Internet Cafe - Sample Plan
Start-up
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
Expenses
Assets
Investment
Loans
2.3 Company Locations and Facilities
A site has been chosen at 10th and Oak in downtown Eugene. This site was chosen for various reasons, including:
Proximity to the downtown business community.
Proximity to trendy, upscale restaurants such as West Brothers.
Proximity to LTD's Eugene Station. Parking availability.
Low cost rent - $.85 per square foot for 1700 square feet.
High visibility.
All of these qualities are consistent with Internet Cafe's goal of providing a central hub of communication and socialization for the Eugene community.
3.0 Services
Internet Cafe will provide full access to email, WWW, FTP, Usenet and other Internet applications such as Telnet and Gopher. Printing, scanning, and introductory courses to the Internet will also be available to the customer. Internet Cafe will also provide customers with a unique and innovative environment for enjoying great coffee, specialty beverages, and bakery items.
Internet Cafe Internet Caffe - Sample Plan
Internet Cafe's objectives for the first three years of operation include:
The creation of a unique, upscale, innovative environment that will differentiate Internet Cafe from local coffee houses.
Educating the community on what the Internet has to offer.
The formation of an environment that will bring people with diverse interests and backgrounds together in a common forum.
Good coffee and bakery items at a reasonable price.
Affordable access to the resources of the Internet and other online services.
1.2 Mission
As the popularity of the Internet continues to grow at an exponential rate, easy and affordable access is quickly becoming a necessity of life. Internet Cafe provides communities with the ability to access the Internet, enjoy a cup of coffee, and share Internet experiences in a comfortable environment. People of all ages and backgrounds will come to enjoy the unique, upscale, educational, and innovative environment that Internet Cafe provides.
1.3 Keys to Success
The keys to the success for Internet Cafe are:
The creation of a unique, innovative, upscale atmosphere that will differentiate Internet Cafe from other local coffee shops and future Internet cafes.
The establishment of Internet Cafe as a community hub for socialization and entertainment.
The creation of an environment that won't intimidate the novice user. Internet Cafe will position itself as an educational resource for individuals wishing to learn about the benefits the Internet has to offer.
Great coffee and bakery items.
1.4 Risks
The risks involved with starting Internet Cafe are:
Will there be a demand for the services offered by Internet Cafe in Eugene?
Will the popularity of the Internet continue to grow, or is the Internet a fad?
Will individuals be willing to pay for the service Internet Cafe offers?
Will the cost of accessing the Internet from home drop so significantly that there will not be a market for Internet Cafes such as Internet Cafe?
Internet Cafe Internet Cafe - Sample Plan
2.0 Company Summary
Internet Cafe, soon to be located in downtown Eugene on 10th and Oak, will offer the community easy and affordable access to the Internet. Internet Cafe will provide full access to email, WWW, FTP, Usenet and other Internet applications such as Telnet and Gopher. Internet Cafe will also provide customers with a unique and innovative environment for enjoying great coffee, specialty beverages, and bakery items.
Internet Cafe will appeal to individuals of all ages and backgrounds. The instructional Internet classes, and the helpful staff that Internet Cafe provides, will appeal to the audience that does not associate themselves with the computer age. This educational aspect will attract younger and elderly members of the community who are rapidly gaining interest in the unique resources that online communications have to offer. The downtown location will provide business people with convenient access to their morning coffee and online needs.
2.1 Company Ownership
Internet Cafe is a privately held Oregon Limited Liability Corporation. Cale Bruckner, the founder of Internet Cafe, is the majority owner. Luke Walsh, Doug Wilson, and John Underwood, all hold minority stock positions as private investors.
2.2 Start-up Summary
Internet Cafe's start-up costs will cover coffee making equipment, site renovation and modification, capital to cover losses in the first year, and the communications equipment necessary to get its customers online.
The communications equipment necessary to provide Internet Cafe's customers with a high-speed connection to the Internet and the services it has to offer make up a large portion of the startup costs. These costs will include the computer terminals and all costs associated with their set-up. Costs will also be designated for the purchase of two laser printers and a scanner.
In addition, costs will be allocated for the purchase of coffee making equipment. One espresso machine, an automatic coffee grinder, and minor additional equipment will be purchased from Allann Brothers.
The site at 10th and Oak will require funds for renovation and modification. A single estimated figure will be allocated for this purpose. The renovation/modification cost estimate will include the costs associated with preparing the site for opening business.
Internet Cafe Internet Cafe - Sample Plan
Table: Start-up
Start-up
|
Requirements |
|
|
Start-up Expenses |
|
|
Legal |
$500 |
|
Stationery etc. |
$500 |
|
Brochures |
$500 |
|
Consultants |
$2,000 |
|
Insurance |
$700 |
|
Rent |
$1,445 |
|
4-group Automatic Coffee Machine |
$10,700 |
|
Bean Grinder |
$795 |
|
Computer Systems (x11) |
$24,310 |
|
Communication Lines |
$840 |
|
Fixtures/Re-model |
$20,000 |
|
Total Start-up Expenses |
$62,290 |
|
Start-up Assets Needed |
|
|
Cash Balance on Starting Date |
$24,000 |
|
Start-up Inventory |
$2,000 |
|
Other Current Assets |
$0 |
|
Total Current Assets |
$26,000 |
|
Long-term Assets |
$0 |
|
Total Assets |
$26,000 |
|
Total Requirements |
$88,290 |
|
Funding |
|
|
Investment |
|
|
Cale Bruckner |
$19,000 |
|
Luke Walsh |
$12,000 |
|
Doug Wilson |
$12,000 |
|
John Underwood |
$12,000 |
|
Total Investment |
$55,000 |
|
Current Liabilities |
|
|
Accounts Payable |
$0 |
|
Current Borrowing |
$9,290 |
|
Other Current Liabilities |
$0 |
|
Current Liabilities |
$9,290 |
|
Long-term Liabilities |
$24,000 |
|
Total Liabilities |
$33,290 |
|
Loss at Start-up |
($62,290) |
|
Total Capital |
($7,290) |
Total Capital and Liabilities $26,000
Internet Cafe Internet Cafe - Sample Plan
3.1 Service Description
Internet Cafe will provide its customers with full access to the Internet and common computer software and hardware. Some of the Internet and computing services available to Internet Cafe customers are listed below:
Access to external POP3 email accounts.
Customers can sign up for a Internet Cafe email account. This account will be managed by Internet Cafe servers and accessible from computer systems outside the Internet Cafe network.
FTP, Telnet, Gopher, and other popular Internet utilities will be available.
Access to Netscape or Internet Explorer browser.
Access to laser and color printing.
Access to popular software applications like Adobe PhotoShop and Microsoft Word.
Internet Cafe will also provide its customers with access to introductory Internet and email classes. These classes will be held in the afternoon and late in the evening. By providing these classes, Internet Cafe will build a client base familiar with its services. The computers, Internet access, and classes wouldn't mean half as much if taken out of the environment Internet Cafe will provide. Good coffee, specialty drinks, bakery goods, and a comfortable environment will provide Internet Cafe customers with a home away from home. A place to enjoy the benefits of computing in a comfortable and well-kept environment.
3.2 Competitive Comparison
Internet Cafe will be the first Internet cafe in Eugene. Internet Cafe will differentiate itself from the strictly-coffee cafes in Eugene by providing its customers with Internet and computing services.
3.3 Fulfillment
Internet Cafe will obtain computer support and Internet access from Bellevue Computers located in Eugene. Bellevue will provide the Internet connections, network consulting, and the hardware required to run the Internet Cafework. Allann Brothers will provide Internet Cafe with coffee equipment, bulk coffee, and paper supplies. At this time, a contract for the bakery items has not been completed. Internet Cafe is currently negotiating with Humble Bagel and the French Horn to fulfill the requirement.
3.4 Technology
Internet Cafe will invest in high-speed computers to provide its customers with a fast and efficient connection to the Internet. The computers will be reliable and fun to work with. Internet Cafe will continue to upgrade and modify the systems to stay current with communications technology. One of the main attractions associated with Internet cafes, is the state of the art equipment available for use. Not everyone has a Pentium PC in their home or office.
1.0 Executive Summary
Internet Cafe, unlike a typical cafe, will provide a unique forum for communication and entertainment through the medium of the Internet. Internet Cafe is the answer to an increasing demand. The public wants: (1) access to the methods of communication and volumes of information now available on the Internet, and (2) access at a cost they can afford and in such a way that they aren't socially, economically, or politically isolated. Internet Cafe's goal is to provide the community with a social, educational, entertaining, atmosphere for worldwide communication.
This business plan is prepared to obtain financing in the amount of $24,000. The supplemental financing is required to begin work on site preparation and modifications, equipment purchases, and to cover expenses in the first year of operations. Additional financing has already been secured in the form of: (1) $24,000 from the Oregon Economic Development Fund (2) $19,000 of personal savings from owner Cale Bruckner (3) $36,000 from three investors (4) and $9,290 in the form of short-term loans.
Internet Cafe will be incorporated as an LLC corporation. This will shield the owner Cale Bruckner, and the three outside investors, Luke Walsh, Doug Wilson, and John Underwood, from issues of personal liability and double taxation. The investors will be treated as shareholders and therefore will not be liable for more than their individual personal investment of $12,000 each.
The financing, in addition to the capital contributions from the owner, shareholders and the Oregon Economic Development Fund, will allow Internet Cafe to successfully open and maintain operations through year one. The large initial capital investment will allow Internet Cafe to provide its customers with a full featured Internet cafe. A unique, upscale, and innovative environment is required to provide the customers with an atmosphere that will spawn socialization. Successful operation in year one will provide Internet Cafe with a customer base that will allow it to be self sufficient in year two.
Highlights
$350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0
Sales
Gross Margin Net Profit
1999
2000
2001
Internet Cafe Internet Cafe - Sample Plan
1.1 Objectives
Internet Cafe Internet Cafe - Sample Plan
3.5 Future Services
As Internet Cafe grows, more communications systems will be added. The possibility of additional units has been accounted for in the current floor plan. As the demand for Internet connectivity increases, along with the increase in competition, Internet Cafe will continue to add new services to keep its customer base coming back for more.
4.0 Market Analysis Summary
Internet Cafe is faced with the exciting opportunity of being the first-mover in the Eugene cyber-cafe market. The consistent popularity of coffee, combined with the growing interest in the Internet, has been proven to be a winning concept in other markets and will produce the same results in Eugene.
4.1 Market Segmentation
Internet Cafe's customers can be divided into two groups. The first group is familiar with the Internet and desires a progressive and inviting atmosphere where they can get out of their offices or bedrooms and enjoy a great cup of coffee. The second group is not familiar with the Internet, yet, and is just waiting for the right opportunity to enter the online community. Internet Cafe's target market falls anywhere between the ages of 18 and 50. This extremely wide range of ages is due to the fact that both coffee and the Internet appeal to a variety of people. In addition to these two broad categories, Internet Cafe's target market can be divided into more specific market segments. The majority of these individuals are students and business people. See the Market Analysis chart and table below for more specifics.
Market Analysis (Pie)
University Students Office Workers Seniors Teenagers Other
Internet Cafe Internet Cafe - Sample Plan
|
Table: Market Analysis |
|||||||
|
Market Analysis |
|||||||
|
Potential Customers |
Growth |
1999 |
2000 |
2001 |
2002 |
2003 |
CAGR |
|
University Students |
4% |
15,000 |
15,600 |
16,224 |
16,873 |
17,548 |
4.00% |
|
Office Workers |
3% |
25,000 |
25,750 |
26,523 |
27,319 |
28,139 |
3.00% |
|
Seniors |
5% |
18,500 |
19,425 |
20,396 |
21,416 |
22,487 |
5.00% |
|
Teenagers |
2% |
12,500 |
12,750 |
13,005 |
13,265 |
13,530 |
2.00% |
|
Other |
0% |
25,000 |
25,000 |
25,000 |
25,000 |
25,000 |
0.00% |
Total 2.68% 96,000 98,525 101,148 103,873 106,704 2.68%
4.2 Target Market Segment Strategy
Internet Cafe intends to cater to people who want a guided tour on their first spin around the Internet and to experienced users eager to indulge their passion for computers in a social setting. Furthermore, Internet Cafe will be a magnet for local and traveling professionals who desire to work or check their email messages in a friendly atmosphere. These professionals will either use Internet Cafe's PCs, or plug their notebooks into Internet connections. Internet Cafe's target market covers a wide range of ages: from members of Generation X who grew up surrounded by computers, to Baby Boomers who have come to the realization that people today cannot afford to ignore computers.
4.2.1 Market Needs
Factors such as current trends, addiction, and historical sales data ensure that the high demand for coffee will remain constant over the next five years. The rapid growth of the Internet and online services, that has been witnessed worldwide, is only the tip of the iceberg. The potential growth of the Internet is enormous, to the point where one day, a computer terminal with an online connection will be as common and necessary as a telephone. This may be 10 or 20 years down the road, but for the next five years, the online service provider market is sure to experience tremendous growth. Being the first cyber-cafe in Eugene, Internet Cafe will enjoy the first-mover advantages of name recognition and customer loyalty. Initially, Internet Cafe will hold a 100 percent share of the cyber-cafe market in Eugene. In the next five years, competitors will enter the market. Internet Cafe has set a goal to maintain greater than a 50 percent market share.
4.2.2 Market Trends
A market survey was conducted in the Fall of 1996. Key questions were asked of fifty potential customers. Some key findings include:
35 subjects said they would be willing to pay for access to the Internet.
Five dollars an hour was the most popular hourly Internet fee.
24 subjects use the Internet to communicate with others on a regular basis.
Internet Cafe Internet Cafe - Sample Plan
4.3 Service Business Analysis
The retail coffee industry in Eugene experienced rapid growth at the beginning of the decade and is now moving into the mature stage of its life cycle. Many factors contribute to the large demand for good coffee in Eugene. The University is a main source of demand for coffee retailers. The climate in Eugene is extremely conducive to coffee consumption. Current trends in the Northwest reflect the popularity of fresh, strong, quality coffee and specialty drinks. Eugene is a haven for coffee lovers.
The popularity of the Internet is growing exponentially. Those who are familiar with the Internet are well aware of how fun and addictive surfing the Net can be. Those who have not yet experienced the Internet, need a convenient, relaxed atmosphere where they can feel comfortable learning about and utilizing the current technologies. Internet Cafe seeks to provide its customers with affordable Internet access in an innovative and supportive environment.
Due to intense competition, cafe owners must look for ways to differentiate their place of business from others in order to achieve and maintain a competitive advantage. The founder of Internet Cafe realizes the need for differentiation and strongly believes that combining a cafe with complete Internet service is the key to success. The fact that no cyber-cafes are established in Eugene, presents Internet Cafe with a chance to enter the window of opportunity and enter into a profitable niche in the market.
4.3.1 Business Participants
There are approximately 16 coffee wholesalers in Lane County. These wholesalers distribute coffee and espresso beans to over 20 retailers in the Eugene area. Competition in both channels creates an even amount of bargaining power between buyers and suppliers resulting in extremely competitive pricing. Some of these major players in the industry (i.e. Allann Brothers Coffee Co., Inc. and Coffee Corner Ltd.) distribute and retail coffee products.
The number of online service providers in Eugene is approximately eight and counting. These small, regional service providers use a number of different pricing strategies. Some charge a monthly fee, while others charge hourly and/or phone fees. Regardless of the pricing method used, obtaining Internet access through one of these firms can be expensive. Larger Internet servers such as America Online (AOL), Prodigy, and CompuServe, are also fighting for market share in this rapidly growing industry. These service providers are also rather costly for the average consumer. Consumers who are not convinced they would frequently and consistently travel the Internet, will not be willing to pay these prices.
4.3.2 Distributing a Service
The dual product/service nature of Internet Cafe's business faces competition on two levels. Internet Cafe competes not only with coffee retailers, but also with Internet service providers. The good news is that Internet Cafe does not currently face any direct competition from other cyber-cafes in the Eugene market. There are a total of three cyber-cafes in the state of Oregon: one located in Portland and two in Ashland.
Heavy competition between coffee retailers in Eugene creates an industry where all firms face the same costs. There is a positive relationship between price and quality of coffee. Some coffees retail at $8/pound while other, more exotic beans may sell for as high as $16/pound. Wholesalers sell beans to retailers at an average of a 50 percent discount. For example, a
Internet Cafe Internet Cafe - Sample Plan
pound of Sumatran beans wholesales for $6.95 and retails for $13.95. And as in most industries, price decreases as volume increases.
4.3.3 Competition and Buying Patterns
The main competitors in the retail coffee segment are Cafe Paradisio, Full City, Coffee Corner and Allann Bros. These businesses are located in or near the downtown area, and target a similar segment to Internet Cafe's (i.e. educated, upwardly-mobile students and business people).
Competition from online service providers comes from locally-owned businesses as well as national firms. There are approximately eight, local, online service providers in Eugene. This number is expected to grow with the increasing demand for Internet access. Larger, online service providers, such as AOL and CompuServe are also a competitive threat to Internet Cafe. Due to the nature of the Internet, there are no geographical boundaries restricting competition.
5.0 Strategy and Implementation Summary
Internet Cafe has three main strategies. The first strategy focuses on attracting novice Internet users. By providing a novice friendly environment, Internet Cafe hopes to educate and train a loyal customer base.
The second, and most important, strategy focuses on pulling in power Internet users. Power Internet users are extremely familiar with the Internet and its offerings. This group of customers serves an important function at Internet Cafe. Power users have knowledge and web-browsing experience that novice Internet users find attractive and exciting.
The third strategy focuses on building a social environment for Internet Cafe customers. A social environment, that provides entertainment, will serve to attract customers that wouldn't normally think about using the Internet. Once on location at Internet Cafe, these customers that came for the more standard entertainment offerings, will realize the potential entertainment value the Internet can provide.
5.1 Strategy Pyramids
The following subtopics provide an overview of Internet Cafe's three key strategies. Strategy pyramid graphics are presented in the appendices of this plan.
Internet Cafe Internet Cafe - Sample Plan
5.1.1 Attract Novice Internet Users
Internet Cafe's first strategy focuses on attracting novice Internet users. Internet Cafe plans on attracting these customers by:
Providing a novice friendly environment. Internet Cafe will be staffed by knowledgeable employees focused on serving the customer's needs.
A customer service desk will always be staffed. If a customer has any type of question or concern, a Internet Cafe employee will always be available to assist.
Internet Cafe will offer introductory classes on the Internet and email. These classes will be designed to help novice users familiarize themselves with these key tools and the Internet Cafe computer systems.
5.1.2 Attract Power Internet Users
Internet Cafe's second strategy will be focused on attracting power Internet users. Power Internet users provide an important function at Internet Cafe. Internet Cafe plans on attracting this type of customer by:
Providing the latest in computing technology.
Providing scanning and printing services.
Providing access to powerful software applications.
5.1.3 Social Hub
The third strategy focuses on building a social environment for Internet Cafe customers. A social environment, that provides entertainment, will serve to attract customers that wouldn't normally think about using the Internet. Once on location at Internet Cafe, these customers that came for the more standard entertainment offerings, will realize the potential entertainment value the Internet can provide.
5.2 Competitive Edge
Internet Cafe will follow a differentiation strategy to achieve a competitive advantage in the cafe market. By providing Internet service, Internet Cafe separates itself from all other cafes in Eugene. In addition, Internet Cafe provides a comfortable environment with coffee and bakery items, distinguishing itself from other Internet providers in Eugene.
Internet Cafe Internet Cafe - Sample Plan
5.3 Marketing Strategy
Internet Cafe will position itself as an upscale coffee house and Internet service provider. It will serve high-quality coffee and espresso specialty drinks at a competitive price. Due to the number of cafes in Eugene, it is important that Internet Cafe sets fair prices for its coffee. Internet Cafe will use advertising as its main source of promotion. Ads placed in The Register Guard, Eugene Weekly, and the Emerald will help build customer awareness. Accompanying the ad will be a coupon for a free hour of Internet travel. Furthermore, Internet Cafe will give away three free hours of Internet use to beginners who sign up for an introduction to the Internet workshop provided by Internet Cafe.
5.3.1 Pricing Strategy
Internet Cafe bases its prices for coffee and specialty drinks on the "retail profit analysis" provided by our supplier, Allann Brothers Coffee Co., Inc. Allann Brothers has been in the coffee business for 22 years and has developed a solid pricing strategy.
Determining a fair market, hourly price, for online use is more difficult because there is no direct competition from another cyber-cafe in Eugene. Therefore, Internet Cafe considered three sources to determine the hourly charge rate. First, we considered the cost to use other Internet servers, whether it is a local networking firm or a provider such as America Online. Internet access providers use different pricing schemes. Some charge a monthly fee, while others charge an hourly fee. In addition, some providers use a strategy with a combination of both pricing schemes. Thus, it can quickly become a high monthly cost for the individual. Second, Internet Cafe looked at how cyber-cafes in other markets such as Portland and Ashland went about pricing Internet access. Third, Internet Cafe used the market survey conducted in the Fall of 1996. Evaluating these three factors resulted in Internet Cafe's hourly price of five dollars.
5.3.2 Promotion Strategy
Internet Cafe will implement a pull strategy in order to build consumer awareness and demand. Initially, Internet Cafe has budgeted $5,000 for promotional efforts which will include advertising with coupons for a free hour of Internet time in local publications and in-house promotions such as offering customers free Internet time if they pay for an introduction to the Internet workshop taught by Internet Cafe's computer technician.
Internet Cafe realizes that in the future, when competition enters the market, additional revenues must be allocated for promotion in order to maintain market share.
|
Coffee (based on average) |
12,015 |
14,068 |
15,475 |
|
Specialty Drinks (based on average) |
6,654 |
7,913 |
8,705 |
|
Email Memberships |
8,704 |
10,505 |
11,556 |
|
Hourly Internet Fees |
38,270 |
46,365 |
51,002 |
|
Baked Goods (based on average) |
32,673 |
42,150 |
46,365 |
|
Total Unit Sales |
98,316 |
121,002 |
133,102 |
|
Unit Prices |
1999 |
2000 $1.00 |
2001 |
|
Coffee (based on average) |
$1.00 |
$1.00 |
|
|
Specialty Drinks (based on average) |
$2.00 |
$2.00 |
$2.00 |
|
Email Memberships |
$10.00 |
$10.00 |
$10.00 |
|
Hourly Internet Fees |
$2.50 |
$2.50 |
$2.50 |
|
Baked Goods (based on average) |
$1.25 |
$1.25 |
$1.25 |
|
Sales |
|||
|
Coffee (based on average) |
$12,015 |
$14,068 |
$15,475 |
|
Specialty Drinks (based on average) |
$13,308 |
$15,826 |
$17,409 |
|
Email Memberships Hourly Internet Fees |
$87,038 |
$105,053 |
$115,558 |
|
$95,676 |
$115,913 |
$127,505 |
|
|
Baked Goods (based on average) |
$40,841 |
$52,688 $303,548 |
$57,956 |
|
Total Sales |
$248,878 |
$333,903 |
|
|
Direct Unit Costs |
1999 |
2000 |
2001 |
|
Coffee (based on average) |
$0.25 |
$0.25 |
$0.25 |
|
Specialty Drinks (based on average) |
$0.50 |
$0.50 |
$0.50 |
|
Email Memberships |
$2.50 |
$2.50 |
$2.50 |
|
Hourly Internet Fees |
$0.63 |
$0.63 |
$0.63 |
|
Baked Goods (based on average) |
$0.31 |
$0.31 |
$0.31 |
|
Direct Cost of Sales |
1999 |
2000 |
2001 |
|
Coffee (based on average) |
$3,004 |
$3,517 |
$3,869 |
|
Specialty Drinks (based on average) |
$3,327 |
$3,957 |
$4,352 |
|
Email Memberships |
$21,759 |
$26,263 |
$28,890 |
|
Hourly Internet Fees |
$23,919 |
$28,978 |
$31,876 |
|
Baked Goods (based on average) |
$10,129 |
$13,067 |
$14,373 |
Subtotal Direct Cost of Sales
$62,138
$75,782
$83,360
