Business Idea Project

Executive Summary

The Dark Side, is an after hours coffee shop located on East Evans Avenue and South High Street. Hours of operation being 4 pm to 2 am, the intention is to attract people ages 15 to 30 years, mostly being students especially from the University of Denver. By offering three distinctive atmospheres within the coffee shop our goal is to satisfy the diverse needs among this age group. We will do this by implementing a study room, a lounge and a main room. On weekends we plan to host live bands on our stage in the main room. In order to attract international students, we are selling international newspapers and hosting international conversation groups. The coffee industry is growing, and we feel that our coffee shop will fit a set of needs that have not yet been met. After surveying a group of people from our draw area, we determined that our business will meet the needs and wants of our target market. The direct competition is mainly Starbucks, Stella's and Colorado Espresso. By utilizing our unique qualities we will be set apart from our competition. By using the zip code breakdowns, we have determined that our target market consists of 76,047 people that live in 6 specific zip codes. (EST) From this number we determined that we would have 5,497 hot prospects. (EST). These people would visit The Dark Side a total of 134,678 times in one year. (EST) From this estimate our anticipated annual sales is $538,712. Our objective is to meet the needs of our target market, to maintain repeat customers, and to break even after one year. Our goals are to have 70 percent of our customers return at least once during the year. We also plan on breaking even, and perhaps making a profit after our first year in business. Our distribution channel runs from producer to wholesaler to distributor to retailer to consumer, this is the most efficient way for our small business. Price stability is the pricing strategy that we have chosen, this way we come into the market as equals with our competition. The Dark Side has an image of being a contemporary, artistic and mysterious establishment. Our slogan is "Music, Mystic, Munchies and More." We will promote recycling and the use of recycled products. Advertising for The Dark Side will be done primarily through print in local newspapers. By offering student discounts and a frequent buyer program, along with occasional coupons, we will encourage repeat customers. We plan on keeping our business connects as local as possible, for example, using a local bakery versus a nation wide distributor. As shown on our budget we estimate annual sales of $538.712 (EST). After calculating expenses we have an estimated net profit of $26,472 (EST) in our first year. By analyzing our overall situation we have determined that our business will be successful after one year.

Mission Statement

By locating our coffee shop within walking distance from the University of Denver, our target market is students as well as people who live or work within the vicinity of our location. Ages of our target market range from 15 to 30 years. We will primarily be targeting those people who like to go out late at night both on weekends and during the week. As an after hours coffee shop we offer a multi-atmosphere environment to cater to the diverse needs people have. Our goal is to provide our customers with high quality coffee as well as live entertainment and international newspapers.

Industry

The coffee shop industry is a growing industry. According to figures that are provided below we can see that the industry is thriving. In a four week period sales went up five percent for Starbucks nationwide. (PR Newswire; August 28, 1997; SearchBank) Denver's economic environment is definitely able to support the industry simply because of the wide range of prices in coffee products. For example a cup of coffee can be as low as fifty cents, while an extravagant double tall almond mocha can sell for close to four dollars. With these price ranges coffee becomes affordable to anyone who wants to buy some. As far as any new governmental regulations or deregulation's, there has been no affect towards this market. Overall, this years prices have gone up fifty nine percent. (The Financial Post; September 17, 1997; "Stockpile Gain Sinks Coffee") Which shows that the market is still growing.

Competition

Our proposed location is on the corner of Evans and High, which is currently a parking lot. Our direct competitors around Evans and High are Starbucks on University Boulevard, Colorado Espresso on University Boulevard, and Stella's on Pearl Street. The local indirect competition is varied. We would be competing with The Border, The Stadium, The I-Beam, and Rock Island. Although these businesses offer different activities and products, we would be competing with them for their late night customers. Bars are offering alcohol, and music, which are equally amusing for late night entertainment. There are many other coffee shops that we will be competing with in Denver, however, The Dark Side will offer everything that our direct competitors do, as well as longer hours of operation. Therefore, consumers will be attracted to our establishment and our intention is to satisfy them.

Direct Competition

Starbucks has been in business for twelve years, but at this location for about a year and a half. Because it is a franchise, Starbucks has 1,346 locations with an annual sales figure of $690,500,000.(Form 10-K; SearchBank)

Colorado Espresso has been in business in the same location for four years. With only one location, Colorado Espresso has an annual sales figure in the range of $500,000 - 1,000,000.(American Business Info, Inc.; Omaha, NE; http://www.abii.com/1996/97 1st Ed)

Stella's, which has been in business for four and a half years, with a second location in Boulder is not a franchise. (Stella's; Denver, CO.) Located at 1476 S. Pearl Street, Stella's Coffee Shop is a major competitor. Not only does it offer coffee, and live entertainment, but used books as well. Fortunately, this establishment is only open until midnight, closing two hours prior to the Dark Side.

Indirect Competition

The Stadium is also another competitor which has been around for four years. This bar has only one location, and it is not a franchise. The annual sales for The Stadium is $500,000.( American Business Info, Inc.; Omaha, NE; http://www.abii.com/1996/97 1st Ed)

The I-Beam is a nightclub which has been in business in the same location for four years. It is not a franchise. I-Beam's annual sales is more than $500,000.( American Business Info, Inc.; Omaha, NE; http://www.abii.com/1996/97 1st Ed)

Another nightclub is Rock Island which is not a franchise either. It has been in the same location for more than ten years. Rock Island's annual sales is more than $500,000.( American Business Info, Inc.; Omaha, NE; http://www.abii.com/1996/97 1st Ed)

Target Market

The main target market throughout this industry seems to people between the ages of 15 and 30 years, generally speaking they are students. Most of these people are single, and willing to go out late at night during the week. Our target market has no specific income because it is a varied group of people.

Due to the fact that we are a new coffee shop in the city of Denver, CO, we primarily would want not only high school and college students to purchase our products, but also employees who work within the vicinity of our selected location. By locating ourselves in the current parking lot across the street from Jerusalem's Restaurant, at the corner of East Evans Avenue, and South High Street, we feel that it will be a perfect location for not only college students to study and get caught up on work, but also for local high school students to meet after class. It also provides a safe and comfortable haven for employees to come and unwind after closing their stores for the evening. We would suspect that the gender of our market would be equally split. Customers would presumably live or work within the vicinity, or a few miles away.

By researching the number of people in 6 specific zip codes (80210, 80208, 80209, 80222, 80110, 80223) we found that between the ages of 15 and 44 years, there are 76,047 people. (Sourcebook of Zip Code Demographics, 1997) Because we are only targeting people ages 15 to 30 years, who drink coffee, our hot prospects only come to 5,497 people in one year, which gives us 134,678 visits per year. (EST)

Needs, Wants and Motives

Customers want a mellow atmosphere with music and entertainment where they can meet people and enjoy a cup of coffee. They want a place to go to hang out and socialize which they cannot do at home. By offering a unique multi-atmosphere environment as well as international newspapers, live entertainment, activities and high quality products, we are providing exactly what some students desire. Students, like most everyone, need to eat and drink in a relaxing environment from time to time, which is precisely what we have to offer.

As an after hours coffee shop, The Dark Side offers a wide variety of goods and services. Some of which include coffee, sodas, fresh deli sandwiches, domestic and foreign newspapers, books, board games, and live entertainment. In order to provide these goods and services we have designed a multi-atmosphere environment. By this we mean that we offer both quiet and lively atmospheres within the same building. The way in which we intend to provide this to our customers, is by dividing the shop into three different parts. One will be a lively atmosphere which will provide live weekend entertainment. The second will be furnished with comfortable couches aimed at an environment to either play board games, read the newspaper, simply hang out with friends, or just be mellow. The third area will be for quiet studying. This will accommodate students that need a quiet place to study, but cannot work in the library.

Strengths

Our unique multi-atmosphere environment along with our late evening hours, from 4 pm to 2 am, and international newspapers all separate us from our competitors. Success will be from getting our name out as being a good place to go to study, socialize, hang out, and meet people all at once. Because of our high quality standards on our products and services and our unique atmosphere, we hope that advertising and grand opening promotions will get us off to a good start.

Weaknesses

Some problems we might run into could possibly be our atmospheres interfering with each other. In this, we mean that the study environment may be too loud, or the social environment too calm, making customers uncomfortable. Because of our limited business experience there will also be many new situations to encounter. We will also be competing with well-established businesses that have been in business for a number of years such as Starbucks Coffee.

Opportunities

Although our competitors are doing well, they are not advertising on the University of Denver campus. We can take advantage of a large share of the market by strongly advertising in the University of Denver area, targeting both students and faculty alike. We also plan to offer student discounts and a frequent buyer program. If business goes well after one year, we will consider offering a push cart on the University of Denver campus. If funds allowed, we could consider opening up branches at other college campuses, such as CU Boulder, Regis, UNC, and even the Auraria campus in downtown Denver.

Threats

Threats to our business would be Stella's for the atmosphere and Starbucks for the name. Because of our hours being later, from 4 pm to 2 am, we also are threatened by businesses that sell alcoholic beverages. We are trying to target those customers who do not drink alcohol. Those who do drink alcohol, have the option of going downtown to the local bars, or if they want to stay close to campus, they can go to the Border, or the Stadium. Another threat, could be other coffee shops trying to steal our ideas, thereby creating even more direct competition. It is because of this that we must establish a strong market, and customer loyalty, ensuring that these customers will come back, despite our competition.

Demand Analysis

In the Denver Metropolitan Area, there is a large demand for a coffee house such as The Dark Side. This demand exists, not only because of the coffee, but also because of the unique environment that The Dark Side provides. People gather at such shops not only to unwind at the end of a long, stressful day, but also to socialize and to have fun on the weekends. By maintaining longer hours and providing such a unique atmosphere, we are giving our customers the option to either relax and listen to music, study, or just hang out with friends.

Our competition, for the most part, is doing rather well in their current locations. Starbucks for example, is making a huge profit by being centrally located to campus. With a national annual sales figure of $696,500,000, Starbucks has really captured the market, and the demand for coffee houses (Form 10 K for Starbucks.). Starbucks has a good location being centrally located to campus.

Just a few doors down from Starbucks is the Border Bar & Pub. By offering two for one drinks on Tuesday nights, they have a high ratio of return customers on Tuesdays, thus creating more profits. We have chosen a location that we feel is centrally located to the University of Denver campus. By offering an alcohol free environment, we feel that we will be able to pull in a lot of under age, or alcohol free customers in the late evening.

Anticipated Sales

After doing some research, we have figured that we can expect to have customers ranging in age mostly from 15 to 30 years. We have calculated that 7,390 people between the ages of 15 and 19 years, 9,207 people between the ages of 20 and 24 years, 51,450 people between the ages of 25 and 44 years and approximately 8,000 students from the University of Denver, fall into our target market. This gives us 76,047 people in our target market. For those people between the ages of 15 and 19 we intend to get 35 percent of them to consider visiting The Dark Side, leaving us with 2,586 people (EST). We feel that 25 percent of those prospects will in turn become hot prospects, which is approximately 646 people (EST). Of the people aged 20 to 24 years we feel that 40 percent will become prospects, which is 3,683 people (EST), and of those prospects 30 percent will become hot prospects adding another 1,105 people (EST). Approximately 15 percent of the people between the ages of 25 and 44 will be considered prospects, which is about 7,717 people (EST). Of those people, only 5 percent will become hot prospects, adding another 386 people (EST). Finally we need to calculate the population of University of Denver students. We feel that 70 percent of the population will be prospects, which is around 5,600 people (EST). Of this group of prospects 60 percent will become hot prospects, which adds another 3,360 people (EST). This comes to a total of 5,497 hot prospects from the initial target market of 76,047 people (EST).

Using the figure of 5,497 hot prospects (EST), we then estimated that 5 percent would not come into The Dark Side at all, 20 percent would come in once a year, 10 percent would come in four times in a year, 20 percent would come in once every two months, 40 percent would come in once a month, and 5 percent would come in daily. This totals to 134,678 visits in one year (EST), with an average of 375 visits in one day (EST). We then figured that an average amount spent would be 4 dollars (EST). Multiplying 4 dollars times 134,678 visits results in an annual sales figure of 538,712 dollars (EST).

Objectives and Goals

Within the first year of business we hope to acquire a fair amount of repeat customers, mostly students from the University of Denver, and surrounding high schools. Another of our objectives is to meet the needs of our target market as well as breaking even. We are anticipating that 70 percent of our customers will return more then once during the year. We will measure our percent of success and failure primarily on the number of customers that we gain from our competitors. Depending on our weekly sales, and business on weekends we should be able to determine how well business is doing. Ultimately our profits will tell us if we can afford to stay in business or not. Our main goal is to penetrate a large share of the market of coffee houses. Denver is ranked 19th as the largest city to harbor young male adults, ages 18-24, and ranked 20th for young female adults of the same age (Demographics USA). We feel that with this high amount of young adults we should be able to create a good active atmosphere, and also be able to maintain our repeat customers. We aim to retain the majority of our customers as repeat customers. As the year goes by, we are hoping to gradually increase our percentage of returning customers.

Logistics

Because we will be a small coffee shop, we will be most successful if we simply buy our products from a distributor. Therefore, our indirect distribution will proceed as follows: producer to wholesaler to distributor to retailer to consumer. It is because we are such a small business, that the purchase of a product cannot flow from producer to consumer directly. This is where our business will differ from Starbucks. Because it is such a huge business, they have a big enough market to keep good relations with their producer. Middlemen may be able to carry out distribution activities better or cheaper than either producers or consumers. However, it is usually not practical for a producer to deal directly with the ultimate consumers. Not only do they serve as purchasing agents for their customers they also act as sales specialists for their suppliers.

We expect to receive new shipments from our distributor once a week. How quickly our products are used, will determine when our next shipments will be needed. For example, our first week in business, we cannot order too many varieties of coffee or food, but rather we should test a few products at a time to see which are preferred, and which ones are not being touched within a weeks time period. This will provide us with a way to keep track of how many of our products are being consumed within a week. Therefore helping us determine which of those products we should keep and which we should pass up until a later date.

In our business, the middleman has most of the control. This is mainly due to the fact that he controls our shipments. He controls how many shipments we will get and when we will get them. Unfortunately, by relying on this outside force we could be hurting ourselves. We run the risk of not receiving our products on time when using middlemen.

Pricing Strategy

Our pricing strategy will be price stability, where we price our products and services based upon those of our competitors. We have gone to Stella's, Starbucks and Colorado Espresso to research our prices. We feel that our pricing strategy will be very competitive with other local coffee shops because we will be offering similar prices. Due to the fact that most of our business will come from students, we intend to keep our prices reasonable due to their lack of income. We have chosen this pricing strategy because we feel that if we charge more then our competitors we will not be able to maintain our customers, and if we charge less then our competitors we will not be able to maintain our budget. By offering discounts we hope that we can attract more of the student population, and encourage the customers to come again by using the frequent user card.

Marketing Communications

Image

Our company is The Dark Side. The trademark is "The Dark Side." Our logo is a black and white coffee cup which will allude to mystery. We want our product to portray a contemporary, artistic, and mysterious image. By having a creative and mystifying image we will lure in people ages 15 to 30. Positioning ourselves in this segment of the market is vital for us because we see a need for some kind of late night local sober hangout. The Dark Side slogan is "Music, Mystic, Munchies, and More."

Marketing Message

We are trying to let our customers know that we are open late and that we cater to evening personalities. We also want to emphasize that we sell international newspapers, which are hard to find in the University of Denver area, and occasionally host live entertainment. With our multi-atmosphere environment, more people should be interested in The Dark Side. One of our marketing plans is to have late hours, opening at 4pm and closing at 2am. By being open late at night we are catering to the needs of students.

Packaging

Our most common product is coffee, it will be presented in a recyclable paper cup that has our logo on it. By putting our logo on the cup, the value of the coffee will go up because it is no longer just another cup of coffee. Now it is coffee from "The Dark Side," where everything is made fresh. The design has a coffee cup on it, along with lettering and our slogan. We may also include our address and phone number, this way when a customer takes their coffee elsewhere we get free advertising.

Advertising

Through advertising, by flyers, newsprint, and our web site, we will let our potential customers know our hours, general product information, variety of atmospheres, international newspapers available, and what upcoming events are scheduled within the month.

We want our target market, of mostly students, to see a late night coffee shop that plays good music, hosts live entertainment, and has a unique atmosphere. This message will appeal to those who do not drink alcohol, yet still want somewhere to go late at night. The effectiveness of our advertising can be measured by a survey of random people who fall into our target market, and also by asking the customers who come in to purchase a drink. Through stressing our varied atmospheres we hope to be able to draw in more of the target market then would otherwise be possible.

Advertising Media

Our advertising will mostly be print. We plan to distribute posters and flyers throughout the University of Denver Campus, as well as nearby high schools. Also advertising in small local papers, such as the Westword, the Washington Park Profile, The Clarion, and local high school papers, will help us to better target the general student population. Our target market will most likely read similar publications, so by advertising in the most popular of these, we hope to target the vast majority of our target market.

Promotion

We have decided that during the day, when other coffee shops are open, we will offer a ten percent discount to anyone with a valid student identification card. This will run from 4 pm to 10 pm every day. We will also offer a frequent buyer program, when a customer purchases 10 drinks, they receive the 11th drink for free. These will run year round. We have considered various other discounts and coupons such as a coffee of the day, and a drink of the week. These coupons would be printed in the local newspapers, and also in flyer form; however, any customer purchasing that item would receive the discounted prices. This way the customer who sees the coupon will be more likely to actually come by and give us a try.

Publicity Activities and Public Relations

By being a coffee shop centrally located to the University of Denver campus, as well as various other high schools, our main goal in our business is to cater to 15 to 30 year old people. At our grand opening we will offer a coupon with every cup of coffee purchased. This way, we are promoting not only the quality of our coffee, but the entire coffee shop as well, because these coupons will lure the customer to return. We plan to promote our business through various forms of advertising media. We also plan on doing business with local businesses, such as a bakery. Where we would purchase their products, and post a sign promoting their business, and in return they would give us a small price break and allow us to display a sign in their business as well. During the holiday season, we will also have a giving program designated to help a specific charity, which would change every year. Customers would be encouraged to donate a dollar or spare change while purchasing food or beverage. Due to the fact that we are a small coffee shop, we plan on taking care of our own public relations responsibilities.

Customer Relations and Customer Service

When our customers have a problem or complaint they will deal directly with a manager. Being such a small operation, there will be two or three employees working at a time. One of which will be a shift manager and the others will be customer service representatives. Due to the fact that we are offering various atmospheres, it will be extremely difficult to have employees deal with the problem customers. We hope to create a more positive environment, by designating a specific employee to deal with complaints during the shift. This way the customer will feel that they are dealing with someone who has the ultimate power within the business, rather then feeling like they are dealing with someone who works for minimum wage. We will train our employees to be as positive as possible with these problem customers, giving them the capability to make the customer happy, which is most important. Our employees would have the right to refund a customers money, and or make them a new coffee free of charge. It would prove more beneficial, because this way the employee can offer to refund the customers money, before the customer demands it, which would make the customer less likely to spread negative word of mouth about our business. However, if the issue requires more attention, it will have to be taken up with a manager. We will ensure customer service through bonuses. By this we mean that our employees will be rewarded occasionally and that we will show them that we care just as much for them as we do for the business in general.

Personal Selling

We will primarily be using outside selling, such as flyers. We do not feel that we could effectively use any other form of selling for the size of our establishment. Again, we would sporadically send flyers to those living within the area of our business. The flyers would be sent to homes around the area, as well as the dormitories and apartments on campus at the University of Denver. We plan on buying addresses for some of our specific zip codes, these can be purchased off the internet. The benefit of this form of selling is mainly that it is a quick and easy way for our potential customers to learn about us as well as the strengths of our business. Our flyers will have coupons on them, for redemption at the counter inside. All of our employees will be involved in the selling of our products. Because we are a coffee shop, we do not have a direct need to sell the products to our customers, but more specifically to sell them something more extravagant then they desired when they entered the store. Most of our customers will be coming to our business specifically seeking coffee or perhaps an international newspaper, it will be our job to sell them something on top of what they are seeking. The employees will be encouraged to suggest a new drink, or food item to the customers.

Conclusion

Overall, we feel that The Dark Side will be a profitable organization that meets the needs of it's target market. We have an estimated net profit of $26, 472 before taxes after one year of business. Because there are no other coffee shops like ours, offering late night hours and various atmospheres in this area, we will dominate the market. By offering international newspapers, conversations groups, live music, and other various activities, we will attract many people.

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