Rapid Roast Visit, Drink It, Live it

Kelci Douglas, David Becerra, Eric Simsolo,

Monica Spacciapolli, Julia Lambright, Rich Rise

Intro to Entrepreneurship: MGMT 365-01

Professor Steve Miller

December 9, 2015

Table Of Contents

1. Executive Summary 2 2. Company Summary 2 3. Products 3 a. Product Description 3 b. Competitive Comparison 4 c. Sourcing 4 d. Technology 5 e. Future Products 5 4. Market Analysis Summary 5 a. Market Segmentation 5 b. Target Market Segment Strategy 6 c. Industry Analysis 6 5. Strategy & Implementation Summary 6 a. Value Proposition 7 b. Competitive Edge 7 c. Marketing Strategy 7 d. Sales Strategy 8 e. Strategic Alliances 9 6. Web Plan 9 a. Website marketing strategy 9 b. Social media 10 c. Development requirements 10 7. Design Plan 10 a. Location 10 b. Structure 10 c. Branding 10 8. Management 11 a. Management Team 11 b. Management Team Gaps 12 c. Organizational Structure 14 d. Personnel Plan 14 9. Financial Plan 15 a. Important Assumptions 16 b. Key Financial Indicators 16 c. Break-even Analysis 17 d. Projected Profit & Loss 18 e. Exit Strategy 21 f. Startup Costs 21 10. Appendix 22

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1. Executive Summary

On average, a guest has to wait 10 minutes for a cup of coffee. Rapid Roast aims to revolutionize the coffee industry by cutting wait times in half while still delivering an exceptional cup of joe. By having a drive-thru coffee stand with windows on either side, we will be able to serve twice the amount of cups of coffee than our leading competitor in half the amount of time. Our innovative technology will allow us to speed up delivery and increase guest involvement. This one of a kind experience will allow Rapid Roast to dominate the coffee market in Orange County. As a company, it is our mission to provide a high quality coffee experience to our guests in a convenient manner. As coffee experts, we strive to create a warm and resonating experience.

Our team of experts has designed a state of the art plan necessary for a successful coffee business. The key to our success will be delivering top of the line coffee to our guests faster than any of our competitors. We will be able to do this because of the use of new technology in our two-window drive-thru. Rapid Roast is different from competitors because of the drive-thru only locations. Not only that, but none of our competitors have two drive-thru lanes. Our coffee company is new, convenient and accessible. We sell delicious, fair-trade coffee with the ability to personally customize each and every drink. The quickness of our lines will allow our guests to be on their way in a matter of minutes so they can make the most of their day. Rapid Roast’s team is like minded with the ability to think out of the box to maximize our differentiation and success. With a unique and modern design, Rapid Roast stands apart and will quickly create buzz among coffee connoisseurs.

In order for Rapid Roast to get on our feet, we need investors. To start up, we need $310,000 based off of our projected startup costs plus 2 months of fixed costs and a cushion of a margin of error. We project that if we open in February of 2016, we will break even by April of 2016 (not including start-up costs). Rapid Roast has major growth potential and by May of 2017 we aim to have three drive-thru locations in southern Orange County. Due to the masses we will be serving, Rapid Roast will hit one million in sales between its three locations by September of 2017. After this major landmark, we will open up more locations and continue our growth.

2. Company Summary

Rapid Roast is a small coffee drive-thru that is designed to serve mass amounts of quality coffee to guests on the go. Our drive-thru locations will serve coffee in a matter of minutes. Rapid Roast will use the highest quality beans, fair trade and organic, roasted in Anacortes, Washington by Moka Joe Coffee Roasters. Rapid Roast will be the fastest drive-thru in the coffee industry while serving the best coffee of its kind. We designed

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this speedy drive-thru coffee establishment because there is a need for quality, customizable coffee delivered in a quick and efficient fashion.

A Rapid Roast location must be in a high volume area that allows easy access to both drive-up windows. The location has to be visible from the street and among other established restaurants or retail shops. Each Rapid Roast location will be equipped with two drive up windows, allowing us to double the capacity of guests served per drive-thru. Our facilities will be green in every way possible, which means our buildings will be created from portable storage containers, our coffee cups will be made of recycled material and we will collect the waterfall to re-use at our establishment.

What sets Rapid Roast apart is the exceptionally fast, friendly and efficient drive-thru service. Our innovative technology will allow us to serve double the amount of coffee that other establishments can currently serve. This is due to our dual window drive-thru and our self-pay method while guests are waiting for their coffee. This eliminates employee cash handling, which speeds up coffee delivery from employee to guest. Along with the fastest service, Rapid Roast offers 25 different flavors for maximum customizability. The ability to customize your coffee with flavors currently unknown to coffee consumers in Southern California will change the industry.

Rapid Roast is privately owned which will allow us to control the quality of the coffee being sold. We have taken all things into account when designing our business to be the best of its class. Rapid Roast has established goals and outcomes for our business that we plan to reach each year. Celebrating Rapid Roast’s one-year anniversary, we will open a new location in February of 2017. Following that, we aim to open a third establishment in April of 2017. Our brand will be developed and recognizable after one year of business, which will make these two additional locations highly profitable in order to reach our goal of one million dollars in sales by May 2017.

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3. Products

Product Description

Rapid Roast will serve a variety of high quality coffee, teas, smoothies and other beverages, as well as breakfast food items. Rapid Roast will brew coffee from 100% organic and Fair Trade certified beans for the best quality coffee, offering basic drip to espresso and cold brewed coffee.

Customization is a key selling point to Rapid Roast and its coffee. With over 25 Monin syrups to choose from, seven milks, including non-dairy options, Ghirardelli sauces and powders, guests will love the amount of choices available to transform their coffee into the perfect coffee cocktail.

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Food offered will include a variety of different muffins and pastries, as well as an assortment of pre- made, microwaveable breakfast sandwiches to shorten food preparation and keep the line moving quickly and consistently.

All products will be served in eco-friendly cups, paper sleeves and containers, along with eco-friendly napkins and utensils, all featuring a green stripe logo to promote our brand’s eco-friendly focus.

Competitive Comparison To establish our brand in the highly competitive coffee industry, Rapid Roast will look to differentiate itself by offering higher quality coffee than its main competitors at a much faster rate.

Competitors like The Coffee Bean and Tea Leaf, Bodhi Leaf, as well as many Starbucks, and 7-11 do not have a drive-thru. Because of this, they will be unable to compete with Rapid Roast’s speed of processing orders. Competitors with a drive-thru, like McDonald’s and select Starbucks, may be able to compete with speed of order, but will fall short in overall quality of coffee. Rapid Roast captures the best of both worlds, giving its guests a faster way to get better coffee than any of the listed top competitors.

Unlike the majority of its competitors, Rapid Roast only brews organic, Fair Trade certified coffee for unmatched quality. Add in its 25 different flavors of syrups and you have a coffee company with better coffee, more customization and faster service than its competitors.

Sourcing Rapid Roast has partnered with Moka Joe Coffee to purchase and brew only 100% organic and Fair Trade certified coffee. All beans purchased will come from Moka Joe only to ensure our coffee is the highest quality available.

Rapid Roast has purchasing agreements with Costco Business Delivery, Food Service Fire Sale and Eco Products Store to deliver all food items, ingredients, beverages and restaurant equipment.

Technology Rapid Roast will utilize the most high quality machinery to produce coffee beverages. Whether espresso, drip coffee, blended beverages or cold brew coffee, Rapid Roast uses the latest technology in order to ensure the best beverages served at a rapid rate.

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Future Products As seasons change, Rapid Roast will adjust its menu accordingly by adding popular seasonal favorites, like eggnog and gingerbread cookies around Christmas time, as well as other seasonal offerings.

Rapid Roast will add Nitro cold brew coffee to its menu, the most prominent menu addition. Nitro cold brew will give Rapid Roast a significant edge in innovative variety offered over its competitors.

Other future products include Rapid Roast merchandise. It will include shirts, pens, decals and hats to promote and advertise the Rapid Roast brand and lifestyle.

Using its online and social media tools, Rapid Roast will communicate with its guests to get a sense of menu additions and seasonal flavors they would like to see.

4. Market Analysis

Market Segmentation The primary consumer groups that Rapid Roast is targeting consist of students, working professionals and commuters. Students and working professionals are constantly on the go, either heading to class or work, these coffee drinkers need something to keep them going and focused throughout the day. For the commuters, it is important to attract anyone in need of a pick me up throughout their busy day.

Target Market Segment Strategy

Market Trends Coffee has grown from the basic drip to the sugary sweets of the ever-popular Starbucks Frappuccino’s. Something that has been lost along the way is efficiency. Average wait times for in-store coffee lines has reached up to 15 minutes before getting the caffeine boost to get on with your day. When busier lifestyles of consumers started to get in the way of freshly brewed and blended coffee, grocery stores and convenience stores stepped in with premixed poor quality beverage dispensers. Today many coffee drinkers are not looking for just black coffee, they are looking for more flavor and different, exciting ways to get their caffeine fix.

Market Needs

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Rapid Roast has identified specific needs from consumers that they will recognize in their marketing plan. Consumers need fast, high quality coffee, a variety of flavors offered to customize drinks. There is a need for craft coffee in the Orange County area during early morning to breakfast hours and early afternoon to late afternoon. There is a slight need for the late night consumers to get their caffeine fix as well. We have been well informed thanks to research collected from coffee statistics about the national breakdown of when people prefer to sip their cup of joe, 65% of all coffee is consumed during breakfast hours, 30% between meals, and the remaining 5% with other meals.

Industry Analysis In the immediate area of Orange County, Rapid Roast has identified our core drive-thru competitors to be Starbucks, The Coffee Bean and Tea Leaf, and McDonald’s. Two additional competitors that Rapid Roast has identified are Bodhi Leaf and 7-11. Of these, only a couple of them are eco-friendly and have a sustainable initiative. None of these coffee establishments offer a fully automatic payment system. Those that are drive-thru have a traditional, single lane, two-stop drive-thru.

5. Strategy & Implementation Summary

Rapid Roast plans to enter the coffee shop market by deploying its innovative drive-thru only shop in key locations. The first to open will be close to a mall and competitors with the future locations opening near airports and other established retail shops. Our drive- thru is designed to function with minimal space for operation with two windows on either side to serve guests. There is no storefront and there will be limited contact with the baristas to maximize the speed of each transaction. The ideal goal is to get the custom designed drinks out to the guest in record time that offers no comparison to visiting any of our competitors.

The Rapid Roast market is the busy consumer, people who live on the run with limited time to wait, students who are rushing off to class, working professionals and travelers that desire a refreshing, igniting, high quality beverage and food to get them on their way.

Finally, in addition to Rapid Roast’s extensive offerings of customizable drinks and food, to ensure positive word of mouth and guest retention, Rapid Roast is promoting an environmentally friendly business. Our building is made from a recycled cargo container; all of our food and beverage containers and utensils are made from recycled materials.

Value Proposition- Visit. Drink it. Live it. We stand by this because we are aware that in order to say we are fast paced and can keep up with the lifestyle of our consumers, Rapid Roast is drive-thru only. This eliminates the need of our guests to leave their car to wait in line. Rapid Roast’s business concept is that the guest drives up, places their order and pays at the kiosk, pulls up to the window to receive their drink and then the guest is on their way. We are also an environmentally conscious business because our drive-thru and containers are all made

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with recycled items. Rapid Roast strives to make sure that the drive-thru space is easily accessible to keep the focus on the guest and speed of transactions.

Competitive Edge Rapid Roast’s competitive edge is simple. We offer a high quality customizable product in a drive-thru environment that saves a lot of time.

Marketing Strategy The marketing strategy for Rapid Roast will rely heavily on our design and the fact that we look different and brew coffee from a small roaster in the Pacific Northwest. We want to highlight that we offer high quality coffee with customizable flavors that allow our guests to craft their perfect coffee cocktail. We will promote that we have something for everyone at our drive-thru, without the lengthy wait time of a storefront. We want our guests to see what we stand for so they can be an advocate to promote positive word of mouth and encourage others to come check us out.

Promotion Strategy Part of how we are going to market Rapid Roast relies on how well we can promote our business. We will have advertisements using a variety of mediums ranging from print advertisements in the newspaper and online to advertisements on social media. To incentivize guests to visit Rapid Roast during our grand opening, we will offer the first 50 guests free tumblers. Another idea is to give guests who visit on the first day a coupon for 10% off their next order. We will also implement a rewards program to encourage our guests to use the app and get engaged with Rapid Roast. The app will increase return guests and incentivize them to purchase more in order to receive coupons and free drinks. We also plan to use our daily specials to intrigue guests. Daily specials ○ Monday - Mocha Monday: 50 cents off ○ Tuesday - Tea Tuesday: Any tea for $2 ○ Wednesday - White Chocolate Wednesday: $3.50-16 oz. ○ Thursday - Thirsty Thursday: Buy 1, get 1 free ○ Friday - Fancy Flavor Friday: Free flavor in your latte ○ Saturday - Sweeten up Saturday: 75 cents off pastry item ○ Sunday - Smoothie Sunday: $4-16 oz. smoothie

Positioning Statement Rapid Roast provides service to the busy consumer who has limited time, but desires a refreshing, high quality and customizable product, and/or something to eat while commuting.

Pricing Strategy Rapid Roast’s pricing strategy will be competitive, with the added value of a payment kiosk for a convenient drive-thru service.

Sales Strategy

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The sales strategy has already been alluded to in the promotional strategy, but to draw attention and to keep up with the demands of our guests, we will be offering daily specials. These specials and the rewards programs will allow our guests to change up and try out different drinks for the special occasion.

Sales Forecast In Rapid Roast’s first year, we will have one location with two windows serving guests from either side of the building. Rapid Roast plans to open two more locations in the second year of operation with each location opening three months apart to reach the guests in those areas. The idea behind it is to build familiarity with our guests and reach a wider audience.

Rapid Roast intends to have an average of 380 guests per day once it gains momentum after the first couple months with a maximum expectancy of 500 guests per day. These numbers will grow with each additional location. Future growth in year three will allow for a possibility of a mobile shop to be at different events. Growth will allow for Rapid Roast to introduce our product offerings to those who may not be able to come to any of our locations.

Sales Programs Sales programs have also been previously identified as rewards cards. For every 10 drinks purchased, reward cardholders will receive a free drink. As a way to bring fresh offerings Rapid Roast will have seasonal beverages and food offerings to keep interest and draw in different consumers. Other ideas include a free drink on your birthday.

The website will be another sales generator for Rapid Roast with merchandise such as tee-shirts and tumblers, to-go bags of coffee and tea, our guests will be able to enjoy and promote Rapid Roast wherever they go. These online items as well as the promotions through social media will encourage consumers to come and try our products.

Strategic Alliances We have identified that the best and smartest alliances are going to be malls and airports because our business is small and compact, so it will not take up much real estate space to have on their properties. The best way to create these alliances is to first contact these places once we become an established, reputable business. Then Rapid Roast executives will inquire space and pricing that these places would offer. These two public places are the ideal guest segments because many are rushing to or from and will mostly likely need a pick me up. Our operation hours will vary depending on location. We would like to start with a location near Chapman University. Another important alliance for us is going to be the shipping company from which we get the frame for our business fronts. An obvious alliance is with Moka Joe, the company whose coffee we brew. We will make sure to invite them down as well as send our guests to visit Moka Joe if they are ever in Washington. Finally, we have a strategic alliance with our food providers.

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6. Web Plan

Website Marketing Strategy In designing our website, we aimed to create a clean, easy to navigate template that offered visual appeal and a modern feel. The website allows guests to shop online for products, including our most prominent item, cold brew coffee. It also includes location services so people can easily navigate to our store location, as well as a search bar in case of any confusion. The goal of our website is to gain recognition and draw in new guests. There will also be some promotions included, with opportunities for guests to sign up for email updates in return for in store deals and holiday promotions.

Social Media A strong social media presence is key to running a successful business in today’s world. We intend to take advantage of multiple social media platforms, including Facebook, Instagram, Twitter, and even developing our own app. The Rapid Roast app is an essential aspect in the running of our drive-thru shop. It will include a loyalty program, along with an online ordering system and coupon program that will allow guests to skip ahead in line and cut down on wait time significantly. This app will provide guests with such a fast and efficient way to get their morning coffee that the thought of going anywhere else becomes irrelevant. Going along with the social media presence, we intend to utilize a Rapid Roast hashtag that will be included in our online promotions such as the cup design competition and more.

Development Requirements Rapid Roast prides itself on its ability to be as eco-friendly and sustainable as possible. One of the ways in which we plan on following this philosophy is by making our drive- thru buildings themselves as sustainable as possible. We plan on building our drive-thru stores out of recycled shipping containers. This allows for a simple and less expensive construction process. For the development of our first location, we will have to take into account the cost of procuring multiple shipping containers as well as the cost of

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renovating, building, providing power, and rent. In the future there is the possibility of expanding to multiple locations, and maybe even franchising.

7. Design Plan

Location The team at Rapid Roast has decided to start off the business with only one drive-thru location. This location will be in Orange, CA, located on one of the following locations: Main and Chapman, Main and La Veta, or Main and Palmyra. After the business is established and has gained a sufficient amount of profit and recognition, the team intends to expand to multiple locations.

Structure Rapid Roast is an exciting new coffee shop opening up in a trendy college town, and as such the design behind the business must embody this. Therefore, the basis of the company’s visual design is a clean, modern feel with neutral color schemes and eco- friendly building design. The logo is modern and hip, with the ability to be simplified as the company gains more recognition. The cups, menus, and website use a neutral color scheme with small accents of color. As for the buildings themselves, they are created out of shipping containers; a popular building technique in recent years, and will allow for a modern appearance as well as eco-friendly perks such as water retention from rain runoff.

Branding We want to brand our business as trendy, modern, and green. We will keep the visual design exciting by inviting guests to participate in promotions such as the seasonal cup design competition. In addition to that, we intend to be a fully green company, utilizing eco-friendly everything, from our cups to our building itself. At Rapid Roast, we believe it is possible to “have it all”. With quality coffee, maximum speed and efficiency, and a sufficient element of trendiness, we are giving the guest an exceptional coffee experience, every time.

8. Management Summary

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Management Team CEO Kelci Douglas Kelci is the originator of the Rapid Roast drive-thru coffee idea. She is studying Strategic and Corporate Communication with an emphasis in entrepreneurship. As an experienced barista, she is an asset to the team because she understands the complex nature of the coffee industry. She delegates team tasks according to strengths and holds all members accountable. As a highly creative individual, she also serves the company’s interest by being heavily involved in the design components of the company.

Vice President of Sales & Marketing Monica Spacciapolli Currently studying Business Administration with an emphasis in Management and Marketing. Monica brings an invaluable amount of knowledge on how to promote Rapid Roast to our target segment. Trained in how to analyze marketing campaigns, she has spent her time on the team learning about the competitors in order to increase our success against them. She has created promotion tactics and taken lead on customer relationship management programs to increase guest retention.

Chief Operations Officer David Becerra With a background in organizational psychology, David has been active in generating the managerial structure necessary to create and sustain an efficient coffee shop. His psychology experience also poises him to take on the challenge of developing a working human resource system. David also has experience in finance and accounting and has shown his ability to create spreadsheets that monitor monthly costs and revenues, specifically cash flows. Lastly, he is great planner and organized, which makes him a great candidate to plan future expansion of Rapid Roast.

Chief Financial Officer Eric Simsolo He knows the numbers. Throughout the beginning stages of this company, Eric has shown his ability to research future costs in order to open Rapid Roast’s first location with no financial burdens. With knowledge of GAAP principles and experience in budgetary project management, he has excelled in making sure each dollar spent has a positive impact. Allocation of funding is one of the primary reasons startups fail and Eric’s generated spreadsheets has forecasted a clear understanding of the financial costs necessary to launch this coffee drive-thru.

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Creative Design Lead Julia Lambright Rapid Roast brings the guest great coffee, but Rapid Roast also provides the guest an ambience during their experience. At the helm of this creative flavor is Julia. Her expertise in creative design has pushed forward the team's idea of a clean and elegant design to our coffee cups, website and soon our first location. Julia adds a splash of flavor to our company’s brand, which makes her a major asset to Rapid Roast.

Director of Food Management Richard Rise The pricing of our coffee and food is integral to the success of Rapid Roast. Rich has done a superlative job at creating a listing of all coffee and food options. He then matched them with a fair, but profitable price. As director, he is also responsible to ensuring Rapid Roast is properly licensed and in accordance with all health standards and laws in the state of California. With experience in the food industry, Rich has proven himself incredibly valuable to them.

Management Team Gaps: Minimal SWOT Analysis

Strengths Weaknesses ● Relatively Low Startup Cost ● No Real Start Up Experience ● Coffee is a known product so ● No Initial Capital advertising or building ● No Market Share awareness is not necessary

Opportunities Threats ● No Drive-Thru Only Coffee ● Tons of Competition Shop Exists Within Target ● Coffee Drinkers Buy Out Of Habit, Region If True, Changing The Location ● Plenty Of Coffee Drinkers To Where They Buy Coffee Will Be Sell To Difficult

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Organizational Structure & Personnel Breakdown

• CEO General & • CFO Administration • COO • Director of Food Management

Sales & • VP of Marketing and Sales Marketing • Creative Design Lead • Sales Representative

• Store Manager * Production • Two Shift Supervisors * • Eight Baristas *

*Production Employees will increase in numbers as we open more locations. This personnel breakdown is a per store rundown.

The management team was outlined above and consists of the core employees at Rapid Roast. For simplicity and efficiency, we have grouped our staff into three areas: General & Administrative, Sales & Marketing, and Production. General and Administrative manage the facilities, equipment, inventory, payroll, and other basic operational processes. The Sales & Marketing team will be responsible for advertising our product to our target market and building brand awareness of our presence to our target segment. In addition, our creative design specialist is in charge of creating a visually appealing design for our coffee shop, cups and advertisements. Lastly, the majority of our employees fall under the categorization of Production. Our production team will be comprised of a store manager, shift supervisors, and baristas. They will brew the coffee, blend the drinks and serve the food to the guest with positive attitudes. As the faces of Rapid Roast, they will be responsible for providing excellent guest service in order to impress new guests, thereby increasing opportunity to retain them as consumers of our product.

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Basic Chain Of Command

Barista

Barista

Shift Barista Supervisor Store CEO COO Barista Shift Manager Barista Supervisor Barista

Barista

Barista

9. Financial Plan

Rapid Roast's financial picture is very promising. Since Rapid Roast is operating a cash business, the initial cost is significantly less than many startups today. The process is labor intensive and Rapid Roast recognizes that a higher level of talent is required. The financial investment in its employees, equipment, and raw goods will be one of the greatest differentiators between it and Rapid Roasts’ competition. For the purpose of this pro-forma plan, the facilities and equipment are seen as outright assets/expenses.. These items are capital expenditures and will be available for financing if needed, but will continue to be seen as paid-outright for the sake of proper cost-evaluation. There will be a minimum of inventory on hand so as to keep the product fresh and to take advantage of price drops, when and if they should occur.

Rapid Roast anticipates the initial combination of investments and long-term financing to carry it without the need for any additional equity or debt investment, beyond the purchase of equipment or facilities. This will mean growing a bit more slowly than might be otherwise possible for the first location, but it will be a solid, financially sound growth based on guest request and product demand. After the Rapid Roast business model has proven itself worthy off of the success of the first location, that said success will be hedged against further investment or debt to open new Rapid Roast locations.

Important Assumptions The financial plan relies on some key assumptions, most important assumptions reflect on the conditions of the Rapid Roast business locations in regards to the capacity and

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abilities of each location, and local and global economic trends. The key underlying assumptions are:

● Rapid Roast assumes a slow-growth economy, without major recession. ● Rapid Roast assumes of course that there are no unforeseen changes in public health perceptions of its general products. ● Rapid Roast assumes access to equity capital and financing sufficient to maintain its financial plan as shown in the tables. ● Rapid Roast assumes that small business loans will stay within the 3.5% - 4.5% for the next 36 months. ● Rapid Roast assumes summer months will tend to be slower at college town locations ● Rapid Roast assumes it can average transactions per day at 380 guests, with a cap out at 500 served per day per location ● Rapid Roast assumes the average transaction per guest is $6 combination of food & beverage. ● Rapid Roast assumes growth in guests will come through social media and other modern promotional advertising platforms, and under the occasion that such marketing platforms are seen as “defunct” or “out-of-date”, Rapid Roast will be able to adjust its marketing efforts accordingly. ● Rapid Roast assumes the ability to open up 3 more locations within 36 months of inception.

Key Financial Indicators The following chart shows changes in key financial indicators: sales, gross margin, and operating expenses. Normally inventory turnover would also be a key factor but seeing that our main sales driver is coffee, and raw coffee beans don’t spoil quickly, we saw it fit that it be left out of the graph. The growth in sales exceeds 291% in year 2 then regulates at a steady climbing 30-50% range. Rapid Roast expects to keep gross margin above the 55% projected for the first year, but it does anticipate a cap at 78% from year 3 and on.

This will be achieved through further investment into automated systems reducing payroll expenses, more purchasing power when it comes to sourcing our direct materials, and an economy of scale scenario towards the construction of our storage container drive- thru. Since our payroll expenses are expected to increase substantially as we continue to conduct business in California, Rapid Roast will have to invest in automating its facilities past just the POS systems, or the graph below will have to be altered to expect great direct labor costs. As Rapid Roast grows we might consider holding larger stores of inventory in case there was some catastrophic event that could cause a dramatic rise in the price of our coffees or teas. This scenario could muddle with the consistency of our gross margin and operating expense reports.

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Break-even Analysis To arrive at the average monthly fixed costs, Rapid Roast calculated the fixed costs for the drive-thru. Using the average price per unit, less the average cost per unit, divided into the fixed costs of operation, Rapid Roast concludes that we will need to sell at least 216 units per day (per location) to reach break-even each month. Rapid Roast is expected to reach its break-even point halfway through month 4.

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Monthly Units Break-even 6,480

Monthly Revenue Break-even $38,880

Average Per Unit Revenue $4.80

Average Per Unit Variable Cost $1.20

Estimated Monthly Fixed Cost $29,860

Projected Profit & Loss Rapid Roast is expecting some dramatic growth in the next five years, reaching healthy sales and Gross Profit Margin by the end of the first year. Excluding the startup expenses, we can expect Net After Tax Profit within the first year. Considering the startup expenses of the first location, Rapid Roast will be able to consolidate its debts by the middle of the second year.

The single largest expenditures in the first year are in the production costs of COGS totaling 55% of sales. Cost of Goods Sold includes the cost direct materials put into the production of all food and beverage products and the expenses incurred from the wages of the direct labor employees (all store employees less the supervisor’s salaries).

Sales increase by more than 390% in the second year, due to the addition of two more drive-thru establishments. The trend is expected to continue as Rapid Roast wishes to meet a goal of 8 locations total by the close of the 5th year of operations. Although operating expenses nearly triple in the second year, Rapid Roast will still be able to recognize a net after tax profit due to the opening of its second and third location. In that same year, Rapid Roast will make substantial charitable contributions, a combination of local causes and other charities.

The third year is when Rapid Roast has the opportunity to break into markets outside of the Orange County area. Rapid Roast will see one additional drive-thru facility open in the third year, with 4 more expected to follow in the next 2 years, which will drive sales, increase in production costs, and help improve Gross Profit Margin. These increases, as well as those for increased equipment leases and rents, raise our operating expenses, leaving a respectable net after-tax profit.

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Year 1 Year 2 Year 3 Year 4 Year 5

Sales $633,600 $2,475,000 $3,000,000 $4,600,000 $6,750,000

# of Stores 1 3 4 6 8

Total COGS 285,120 941,400 657,600 1,006,400 1,465,200

Gross Profit 348,480 1,533,600 2,342,400 3,593,600 5,284,800

Total SG&A 123,310 347,510 466,580 697,500 1,301,00

Operating 225,170 1,186,090 1,875,920 2,896,100 3,983,800 Income

Net Income $107,393 $770,959 $1,219,283 $1,882,465 $2,589,470

Exit Strategy There are three scenarios for the investors and management to recover their investment.

Scenario 1 Rapid Roast expands rapidly and garners enough exposure and growth interest to consider franchising opportunities.

Scenario 2 Rapid Roast builds a reputation of breaking the market with their new style, idea, and service. Rapid Roast decides to continue expanding whilst also opening itself up to other business opportunities: ■ Ready made refrigerated beverages (cold brew, flavored coffee). ■ Keurig cups and other instant or pod-like coffee packets. ■ Opening up own roast house and provide Rapid Roast coffee beans in store and online.

Scenario 3 Rapid Roasts disturbance of the market alarms the major brands such as Starbucks, Peet's, and The Coffee Bean. Rapid Roast proved to be a business plan that is profitable and effective. One of the major brands then decides to buy out Rapid Roast to acquire our assets and brand diversification.

Conclusion Of the three scenarios, the Rapid Roast management team prefers Scenario #2. Simply put, if you have a healthy, net cash positive business, continue making money. Natural growth. This option also allows Rapid Roast the future capability to go public. An IPO would allow our investors the opportunity to get a cash buyout.

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Startup Costs For the Rapid Roast business plan to be fully implemented, the management team is asking for an investment of $310,000 for 25% of the company, at a total valuation of 1.24 million USD. This number is derived from: ● Estimated startup costs: $200,000, ● 2 months of fixed costs: $60,000 ● Margin of error: $50,000 cushion The proposed investment will be enough to start up and keep the Rapid Roast business running until we are net cash positive.

10. Appendix

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