Plan For An Internet Coffee Shop Start-up

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This is a business plan and does not imply an offering of securities.

 Table of Contents

1. Executive Summary 1
Business Opportunity
Product/Service Description

2. Company Background 3
Business Description
Company History

3. Business Plan For An Internet Coffee Shop Start-up 5

4. Services 6

5. The Industry, Competition, and Market 7

Market Definition
Primary Competitors
Customer Profile

6. Marketing Plan 10

7. Financial Plan 12
Investment Plan
Break-even Analysis
Liquidity Plan
Earnings Plan
Risk Analysis

8. Conclusion 20
Plan For An Internet Coffee Shop Start-up 1

1. Executive Summary
Due to shrinking profit margins the classical catering services industry is turning toward
innovative business concepts. Coffee bars with internet access are just one such concept that
lately showed significant growth potential. For selected locations the industry expects
significant growth rates to persist in the near future so that investments in that segment are
very profitable.

The goal of this start-up is the operation of a coffee bar that offers computer terminals with
internet access and technical support. for the user Additional to this core business the coffee
shop offers a selection of coffee, tea and additional equipment for sale which will help
optimize and increase sales revenues and utilize personnel capacity.

1.1 Business Opportunity

The restaurant industry is currently experiencing an economic crisis marked by shrinking
revenues and growing costs. The development of new business strategies and solutions
seems critical for industry players to survive this crisis and regain a market share in this
highly competitive industry. The choice of food and beverages as well as the architecture
and additional services can be one strategy in this development. Additionally a sound
cost management is of critical importance for a solid stream of revenues. Big industry
players have shown that even in a stagnating market growth rates of more than 20% can
be sustained.

Many businesses in the industry have failed to adjust their strategy when customer
demands and environmental factors changed. The most critical failures in such times
were non-competitive offerings, unsatisfactory service, slacking cost control and
management mistakes. On the other hand, companies that reacted flexibly to their
changing environment show significantly higher revenues and margins and increased
shareholder value.

The operation of a coffee bar with internet access that offers a range of classical and new
coffee products and a selection of food is the core of this start-up. A strong focus of this
business will be placed on the development and marketing of broadband internet access.
As an add-on the shop will sell the entire range of goods from the restaurant segment
over-the-counter which will help utilize store and employee capacity. This offer will
include coffee and tea as well as other coffee equipment but also technical equipment.
The range of products is selected to provide solid growth potentials.

The operation of this business requires a good knowledge of the restaurant industry as
well as a competitive service concept to increase customer satisfaction. The demand to
explain the handling of computers and internet software is likely to require a high degree
of individual customer advise. However, it is critical that this service is offered with a
strong focus on cost management.

One central goal of the proposed business strategy is the development of an own
corporate identity. Such identity will create customer loyalty and help gain a competitive
Plan For An Internet Coffee Shop Start-up 2

advantage. Therefore it is planned that additional to the selection of shop products a

company design is developed.

The required investment for the proposed business are moderate compared to other
companies in the industry. Labor is expected to be the main cost driver whereas no other
substantial investment in fixed assets is required. Depending upon the location the
required investment amount ranges between $1,200,000 and $1,500,000 in the start-up
phase based on a 15-18% revenue margin. This amount is well within the financial
requirements observed for comparable companies.

1.2 Product/Service Description

The business will operate in the specialized industry segment of providing catering
services in a coffee shop. An additional source of revenues is the sale of internet access
and technical equipment. Cross selling is planned to be one of the prime strategies in this
business since all products are targeted to serve a similar need and can easily be
combined. Synergies in selling product across business segments is likely to boost
earning further. Net earning are expected to be at least 6% above traditional coffee bars.

Figure 1.1 shows the revenue mix across segments in the start-up phase. This projection
is based on the expected strategic direction, investment amount and business
environment. Being the core business the catering segment is expected to generate the
largest share in revenues. The sale of a limited assortment of refreshments and snacks is
expected to be another important generator of revenues which also helps utilize invested
capacity. The sale of internet access time is expected to be intensified depending upon
market conditions.
Plan For An Internet Coffee Shop Start-up 3

2. Company Background
The goal of this start-up is the operation of a coffee bar with internet access terminals and an
inside and outside service area. The focus of this business will be on the catering service
segment, i.e. the preparation and sale of food and beverages as well as on the sale of a
selection of coffee beans. Additionally, the sale of internet access and technical equipment is
planned to guarantee an optimal utilization of personnel and store capacity. An initial
investment amount of $450,000 is required which will allow the operation of 220 square feet
of store with 10 employees. Sales revenues are expected to range between $900,000 and
$1,500,000 in the start-up phase and the operation is expected to generate profits starting in
the second or third business year.

2.1 Business Description

Management is expected to have a solid knowledge of bringing the coffee experience to
the customer as well as table service knowledge. The goal is to create a modern
atmosphere in which the customer experiences competent service. A well chosen and
targeted food and beverage selection will complement this strategy. Both aspects are a
core requirement to build customer loyalty. In the mean run repeat customers are
expected to generate revenues of 40% and more. Although this strategy is likely to
require additional investments it is expected that revenues per customer will increase
significantly and range above industry average. Furthermore this strategy will provide a
clear entrance barrier for prospective competitors.

The development and promotion of a corporate identity is another central task for
management. Given the homogeneity of businesses in this industry the development of a
corporate identity will markedly increase sales revenues and build a customer base.
Furthermore a corporate identity will support expanding the business to a larger regional
target market.

2.2 Company History

In the start-up phase the business is operated as a one-man-business. This set up carries a
certain risk potential because of the high equity stake the manager bears and the personal
and statutory liability assumed. However, this set-up preserves a high degree of
flexibility in managerial decision taking.

The number of personnel to be employed depends on the structural complexity of the

operations and the desired size. Figure 2.1 shows a break up of costs in the industry. It is
expected that the target employee earns a monthly salary of $2,400 to $2,500 based on 40
hours per week. The sales and service area requires 4 employees on average working in 2
shifts. Due to illness and vacation times in the long run an average of 10 permanent
employees will be required. With increasing sales and better utilization of employee
work time revenue margins, and thus costs per employee will decrease on average. With
revenues ranging around $2,000,000 capacity utilization is expected to be around 85%.
Plan For An Internet Coffee Shop Start-up 4

During the start-up phase a single person will attend to all necessary management task,
coordinate employees and provide strategic direction to the developing business.
Accounting, administrative and machine maintenance will be outsourced to external
partner since those tasks can typically be provided at better rates externally. Sourcing and
marketing will require one employee.

Finding the optimal location for a business is one of the key success factors in the short
and long run. The following analysis is based on 10 businesses in the restaurant industry
in a demographic environment comparable to the location planned for the coffee shop
and with very similar product offerings. Since a coffee shop is recruiting its business
typically only from the area immediately near by the shop this proximity is regarded as
the relevant market for the shop.

For the planned location the following factors are regarded as relevant:

The passenger frequency is expected to be high given the close proximity to a walking
area. This will positively affect demand.
Administrative costs are expected comparably small given the expected revenues.
The possibility to recruit additional personnel is favorable.
Public institutions are expected to provide additional sponsoring.

Because of the favorable growth perspectives in the chosen market and growing
investment activities we expect to realize yearly growth rates in revenues of 20-25%
given a 4% economic growth rate.
Plan For An Internet Coffee Shop Start-up 5

3. Business Plan For An Internet Coffee Shop Start-up

The catering service area is planned for 15 tables inside and outside the bar. This size
provides capacity for 60 people. This area is planned as a full service area in refreshments
and snacks. The refreshment choice will include a selection of specialty coffees and other
miscellaneous drinks. The selection of coffees will include traditional flavours as well as new
and innovative mixtures. This strategy provides a competitive edge against other coffee bars
in the close vicinity and is expected to generate additional demand and the possibility for a
price mark-up. Such mark-ups are impossible to achieve in the classical coffee segment since
the high competitiveness of this segment competes away any price differentials. New coffee
flavours still have a mark-up potential of 15-20% above average while the additional cost is
minimal at 5%. This provides a 10-15% margin. Since such new coffee flavours meet a high
customer demand the selection of flavours can be extended regularly. Such strategy should
focus on flavours with the highest mark-up potential.

To complement the assortment of coffee we plan to offer a limited selection of snacks. The
focus in this segment will be on light Italian style food that is easy to prepare. This strategy
will keep the investment in kitchen appliances within limits. Additionally, the variable cost
of preparing the food will be small which will allow a pricing strategy targeting the
low-budget clientele. The specific selection of foods offered will be monitored constantly
over time and vary according to business needs.

The offer of coffee and beverages over the counter will be a another important source of
revenues. For food storage a cooling unit will have to be installed on the premise. Coffee will
be sold over the counter ground or unground by weight. A selected assortment of Italian style
food will be sold over the counter as well. The individual sales service of each customer is a
key element of this segment.

This strategy will help utilize the capacity in personnel since it allows for an optimal
coordination of employees. All employees will be trained to cover all aspects of service,
internet knowledge, sales, over-the-counter sale and service area work. This requires that
each employee has full knowledge of the food and beverages selection in the shop. This
concept is adaptive to changes in customer demand.
Plan For An Internet Coffee Shop Start-up 6

4. Services
One of the key elements of a successful business in the coffee-shop industry is the selection
of services that are currently as profitable as possible. One key element of a product
presentation against the customers is to minimize the costs and to increase the profit. The
internet access demand shows high growth rates and will boost earning in the other
segments. Initially, the investments in inventory of this segment are limited. The experience
of the employees will support customer demand and also increase sales. The additional
selling of technical equipment will also be positive for sales and earnings.
Plan For An Internet Coffee Shop Start-up 7

5. The Industry, Competition, and Market

A careful analysis of the market and competitive forces in this industry is a key element in
assessing the business potential of our project. This analysis will provide marketing- and
sales data that are indispensable to develop the business potential optimally. The main
competitors are internet- and coffee-shops with a similar selection of services, food and
beverages and comparable size. Since the planned project is of regional scope only the
competitive analysis will have to focus on the local market environment. The market analysis
will be based on the entire market.

5.1 Market Definition

Figure 5.1 shows average growth figures in revenues of coffee shops during the past 5
years and revenue estimates for the year 2003. Despite slowing global economic growth
in general and in the restaurant industry in particular, coffee bars have experienced
constant growth rates of more than 20% since 2001. For 2003 a growth of 25% is
expected while the 3rd quarter is expected to show a very pronounced growth.

Despite slowing economic growth and decreasing customer demand the catering industry
underwent a relatively favorable development. New and innovative business concepts
with internet access terminals still show high growth potentials while growth rates of
traditional businesses in that industry were below average. The significant growth of new
business concepts is primarily due to sharp cost control and more efficient business
strategies that accounted for higher revenue and earning figures. According to industry
estimates 35% of such innovative businesses gained from cross-selling activities between
their business segments. Sinking prices of products and raw materials have allowed the
industry to partially compensate for slowing demand. Savings in input costs were also
due to decreased labor costs. However, starting in 2004 this trend is expected to reverse
and growth rates will pick up markedly despite the uncertainty in the development of
input prices and governmental tax policies.

5.2 Primary Competitors

The competitive environment is primarily determined by the choice of location. But
regardless of the location high mark-ups are not feasible in the long run since this will
Plan For An Internet Coffee Shop Start-up 8

attract competitors who compete away any rents. With a high density of businesses in one
location businesses with the highest marginal cost will be driven out of the market. Such
locations will yield a return of 12-15% on average. This is the expected equilibrium
return in a saturated market. To further analyze the competitive environment it is
necessary to define the players in that environment. A firm that generates $1,000,000 to
$1,500,000 in revenues and employs 25 people should regard a firm with revenues and
personnel 3 times this figures as a viable competitor. On the product and service side,
businesses with a comparable selection of offers are regarded competing in the same
market segment. Since the planned business is in the coffee bar segment of the restaurant
market with a very specialized range of offers we regard any business that trades in a
similar segment and similar location as a competitor. Figure 5.4 shows the size of
businesses in this market segment which also includes coffee chains. The numbers are
based on average revenues of a single branch in a highly frequented location.

5.3 Customer Profile

The specialized product and service offerings are primarily targeting a young and
financially strong clientele. A possible segmentation to identify this group is income as
well social groups which allows to determine revenue and earnings per customer or total
revenues and earnings. Segmenting the target market is a key element for the design of an
appropriate marketing strategy.

Figure 5.2 shows revenues by social group. Numbers are based on average sales per
customer of a particular group multiplied by the member of individuals in the respective
group. This gives total revenues per group. As can be seen businessmen, pupils and
students generate high revenue streams. Members of these groups are frequent internet
coffee bar visitors. Although the total visits of tourists and random visitors are relatively
higher total revenues from this segment are smaller because members in this group are
less frequent visitors.

Figure 5.3 shows revenues by yearly income. The figure shows revenues generated per
income group. Numbers are based on the average income per customer and the number of
customers per income group. As can be seen customers in the middle income cohort
generate the highest revenues. High frequented low income groups such as students and
pupils also generate relatively high revenue streams although revenues per customer are
Plan For An Internet Coffee Shop Start-up 9

relatively lower.
Plan For An Internet Coffee Shop Start-up 10

6. Marketing Plan
In the start-up phase it is a central task of the marketing concept to establish a name
recognition and own trade mark. Later on the strategy will primarily be targeted to gain new
customers and create customer loyalty of repeat customers. Several marketing and sales
promotion strategies are available in the catering industry. Figure 6.1 shows different
marketing elements and their use in marketing strategies as well as their estimated potential
success factor. The figure can serve as a direction for the planning of a marketing and sales
promotion strategy. The numbers are based on typical businesses in the catering industry. As
can be seen printed advertisements targets a large potential customer group but at a relatively
high cost. Printed advertisements in regional newspapers and magazines is regarded as very
beneficial in the start-up phase to attract a large group of potential customers and draw
attention to the range of articles offered. 39% of businesses in the catering industry use
printed advertisements and about 50% of this group regard this as the most beneficial form of
marketing. Sales promotion strategies have temporary effects only. They are used at shop
openings primarily and offer special discounts. 49% of businesses use sales promotion
strategies frequently and 81% of the users responded that this instrument is successful.
Marketing alliances of regional businesses to generate cost savings and increase efficiency
are used rarely. Such strategies include mutual use of marketing and web promotion events
and joint promotion arrangements. Only 41% of businesses have used these elements and
81% of these regard this instrument as beneficial. Web and e-mail marketing is not used
frequently in the catering industry although this would be a relatively inexpensive additional
effort especially for an internet coffee shop. Direct mailings are a very efficient strategy that
sends mailing to selected student or businessmen groups. Since spreading costs of such
mailing are very low this marketing element provides a useful tool for special offer
promotions.

The use of marketing and sales promotions proceeds as follows: to a broad base attract new
customers the strategy will include a combination of printed advertisements and special
offers with opening discounts. Furthermore a group of customers will be selected for direct
mailings. This strategy is expected to continue for 3-4 months after which the effort will turn
towards creating a customer loyalty for regular customers. This strategy is supplemented by a
regular marketing strategy and direct mailings to regular customers. A marketing alliance
and online advertisements will also come to use.
Plan For An Internet Coffee Shop Start-up 11
Plan For An Internet Coffee Shop Start-up 12

7. Financial Plan
A sound financial plan is the key factor for the success of a business start-up. Investors and
banks will base their funding decision on the information given in this plan. Besides a plan of
the financial needs this plan must insure that the business is always liquid and ultimately
profitable. Since the sales and earnings projections in the business plan are based on
expectations, the financial plan has to be revised and refined on a constant basis so that
discrepancies can be uncovered and solved instantly. The inputs for this financial plan are
based on 10 businesses of different size and market segments in the catering industry which
serve as a group of comparable firms as well as own estimates based on the planned business
environment. Revenue estimates are conservative and expense projections include a cushion
for unforeseen contingencies.

The initial capital requirement is estimated to be $450,000 . The sales margin is expected to
be 14-15% whereby each business segment contributes differently to sales and earnings. The
classical catering segment which involves the servicing of food and beverages on-site will of
all segments have the smallest contribution to sales in relative terms (11%) but given the
high sales volume the largest in absolute terms. Revenues from internet access sales can be
differentiated into those from flat fees to time dependent fees. The sale of coffee is expected
to generate a 10% sales margin while the margin from sales of internet access is expected to
be closer to 12%. Since the sales revenue of lower priced coffee and coffee products is
expected to be larger this segment will generate a significantly higher profit. Figure 7.1
shows the source of revenues by segment during the start-up phase.

Depending on the initial investment sum cost and revenue estimates vary. Figure 7.2 shows
the expected relationship of cost and revenues. As can be seen the relationship is not linear
everywhere but costs decrease relative to sales at an initial investment of $1,500,000. This
effects is due to the better utilization of capacities in personnel at rising revenues at constant
cost. If capacity is fully utilized additional personnel must be recruited. At an investment
sum of $2,000,000 administrative costs are expected to return to a linear relationship of sales.
At sales levels between $1,000,000 to $2,000,000 costs increase by the factor 1.85. The cost
revenue relationship is important not only during the start-up phase but also for planned
further expansion. Often such expansion strategies are based on this relationship. Other
industries are able to generate cost savings of 30-50% during expansion periods while for the
catering industry this factor is close to 15%. At a specific size this relationship reverses
because administrative costs rise sharply. This affects small businesses between 10 and 20
employees most severely.

The details of the financial plan are laid out in more detail as follows:

Section 7.1 gives an investments schedule. This includes all investments necessary during the
start-up phase.

Section 7.2 gives a break-even analysis that shows revenues at the break-even point. Every
additional sales revenue adds to profit and vice versa.
Plan For An Internet Coffee Shop Start-up 13

Section 7.3 gives a liquidity plan. This plan is based on current cost and revenue estimates
from Section 7.2. Liquidity must always be positive.

Section 7.4 contains a long-term profit projection for the first 4 years of business. The
projection shows that the critical amount of revenues at which the business is profitable and
how profit develops over time.

Section 7.5 provides a risk analysis. The risk analysis contains critical factors that may
impact the financial numbers presented in this plan.

7.1 Investment Plan

The investment plan comprises primary capital needs for the foundation and operation of
an internet coffee-shop with a selected offer of coffee, tea and additional equipment for
sale. The plan also includes initial marketing and sales promotion expenses.

The figures are based on a business with 12-15 employees and expected revenues of
$1,500,000 in year 2-3.
Plan For An Internet Coffee Shop Start-up 14

7.2 Break-even Analysis

The break-even analysis shows how earnings rise as a function of sales. The break-even
point is the point at which revenues from sales cover total costs (fix costs and costs rising
with sales). This analysis is important for the development of the liquidity plan. If the
break-even point is not achieved in the long run the business loses liquidity and may
become insolvent. This requires that a critical amount of revenues must be generated.

At a sale revenue of $1,250,000 and given fixed costs the business will generate a profit.
Fixed costs are estimated at $350,000 to $400,000 and variable costs at $900,000 .

At a realizable revenue of $1,500,000 after 2-3 years profits will rise to $225,000 pre-tax.
This represents an earnings margin of 15% pre-tax and 10% after-tax. These estimates
are realistic in this market segment. Increasing sales volume will increase pre-tax
earnings margins but this development reverses when administrative costs begin to rise
sharply. Up to a sales volume of $2,000,000 earnings margins rise to 17.5% after which
the margin decreases to constant 15.5%.
Plan For An Internet Coffee Shop Start-up 15

Figure 7.3 shows at which critical sales volume the business generates a profit. This
serves as a base for a pricing strategy. Additionally the graph shows the amount of sales
at which a marketing campaign can be run profitably.

7.3 Liquidity Plan

The liquidity plan shows the amount of finances necessary to assure permanent liquidity
of the business. The plan is based on 4 representative months of a typical business with
15 employees and annual sales of $1,500,000. Revenue estimates are drawn from a
standard normal distribution.
Plan For An Internet Coffee Shop Start-up 16

7.4 Earnings Plan

The earnings plan shows the results from ordinary operations. The plan is based on the
first 4 years of business. Revenue estimates are drawn from a normal distribution with an
estimated growth rate of 15 to 20%.
Plan For An Internet Coffee Shop Start-up 17

7.5 Risk Analysis

The risk analysis considers critical factors that may lead to a failure of the business
concept. Such factors can involves failures during the implementation phase as well as
during operations. Such potential factors are ordered according to the probability at
which they can arise. Shown is the key factor that led to the failure only. Data are drawn
from questionnaires of 10 catering businesses with comparable product offerings and
revenue- and cost structures that went bankrupt during the last 3 years as well as analyses
of different research institutes.

1. Insufficient demand: This is the most frequent reason that leads to business
failure. This includes permanently low demand as well as a temporary collapse in
demand. Often demand estimates were too optimistic at the outset. Such failures might
also come from external shocks instead of operating deficiencies. 19% of businesses with
insufficient demand go bankrupt. 50% of these businesses report that once demand
slacked they did not react accordingly because they believed that this phenomenon was
only temporary. Since the expected frequency of customers during the start-up phase are
Plan For An Internet Coffee Shop Start-up 18

still low a critical success factor is to focus promotional effort so as to generate customer
loyalty early on which will help minimize the effects of demand fluctuations.

2. Behavior of Competition: Due to low entry barriers additional businesses can

enter the market at low cost. Approximately 16% of insolvent businesses were driven out
of the market by that competition. A better service concept, innovative ideas and
concentration on core businesses are an easy means for an entrant to gain a competitive
edge.

3. Personnel and capacity utilization: Often personnel capacity cannot be adjusted

flexibly easily when demand slows down. Currently catering businesses have a capacity
utilization rate of personnel of 70%, i.e. 70% of employee working hours can be directly
credited to sales. At small businesses this value is often lower which means that 30% of
working hours arise without generating any further revenue. 13% of such businesses go
bankrupt for this reason.

4. Liquidity constraints: Another frequent reasons for bankruptcy is in sufficient

liquidity. In that case it is possible that all liquid funds are used to cover losses or that
liquidity needs were planned too tight. To be able to flexibly react to changing liquidity
needs it is important that sufficient funds be planned even during the start-up phase thus
5-10% of the investment sum should be held as liquidity reserve permanently. 13% of
insolvent businesses reported liquidity as the reason for bankruptcy.

5. Over-indebtedness: Many business are run on a small equity base. The majority of
investments are funded by debt. If the business becomes unprofitable, debt obligations
cannot be covered. Little more over 10% of insolvent firms reported over-indebtedness as
the reason for going bankrupt. It is therefore important that a share of earnings is retained
for debt service.

6. Macroeconomic Conditions: In a cyclical downturn revenue expectations my not

come in according to expectation. Although this factor does not affect the business in
itself it does have an impact on profitability, liquidity and leverage. Cost remain constant
during such period but revenues typically decrease which affects overall profitability.
10% of all insolvent businesses report that they went bankrupt due to macroeconomic
conditions although the relevant indicators of the business looked healthy.

7. Location: The business location is an important success factor and one of the
fundamental decisions that have an impact on the future prosperity of the firm. Therefore
a careful analysis with detailed data is indispensable. More than 10% of insolvent
businesses reported that they went bankrupt because of the wrong location. Often
start-ups did not consider that even when the choice of location may not be wrong at the
outset it may later become so when economic conditions worsen. This may be due to
structural of demographic changes.

8. Wrong Business Decisions: Often wrong business decisions and difficult situations go
unnoticed for some period which can lead to a failure of the business. A critical and
Plan For An Internet Coffee Shop Start-up 19

independent reflection of a decision are critical factors to determine the value of a

management decision and evaluate the business' profitability. Studies have shown that
many businesses fail in their start-up phase because of management’s inability to make
sound business decisions while one a business is settled such mistakes are very rare. A
critical management instrument is the ability to detect potential failures and problems.
Certain key figures can help measure this ability and allow to objectively determine a
decision's chance for success. Small businesses should use such indicator ratios to assess
their business outlooks.

Figure 7.5 shows the relative importance of each factor for businesses that went bankrupt.
The numbers are based on the most relevant reason that triggered bankruptcy but not the
reason responsible for bankruptcy. As can be external factors that changed the
competitive environment and changing macroeconomic conditions were the most
important reasons relative to internal factors.
Plan For An Internet Coffee Shop Start-up 20

8. Conclusion
The coffee shop segment with internet access terminals is one of the most profitable with in
the catering service industry while almost any other segment in the market currently lives
through a difficult time. This situation is mostly driven by the competition of larger chains. A
business that successfully survives the current temporary slow down can be certain of
increased profitability one the situation rebounds.

The relatively modest investment requirements and running costs (compared to a classical
catering services business) are a favorable argument since external funds from banks
becomes more difficult since the risk aversion to finance such ventures has risen. A person
with specific knowledge and innovative ideas has good chances to move into profitable
market niches and run a successful business. Market conditions chance constantly as do
customer demands. This is the chance for businesses with innovative ideas and new offerings
to secure a dependable customer basis. Service is a critical factor that can earn a competitive
edge. This is also true for new trends in the industry to better control costs and increase
efficiency.

For a successful operation of an internet coffee shop 5 factors are critical and central for the
business strategy:

- In the catering industry it is important that the customer experiences a friendly and
competent service. This will secure customer loyalty in a market that is very competitive.

- The utilization of personnel capacity is critical for the long-term profitability because of
changing margins and the constraints to flexibly reduce personnel. Therefore the catering
service segment of the business is integrated in the sale of technical equipment.

- A carefully selected assortment of food and beverages as well as the selected choice of
coffee specialties is a potential to gain a competitive edge against competitors. Furthermore
a service that aims to give the customer an added value through a 'coffee experience' can
justify price mark-ups.

- A critical factor in the services industry is quality management. Better quality at lower cost
increases customer satisfaction. Deficiencies in service quality can lower demand while
good service quality can help create customer loyalty.

- Cost management is a critical success factor for businesses in industries where margins are
low. Computer aided planning is an integral part of cost management.