Feasibility Analysis of a Coffee Shop

 

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Business Description

The proposed business is named ‘The Coffee House’ and is designed to be a limited liability company that sells specialty coffees as well as healthy snacks. The business’ mission is to continuously provide quality food and beverage sourced from local and environmentally sustainable global suppliers in order to grow through innovation and dedication to excellence. The desired strategic location is within walking distance from office complexes and learning centers.

Industry and Market Feasibility

Description of the industry

The coffee industry is a multi-billion industry making it a significant part of many countries. According to IBIS World, the coffee and snack shops in the US have experienced a growth of 4.9% over a period of 5 years amounting to revenue of 49 billion dollars in 2019 (IBIS World, 2019). Coffee is notably the most favorite beverage for most Americans. The major items offered in this industry include beverages consumed in store, taken to go, and ordered via drive-thru. Additionally, there are foods such as snacks which also include the options of consuming in store, to go, and making an order via drive-thru.

Given such a large industry, competition is also expected. Starbucks Corporation is one of the companies known to hold the largest market share (IBIS World, 2019). Other major players who have built a name in the industry include Costa Coffee, Dunkin Donuts, McDonalds McCafe, and Café coffee day. Despite these being large corporations, the industry is large enough to accommodate small businesses. Reports show that the number of both businesses and employees keep increasing. IBIS World reports that the number of business in the US coffee industry has grown close to 80,000 in 2019 (IBIS World, 2019). This increase is a clear indication that the industry is not yet saturated.

When it comes to the market niche in the coffee industry, the coffee niche is one of the biggest markets. The fact that over half the population of America takes coffee daily makes this possible. The niche includes sales of coffee related products including coffee beans and coffee bean roasting.

Product or Service Feasibility

Description of the product

The Product at the center of this feasibility study is coffee as the main products targeted for sale are coffee products including cappuccinos, espressos, and lattes. Coffee is a beverage which is a product of roasting coffee beans. In turn, these beans are derived from coffee berries produced by a coffee tree. The various products such as cappuccinos and espressos are pretty much similar and only differ in preparation methods.

Benefits of the product

When it comes to the benefit of the product, coffee offers its consumers value for their money that keeps them coming back for more. One of the reasons for coffee popularity, other than its great taste and smell of course, is the fact that it is categorized as a stimulant (Tucker, 2017). This is given that coffee contains caffeine. In biological terms, stimulants have the capacity to increase to boost energy levels and increase alertness in one’s body (Zhang, Jiang, Liu, & He, 2017). Thus when an individual needs to accomplish a certain task that requires concentration, coffee is mostly the first option. A cup of cappuccino is best accompanied by a snack. For this reason, the business aims to also serve snacks and cakes in its menu.

Financial Feasibility

Startup capital

The startup capital for this company can be categorized into various classifications. First are the capital required to obtain permits and licenses. Such legal expenses can accrue to $1,000. The business premises will also demand rent estimated at $5,000. Insurance for the business including property casualty, general liability, and the workers’ compensation can be estimated to total to premiums of $3,000. The businesses premises will require to be remodeled to attain the desired image of The Coffee Shop hence requiring an additional $7,000. Another startup cost is the cost of marketing directed towards business promotion totaling to $2,500. Then are the miscellaneous expenses such as phone costs estimated at $2,000. On top of these costs is the operating capital including cash reserves and salary for the employees. Also, there is the startup inventory and equipment required. Combined, this brings the total costs of assets required to start to $90,000 and the total startup capital to $110,500.

Sources of capital

The funding for this business will be sourced from a combination of both the owner and a bank loan. The owner can afford to fund half the cost of starting the business while the rest will be sourced through a long term loan that will be paid from the business profits. The business is expected to break even in six months.

Entrepreneurial Readiness

Coffee shops do not require much skill for startup. However, there are skills that are indispensable when it comes to entrepreneurship. It requires one not to shy away from undertaking risks. As with any business, risks are involved in the coffee business. This is likely to result to fear of failure, a vice that must be avoided at all costs. Other helpful virtues include strategic thinking for effective planning, and leadership skills to enable smooth management of all the employees of the establishment.

Conclusion

After conducting this assessment of the coffee business idea, I am satisfied that it is a solid idea that can be executed. No significant changes are required other than the inclusion of more partners due to the need for funding. Other than that, the feasibility study proves that the market is very promising and that the product is on high demand giving a promise of high returns.

References

IBIS World (January 2019). The Coffee & Snack Shop Industry in the US Report. Retrieved from https://www.ibisworld.com/industry-trends/market-research-reports/accommodation-food-services/coffee-snack-shops.html

Tucker, C. M. (2017). Coffee culture: local experiences, global connections. Routledge.

Zhang, C., Jiang, H., Liu, F., & He, Y. (2017). Application of near-infrared hyperspectral imaging with variable selection methods to determine and visualize caffeine content of coffee beans. Food and Bioprocess Technology, 10(1), 213-221.

 

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