SECTION I: INTRODUCTION

1.1 Background:
The introduction of coffee to the human palate can be recorded as far back as the ninth
century. The first known coffee plantation was confined to Ethiopia, where its native beans were
first cultivated by Ethiopian highlanders. However, the Arab world began expanding its trade
horizons, and the beans moved into northern Africa where it was mass-cultivated. From there,
the beans entered the Indian and European markets, and the popularity of the beverage spread all
over the world.
Source: “www.ncausa.org/coffee/history”

The word coffee came into English in 1598 via Italian caffè. This word was created via Turkish
kahve, which in turn came into being via Arabic qahwa, a truncation of qahhwat al-bun or wine
of the bean. Islam prohibits the use of alcohol as a beverage, and coffee provided a suitable
alternative to wine. Today, coffee is one of the most popular beverages in the world.
Source: “www.turkishcoffeeworld.com/history”

Coffee culture in Nepal is relatively a new phenomenon. Tea was introduced in Nepal in the mid
1800’s and has been the main social beverage. The day of most people would start with a cup of
tea. Any guest who comes to a house is offered tea first. Coffee entered Nepal during the mid
1900’s only. Tea as a social beverage had a hundred years of head start over coffee and due to it;
tea became the ubiquitous drink for all ages of people. Coffee culture never caught on as much as
tea drinking culture. However, coffee is grown in Nepal at the altitude of 500 to 1500 meter
above sea level and the temperature is about 30 degree Celsius. Coffee is a high value cash crop
with environmental importance and is being popular among Nepalese people since last few
decades. It has been spreading in over 33 districts of the middle hill Zones. Of the two variety of
coffee found – “Arabica” and “Robusta”, only Arabica variety is grown in Nepal. According to
the National Coffee development board in Kathmandu, Nepal's annual production is around 460
metric tons of cherry coffee.
Source: “www.himalayanajava.com/nepali.coffee”
“www.teacoffee.gov.np”

Recognizing the scope of the growing demand of coffee house, we have planned to start up
coffee shop targeting especially young generation in Nepal.

Ashim Cafe (AC) is coffee house which will be located in Anamnagar within 1400 square foot area.
It will be regular meeting place especially targeted for 15 to 29 years old, who are waited on by
friendly and informed staff, and are offered the best made hot or cold coffee, beverages and food
in an invigorating ambience.
It will come up with the motto “Enjoy the Life fullest” and will target mostly young college
students and young professionals. Its motto will reflect how it wants to be positioned in the
minds of the customers. It will be the place to socialize with your friends. Drinking coffee would
be an experience; it would be an enjoyable moment because you would be sharing it with your
friends and family. AC serves varieties of hot coffee and cold coffee, good tea and cookies.. It
serves fresh cup of coffee of high quality at affordable price. AC will even serve Nepali Organic
Coffee in order to promote Nepali Coffee.

Ashim Cafe product mix constitutes a wide range of products that appeal primarily to coffee
lovers. The best selling item in summer will be frappe, which is coffee and ice cream blended
together. The young people favor it. In winter it is cappuccino. We have followed cost plus basis
for pricing. The food and drinks provided in our coffee house will be of high quality and will be
very hygienic in nature.

Varieties of Coffee:

Hot Coffee
 Cappuccino: Strong milk based coffee with a shot of Espresso, milk and milk foam
 Irish coffee: A light Espresso flavored with a choice of Irish Cream/ Hazelnut/ Caramel
and topped with Whipped Cream
 Latte: Milkier hot coffee, mild and goes best with coffee flavoring syrups. It has a very
thin layer of milk foam
 Café Mocha: Like a café latte, typically one third espressos and two thirds steamed milk,
but a portion of chocolate is added, typically in the form of sweet cocoa powder.
 Espresso: Strong black coffee extracted at high pressure and optimum temperature.
 Macchiato: A shot of Espresso topped up with milk foam.

Cold Coffee
 Mocha chilly: Chocolate flavored coffee with sweetened creamy milk served on the
rock.
 Cafe Frappe: A judicious blend of ice cream and coffee that gives a smooth and creamy
effect.
 Devil’s Own: Like a coffee Frappe loaded with chocolate poured over ice.
 Happy Nirvana: A chilled out espresso with subtle caribbean flavors topped with
whipped ice-cream and chocolate vermicelli.
 Iced Eskimo Ice blended cold coffee with notes of coffee and cream balanced in right
proportions.

Apart from beverages the customer will be able to use free Wi-Fi services in their web portals as
well and can even read varieties of newspaper and magazine available. In addition to this AC
will facilitate its customer to organize small event like seminar, success function, re-union.

1.2 Mission, Vision, Values and Objectives:

1.2.1 Mission:
“Deliver the highest levels of experiential product and services and maintain consistency
in serving the highest quality products at affordable price “
1.2.2 Vision:
 “To be the social coffee shop of 21st Century, the place where everyone can meet and
build relationship”

1.2.3 Values:
AC will give values to PRAISE i.e. Product Quality, Respect, Accuracy, Integrity, Self
Discipline and Exemplary Values at AC will be given utmost importance. Because values are the
seeds which when sown would reap rich harvest.

1.2.4 Objectives:
 To maintain a high standard of food quality and service
 To serve food at affordable price
 To ensure a friendly comfortable atmosphere where young generation can come and have
a relaxing and wonderful moment.
 To be ahead in the competitive market of coffee house and earn profit

1.3 Location and Premises:

As him Cafe (AC) is coffee house which will be located in Anamnagar within 1700 square
foot area. It will be regular meeting place especially targeted for 15 to 29 years old, who are
waited on by friendly and informed staff, and are offered the best made hot or cold coffee in an
invigorating ambience.

The reason behind selecting Anamnagar as the location for AC is that it is growing continuously
as a major commercial place and has many established business like Corporate Houses and
Colleges (I.e. Nabil Bank, Global Ime Bank, Apca House, Trinity college, Platinum College, etc)
and as well as it is near to Singhdurbar where different people come to work and employees
prefer to have cozy café to hang out in break time or after the work is over. There will be regular
flow of customer in particular area.

1.4 Key to Success:

 Varieties of superior coffee product.

 Friendly customer environment
 Prime location with good transportation facilities.
 Aggressive marketing
 Knowledgeable and skillful staff
 SECTION II: PEOPLE AND ORGANISATION

2.1 Company Background:

Ashim Cafe is established with mission to deliver the highest levels of experiential
product and services and maintain consistency in serving the highest quality products at
affordable price. It will target mostly young college students and young professionals. Its motto
will reflect how it wants to be positioned in the minds of the customers. It will be the place to
socialize with your friends. Drinking coffee would be an experience; it would be an enjoyable
moment because you would be sharing it with your friends and family. AC serves varieties of hot
coffee and cold coffee, good tea and cookies.

2.2 Ownership of the Company:

The overall operation will be handled by owner of the company. Mr.Ashim Aryal with
the help of other employee in the organization. There will be transparency in the information
about the company policies with each of its employee. All of the employee will work for the
overall satisfaction of the customer in friendly environment.

2.3 Human Resource Panning:

The quality and content of the workforce also has a direct influence on the overall
success of the company. Thus, in Ashim Cafe we will choose competent staff not only for
providing qualitative and customer oriented service but also for enhancing the goodwill and
brand image of the company. Special training of 2 days will be also given to them at the time of
induction to understand well the café vision and mission and some tips to deal with client.

The details human resource requirement and placement are as follows:

Designation Number Salary(Per Month) Total

Managing Director 1 20,000 20,000
Operation Manager 1 15,000 15,000
Marketing Staff 1 10,000 10,000

Helper 4 5,000 20,000

Waiter 4 5,000 20,000

Receptionist 1 5,000 5,000

Total 90,000

Human Resource Planning

There will be a total of 12 members in AC workforce and total salary expenses per month for all
the staff will be Rs 90,000. The number of workforce members will be adjusted as per the need
of the cafe in future.

2.4 Organizational Structure:

Managing Director

Operation Manager Marketing Staff

Helper Waiter Receptionist

Fig: Organizational Structure

2.5 Job Description:

2.5.1 Managing Director:

The role of MD is to create strategy for the business that will lead to increase in number
of customers in the business. He will also communicate with the manager to know about
the situation and after knowing the situation both will take the decision collectively.

2.5.1 Operation Manager:

The Operation Manager will be responsible for data entry, accounts payable, payroll
management and core tasks and responsibility of the day to day operation. The main purpose of
the operation manager is to plan and direct operation and improves productivity and efficiency.

2.5.3 Marketing staff:

Marketing staff will be responsible to go to market and promote the firm products and
services. Similarly he will be responsible to do customer research and their responses towards
the products.
2.5.4 Receptionist:
Receptionist will be responsible in welcoming customers as well as handle different calls
and provide necessary information. Similarly she will be responsible in making bills of sales and
collects the cash.

2.5.5 Waiter:
Waiting staff serve customers by taking orders, serving food and preparing tables. An
important part of the work is to make customers feel welcome and comfortable during their
coffee time and also greeting customers and showing them to their table.
 SECTION III: INDUSTRY AND OPPORTUNITY

3.1 Industry Analysis:

Although there are many Coffee House providing the quality products and services in the
town, Ashim Cafe will be one of its type of firm which will provide quality coffee time by
delivering the highest levels of experiential product and services at affordable price.
In Nepal, coffee is predominantly consumed in the form of imported instant coffee. Though
quality of coffee produced in Nepal has potential for the domestic market, there is still much has
to be done to upgrade and bring consistency in the quality of coffee. Ashim Cafe will follow its
PRAISE model which will help the Café to a high level in terms of recognition and revenue.

3.2 Market Size and Growth Potential:

The market size of the business in town is already very high and still its has great
potential to grow.The success of the coffee shop is driven by the consumer taste and income
level, as well as shop location and atmospheres. Small coffee shops offering first-class service
and high-quality product can be effective competitors in a market that continues to grow.

3.3 Competitive Analysis:

The competitor of AC will be coffee house as well as restaurant. But however among
them its main competitor will be restaurant located itself in Anamnagar area.
Competitive analysis is done on the basis of Porter’s five forces model which is described
below:

3.3.1 Threats of new entrants:

There is presence of threat of new entrants in the coffee business. But the threat is not
substantial because of cost disadvantages, capital requirements and low level of differentiation
possible. Existing competitor may change their strategy to gain competitive advantage as it is
universal truth that we cannot escape from the competition. Here we have to use the management
concept that we have learn from our MBA into the real business sector. Similarly it is necessary
to implement differentiation strategies.

3.3.2 Intensity of Rivalry:

There is intense rivalry in these industries as there are various restaurants and cafe around
the town but AC will stands out from the competition by providing quality products at affordable
price with good ambience.

3.3.3 Threat of substitute products:

The threat of the substitute products is not that high because people who want to go to
restaurant don’t weigh it against the substitutes. However, when the economic situation stays
bad, people want to spend less on average. In this case, the threat of the substitutes can become
higher. The substitutable products can be having tea instead of coffee.
3.3.4 Bargaining power of customer:
The bargaining power of customer is high as there many restaurants present and the
switching cost is low, so to meet up the customer expectation it shall have flexible pricing
method. It can be mitigated by providing the different scheme to the consumer like discount for
the regular customer and also the different offer in the festive session like Christmas, New Year,
etc.

3.3.5 Bargaining power of supplier:

The bargaining power of the supplier is strong if the firm is single or if there is very few
firm of similar nature. Since there are many suppliers who supply grocery items, coffee and fresh
vegetables and fruits, so the bargaining power of suppliers is low.

3.4 Assessment of the Business Environment:

SWOT analysis of Ashim Cafe (AC) will be done to understand the competitive position
of AC with regard to its business environment.

3.4.1 SWOT Analysis:

Analyzing the strength, weakness, opportunity and threats is necessary for any business
to identify its core competencies and mitigate its risks SWOT analysis for Ashim Cafe is done
below:

a) Strength:

 Invigorating ambience where customers can enjoy varieties of coffee and some other
food items.
 Quality product at affordable price
 First mover advantage as a coffee house in Anamnagar area.
 Knowledgeable and friendly staff.
 Facilitate customers to organize varieties of event like seminar, reunion, etc.

b) Weakness:

 Not suitable for those who prefer variety of food

c) Opportunities:

 Growing demand of warm, calm environment in which people can come to socialize,
relax or even catch up on work.
 Change in the life style of the customers.
 Increase in market share for such goods and services.
d) Threats:
 Face competition not only from other coffee shops but also quick service and fast food
restaurants, convenience stores
 Increase in the price of raw material.
 Change in taste and preference of the customer
 SECTION IV: MARKETING PLAN
4.1 Market Research:
Restaurant business has been gaining popularity in this modern world. Previously going
to the restaurants was thought of just a status thing. The trend of going to the restaurant is
increasing. Ashim Cafe which provides variety of hot and cold coffee and some other items also
falls under the restaurant business.

From recent decade there is excessive growth of coffee house business in Nepal. Among them
Himalayan Java Coffee House and Restaurant is the first specialty coffee house in Nepal, which
excels in quality and customer service. It has been running very successfully and has open many
outlets across the national boundaries. After that many coffee house as well as restaurant was
established that offer varieties of coffee among them most popular other coffee house are Illy,
Cafe Shop, Central Perk, Kaldi etc. But, the price ranges of these coffee shops are very high and
targeted customer are mostly business person and tourist. Including these there are more than 40
other restaurants around Kathmandu which has capture large number of market share. The major
players beside them in the market are Nanglo, Bakery cafe, Lazimpat Gallery Cafe, Road house
cafe, etc.

Ashim Cafe outlet will be opened in Anamnagar because it is growing continuously as a major
commercial place and has many established business like educational institutions, corporate
houses, etc whose employees prefer to have good cafe to hang out in break time or after the work
is over. Besides this, the transportation facility is very easy which helps in creating attractive
market potential. Including this ambience will be very lively that will be adorable to the young
generation.

4.2 Market Segmentation Strategies:

I have segmented the market on the basis of demography and behavioral. Following will
be the basis of segmentation of the market.

4.2.1 Demographic Segmentation:

In demographic segmentation, the major variable that has been used for segmenting the
market is Income and Age.
On the basis of income segmentation, AC will focus mainly on middle level income people.(i.e.
generally income from 20,000 to 30,000 per month). On the basis of age segmentation, AC target
age group will be between 15 – 29 years of age.

4.2.2 Behavioral Segmentation:

As there is increasing trend specially among younger generation in the market for visiting
restaurants and cafés .So, AC will be perfect choice of restaurant which customer prefer to go
because it has been designed considering the taste and preference of younger generation.

4.3 Market Targeting Strategies:

Since, from last decades with the advancement of technology and globalization the life
styles of Nepalese people are changing. There is increasing trend of people who prefer to visit
restaurants and have refreshing time. This people mostly fall in the age group of 15- 29. So our
target customer will be mostly student, people from middle income to higher middle level
income, lonely rich, young and happy couples.

The Ashim Cafe (AC) targeted customers are:

 Local residents :
Research shows that mostly Anamnagar area people fall in middle income to higher
middle level income group and has mostly residence of 15-29 age group so, the local
residents are one of the targeted customers of AC.

 College students:
These are the college student around the Kathmandu valley; around Anamnagar area
also students can come to the cafe in their break time or after college. Similarly in weekends
other students from different location can also come.

 Working people:
They are the employees of the corporate houses. As there are many banks and
offices around Anamnagar. They are potential customer for the cafe. They can come and
do their work in sitting in couch or chair while enjoying a cup of coffee.

 The Lonely Rich:

Most of the lonely rich are technology workers these days, who are mostly
Internet workers. Their life has become their website servers and code they write, and the
people who help them to make the decisions in that world. They hang out with each
other, but desperately want to get away from it and use the money they are racking up.
As, they spend the most on their money in drinks, appetizers and tips so they are also AC
targeted customer.

 Young Happy Couples:

The restaurant will have an atmosphere that encourages people to bring dates and to
have couples arrive. It won't be awkward for others, and AC does want to be a social place
where people meet each other and develop a network. These young couples are also AC
targeted customers.

 Tourist:
Tourist are one of the great source of earning revenue for AC.Targeting specially tourist
we provide Himalayan Organic Coffee .The main reason behind keeping this coffee is to
promote Nepalese coffee among foreigners.

4.4 Positioning strategies:

Ashim Cafe will position itself as a brand for youth who loves coffee and looks for a nice
quite time .Its main targeted customers will be 15-29 age group who are mainly students and
young urban professionals. It will come up with the motto “Enjoy the life fullest”. Its motto will
reflect how they want to be position in the mind of the customers. It will be a place where they
could relax, unwind and socialize over a cup of coffee listening the instrumental music, using
wifi services, reading any magazine or newspaper or watching TV. Drinking coffee would be an
experience; it would be an. Targeting youngster and considering changing taste of customer we
have enjoyable moment because you would be sharing it with your friends and family.

4.5 Product Strategies:

Ashim Café product mix constitutes a wide range of products like cold and hot coffee,
other cold drinks, cookies, pastries. It is specifically a coffee house. So it specializes in providing
the various flavors of coffee .Among them the best selling item in summer will be frappe, which
is coffee and ice cream blended together. The young people favor it. In winter it is cappuccino.
Targeting youngster and considering changing taste of customer we have deliver quality product
for costumer.

4.6 Pricing Strategies:

AC has priced their items in a very reasonable way. Since the overhead cost due to
location, the level of services and the furniture it will use are high, so it has high overhead and
operating cost. However, considering all those factors, it has still tried to lower their cost as
much as possible to offer an affordable cost to their customers. . We will charge a markup of
30% to 50 % on the cost of producing any item. So AC believes that the price range they have
offered can cater every customer from middle to high level.

4.7 Distribution Strategies:

The location of Anamnagar has been chosen to open AC This is most common place
where youngster can be found .As in this area there are many colleges, schools, and banks. It is
very easy to find the place, refer to their friends and convenient to find taxi or any local
transportation. In addition to this customer can enjoy longer hours and enjoy their book, surfing
the net or simply watch some songs or sports program on the big plasma TV.

4.8 Promotion Strategies:

As promotion strategy AC will distribute flyers, advertisement in face book, local daily
newspaper like Kantipur and Himalayan Times and F.M. AC will distribute flyers in different
nearby Corporate Houses Like Apca House, Nabil Bank Ltd, Global Ime Bank Ltd and also in
Singhadurbar Office.It will even do advertisement of its café in face book and in some local
daily newspaper at starting phase .
This is one effective way to connect with number of people. This will even help us to provide
word of mouth advertisement which is a very powerful way to advertise the product.
AC will also launch website of Cafe, so that people from any corner can view information about
it. As a part of the promotional advertisement AC will even provide 5 % discount in every food
item for 3 months. Advertisement will add lots of cost to the cafe, so AC will decrease
advertisement slowly once the café is established. Later it wills mostly belief on the word of
mouth strategy by consistently providing quality food and services at affordable price with clean
environment.
 SECTION V: FINANCIAL PLAN

5.1Capital Requirement:

Capital requirement Amount(Rs)

Fixed Assets:
Furniture and Fixtures 420000

Kitchen Equipment

Refrigerators 35,000

Espresso Machine 150,000

Microwave Oven 30,000

Crockery and Cutlery 29,800

Kitchen Utensils 250,000

Freezer 122,000

Others:
Computer 45,000

Music System 150000

Generator 80,000

Air Condition 60,000

Television 100,000

Fixed Assets 1,471,800

Working Capital 528,200

Total Capital Required 2,000,000

Capital requirement
 5.2 Capital Structure:

Capital structure Percentage Amount(Rs)

Equity 50% 1,000,000
Debt 50% 1,000,000

Out of Rs 20, 00,000 capital required, 50% will be equity financing and rest 50% will be loan
from Bank @12% interest annually for 5 years.

5.3 Operating Expenses

Administrative and Other Expenses

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Salary Expenses 1,080,000 1,134,000 1,190,000 1,250235 1312746
Dress 20000 21000 22050 23153 24310
Registration 8000 8400 8820 9261 9724
News Paper and 12000 12600 13230 13892 14586
Magazines
Rent 420,000 441,000 463,050 486202 510512
Internet 25,000 27,500 30250 33275 36603
Expenses
Electricity 60000 63000 66150 69457 72930
Discount 57,066 - - - -
Depreciation 147,180 132,462 119,216 107,294 96,565
Advertisement 77000 77000 13000 13000 13000
Auditing 30000 31500 33705 34729 36465
Expenses
Miscellaneous 40000 42000 44100 46305 48620
Total 1976246 1990462 2004271 2086803 2176061

ADMINISTRATIVE AND OTHER EXPENSES

Assumptions:

 Salary Expenses, Dress Allowance, Registration and Renewal Expenses, Electricity

Expenses, News Paper and Magazine, Rent Expenses, Internet Expenses, Auditing Fee
Expenses and Miscellaneous expenses will increase by 5% every year
 Discount Expenses is 5% on each item for only 3 month of first year.
5.4 Pro-forma Income Statements:

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Sales 4,565,300 5,021,830 5,524,013 6,076,414 6,684,055
Less: COGS 2,432,500 2,675,750 2,943,325 3,237,657 3,561,423
Gross Profit 2,132,800 2,346,080 2,580,688 2,838,756 3,122,632
Less: 1,976,246 1,990,462 2,004,271 2,086,803 2,176,061
Operating
Expenses
EBIT 156,554 355,618 576,417 751,953 946,571
Less: Interest 120,000 101,144 800,25 56,373 28,113
Expenses
EAT 36,554 254,474 496,392 695,580 918,458
Less: Tax 9,139 63,618 124,098 173,895 229,615
25%
Net Profit 27,415 190,856 372,294 521,685 688,844

Income Statement

Analysis:
From the five years forecasted income statement, we can see that every year, there is increase in
the revenue from sales of product and service provided and the cost of goods have also increased
due to the inflation or due to the increase in demand of product and services but the Net Profit
after Tax has increased from Rs. 27,415 to Rs.688, 844 by the end of 5 years. From this, we have
analyzed that the project seems to be profitable with respect to the amount of Net profit it will be
giving in the period of five years.
 5.5 Pro-forma Cash Flow Statements:

Particulars Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

A. A. Opening Balance
Add: Cash Inflows 528,200 555,615 746,471 1118,765 1,6640,451
Equity 1,000,000
Debt 1,000,000
Cash Sales 4,565,300 5,021,830 5,524,013 6,076,414 6,684,055
Total Cash Available 2,000,000 5,093,500 5,577,445 6,270,484 7,195,179 8,324,506
B. B.Payments
Payment for Purchase 2,432,500 2,675,750 2,943,325 3,237,657 3,561,423
Purchase of Fixed 1,471,800 - - - - -
Assets
Operating Expenses 1,976,246 1,990,462 2,004,271 2,086,803 2,176,061
Interest Expenses - 120,000 101,144 80,025 56,373 28,113
Tax - 9,139 63,618 124,098 173,895 229,615
Total Cash Outflow 1,471,800 4,537,885 4,830,974 5,151,719 5,554,728 5,995,212
C. Surplus/Deficit 528,200 555,615 746,471 1,118,765 1,640,451 2,329,294

Cash Flow Statement

Analysis:
From this cash flow statement, we can see that there is surplus cash at the end of the every year
so this gives the satisfactory result.

5.6 Statement of Retained Earning:

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Opening 0 27,415 218,271 590,565 1,112,250
Balance
Add: Net Profit 27,415 190,856 372,294 521,685 688,844
Balance 27,415 218,271 590,565 1,112,250 1,801,094
Less: Dividend 0 0 0 0 0
Ending Balance 27,415 218,271 590,565 1,112,250 1,801,094

Statement of Retained Earning

5.7 Pro-forma Balance Sheets:

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Equity &
Liabilities:
Equity 1,000,000 1,000,000 1,000,000 1,000,000 1,000000
Retained 27,415 218,271 590,565 1,112,250 1,801,094
Earning
Loan Payable 842,869 666,882 469,776 249,018 0
Total 1,870,284 1,885,153 2,060,341 2,361,268 2,801,094
liabilities
Assets:
Net Fixed 1,324,620 1,192,158 1,072,942 965,648 869,083
Assets:
Current
Assets:
Inventories 93,300 102,630 112,893 124,182 136,600
Bank 200,000 300,000 400,000 500,000 600,000
Cash 252,364 290,365 474,506 771,438 1,195,411
Total 545,664 692,995 987,399 1,395,620 1,932,011
Current
assets
Total Assets 1,870,284 1,885,153 2,060,341 2,361,268 2,801,094

Balance sheet

5.8 Other Assumptions:

 Fixed Assets depreciate in its value by 10 % every year by written down method
 Sales Increase by 10% every year
 Cost Increase by 10% every year
 Corporate Tax is 25%
 5.9 Ratio Analysis:

Ratios Year 1 Year 2 Year 3 Year 4 Year 5 Formula

Efficiency ratio
Fixed assets 3.45 4.21 5.15 6.29 7.69 Net Sale/fixed
Turnover assets
Total Assets 2.44 2.66 2.68 2.57 2.39 Net sales/total
Turnover assets
Debt
Management
Ratio
Debt Ratio 0.45 0.35 0.23 0.11 0 Debt/assets
Debt Equity 0.82 0.55 0.30 0.12 0 Debt/net worth
Ratio
Interest 1.30 3.52 7.20 13.34 33.67 EBIT/Interest
Coverage Ratio
Profitability
Ratio (%)
Net profit 1.00 4.00 7.00 9.00 10.00 (NPAT/Sales)*100
Margin
Earning Power 8.37 18.86 27.97 31.84 33.79 (EBIT/assets)*
Ratio 100
ROA 1.46 10.12 18.06 22.09 24.59 (NPAT/Total
Assets)*100

Ratio Analysis
 SECTION VI: OPERATIONAL PLAN

6.1 Production/Operation Process:

The raw material needed will be purchased from wholesalers. This will be checked on daily
basis and make available as soon as the stock starts to decrease. The supplier for coffee will be Blue
Moon, RB Complex and espresso machine and other kitchen equipment will be purchased from
Bishal Kitchen Equipment, Sano Bharen, cookies and pastries will be ordered from Krishna Bakery
Cafe, other raw material and grocery item will purchased from local wholesaler and retailer of
Anamnagar. We have already made contract with them as they will be supplying good to us at
wholesale price.

6.2 Inventory Management:

The raw material will be kept in stock for 1 month .

6.3 Quality Assurance and Control:

For the success of any business, quality of its product is most essential. Therefore Ashim
Cafe will always serve the quality product and seek the feedback from customers regarding its
cafe. For these purpose we have even planned to request to fill up the customer feedback form to
everyone who visited the cafe for at least three month. On the basis of this feedback we will
make major improvement that is required as per customer demand. AC will also follow
promptness and cleanliness as the major quality aspect in the cafe. The major quality parameters
for the cafe are as follows:

 Response:
AC will also provide product as per the customer request. We will also look at
the customer’s feedback and improve it

 Timeliness:
AC believes in quick service to customer .So, it will not make customer wait for
long time for certain item ordered.

 Courtesy:
The staff members will be polite to the customer and greet them when they enter
in the cafe. They will also be trained to handle complaints and handle situation with a
smile.
 Cleanliness:
The area of the cafe will be hygienic and clean. The overall environment of the
cafe will be customer friendly.

 Aesthetic:
Aesthetics also plays a very valuable role in defining quality in a cafe.
Considering this fact AC, will have good aesthetic that will be highly appreciated by
youngster
SECTION VII: CRITICAL RISKS: IDENTIFICATION, EVALUATIOAN AND
MITIGATION

7.1 Critical Risk Factors:

While starting upon any business there exist various risk that will either have direct or
indirect influence to the survival of business in the market. The risk can be both internal as well as
external. The risks are as follows:

Internal risks:

 Unavailability of qualified and skilled workforce in the market.

 Delay in opening the café because of various problems like workforce deficiencies,
insufficient fund or owner personal problem.
 Mishandling of equipment like oven, espresso machine, computer by staff
 People from diverse backgrounds have to work together as a team, so misunderstanding may
occurs among them.
 Face operating problems such as equipment malfunction and breakdown, shortage of raw
materials and maintenance problem.

External risks:

 The demand of customer visiting the café may decrease in case of economic instability in the
country.
 The political uncertainty and strike will hamper the cafe because it cannot operate effectively
and efficiently in unstable economic situation.
 Currently, the starting of coffee house business is considered as one of the most potential
business but if the cafe started to open up in rapid pace then supply many exceed the demand
which will ultimately lead to loss to many café businesses
 The law may change and there may be increase in the policies toward cafe.
 The suppliers may change its terms and condition of supplying the item or may not be able to
supply inputs in time which may hamper the cafe

7.2 Contingency Plan:

 APPENDIX:

Sales Forecast:

Item Sales Volume Rate Sales value

Hot Coffee

Cappuccino (Regular 11000 75 825,000

)

Irish Coffee 2400 110 264,000

Latte 2600 80 72,000
Macchiato 2100 75 157,500
Espresso 1200 60 72,000
Café Mocha 2000 95 190,000
Total 1,716,500

Cold Coffee
Mochchillo 3960 95 376,200
Devil’s Own 2160 140 302,400
Happy Nirvana 1,440 145 208,800
Iced Eskimo 720 85 61,200
Coffee Frappe 2520 110 277,200
Total 1,225,800

Nepali Organic
Coffee
Item
Himalayan Organic 1080 85.00 91,800
Coffee

Coffee Alternatives
Nepali Tea 7200 40.00 288,000
Green Tea 1800 75.00 135000
Hot Lemon With 3600 40.00 144,000
Honey
Total 567,000

Other Drinks
Mineral water 6000 35 105,000
Soft Drink 6000 45 270,000
Juice 4000 60 240,000
Total 615,000

Cookies
Fruit Drop Cookies 1800 50 90,000
Choclate Chips 720 60.00 43,200
Cookies
Butter Cookies 720 60.00 43,200
Total 176,400

Pastries
Black Forest 1800 75 135,000
Pineapple Pastries 1440 65 93,600
Choclate Pyramid 720 50 36,000
Total 264,600
Grand Total 4,098,600

Cost Price of Item:

Item Sales Volume Rate S.value

Hot Coffee

Cappuccino (Regular 11,000 40 440,000

)

Irish Coffee 2400 65 156,000

Latte 2600 50 130,000
Macchiato 2100 45 94,500
Espresso 1200 40 48,000
Café Mocha 2000 50 100,000
Total 968,500

Cold Coffee
Mochchillo 3960 45 178,200
Devil’s Own 2160 70 151,200
Happy Nirvana 1440 80 115,200
Iced Eskimo 720 45 32,00
Coffee Frappe 2520 55 138,600
Total 615,600

Nepali Organic
Coffee
Item
Himalayan Organic 1080 45 48,600
Coffee
Coffee Alternatives
Nepali Tea 7200 20 144,000
Green Tea 1800 40 72,000
Hot Lemon With 3600 15 54,000
Honey
Total 270,000

Other Drinks
Mineral water 6000 15 90,000
Soft Drink 6000 20 120,000
Juice 4000 30 120,000
Total 330,000

Cookies
Fruit Drop Cookies 1800 25 45,000
Choclate Chips 720 30 21,600
Cookies
Butter Cookies 720 30 21,600
Total 88,200

Pastries
Black Forest 1800 45 81,000
Pineapple Pastries 1440 40 57,600
Choclate Pyramid 720 30 21,600
Total 160,200
Grand Total 2,142,000
Cost Price of Item Offered

Loan Amortization Schedule:

Annual Installment = Loan Amount

PVIFAi,n
1,000,000
3.61
= Rs. 277,131.
Particulars Beginning Annual Interest Principal Ending
Installment
Year 1 1,000,000 277,131 120,000 157,131 842,869
Year 2 842,869 277,131 101,144 175,987 666,882
Year 3 666,882 277,131 80,025 197,106 469,776
Year 4 469,776 227,131 56,373 220,758 249,018
Year 5 249,018 277,131 28,113 249,018 0

Loan Amortization Schedule

 ITEMS TO BE OFFERED
S.No. HOT coffee Sales Sales Cost per Profit % Cost % Profit to
Per Day Per Unit Unit to SP SP
1 Cappuccino 31 75 40 35.00 0.53 0.47

2. Irish Coffee 7 110 65 45.00 0.59 0.41

3. Latte 7 80 50 30.00 0.63 0.38

4. Machchiato 6 75 45 30.00 0.60 0.40
5. Espresso 4 60 40 20.00 0.67 0.33
6. Café Mocha 6 95 50 45.00 0.53 0.47

COLD
Coffee
1. Mochchillo 11 95 45 50.00 0.47 0.53
2. Devil’s Own 6 140 70 70.00 0.50 0.50
3. Happi 4 145 80 65.00 0.55 0.45
Nirvana
4. Iced Eskimo 2 85 45 40.00 0.53 0.47
5. Coffee 7 110 55 55 0.50 0.50
Frappe

Nepali
Organic
Coffee
1. Himalayan 3 85.00 45 40 0.53 0.47
Organic
Coffee
Coffee
Alternatives
1. Nepali Tea 20 40.00 20 20 0.50 0.50
2. Green Tea 5 75.00 40 35 0.53 0.47
3. Hot lemon 10 40.00 15 25 0.38 0.63
With Honey

Other Drinks
1. Mineral 16 35 15 20 0.43 0.57
Water
2 Soft Drink 16 45 20.00 25 0.44 0.56
3. Juice 11 60 30.00 30 0.50 0.50
 Cookies
1 Fruit Drop 3 50 25 25 0.50 0.50
Cookies
2. Chocolate 2 60 30 30 0.50 0.50
Chips
Cookies
3 Butter 2 60 30 30 0.50 0.50
Cookies

Pastries
1. Black forest 5 75 45 30 0.60 0.40
2. Pineapple 4 65 40 25 0.62 0.38
Pastries
3. Choclate 2 50 30 20 0.60 0.40
Pyramid

Cost price and selling price of item offered with per day sales

Raw Material Consumption Cost

Items Cappuccino Irish Mochachillo Coffee Nepali Tea

Coffee Frappe Organic
Coffee
Sugar 5 5 5 5 5 5
Milk 10 10 10 10 10 10
Coffee 10 10 10 5
Water 5 5 5 10 10 2
Flavor in 10 5 5
Irish Cream 20
Organic Coffee 20
Chocolate 5
Flavored
Whipped Cream 10 10 20
Tea Leaf 3
Total Cost 40 65 45 55 45 20
 Inventories

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

RAW 93,300 102,630 112,893 124,182 136,600

MATERIAL
Finished - - - - -
Goods
Total 93,300 102,630 112,893 124,182 136,600

Inventories

Depreciation Schedule:

Fixed Assets: First Year

Capital Requirement
A. Fixed Assets Amount Depreciation Closing Balance
Furniture and Fixture 420000 42000 37800
Kitchen Equipment
Refrigerators 35000 3500 31500
Espresso Machine 150,000 15000 135000
Microwave Oven 30,000 3000 27000
Crockery and Cutlery 29,800 2980 26820
Kitchen Utensils 250,000 25000 225000
Freezer 122,000 12200 109800
Others:
Computer 45000 4500 40500
Music System 150000 15000 135000
Generator 80000 8000 72000
Air Condition 60,000 6000 54000
Television 100,000 10000 90000
Total 1471800 147180 1324620
Fixed Assets: Second Year

Capital Requirement
A. Fixed Assets Amount Depreciation Closing Balance
Furniture and Fixture 378000 37800 340200
Kitchen Equipment
Refrigerators 31500 3150 28350
Espresso Machine 135000 13500 121500
Microwave Oven 27000 2700 24300
Crockery and Cutlery 26820 2682 24138
Kitchen Utensils 225000 22500 202500
Freezer 109800 10980 98820
Others:
Computer 40500 4050 36450
Music System 135000 13500 121500
Generator 72000 7200 64800
Air Condition 54000 5400 48600
Television 90000 9000 81000
Total 1324620 132462 1192158

Fixed Assets: Third Year

Capital Requirement
A. Fixed Assets Amount Depreciation Closing Balance
Furniture and Fixture 340200 34020 306180
Kitchen Equipment
Refrigerators 28350 2835 25515
Espresso Machine 121500 12150 109350
Microwave Oven 24300 2430 21870
Crockery and Cutlery 24138 2413.8 21724.2
Kitchen Utensils 202500 20250 182250
Freezer 98820 9882 88938
Others:
Computer 36450 3645 32805
Music System 121500 12150 109350
Generator 64800 6480 58320
Air Condition 48600 4860 43740
Television 81000 8100 72900
Total 1192158 119215.8 1072942.20

Fixed Assets: Fourth Year

Capital Requirement
A. Fixed Assets Amount Depreciation Closing Balance
Furniture and Fixture 306180 30618 275562
Kitchen Equipment
Refrigerators 25515 2551.5 22963.5
Espresso Machine 109350 10935 98415
Microwave Oven 21870 2187 19683
Crockery and Cutlery 21724.20 2172.42 19551.78
Kitchen Utensils 182250 18225 164025
Freezer 88938 8893.80 80044.2
Others:
Computer 32805 3280.50 29524.50
Music System 109350 10935 9815
Generator 58320 5832 52488
Air Condition 43740 4374 39366
Television 72900 7290 65610
Total 1072942 107294.2 965648

Fixed Assets: Fifth Year

Capital Requirement
A. Fixed Assets Amount Depreciation Closing Balance
Furniture and Fixture 275562 27556 248005.8
Kitchen Equipment
Refrigerators 22963.5 2296.40 20667.15
Espresso Machine 98415 9841.5 88573.5
Microwave Oven 19683 1968.30 17714.70
Crockery and Cutlery 19551.78 1955.20 17596.60
Kitchen Utensils 164025 16403 147622.50
Freezer 80044.20 8004.40 72039.48
Others:
Computer 29524.50 2952.50 26572.05
Music System 98415 9841.50 88573.5
Generator 52488 5248.8 47239.2
Air Condition 39366 3936.6 35429.4
Television 65610 6561 59049
Total 965648 96565 869083.2

Depreciation on Fixed assets up to five years