 $255,313

Income Tax
$65,919 $71,284 $76,967 $82,986 $89,359
Expense

NET INCOME $122,421 $132,385 $142,939 $154,117 $165,953

Net Profit Margin

20.3% 20.9% 21.5% 22% 22.6%
(%)

11
 JAVA CULTURE

5 Year Annual Balance Sheet

FY 1 FY 2 FY 3 FY 4 FY 5

ASSETS

Cash $369,229 $528,309 $697,866 $879,075 $1,096,663

Other Current
$51,177 $53,792 $56,541 $58,336 $61,317
Assets
Total Current
$420,406 $582,102 $754,408 $937,412 $1,157,981
Assets

Intangible Assets $0 $0 $0 $0 $0

Acc Amortization $0 $0 $0 $0 $0

Net Intangibles $0 $0 $0 $0 $0

Fixed Assets $140,000 $140,000 $140,000 $140,000 $140,000

Accum
$28,000 $56,000 $84,000 $112,000 $140,000
Depreciation

Net fixed assets $112,000 $84,000 $56,000 $28,000 $0

Preliminary Exp $0 $0 $0 $0 $0

TOTAL ASSETS $532,406 $666,102 $810,408 $965,412 $1,157,981

LIABILITIES & EQUITY

Current Liabilities $32,472 $33,782 $35,148 $36,034 $37,498

Debt outstanding $63,826 $63,826 $63,826 $63,826 $88,978

Total Liabilities $96,298 $97,608 $98,974 $99,860 $126,476

Share Capital $354,156 $354,156 $354,156 $354,156 $354,156

Retained earnings $81,952 $214,338 $357,277 $511,395 $677,349

Total Equity $436,108 $568,494 $711,433 $865,551 $1,031,505

TOTAL LIABILITIES & EQUITY $532,406 $666,102 $810,408 $965,412 $1,157,981

12
 JAVA CULTURE

5 Year Annual Cash Flow Statement

FY 1 FY 2 FY 3 FY 4 FY 5

CASH FLOW FROM OPERATIONS

Net Income (Loss) $122,421 $132,385 $142,939 $154,117 $165,953

Change in
($4,230) ($1,305) ($1,382) ($908) ($1,517)
Working Capital

Plus Depreciation $28,000 $28,000 $28,000 $28,000 $28,000

Plus Amortization $0 $0 $0 $0 $0

Net Cash Flow

$146,191 $159,080 $169,557 $181,209 $192,436
from Operations

CASH FLOW FROM INVESTMENTS

Fixed Assets ($140,000) $0 $0 $0 $0

Intangible Assets $0 $0 $0 $0 $0

Net Cash Flow

($140,000) $0 $0 $0 $0
from Investments

CASH FLOW FROM FINANCING

Cash from Equity $142,528 $0 $0 $0 $0

Cash from Debt

$25,152 $0 $0 $0 $25,152
financing
Net Cash Flow
$167,680 $0 $0 $0 $25,152
from Financing

Net Cash Flow $173,871 $159,080 $169,557 $181,209 $217,588

Cash at Beginning
$195,358 $369,229 $528,309 $697,866 $879,075
of Period

$369,229 $528,309 $697,866 $879,075 $1,096,663

13