Café Royale’s Coffee and Snack Vending Machines:
A Comprehensive Feasibility Analysis
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Café Royale’s Coffee and Snack Vending Machines:
A Comprehensive Feasibility Analysis
Coffee and Snack Vending machines are highly profitable business ventures in contemporary society. These machines do not require any human resources to operate; instead, by inserting enough money in the machine, customers can get their coffee or snack and change, if any (Bodhale & Kulkarni, 2017). Hence, to determine the feasibility analysis of this business venture, this presentation will look into the industry feasibility assessment and operational mapping, market condition, the marketing plan, financial plan, and the ethical, social, and environmental responsibilities.
Industry Feasibility Assessment and Operational Mapping
Over the years, Café Royale has focused its attention on the walk-in customers in need of snacks and coffee. Today, the company has been able to open fifteen more branches across Mesa City, which has contributed to the high-profit margins even during the Covid-19 pandemic. The executive team is passionate about the business venture, given their experience dealing with the café branches. Hence, the company can lease vending machines and acquire working space in the established strategic areas.
The goal of venturing into vending machines is to expand the company’s operations from one centralized area to others areas to serve our customers better and improve the company’s productivity through increased profit margins. The strategic team identified five possible working areas. The business venture is viable due to the availability of the company to afford the nonfinancial resources as indicated by the annual budget and the founders’ passion for the business.
Market Analysis
Mesa city accommodates several small businesses, including fast food cafes. Recently, the city introduced the Mesa CARE Initiative and relief programs to Help businesses in coping with the drawback of the Covid-19 pandemic. As local cafes’ company, we can now expand our patio areas to accommodate many customers. Besides, our recent survey revealed that the city’s population loves take-away fast foods and drinks to avoid long queues and congestions, which are regulated due to the Covid-19 pandemic.
As a result of this change in customer preferences, other companies have begun the vending machine business. The market has four competitors engaged in soda vending machines, cold food vending machines, and a few coffee and snack vending machines. Café Royale’s strategic goal is to provide quality hot beverages and snacks through the vending machines and ensure consistency of stocking to survive the level of competition.
The targeted market is Medical Centers, Education institutions, Office buildings, and Maintenance areas. These four areas in Mesa City are usually high populated due to the kind of services offered. That allows the company to get an easy market share for the business venture to thrive effectively. The target market is lovers of hot beverages, which go hand in hand with snacks, hence the idea for operating both coffee and snack vending machines.
Marketing Plan
Café Royale will introduce its coffee and snack vending machines designed attractively to capture consumers’ attention. The company will utilize a penetrative pricing strategy, extensive advertising, and expansion of service provision to increase our revenues and growth rate (Fotiadis, Mombeuil & Valek, 2018). The marketing plan incorporates the product, price strategy, distribution, and promotion.
Product
Products required in the coffee vending machine are paper cups, sugar stirrers, milk, chocolate sprinkles, and condiment units to compliment the machine and hot water boiler. The reusable cups will be tulip-shaped 350ml and branded with the company’s name Café Royale for a unique description. The snack vending machine products will include but are not limited to the snickers bar, sun chips, planters trail mix, granola bars, and cheez-its. Having both vending machines in one place is advantageous since customers who purchase coffee will need a snack.
Price
A coffee cup will be sold at a suggested retail price of $2.40 as an entry pricing strategy to attract customers in the initial six months of operation. All snacks will sell based on the current retail market price.
Distribution
The vending machines will be located at the patio areas in the identified strategic locations. However, one of the company’s employees will be within the area if the customers may need any Helpance.
Promotion
The company will hire sales representatives to promote the items at the relevant outlets by giving coffee samples for the first month. Our company will engage in advertising to create awareness of the new vending machines and the quality of our coffee. The costs incurred in the promotion are within the company’s budget.
Financial Plan
The company will incur costs in purchasing the required resources to begin the business, leasing the vending machines, and paying rent in the target placement areas. Leasing machines is expected to cost the company lots of money. Hence, we opt to source a loan from a bank of $18,000 to cater for the expense in the two years of operation. The figures below represent the Balance sheet and the income statement for the subsequent two years.
Café Royale
Balance Sheet
Year
2021 2022
Assets
Current assets:
Cash 100,000.00 112,590.00
Accounts Receivable 7,500.00 8,600
Prepaid expenses 500 830
Inventory 45,500.00 50,740.00
Total current assets 153,500.00 172,760.00
Property & Equipment 60,000.00 48,000.00
Total Assets 213,500.00 220,760.00
Liabilities
Current liabilities:
Accounts Payable 1,400.00 1,895.00
Accrued expenses 900 945
Unearned revenue 250 520
Total current liabilities 2,550.00 3,360.00
Long-term debt 18,000.00 18,000.00
Other long-term liabilities 1,500.00 1,750.00
Total Liabilities 19,500.00 19,750.00
Shareholder’s Equity
Equity Capital 2,500.00 2,100.00
Retained Earnings 1,450.00 9,500.00
Shareholder’s Equity 3,950.00 11,600.00
Total Liabilities & Shareholder’s Equity 23,450.00 31,350.00
Fig 1. A table showing Café Royale’s vending machine business balance sheet for the years ended 2021 and 2022.
Café Royale’s
Income Statement
Year
Description 2021 2022
Revenue stream 1 30,000.00 45,000.00
Revenue stream 2 32,000.00 47,000.00
Returns, Refunds, Discounts -560 -590
Total Net Revenue 61,440.00 91,410.00
Cost of Goods Sold 15,000.00 19,000.00
Gross Profit 46,440.00 72,410.00
Expenses
Advertising & Promotion 3,000.00 3,000.00
Depreciation & Amortization 1,450.00 1,595.00
Insurance 1300 1300
Maintenance 850 750
Office Supplies 500 400
Rent 8500 8500
Salaries, Benefits & Wages 10,000.00 10,000.00
Telecommunication 100 90
Travel 68 72
Utilities 50 65
Other Expense 1 75 55
Other Expense 2 80 60
Total Expenses 25,973.00 25,887.00
Earnings Before Interest & Taxes 660 514
Interest Expense 55 28
Earnings Before Taxes 605 486
Income Taxes 300 255
Net Earnings 305 231
Fig 2. A table showing Café Royale’s vending machine business income statement for the years ended 2021 and 2022.
Ethical, Social, and Environmental Responsibilities
At Café Royale, we believe that a responsible approach to the broader community is essential. Implementation and improvement of policies and systems are regularly updated to ensure that the company business is conducted according to the ethical, social, and environmental issues since they represent its reputation. Business ethics incorporates a whistle-blowing policy in the event of any emergency to be reported to the management by the employees, recognizes the global group business ethics, and sets standards that all employees should strive to achieve. To protect the environment, the company will use products that can be recycled and continue to work with environmentally conscious suppliers and distributors.
References
Bodhale, A. P., & Kulkarni, J. S. (2017). Case Study on Different Vending Machines.
Fotiadis, A., Mombeuil, C., & Valek, N. S. (2018). Designing and implementing a marketing plan. In The Emerald Handbook of Entrepreneurship in Tourism, Travel, and Hospitality. Emerald Publishing Limited.
