Bakery Business Plan Jollys Java And Bakery

Jolly’s Java and Bakery (JJB) is a start-up coffee and bakery retail establishment located in southwest Washington. JJB expects to catch the interest of a regular loyal customer base with its broad variety of coffee and pastry products. The company plans to build a strong market position in the town, due to the partners’ industry experience and mild competitive climate in the area.

JJB aims to offer its products at a competitive price to meet the demand of the middle-to higher-income local market area residents and tourists.

The Company

JJB is incorporated in the state of Washington. It is equally owned and managed by its two partners.

Mr. Austin Patterson has extensive experience in sales, marketing, and management, and was vice president of marketing with both Jansonne & Jansonne and Burper Foods. Mr. David Fields brings experience in the area of finance and administration, including a stint as chief financial officer with both Flaxfield Roasters and the national coffee store chain, BuzzCups.

The company intends to hire two full-time pastry bakers and six part-time baristas to handle customer service and day to day operations.

Products and Services

JJB offers a broad range of coffee and espresso products, all from high quality Columbian grown imported coffee beans. JJB caters to all of its customers by providing each customer coffee and espresso products made to suit the customer, down to the smallest detail.

The bakery provides freshly prepared bakery and pastry products at all times during business operations. Six to eight moderate batches of bakery and pastry products are prepared during the day to assure fresh baked goods are always available.

The Market

The retail coffee industry in the U.S. has recently experienced rapid growth. The cool marine climate in southwest Washington stimulates consumption of hot beverages throughout the year.

JJB wants to establish a large regular customer base, and will therefore concentrate its business and marketing on local residents, which will be the dominant target market. This will establish a healthy, consistent revenue base to ensure stability of the business. In addition, tourist traffic is expected to comprise approximately 35% of the revenues. High visibility and competitive products and service are critical to capture this segment of the market.

Financial Considerations

JJB expects to raise $110,000 of its own capital, and to borrow $100,000 guaranteed by the SBA as a ten-year loan. This provides the bulk of the current financing required.

JJB anticipates sales of about $491,000 in the first year, $567,000 in the second year, and $655,000 in the third year of the plan. JJB should break even by the fourth month of its operation as it steadily increases its sales. Profits for this time period are expected to be approximately $13,000 in year 1, $36,000 by year 2, and $46,000 by year 3. The company does not anticipate any cash flow problems.

Company Summary

JJB is a bakery and coffee shop managed by two partners. These partners represent sales/management and finance/administration areas, respectively. The partners will provide funding from their own savings, which will cover start-up expenses and provide a financial cushion for the first months of operation. A ten-year Small Business Administration (SBA) loan will cover the rest of the required financing. The company plans to build a strong market position in the town, due to the partners’ industry experience and mild competitive climate in the area.

2.1 Company Ownership

JJB is incorporated in the state of Washington. It is equally owned by its two partners.

2.2 Company History

JJB is a start-up company. Financing will come from the partners’ capital and a ten-year SBA loan. The following chart and table illustrate the company’s projected initial start-up costs.

Products

Market Analysis Summary

JJB’s focus is on meeting the demand of a regular local resident customer base, as well as a significant level of tourist traffic from nearby highways.

4.1 Market Segmentation

JJB focuses on the middle- and upper-income markets. These market segments consume the majority of coffee and espresso products.

Local Residents

JJB wants to establish a large regular customer base. This will establish a healthy, consistent revenue base to ensure stability of the business.

Tourists

Tourist traffic comprises approximately 35% of the revenues. High visibility and competitive products and service are critical to capture this segment of the market.

4.1.1 Market Analysis

The chart and table below outline the total market potential of the above described customer segments.

4.2 Target Market Segment Strategy

The dominant target market for JJB is a regular stream of local residents. Personal and expedient customer service at a competitive price is key to maintaining the local market share of this target market.

4.2.1 Market Needs

Because Washington has a cool climate for eight months out of the year, hot coffee products are very much in demand. During the remaining warmer four months of the year, iced coffee products are in significantly high demand, along with a slower but consistent demand for hot coffee products. Much of the day’s activity occurs in the morning hours before ten a.m., with a relatively steady flow for the remainder of the day.

4.3 Service Business Analysis

The retail coffee industry in the U.S. has recently experienced rapid growth. The cool marine climate in southwest Washington stimulates consumption of hot beverages throughout the year. Coffee drinkers in the Pacific Northwest are finicky about the quality of beverages offered at the numerous coffee bars across the region. Despite low competition in the immediate area, JJB will position itself as a place where customers can enjoy a cup of delicious coffee with a fresh pastry in a relaxing environment.

4.3.1 Competition and Buying Patterns

Competition in the local area is somewhat sparse and does not provide nearly the level of product quality and customer service as JJB. Local customers are looking for a high quality product in a relaxing atmosphere. They desire a unique, classy experience.

Leading competitors purchase and roast high quality, whole-bean coffees and, along with Italian-style espresso beverages, cold-blended beverages, a variety of pastries and confections, coffee-related accessories and equipment, and a line of premium teas, sell these items primarily through company-operated retail stores. In addition to sales through company-operated retail stores, leading competitors sell coffee and tea products through other channels of distribution (specialty operations).

Larger chains vary their product mix depending upon the size of each store and its location. Larger stores carry a broad selection of whole bean coffees in various sizes and types of packaging, as well as an assortment of coffee- and espresso-making equipment and accessories such as coffee grinders, coffee makers, espresso machines, coffee filters, storage containers, travel tumblers and mugs. Smaller stores and kiosks typically sell a full line of coffee beverages, a more limited selection of whole-bean coffees, and a few accessories such as travel tumblers and logo mugs. During fiscal year 2000, industry retail sales mix by product type was approximately 73% beverages, 14% food items, eight percent whole-bean coffees, and five percent coffee-making equipment and accessories.

Technologically savvy competitors make fresh coffee and coffee-related products conveniently available via mail order and online. Additionally, mail order catalogs offering coffees, certain food items, and select coffee-making equipment and accessories, have been made available by a few larger competitors. Websites offering online stores that allow customers to browse for and purchase coffee, gifts, and other items via the Internet have become more commonplace as well.

Strategy and Implementation Summary

JJB will succeed by offering consumers high quality coffee, espresso, and bakery products with personal service at a competitive price.

5.1 Competitive Edge

JJB’s competitive edge is the relatively low level of competition in the local area in this particular niche.

5.2 Sales Strategy

As the chart and table show, JJB anticipates sales of about $491,000 in the first year, $567,000 in the second year, and $655,000 in the third year of the plan.

Sales Forecast

2001

2002

2003

Unit Sales

Espresso Drinks

135,000

148,500

163,350

Pastry Items

86,000

94,600

104,060

Other

Total Unit Sales

221,000

243,100

267,410

Unit Prices

2001

2002

2003

Espresso Drinks

$3.00

$3.15

$3.31

Pastry Items

$1.00

$1.05

$1.10

Other

$0.00

Sales

Espresso Drinks

$405,000

$467,775

$540,280

Pastry Items

$86,000

$99,330

$114,726

Other

Total Sales

$491,000

$567,105

$655,006

Direct Unit Costs

2001

2002

2003

Espresso Drinks

$0.25

$0.26

$0.28

Pastry Items

$0.50

$0.53

$0.55

Other

$0.00

Direct Cost of Sales

Espresso Drinks

$33,750

$38,981

$45,023

Pastry Items

$43,000

$49,665

$57,363

Other

Subtotal Direct Cost of Sales

$76,750

$88,646

$102,386

Management Summary

Austin Patterson has extensive experience in sales, marketing, and management, and was vice president of marketing with both Jansonne & Jansonne and Burper Foods. David Fields brings experience in the area of finance and administration, including a stint as chief financial officer with both Flaxfield Roasters and the national coffee store chain, BuzzCups.

6.1 Personnel Plan

As the personnel plan shows, JJB expects to make significant investments in sales, sales support, and product development personnel.

Personnel Plan

2001

2002

2003

Managers

$100,000

$105,000

$110,250

Pastry Bakers

$40,800

$42,840

$44,982

Baristas

$120,000

$126,000

$132,300

Other

Total People

Total Payroll

$260,800

$273,840

$287,532

Financial Plan

JJB expects to raise $110,000 of its own capital, and to borrow $100,000 guaranteed by the SBA as a ten-year loan. This provides the bulk of the current financing required.

7.1 Break-even Analysis

JJB’s Break-even Analysis is based on the average of the first-year figures for total sales by units, and by operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions make for a more accurate estimate of real risk. JJB should break even by the fourth month of its operation as it steadily increases its sales.

Break-even Analysis

Monthly Units Break-even

17,255

Monthly Revenue Break-even

$38,336

Assumptions:

Average Per-Unit Revenue

$2.22

Average Per-Unit Variable Cost

$0.35

Estimated Monthly Fixed Cost

$32,343

7.2 Projected Profit and Loss

As the Profit and Loss table shows, JJB expects to continue its steady growth in profitability over the next three years of operations.

Pro Forma Profit and Loss

2001

2002

2003

Sales

$491,000

$567,105

$655,006

Direct Cost of Sales

$76,750

$88,646

$102,386

Other

Total Cost of Sales

$76,750

$88,646

$102,386

Gross Margin

$414,250

$478,459

$552,620

Gross Margin %

84.37%

Expenses

Payroll

$260,800

$273,840

$287,532

Sales and Marketing and Other Expenses

$27,000

$35,200

$71,460

Depreciation

$60,000

$69,000

$79,350

Utilities

$1,200

$1,260

$1,323

Payroll Taxes

$39,120

$41,076

$43,130

Other

Total Operating Expenses

$388,120

$420,376

$482,795

Profit Before Interest and Taxes

$26,130

$58,083

$69,825

EBITDA

$86,130

$127,083

$149,175

Interest Expense

$10,000

$9,500

$8,250

Taxes Incurred

$3,111

$12,146

$15,650

Net Profit

$13,019

$36,437

$45,925

Net Profit/Sales

2.65%

6.43%

7.01%

7.3 Projected Cash Flow

The cash flow projection shows that provisions for ongoing expenses are adequate to meet JJB’s needs as the business generates cash flow sufficient to support operations.

Pro Forma Cash Flow

2001

2002

2003

Cash Received

Cash from Operations

Cash Sales

$491,000

$567,105

$655,006

Subtotal Cash from Operations

$491,000

$567,105

$655,006

Additional Cash Received

Sales Tax, VAT, HST/GST Received

New Current Borrowing

New Other Liabilities (interest-free)

New Long-term Liabilities

Sales of Other Current Assets

Sales of Long-term Assets

New Investment Received

Subtotal Cash Received

$491,000

$567,105

$655,006

Expenditures

2001

2002

2003

Expenditures from Operations

Cash Spending

$260,800

$273,840

$287,532

Bill Payments

$143,607

$186,964

$237,731

Subtotal Spent on Operations

$404,407

$460,804

$525,263

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

Principal Repayment of Current Borrowing

Other Liabilities Principal Repayment

Long-term Liabilities Principal Repayment

$10,000

$15,000

Purchase Other Current Assets

Purchase Long-term Assets

$20,000

Dividends

Subtotal Cash Spent

$404,407

$490,804

$560,263

Net Cash Flow

$86,593

$76,301

$94,744

Cash Balance

$156,593

$232,894

$327,637

7.4 Balance Sheet

The following is a projected Balance Sheet for JJB.

Pro Forma Balance Sheet

2001

2002

2003

Assets

Current Assets

Cash

$156,593

$232,894

$327,637

Other Current Assets

$12,000

Total Current Assets

$168,593

$244,894

$339,637

Long-term Assets

$65,000

$85,000

$105,000

Accumulated Depreciation

$60,000

$129,000

$208,350

Total Long-term Assets

$5,000

($44,000)

($103,350)

Total Assets

$173,593

$200,894

$236,287

Liabilities and Capital

2001

2002

2003

Current Liabilities

Accounts Payable

$14,574

$15,438

$19,907

Current Borrowing

Other Current Liabilities

Subtotal Current Liabilities

$14,574

$15,438

$19,907

Long-term Liabilities

$100,000

$90,000

$75,000

Total Liabilities

$114,574

$105,438

$94,907

Paid-in Capital

$110,000

Retained Earnings

($64,000)

($50,981)

($14,544)

Earnings

$13,019

$36,437

$45,925

Total Capital

$59,019

$95,456

$141,381

Total Liabilities and Capital

$173,593

$200,894

$236,287

Net Worth

$59,019

$95,456

$141,381

7.5 Business Ratios

The following table represents key ratios for the retail bakery and coffee shop industry. These ratios are determined by the Standard Industry Classification (SIC) Index code 5812, Eating Places.

Ratio Analysis

2001

2002

2003

Industry Profile

Sales Growth

0.00%

15.50%

7.60%

Percent of Total Assets

Other Current Assets

6.91%

5.97%

5.08%

35.60%

Total Current Assets

97.12%

121.90%

143.74%

43.70%

Long-term Assets

2.88%

-21.90%

-43.74%

56.30%

Total Assets

100.00%

Current Liabilities

8.40%

7.68%

8.42%

32.70%

Long-term Liabilities

57.61%

44.80%

31.74%

28.50%

Total Liabilities

66.00%

52.48%

40.17%

61.20%

Net Worth

34.00%

47.52%

59.83%

38.80%

Percent of Sales

Sales

100.00%

Gross Margin

84.37%

60.50%

Selling, General & Administrative Expenses

74.74%

71.43%

71.39%

39.80%

Advertising Expenses

0.49%

1.76%

6.87%

3.20%

Profit Before Interest and Taxes

5.32%

10.24%

10.66%

0.70%

Main Ratios

Current

11.57

15.86

17.06

0.98

Quick

11.57

15.86

17.06

0.65

Total Debt to Total Assets

66.00%

52.48%

40.17%

61.20%

Pre-tax Return on Net Worth

27.33%

50.90%

43.55%

1.70%

Pre-tax Return on Assets

9.29%

24.18%

26.06%

4.30%

Additional Ratios

2001

2002

2003

Net Profit Margin

2.65%

6.43%

7.01%

n.a

Return on Equity

22.06%

38.17%

32.48%

n.a

Activity Ratios

Accounts Payable Turnover

10.79

12.17

n.a

Payment Days

n.a

Total Asset Turnover

2.83

2.82

2.77

n.a

Debt Ratios

Debt to Net Worth

1.94

1.10

0.67

n.a

Current Liab. to Liab.

0.13

0.15

0.21

n.a

Liquidity Ratios

Net Working Capital

$154,019

$229,456

$319,731

n.a

Interest Coverage

2.61

6.11

8.46

n.a

Additional Ratios

Assets to Sales

0.35

0.36

n.a

Current Debt/Total Assets

n.a

Acid Test

11.57

15.86

17.06

n.a

Sales/Net Worth

8.32

5.94

4.63

n.a

Dividend Payout

0.00

n.a

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