66 books

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1.0 Executive Summary .................................................................................................................... 1Chart: Highlights .......................................................................................................................... 21.1 Objectives.................................................................................................................................... 21.2 Keys to Success ........................................................................................................................ 21.3 Mission .......................................................................................................................................... 32.0 Company Summary..................................................................................................................... 32.1 Company Ownership ............................................................................................................... 32.2 Company Locations and Facilities ...................................................................................... 42.3 Start-up Summary................................................................................................................... 4Table: Start-up.............................................................................................................................. 5Chart: Start-up ............................................................................................................................. 72.3.1 Itemized Start-up............................................................................................................. 83.0 Products ......................................................................................................................................... 123.1 Product Description ............................................................................................................... 123.2 Competitive Comparison ..................................................................................................... 143.3 Sales Literature ....................................................................................................................... 143.4 Sourcing ..................................................................................................................................... 143.5 Technology................................................................................................................................ 143.6 Future Products ....................................................................................................................... 154.0 Market Analysis Summary ...................................................................................................... 154.1 Market Segmentation ........................................................................................................... 15Table: Market Analysis ............................................................................................................. 17Chart: Market Analysis (Pie).................................................................................................. 174.2 Target Market Segment Strategy .................................................................................... 174.2.1 Market Trends.................................................................................................................. 184.2.2 Market Growth................................................................................................................. 184.2.3 Market Needs ................................................................................................................... 184.3 Industry Analysis.................................................................................................................... 184.3.1 Competition and Buying Patterns ............................................................................ 194.3.2 Main Competitors ........................................................................................................... 194.3.3 Industry Participants..................................................................................................... 195.0 Strategy and Implementation Summary .......................................................................... 205.1 Value Proposition.................................................................................................................... 205.2 Competitive Edge ................................................................................................................... 205.3 Marketing Strategy ................................................................................................................ 215.3.1 Pricing Strategy............................................................................................................... 215.3.2 Promotion Strategy ....................................................................................................... 225.3.3 Marketing Programs ...................................................................................................... 225.3.4 Positioning Statement .................................................................................................. 235.4 Sales Strategy ......................................................................................................................... 235.4.1 Sales Programs ............................................................................................................... 235.4.2 Sales Forecast.................................................................................................................. 24Table: Sales Forecast ........................................................................................................... 24

Table of Contents

Table of ContentsChart: Sales Monthly ............................................................................................................ 25

Page 2

Page 1

Chart: Sales by Year ............................................................................................................. 255.5 Strategic Alliances.................................................................................................................. 265.6 Milestones.................................................................................................................................. 26Table: Milestones ....................................................................................................................... 26Chart: Milestones ....................................................................................................................... 276.0 Web Plan Summary ................................................................................................................... 277.0 Management Summary............................................................................................................ 277.1 Personnel Plan ......................................................................................................................... 28Table: Personnel ......................................................................................................................... 287.2 Management Team ................................................................................................................ 288.0 Financial Plan ............................................................................................................................... 298.1 Important Assumptions ....................................................................................................... 29Table: General Assumptions .................................................................................................. 298.2 Break-even Analysis.............................................................................................................. 308.2 Break-even Analysis.............................................................................................................. 30Chart: Break-even Analysis ................................................................................................... 30Table: Break-even Analysis.................................................................................................... 308.3 Projected Profit and Loss..................................................................................................... 318.3 Projected Profit and Loss..................................................................................................... 31Chart: Profit Monthly ................................................................................................................ 31Chart: Profit Yearly.................................................................................................................... 31Chart: Gross Margin Monthly................................................................................................. 32Chart: Gross Margin Yearly .................................................................................................... 32Table: Profit and Loss............................................................................................................... 338.4 Projected Cash Flow .............................................................................................................. 348.4 Projected Cash Flow .............................................................................................................. 34Chart: Cash .................................................................................................................................. 34Table: Cash Flow ........................................................................................................................ 358.5 Projected Balance Sheet...................................................................................................... 368.5 Projected Balance Sheet...................................................................................................... 36Table: Balance Sheet................................................................................................................ 368.6 Business Ratios ....................................................................................................................... 378.6 Business Ratios ....................................................................................................................... 37Table: Ratios ................................................................................................................................ 38Table: Sales Forecast ......................................................................................................................... 1Table: Personnel ................................................................................................................................... 2Table: Personnel ................................................................................................................................... 2Table: Profit and Loss......................................................................................................................... 3Table: Profit and Loss......................................................................................................................... 3Table: Cash Flow .................................................................................................................................. 4Table: Cash Flow .................................................................................................................................. 4Table: Balance Sheet.......................................................................................................................... 5Table: Balance Sheet.......................................................................................................................... 5

1.0 Executive Summary

66 Books Cafe will provide a relaxing, Christian-focused, neighborhood-centered place with freshly roasted coffee, specialty drinks, good books, and music. 66 Books Cafe is the answer to an increasing demand. Our target market wants:

Neighborhood businesses in TBD Great coffee at a competitive price A comfortable place to socialize with others with similar interests

66 Books Cafes' goal is to provide the community with a social, entertaining atmosphere whereChristian neighbors can meet each other in a neutral, non-denominational setting.

66 Books Cafe is incorporated as an S corporation. This will shield the owner from issues of personal liability and double taxation.

This proposal is prepared to obtain financing in the amount of $80,000. The supplemental financing is required to prepare the selected site, purchase equipment, and cover expenses during the first year of operation. The owner will invest $15,000 of her own into the business.

This financing will allow 66 Books Cafe to successfully open and maintain operations.The large initial capital investment will allow 66 Books Cafe to provide its customers with an inviting atmosphere and quality products. A unique, upscale and innovative environment isrequired to provide customers with an atmosphere that will create socialization. Successful operation in year one will provide 66 Books Cafe with a customer base that will allow itto be self sufficient in year two.

Inspirational Grounds

66 Books CafeEven with our conservative sales forecast, we will maintain a positive cash flow in all months, repay the loan in 12 years, and have a positive net worth over $27,000 by year three. We project that our net profits will increase from $12,000 to over $14,000 over the next three years.

Chart: Highlights

1.1 Objectives

66 Books Cafe' objectives for the first three years of operation include:

The creation of a unique, upscale, innovative spiritual environment that will differentiate66 Books Cafe from local coffee shops. To make 66 Books Cafe the destination for quality coffee in a welcoming atmosphere for people who are serious about their coffee and growing in their spirituality. The formation of an environment that will bring people with diverse backgrounds and interests together in a common forum. To be an active and vocal member of the community, and to provide continual reinvestment through participation in community activities and financial contributions. Consistently providing excellent specialty beverages, bakery items, inspirational books, and music.

1.2 Keys to Success

The keys to the success for 66 Books Cafe are:

The creation of a unique, innovative, upscale atmosphere that will differentiate 66 Books Cafe from other local coffee shops and future coffee shops. Fresh Coffee roasted on-site daily will give customers a unique experience as well as excellent product. Selling beverages and products that are of the highest quality. The creation of an environment that won't intimidate the spiritual seeker. 66 Books Cafe will position itself as an educational resource for individuals wishing to learn about the benefits of growing spiritually. The establishment of 66 Books Cafe as a community hub for socialization and entertainment. Encourage the two most important values in Christianity: love and service.

1.3 Mission

As people are becoming more interested in their spiritual side, a neighborhood shop with excellent freshly roasted coffee and non-denominational Christian books and tapes, is a welcomed alternative and/or addition to the local church. 66 Books Cafe is a specialty beverage establishment focused on providing freshly roasted coffee beans, coffee/espresso drinks and information to enhance our customers' spiritual experience. We also understand that coffee drinkers interested in growing spiritually want a destination, not just a location;we provide them with the best of both.

Our goal is to be the destination for Christian coffee drinkers seeking a non-secular environment in the Twin Cities area. People of all ages and backgrounds will come to enjoy the unique upscale, educational, motivational and innovative environment that 66 Books Cafe provides.

We believe it is important to remain an active member of the community and to impact our customers' lives in more ways than the selling of specialty drinks.

2.0 Company Summary

66 Books Cafe, Minneapolis' South Central area, will offer great specialty beverages and easy access to exciting spiritual information. 66 Books Cafe sells quality products and provides excellent customer service for coffee lovers and persons looking to enhance their spiritual experience. We are looking to lease a retail store which we will use to market and merchandise our products. The company took its name in July 2002, and organized as an S Corporation in October, 2003.

Our book and music selection and helpful staff will appeal to the audience that is seeking togrow and learn spiritually in this age of uncertainty. This invigorating aspect will attract younger and elderly members alike who are gaining interest in their spiritual condition. The centrallocation will provide easy access from most points of origin throughout the Twin City area for those who will recognize 66 Books Cafe as a destination point, as well as provide localcommunity residents with convenient access to freshly roasted coffee.

2.1 Company Ownership

Inspirational Grounds

Inspirational Grounds66 Books Cafe is incorporated as an S corporation. This will shield the owner Regina Brown from issues of personal liability and double taxation. The Corporation was formed in October of 2003.

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2.2 Company Locations and Facilities

The site, Midtown Commons (Also known as the Sears Project), is located in South Central Minneapolis. The initial space is approximately 2,000 square feet and has ample space for the first three years of growth. The complex has ample parking and significant foot traffic from Allina Healthcare Office Facility. This area was chosen for various reasons, including:

Proximity to other areas within the Twin Cities; Central location easily accessed. Proximity to the Lyn/Lake and Uptown areas. High Visibility. Proximity to the many local churches in South Central Minneapolis. Diverse population within the community. Desire for South Central Businesses. Scarcity of other coffee houses in the area. Proximity to the light rail depot and 12th Precinct of the Minneapolis police.

All of these qualities are consistent with 66 Books Cafe' goal of providing a community hub for socialization and entertainment.

2.3 Start-up Summary

66 Books Cafe' start-up costs will cover coffee, espresso, and specialty drink making equipment, micro-roasting equipment, training, site renovation and modification, capital for operating expenses in the first year, and the inventory necessary to provide customers with the information needed to grow.

A large portion of our start-up requirements will go towards the purchase of specialty drink equipment from Espresso Services, Inc. Our long-term assets will include:

One espresso machine One micro-roasting system an Espresso grinder/doser water filtration system

Expensed equipment includes:

A Bulk grinder for drip coffee Single airpot brewer Smoothie blender Minor additional equipment

Additionally, we need funding for initial inventory, both for the coffee shop side of things and the other specialty merchandise, books, and music. Music items will be purchased from Provident Music, Diamante Music Group, and New Day Christian Distributors among others. Books and other inspirational material will be purchased from Bridge-Logos Publishers, KCM, Bethany House Distributors, and others.

The site 66 Books Cafe chooses will require funds for renovation and modification. A single estimated figure will be allocated for this purpose. The renovation/modification cost estimate will include the costs associated with preparing the site for opening business.

Current Assets, in the table below, includes furniture and fixtures.

Long-term assets, in addition to our major brewing, grinding, and roasting equipment, includes a POS System.

Table: Start-up

Start-up

Requirements

Start-up Expenses

Legal$1,500

Stationery etc.$800

Brochures/Mailings$1,000

Marketing Consultant$1,000

Insurance$500

Rent$2,000

Research and Development$1,500

Build Out Expenses$8,000

Initial Marketing$2,000

Training$1,500

Website development$50

Expensed Equipment$4,950

Other$5,000

Total Start-up Expenses$29,800

Start-up Assets

Cash Required$30,600

Start-up Inventory$6,600

Other Current Assets$12,000

Long-term Assets$16,000

Total Assets$65,200

Total Requirements$95,000

Table: Start-up Funding

Start-up Funding

Start-up Expenses to Fund$29,800

Start-up Assets to Fund$65,200

Total Funding Required$95,000

Assets

Non-cash Assets from Start-up$34,600

Cash Requirements from Start-up$30,600

Additional Cash Raised$0

Cash Balance on Starting Date$30,600

Total Assets$65,200

Liabilities and Capital

Liabilities

Current Borrowing$0

Long-term Liabilities$80,000

Accounts Payable (Outstanding Bills)$0

Other Current Liabilities (interest-free)$0

Total Liabilities$80,000

Capital

Planned Investment

Owner Investment$15,000

Investor 2$0

Other$0

Additional Investment Requirement$0

Total Planned Investment$15,000

Loss at Start-up (Start-up Expenses)($29,800)

Total Capital($14,800)

Total Capital and Liabilities$65,200

Total Funding$95,000

Chart: Start-up

2.3.1 Itemized Start-up

The following table represents an itemized list of the equipment, supplies, furniture and fixtures needed at start-up.

Equipment: Total $15,946.78

ItemDescriptionSupplierNumberPer Item CostTotal Cost

Espresso MachineLa Cimabli MN29 SelectESI1$6,900.00$5,643.50

Grinder/DoserMazzer Super JollyESI1$770.00$629.78

Bulk GrinderMazzer MajorESI1$1,025.00$838.35

BrewerSingle Pot BrewerESI1$865.00$707.48

AirpotService Idea 3 ltrESI4$54.90$179.61

Water Filter HeadEverpure SO MC twinESI1$175.71$143.71

Filter CartridgeEverpure MCESI1$69.07$56.49

Water softenerEverpure 7-SO CartridgeESI1$94.92$77.63

KnockboxCountertopESI1$40.00$32.72

CreamerBell CreamerESI0$40.00

ThermometerESI0$7.35

Steam Pitcher1 literESI0$12.15

Steam Pitcher1.5 literESI0$19.15

Whipped Cream MakerISI 1 PintESI0$69.23

Espresso Hand TamperESI0

BlenderVita Mix 48 OZ - Bar BossZesco1$379.00$379.00

Coffee RoasterMicro RoasterESI1$3,500.00$3,500.00

Microwave OvenAmana lgt duty 1000 wtZesco1$200.00$200.00

Refrigerator27 1/2" UndercounterZesco1$837.00$837.00

RefrigeratorUpright beverage - TrueZesco1$1,092.00$1,092.00

FreezerChestZesco1$379.00$379.00

Ice MachineUndercounterZesco1$1,096.00$1,096.00

Dipperwellw/faucetZesco1$154.50$154.50

Supplies: Total $2,667.94


DetergentEspresso cleaningESI1$7.57$7.57

BarspoonESI1$2.15$2.15

Nail BrushZesco1$8.70$8.70

Cleaning BrushGroup head O-RingESI1$4.38$4.38

Cleaning BrushAirpotESI1$3.75$3.75

Cleaning brushflat groundsESI1$3.09$3.09

Cleaning blankback flushESI1$3.58$3.58

Foam Cups - hot8oz - 1000 countESI1$39.33$39.33

Foam Cups - hot12 oz - 1000 countESI1$55.92$55.92

Foam Cups - hot16 oz - 1000 countESI1$63.92$63.92

Insulated Cups - hot20 oz - 500ESI1$64.42$64.42

Plastic Cups - cold12 oz - 500ESI1$36.83$36.83



Lid - Hot8 oz - 1000 countESI1$28.36$28.36

Lid - Hot12/16 oz - 1000 countESI1$36.58$36.58

Domed Lid12/16/20 oz 1000ESI2$36.58$73.16

Lid - Coldflat 12 oz 1000 countESI1$36.51$36.51

Lid - Coldflat 16/20 oz 1000 countESI1$44.72$44.72

Lid - Colddome 12 oz - 1000 countESI1$52.09$52.09

Lid - Colddome 16 oz - 1000 countESI1$67.41$67.41

Bus BoxesZesco5$4.70$23.50

Mugs3 oz Barista - 3 dozZesco1$180.00$180.00

Mugs8 oz barista - 3 dozZesco1$201.00$201.00

Mugs12 oz Barista - 2 dozZesco1$152.00$152.00

Saucers5 1/4 " Barista - 3 dozZesco1$118.00$118.00

Saucers6 1/2" Barista- 3 dozZesco2$128.00$128.00

Demitasse Spoons1 dozESI2$3.00$6.00

PlasticwareSpoons/Forks/KnivesCostco2$6.00$12.00

FlatwareSpoons - 3 dozZesco2$35.60$71.20

FlatwareForks 3 dozZesco2$49.70$99.40

Utility Cart300 lb capacityZesco2$230.00$460.00

Stir Stickswooden 1000 countESI2$1.57$3.14

StrawsIndividually Wrap 500 cntESI3$2.72$8.16

Coffee Bags1 lb bags - 50 cntESI3$6.38$19.14

Coffee Bags1/2 lb bags - 50 cntESI3$5.45$16.35

Coffee Filters13x5 1000/caseESI1$12.02$12.02

Carrier4 cup carrier- 300 cntESI1$52.57$52.57

Java Jackets1500 cntESI1$87.21$87.21

Condiment DispensersSalt & Pepper shakersDollar Store6$1.00$6.00

Furniture & Fixtures: Total $10,570.50


Menu BoardLaminatedEckel Sign Co1$150.00$150.00

Cash RegisterRestaurant POS System1

Hand Sinkw/ faucetZesco1$73.10$73.10

3 Compartment Sink94" w/ 2 drainboardsZesco1$612.00$612.00

Faucet3 comp sinkDirect Buy1$100.00$100.00

Prep SinkTBDZesco1$100.00$100.00

Mop SinkZesco1$170.00$170.00

Trade Scale10 lb Avert Berkel DigitalZesco1$342.00$342.00

ChairsZesco90$53.10$4,779.00

StoolsZesco12$88.60$1,063.20

Table Tops24x24Zesco30$22.70$681.00

Table Tops24x42Zesco10$35.40$354.00

Table Bases22x22Zesco30$27.00$810.00

Table Bases33x33Zesco10$34.00$340.00

Bakery CaseZesco

Storage ShelvingAmco IIZesco20$38.60$772.00

Stackable high chairsZesco3$63.90$4,191.70

LightingDirect Buy

Hand TowelDispenserZesco1$32.50$32.50

Start-up Inventory: Total $1,812.96


Espresso BeansLavazza 6/2.2 lb caseESI2$102.93$205.86

Decaf Espresso BeansLavazza 1.1 lbESI2$9.70$19.40

Green BeansColumbian SupremoESI2$75.45$150.90

Green BeansCosta Rican TarrazuESI1$89.48$89.48

Green BeansTanazanian PeaberryESI1$66.35$66.35

Green BeansIndianESI1$64.08$64.08

Green BeansNicaraguanESI1$74.32$74.32

Green BeansGuatemala AntiguaESI1$79.25$79.25

Green BeansPeru OrganicESI1$74.04$74.04

Green BeansColumbian DecafESI1$72.50$72.50

Green BeansCosta Rican DecafESI1$81.25$81.25

1883 Flavored Syrup6 per caseESI4$37.38$149.52

1883 Syrup PumpsNo ChargeESI12$0.00$0.00

1883 Syrup RackNo ChargeESI1$0.00$0.00

Sugar-Free SyrupsDaVinciESI4$5.82$23.28

Chai SyrupDaVinci 750 ml bottleESI2$6.49$12.98

DaVinci PumpsNo chargeESI8$0.00$0.00

Chocolate SauceDaVinci 6/64 caseESI1$42.81$42.81

White Chocolate SauceDaVinci 6/64 caseESI1$42.81$42.81

Caramel SauceDaVinci 6/64 caseESI1$48.44$48.44

Sauce PumpsDaVinci - No ChargeESI3$0.00$0.00

Fruit Smoothie BaseCaseESI3$54.42$163.26

Pwd Smoothie BaseCaseESI2$24.96$49.92

N20 Chargers24/caseESI1$13.85$13.85

Stash Tea DisplayNo chargeESI1$0.00$0.00

Stash TeaStart-up caseESI1$24.57$24.57

Milk2% Gal 4/caseClover Super Foods2$2.38$4.76

MilkSkim gal 4/caseClover Super Foods1$2.53$2.53

MilkSoy 32 oz 12/caseClover Super Foods1$16.48$16.48

MilkHalf/HalfClover Super Foods1$8.27$8.27

Sugarpackets 2000 ctClover Super Foods1$10.84$10.84

Equalpackets 2000 ctClover Super Foods1$35.74$35.74

BakeryCheesecake - AmarettoClover Super Foods1$14.39$14.39

BakeryChoc Chip CheesecakeClover Super Foods1$15.54$15.54

BakeryDipped CheescakeClover Super Foods1$18.67$18.67

BakeryRaspberry CheescakeClover Super Foods1$16.43$16.43

Soft DrinksJones Soda 12 oz 24/csClover Super Foods4$15.95$63.80

3.0 Products

Beverages and Baked Goods

66 Books Cafe sells quality freshly roasted coffee, specialty beverages, and beverage related items to the discriminating coffee drinker. The beverages are made by trained staff members who know the products and make recommendations to customers.

The coffee varietals, teas, and other beverages items are supplied by Espresso Services, Inc and delivered within 24 hours. The roasting of the green beans will take place on-site for the freshest product possible. Owner will rely on customers and employees to shorten the communication and feedback loop in product and service offerings.

66 Books Cafe will offer custom roasting services to our customers. Customers will be able to order selected coffee varietals roasted to order for enjoyment in their homes or offices. These custom roasted coffees will create a unique experience for our customer, and allow them to further their specialty coffee knowledge.

Books and Music

Containing Christian, uplifting, and life-affirming messages will be sold to complete the ambiance and community centered feel of the store.

3.1 Product Description

66 Books Cafe sells the entire array of coffee and espresso-based drinks,specialty drinks, and bakery items, as well as music and books geared toward the spiritual reader.

Specialty CoffeesThe primary product of 66 Books Cafe is the specialty coffee. Several unique blends will be micro roasted for daily serving or specially roasted to order at our customers' request which will give our customers the variety they seek. These coffee blends include: Columbia Supremo, Tanzanian Peaberry, Jamaican Blue Mountain, Guatemalan Antigua, Costa Rican Tarrazu, Sumatra Mandheling, and Ethiopian Yaefacheffe. Other blends and decaffeinated coffee will be offered as well.

Espresso & Coffee Drinks

The Straight Shot - The foundation of every espresso beverage; served in a demitasse, when consumed alone.

Espresso Macchiato - Espresso served in a demitasse with a small amount of foamed milk on top

Espresso Con Panna - Variation of the Macchiato substituting whipped cream in place of the foamed milk.

Caff Americano - A single or double shot of espresso is combined with hot water from the espresso machine. This produces a smoother and fresher (as well as hotter) cup of coffee than conventional brewing.

Cappuccino - Espresso mixed with foamed milk upon the pour; can be garnished with shaved chocolate.

Caff Latte - Espresso mixed with steamed milk, and topped with foamed milk; can be garnished with shaved chocolate.

Mocha - Espresso, steamed milk, and chocolate syrup, usually topped with whipped cream and chocolate shavings.

The Breve - An extra rich Caffe' Latte made with half & half instead of milk.Caf Au Lait - Drip coffee with steamed milk added and topped with foamed milk. Flavor-Based DrinksHot Chocolate and Steamers - These drinks are made like lattes and mochas without theaddition of coffee. Flavored syrups are added to steamed milk and may be topped with whipped cream at the customer's request.

Italian Sodas and Creamosas - An Italian soda is a combination of flavored syrup and high quality carbonated mineral or soda water, served over ice. A creamosa is an Italian soda with heavy cream or half & half added and gently stirred to making a swirled appearance in the drink.

Granita - An Italian style granular ice drink similar to a slushy but much more dense in consistency.Granita flavors are usually coffee or fruit based

Other specialty drinks include: Gourmet hot tea, iced Tea, Chai, smoothies, blended coffee and tea-based drinks, and bottled soft drinks.

Books and Music

Books - The most popular titles will be stocked in limited supply. Such books as Woman, Thou are Loosed by T.D. Jakes; In Pursuit of Purpose, by Dr. Myles Munroe; Prayers That Heal The Heart, by Mark & Patti Virkler; A Fresh Word For Today, by Bob Gass; Run Baby Run, by Nicky Cruz; Morning By Morning, by Charles H. Spurgeon, and others.

Music - 66 Books Cafe will carry the finest in contemporary Christian music. Titles include Kirk Franklin; Mary Mary; Set Free; Audio Adrenaline; Yolanda Adams, and more.

Bakery Items66 Books Cafe will also offer its customers a variety of baked goods, including pastries, cookies, and cakes. Bread for sandwiches and buns for soup will also be secured. Negotiations with several local bakeries are now underway. Quality and consistency will be the determining factors for this decision.

3.2 Competitive Comparison

66 Books Cafe will be unique in the vicinity. Not only will 66 Books Cafe differentiate itself from the strictly-coffee cafes by providing its customers with a theme based on sound spiritual principles, we will also be the first independently-owned, urban store to roast its own beans on-site, providing the customer with a unique experience in a welcoming environment.

3.3 Sales Literature

66 Books Cafe will use print advertising and sales programs to get the word out to customers.

Fliers will be distributed throughout the Twin City area to chambers of commerce, tourism council offices, hotels, neighborhood stores and shops, churches, schools, and other areas one month before the grand opening.

Newspaper advertisements in Minneapolis and St. Paul, The Shepherd's Guide, and neighborhood publications will be used to attract customers with grand opening offers, as well as 1,000 door-to-door flyers offering a free 16 oz. drink.

See attached example flier.

3.4 Sourcing

66 Books Cafe has associated itself with the finest coffee supplier in the Twin Cities area, Espresso Services, Inc. We will bring fine coffees from all over the world to South Central Minneapolis, where residents, other Midtown tenants and passers-by can enjoy a freshlyroasted quality cup of coffee, an espresso or specialty drink in an inviting and friendly atmosphere.

3.5 Technology

The technology 66 Books Cafe is dependant upon is the micro-roasting equipment it will use to roast the beans on-site. This equipment is serviced through the supplier;Espresso Services, Inc.

66 Books Cafe will also use our website to advertise specials and events, and to post the monthly menu and talent offerings. We will use email to communicate with customers wishingto sign-up for email specials. Eventually, we would like to institute online ordering for roasted coffee and specialty merchandise, but that plan is at least two years off.

The Point of Sale (POS) technology 66 Books Cafe will use allows for order taking when the lines are long, keeps customer discount information, inventory, and revenue/profit information. The system has a battery back-up in case of power surges and temporary power losses.

The 66 Books Cafe' logo will be Federally Trademarked. Although the beverages will not be protected in content, beverage names for specialty drinks reflecting the theme of the shop will be protected under the Federal Trademark laws.

The security system 66 Books Cafe uses will protect the contents of the store and reduce insurance premiums.

3.6 Future Products

As 66 Books Cafe grows, more features will be added to the existing store. A key part of this is the addition of live entertainment. This entertainment will be in the form of Jazz singers, poetry readings, Comedy for the King, motivational speakers, and Christian musical Artists.

Food items will be added to the menu of offerings. The soup will be made fresh daily, one kind per week. The soups are: Chicken Noodle, Minestrone, Clam Chowder, Vegetable Beef, Vegetable, Chicken and Rice, and Wild rice. Sandwiches are made to order and include deli favorites such as herbed turkey, egg salad, tuna salad, roast beef, corned beef, and turkey. A variety of condiments will also be available. 66 Books Cafe will obtain deli meats from Costco. The salad sandwiches will be made fresh on-site.

66 Books Cafe will establish itself as the destination for non-secular and motivational entertainment. We also envision adding meeting rooms, hosting receptions, and adding small devotional rooms for private reflection. The meeting rooms will be perfect for small business and non-profit organizations with limited office space. Coffee and pastries will be served to ensure a successful atmosphere for business. 66 Books Cafe will also be available for private receptions, such as birthday parties, anniversaries, or showers. Customer provided catering will go a long way to ensure the guests' parties are successful. The devotional rooms will be wired for individual music selection, equipped with one-way TV cameras, and furnished with a comfortable chair and table.

These additions complete the vision for 66 Books Cafe, and provide its customers with a place for socialization, relaxation, and reflection.

4.0 Market Analysis Summary

66 Books Cafe is faced with the exciting challenge of being the first-mover in the Minneapolis/St. Paul Christian coffee house and roaster market. The consistent popularity of coffee and specialty drinks, combined with the ever growing and ever profitable Christian bookselling and music market, is a winning concept and will produce overwhelming results. Our target market includes coffee drinkers, spiritual seekers, Christians seeking fellowship (and snacks), and local neighborhood residents.

4.1 Market Segmentation

Census data, religous adherent research, and coffee consumption statistics were used to determine market share for 66 Books Cafe. Recent census data shows that there are38,860 persons in the 55407 zip code, and 1,126,944 persons in Hennepin county. CoffeeResearch Institute data shows that 54% of the population drinks coffee daily, and 25% drink coffee occasionally. The Glenmary Research Institute shows that 64.9% of the Minnesotapopulation are self-professed religous adherents. Minnesota ranks 5th in the nation forpercentage of population religiously affiliated. National statistics show that most persons do not travel more than 20 minutes to eat or listen to entertainment; we are using a conservative10%. The following is a breakdown of target customers:

55407 Market

AGE% of Population

15-197.1%

20-248.4%

25-4435.8%

45-6417.3%

TOTAL68.6%

INCOME% of Population

15,000-24,99916.5%

25,000-49,99929.0%

50,000-99,99928.6%

TOTAL74.1%

55407 market = (38,860 x 68.6% 15-64 year olds, x 74.1% in targeted income bracket, x 54%coffee drinkers) + (38,860 x 68.6% x 74.1% x 25% occasional coffee drinkers)

The formula takes the total 55407 population and then multiplies that number by the percentages in order of importance, that figure is multiplied by the percent of persons who drink coffee daily. The next formula is calculated the same except it uses the percentage of person who drink coffee occasionally.

Hennepin County Market

AGE% of Population

15-196.5%

20-247.3%

25-4433.1%

45-6422.2%

TOTAL69.1%

INCOME% of Population

15,000-24,99910.8%

25,000-49,99923.9%

50,000-99,99937.6%

TOTAL72.3%

Hennepin County Market = ((1,126,944 - 38,860) x 69.1% x 72.3% x 64.9% x 54% x 10%) + ((1,126,944 - 38,860) x 69.1% x 72.3% x 64.9% x 25% x 10%))

The formula takes the total county population minus the 55407 population and then multiplies that number by the percentages in order of importance, that figure is multiplied by the percent of persons who drink coffee daily multiplied by the percentage of the population likely to travel to 66 Books Cafe. The next formula is calculated the same except it uses the percentage of person who drink coffee occasionally.

Table: Market Analysis

Market Analysis

Year 1Year 2Year 3Year 4Year 5

Potential CustomersGrowthCAGR

Neighborhood Resident1%13,16513,29713,43013,56413,7001.00%

Religious Adherent - HennCounty1%19,73119,92820,12720,32820,5311.00%

Other0%10,00010,00010,00010,00010,0000.00%

Total0.77%42,89643,22543,55743,89244,2310.77%

Chart: Market Analysis (Pie)

4.2 Target Market Segment Strategy

The customers will be between 15-64 years old. The income level is between $15,000 and$99,000 annually. They live in the 55407 zip code, the proposed area for 66 Books Cafe. The Hennepin county customer is between 15-64 with income levels ranging from $15-99Kannually. They live in the Hennepin county area and are self-professed religious adherents. A limited number, estimated at about 10,000 will come from other areas out of curiosity or to see a particular entertainer or poetry reading. A majority of the customers will be persons whoenjoy a relaxing atmosphere, reading, reflection, and excellent coffee.

4.2.1 Market Trends

The specialty beverage market will continue to grow as younger people are opting for non- alcoholic beverages and wholesome entertainment. Religious book retail sales grew 2.3% in2002. In 2000 they represented 5.25% of all book sales resulting in $1.25 billion in revenue. In2001, these sales grew 4.7% to $1.3 billion and market share grew to 5.5%. With the increasing interest in spirituality, sales and market share will increase steadily.

4.2.2 Market Growth

The Hennepin County area is expected to grow .8% annually. The 55407 zip code area is expected to grow 1% annually. These estimates are based on most recent census data and projected growth rate for the the Minneapolis area.

4.2.3 Market Needs

Current trends and historical sales data both indicate that the high demand for coffee will remain constant over the next five years. The Christian book and music business is expected to continue to grow as contemporary Christian artists rival secular music. In addition to the increased sales in these areas, Generation X'ers are more religious than their parents,according the GlenMary Research Institute.

The needs of this market are decidedly soft in nature. The soft needs of this market include, but are not limited to, a general feeling of acceptance, a place of belonging, and non-judgmental atmosphere.

4.3 Industry Analysis

The retail coffee industry in the Twin Cities experienced rapid growth at the beginning of the90's and is now moving into the mature stage of its life cycle. Many factors contribute to the demand for excellent coffee and specialty beverages in Minneapolis. The climate in Minneapolisis extremely conducive to coffee consumption; coffee consumption increases in colder months. Current trends in the Midwest reflect the popularity of fresh, quality coffee and specialty drinks,Minneapolis/St. Paul boasts sophisticated coffee lovers.

The popularity of Christian entertainment is growing immensely as people are searching for meaning during these uncertain times. Those who are familiar with Christian music and book trends and sales are looking for authors and performers to keep up with the seemingly insatiable demand.

Due to competition, cafe owners must look for ways to differentiate their place of business from others in order to achieve and maintain a competitive advantage. The founder of 66 Books Cafe realizes the need for differentiation and strongly believes that combining freshly roasted coffee, a cafe, spiritual books and music, and entertainment are the keys to success. The fact that no other such cafes are established in the Twin Cities presents 66 Books Cafe with a chance to enter the window of opportunity and take hold of a very profitable niche market.

4.3.1 Competition and Buying Patterns

66 Books Cafe will face competition on two fronts: coffee retailers and book & music stores. The good news is that 66 Books Cafe does not currently face any direct competition from other cafes in the market. There are no independently operated Christian cafes in the Twin Cities. Christian based coffee houses are either located within, or owned by a church.

Heavy competition in the Twin Cities area creates an industry where cafes face the same costs. There is a direct relationship between price and quality of coffee. Some fresh roasted coffee retails from $12/lb while other more exotic beans may sell as high as $40/lb. Wholesalers sell green (unroasted) beans to retailers at an average of 50-75% discount. For example; a pound of Columbian Supremo beans wholesale for $3.06 and retails for $12.85. As in most industries, price decreases as volume increases.

4.3.2 Main Competitors

The main competitor in the retail coffee segment is Dunn Bros, as they also sell freshly roasted beans. In fact, the largest part of Dunn Bros' revenue is generated from the sale of the roasted beans to the consumer. The difference is Dunn Bros. does not roast their beans on-site, nor do they have the ability to custom roast for their customers.

Dunn Bros. - UptownLocal chain cafe that boasts freshly roasted beans. The bulk of these sales are in the form of roasted beans sold to the consumer. The cafe caters to customers who want fresh beans andbrewed coffee. The atmosphere is homey, the prices are competitive, no entertainment is provided. They are known for good quality coffee. The stores are clean and well managed.

Vera's - Lynn/LakeA nice specialty coffee cafe with an atmosphere that caters to the "Green Peace" crowd. They have competitive prices, good quality coffee, and an excellent location. The cafe has threerooms; one with tables and chairs, one with couches and over-stuffed chairs, the third "room"is an outside patio. Vera's doesn't offer entertainment, on-site roasted coffee, or books and music.

Boathouse Coffee - 42nd & Cedar Ave SouthServes specialty coffee drinks, sandwiches, soft drinks, and ice cream. The street is busy, there is not a lot of foot traffic, and there is no parking lot so the location doesn't allow for easy access. The shop is clean and prices are competitive. The Boathouse Coffee Cafe has several tables, and a couch. It can accommodate about 25 patrons.

4.3.3 Industry Participants

There are countless coffee wholesalers who could conceivably do business with 66 Books Cafe. These wholesalers distribute coffee and espresso beans to restaurants and retailers. Competition in this industry creates an even amount of bargaining power between buyers and suppliers resulting in competitive pricing.

5.0 Strategy and Implementation Summary

66 Books Cafe uses a strategy of total market service. Our promise is in our uniqueness in the market and the products we sell, the people we attract, the atmosphere we create.

We will create an atmosphere that lures the "spiritual seeker." The "coffee lover" and others will come because of the quality and the atmosphere. Ultimately, we aren't selling either productsor coffee. We are selling the experience. We want to be part of the community, part of their lives, part of the search for meaning.

Strategic Assumptions:

1. Every person is a potential customer and all potential markets experience growth.2. Marketing to the soft needs of the customer will produce sales of products.

5.1 Value Proposition

66 Books Cafe will position itself as an upscale coffee house, spiritual resource and entertainment provider. It will serve on-site roasted, high quality coffee and espresso, as well as specialty beverages at a competitive price. Due to the number of coffee shops in the Minneapolis area, it is important that 66 Books Cafe set competitive prices for the freshly roasted coffee. Customers will see coffee as it roasts throughout the day, and they will be able to order coffee beans roasted to their specifications while they enjoy a beverage.

5.2 Competitive Edge

The competitive advantage of 66 Books Cafe is threefold:

Our uniqueness in the market - 66 Books Cafe will be the only spiritually centered coffee shop in the Twin Cities metropolitan area which roasts its own beans daily, sells quality coffee and espresso based beverages, and specialty drinks, along with inspirational music and books. 66 Books Cafe is upscale, not stuffy. Our community-based focus will be hard to duplicate, even if products and service are similar.

Excellent Customer Service - Because competition in the specialty beverage market is high, 66 Books Cafe will work to ensure that each customer is treated in the same respectful manner as the next. Technology will play a key role in ensuring that our customers get that special one-on-one feeling they might experience at a high-end retail store. Our Point of Sale system will not just ring orders, but keep key data on customers' previous purchases in thearea of freshly roasted coffee. In this manner, sales staff will know about the customer's buying habits and tastes, and will be able to make suggestions for purchases that will likely resultin increased sales and make the customer feel special.

Excellent service in a community focused environment will be a unique undertaking. We will ensure that 66 Books Cafe is a fun place for people to gather. 66 Books Cafe will employ the principles that make Seattle's World Famous Pike Place Fish Market an invigorating experience for customers. These principles are: Play, Make Their Day, Be there, and Choose Your Attitude. We will ensure that each employee understands the fundamentals at the base of any successful service organization.

Quality - We are committed to serving only the best quality beans and beverages. Moreover, the training the staff receives will ensure that the art of espresso making is understood. There is more to a good espresso than the beans and the machine. At 66 Books Cafe, we understand it, and will ensure our customers do as well.

It's the combination of these three elements that make up the competitive advantage of66 Books Cafe.

5.3 Marketing Strategy

66 Books Cafe' marketing strategy focuses on the key elements of the target markets' soft needs, and the focus of the venture.

Soft Needs:

Spiritual Growth A place of belonging Learning & communication

Venture Focus:

On-Site Roasted Coffee Community Involvement

5.3.1 Pricing Strategy

Pricing in this industry is very competitive. The price of freshly brewed coffee and specialty beverages doesn't vary by more than a few cents between the corner coffee shop and the large chains.

The price of roasted coffee beans can vary. Larger chains, having the benefit of volume, can charge slightly lower prices per pound. 66 Books Cafe will charge a slightly higher price as our coffees are freshly roasted on-site daily. 66 Books Cafe will roast its coffee to maximize the flavor of the specific bean. We will also roast coffee to the customer's specifications. This strategy of bringing the customer in to the whole coffee experience, gives the customer an additional service, for which a slightly higher price will not be deemed excessive.

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5.3.2 Promotion Strategy

66 Books Cafe will use several ways to reach new customers. We will leverage schools, churches, community organizations, print ad, internet advertising and word of mouth.

1. Advertising--We'll be developing our core positioning message: "On-Site Roasted Coffee, Made to Order." to differentiate our service from the competition.

2. Postcards-- 66 Books Cafe will employ targeted mailings to our 55407 customer base. These postcards will announce Grand Opening Specials.

3. Internet Advertising--As customers come in, they will be asked if they wish to sign up on our internet mailing list. Special promotions will be available only through Internet "coupons."

4. Media--66 Books Cafe will work with local media on several different "story of interest" venues. The Homework Happy Hour is one example that would gain media attention at no cost to 66 Books Cafe.

5.3.3 Marketing Programs

The programs 66 Books Cafe will initiate are depicted on the following graphs. These programs support the soft needs and product offerings listed in the Marketing Strategy section, and have been transliterated into "Vision Focus" and "Customer Focus" programs.

Vison Focus

1. Community Involvmento Community Reinvestmento MCDA Hiring Program2. Spiritual Informationo Product Offeringso Speakers and Entertainment3. Welcoming Environmento Vision Communication

Customer Focus

1. Roasting Expertiseo Micro Roasting Program2. Custom Offeringso POS System3. Excellent Trainingo EST Training Programso Encourage F.I.S.H. Philosophy

5.3.4 Positioning Statement

For the Christian who needs a place to seek, have fun, relax, and enjoy quality beverages, 66 Books Cafe is a place to feel welcome, special, informed, and energized. 66 Books Cafe meets the needs of this market. Unlike the other coffee shops in the metro area, 66 Books Cafe has character and a purpose.

For the neighborhood, 66 Books Cafe brings a positive message with a community centered focus. This is a place where all are welcomed and embraced with a warm greeting and hot coffee. The look and feel of the shop will ensure that anyone who walks through the door feels right at home. We want our customers to learn about coffee, and experience quality first hand.

5.4 Sales Strategy

The trained baristas at 66 Books Cafe will handle the sales transactions. To speed up the customer service, at least two employees will be servicing clients--while one employee prepares the customer's order, the other one will take care of the sales transaction. All sales data logged on the computerized point-of-sale terminal will later be analyzed for marketing, Cost of Sale, and volume purposes.

In order to build up its client base, 66 Books Cafe will use banners, fliers, postcards and other advertising, utilize customer referrals and cross-promotions with other businesses in the community. At the same time, we will use customer retention programs like drink punch-cards to make sure the customers are coming back and spending more at the coffee bar.

5.4.1 Sales Programs

Internet Coupons - As customers come into the store, they will asked if they'd like to put their name on the internet mailing list. Once added, these customers will receive special "internet only" solicitations for discounts and specials, as well as a calendar of events.

Community Based Programs - 66 Books Cafe will partner with community organizations, schools, and churches to provide unique offerings which strengthen the community and provide sales for the store. The Homework Happy Hour is a prime example of leveraging community needs with sound sales techniques and business practices.

Direct Mailing - 66 Books Cafe will periodically mail special product offerings to people in the 55407 zip code. This promotion will also be used to announce the Grand Opening of 66 Books Cafe.

5.4.2 Sales Forecast

66 Books Cafe is taking a modest approach to forecasting. 66 Books Cafe is forecasting an 8% average growth which is in line with industry estimates. With our unique product and service offerings, along with our aggressive marketing strategies, the sales forecasts are actually on the conservative side.

Table: Sales Forecast

Sales Forecast

Year 1Year 2Year 3

Sales

Fresh Brewed Coffee$41,079$44,365$47,914

Espresso Based Beverages$53,507$57,788$62,411

Specialty Drinks$34,725$37,503$40,503

Pastries/Desserts$14,458$15,615$16,864

Music/CDs$11,604$12,765$14,041

Books$11,604$12,765$14,041

Fresh Roasted Coffee$19,341$21,275$23,402

Misc Candies/Products$17,121$17,977$18,876

Total Sales$203,440$220,053$238,054

Direct Cost of SalesYear 1Year 2Year 3

Fresh Brewed Coffee$1,370$1,397$1,425

Espresso Based Beverages$3,855$3,933$4,011

Specialty Drinks$7,216$7,289$7,361

Fresh Roasted Coffee$5,809$5,867$5,925

Pastries/Desserts$7,229$7,807$8,432

Candies, etc.$8,561$8,989$9,438

Books/Music$11,617$11,733$11,851

Subtotal Direct Cost of Sales$45,657$47,014$48,444

Chart: Sales Monthly

Chart: Sales by Year

5.5 Strategic Alliances

66 Books Cafe has aligned itself with key players in the industry: Espresso Services, Inc. located in Minneapolis, Minnesota, and the specialty Coffee Association of America. Both ofthese organizations are nationally and internationally known for their knowledge of, and expertise in, the specialty beverage industry.

66 Books Cafe has also formed key alliances with non-competing experts in Restaurant and Retail markets.

Finally, 66 Books Cafe has established itself within the community through developing relationships with five of the surrounding Neighborhood Associations, key developers and planners of the Midtown Exchange project and various City Officials and city Counsel Members.

These alliances will serve to be conducive to the company's success and marketability.

5.6 Milestones

The accompanying table lists important program milestones up to the date of opening. Further milestones, with dates and budgets for each, are currently being developed to line up our live- performance events and to meet our marketing and sales goals. These post-opening milestones are dependent on receiving adequate funds for opening.

Table: Milestones

Milestones

MilestoneStart DateEnd DateBudgetManagerDepartment

Accounting Plan9/30/200310/15/2003$1,500ABCDepartment

Personnel Plan10/1/200311/1/2003$500ABCDepartment

Technology Systems10/1/200311/1/2003$1,500ABCDepartment

Communication Systems10/1/200311/1/2003$1,500ABCDepartment

Site Selection6/1/20032/1/2004$1,500Regina BrownOwner

Business Plan7/1/20022/4/2004$500Regina BrownOwner

Shop Design9/15/200310/1/2004$2,500Regina BrownOwner

Secure Start-Up Funding5/1/200312/31/2004$150Albert BrownManager

Grand Opening Materials1/1/20051/15/2005$500ABCDepartment

Opening Inventory1/5/20053/1/2005$2,500ABCDepartment

Totals$12,650

Chart: Milestones

6.0 Web Plan Summary

66 Books Cafe will use our website to advertise specials and events, and to post the monthly menu. We will maintain a confidential email list to communicate with customerswishing to sign-up for email specials. Our website is being developed by the owners, and will be hosted with a professional hosting service which allows us to post our own changes as often aswe wish.

Although we would eventually like to institute an on-line ordering system, we realize this development may have to wait until the business is firmly established and has sufficient cash for designing and maintaining these dynamic features. Online ordering will not only increase sales geographically, but allow 66 Books Cafe to utilize the full spectrum of its POS system's capabilities.

7.0 Management Summary

66 Books Cafe is owned by Regina Brown, and operated by Albert Brown. The company, being small, requires a simple organization structure. Implementation requires the owner, Regina Brown, to make decisions on the mission and vision, while Albert Brown makes operational decisions. Major decisions affecting the execution of the plan are made jointly by the owner and operations manager.

7.1 Personnel Plan

The personnel plan is included in the following table. It shows the owner's and operations manager's salaries, followed by 5 part-time salaries for espresso servers. Part time employees will collectively work 19.5 hours daily with an hourly salary of $8.00. 66 Books Cafe assumes a 5% annual increase in barista salaries. These employees will share any tips received while they are on duty. The owner will receive no payments or dividends until at least thefourth year of the business.

Table: Personnel

Personnel Plan

Year 1Year 2Year 3

Albert Brown - Operations Manager$18,000$18,000$25,000

Owner$0$0$0

Baristas$56,160$58,968$61,916

Total People667

Total Payroll$74,160$76,968$86,916

7.2 Management Team

Regina Brown, owner and operator, has extensive start-up experience within the corporate sector and has successfully managed key areas for Fortune 500 companies. She has an entrepreneurial spirit which has made her corporate ventures successful. Her people savvy, and ability to turn vision into strategy, and strategy into tactics, will be key elements of success for 66 Books Cafe. She has successfully managed million dollar budgets. Currently, Reginais starting up a new venture within Wells Fargo Home Mortgage. This is her third start-up for that organization.

Albert Brown has start-up experience as well as restaurant management experience. Most recently Albert owned and operated RB Mortgage Company. Albert received a bachelor's degree from Cheney University in Cheney, PA, a Juris Doctorate from Lasalle University, and iscurrently pursuing a Masters in Divinity at Bethel Seminary in St. Paul, MN. Albert has held several management positions within the restaurant industry.

8.0 Financial Plan

66 Books Cafe is basing projected sales on the market research, industry analysis and proximity of other coffee houses in the area. We are looking to obtain a modest .1% of the market share.

The cost of goods sold is based on the price list of Espresso Services, Inc., and is consistentwith costs in the coffee and espresso industry. The cost of the bakery items and candies is 50%of the selling price.

66 Books Cafe will use its POS System to keep cash flow and sales goals on track, and to indicate which marketing efforts are worth the investment. We expect sales to easily exceed the break-even point from the first month onward. The following sections outline our projected Profit and loss, Cash Flow, and Balance Sheet.

8.1 Important Assumptions

We do not sell anything on credit. The personnel burden is very low because part-time workers receive no benefits. The long-term interest rate is extraordinarily low because of the MCDA business program which loans money to start-up ventures at a 2% annual interest rate.

66 Books Cafe will obtain employees through MCDA's community reinvestment programs, which further establishes our commitment to the community, and raises community awareness of our presence and purpose. We will also look to local seminaries to involve their students in a internship capacity.

Table: General Assumptions

General Assumptions

Year 1Year 2Year 3

Plan Month123

Current Interest Rate8.75%8.75%8.75%

Long-term Interest Rate2.00%2.00%2.00%

Tax Rate25.00%25.00%25.00%

Other000

8.2 Break-even Analysis

For our break-even analysis, we assume fixed costs of approximately $11,650 per month, which includes our full payroll, rent, and utilities, and an estimation of other running costs.

The chart shows that we need to sell about $15,000 per month to break-even, according to these assumptions. Our conservative projections will exceed the break-even point even in the first month of business.

Chart: Break-even Analysis

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even$15,017

Assumptions:

Average Percent Variable Cost22%

Estimated Monthly Fixed Cost$11,646

8.3 Projected Profit and Loss

Projected profit and loss are depicted in the table below. Payroll expenses reflect the annual salaries of operations manager and 5 part-time baristas. Rental Expense is based on leasing2,000 square feet at $12.50 per square foot.

We project sales and marketing expenses at $12,000 for the first year. 66 Books Cafe will depend on curiosity, established community involvement and media human interest stories to spread the word, in addition to the tradition sales and marketing tactics.

Chart: Profit Monthly

Chart: Profit Yearly

Chart: Gross Margin Monthly

Chart: Gross Margin Yearly

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1Year 2Year 3

Sales$203,440$220,053$238,054

Direct Cost of Sales$45,657$47,014$48,444

Other$0$0$0

Total Cost of Sales$45,657$47,014$48,444

Gross Margin$157,783$173,038$189,610

Gross Margin %77.56%78.63%79.65%

Expenses

Payroll$74,160$76,968$86,916

Marketing/Promotion$12,000$15,000$18,000

Depreciation$2,004$2,000$2,000

Leased Equipment$3,000$3,000$3,000

Utilities$4,000$4,700$5,800

Insurance$1,800$1,900$2,000

Rent$28,380$31,691$33,100

Website Hosting and Maintenance$300$325$350

Payroll Taxes$11,113$11,545$13,037

Other$3,000$4,000$4,500

Total Operating Expenses$139,757$151,129$168,703

Profit Before Interest and Taxes$18,026$21,909$20,906

EBITDA$20,030$23,909$22,906

Interest Expense$1,528$1,400$1,267

Taxes Incurred$4,124$5,127$4,910

Net Profit$12,373$15,382$14,730

Net Profit/Sales6.08%6.99%6.19%

8.4 Projected Cash Flow

We will be a medium risk concern with steady cash flows. Sales are in cash, giving 66 Books Cafe an excellent cash structure. Solid product offerings and intelligent marketing will secure a cash balance of close to $48,000 by December 2005.

Chart: Cash

Table: Cash Flow

Pro Forma Cash Flow

Year 1Year 2Year 3

Cash Received

Cash from Operations

Cash Sales$203,440$220,053$238,054

Subtotal Cash from Operations$203,440$220,053$238,054

Additional Cash Received

Sales Tax, VAT, HST/GST Received$0$0$0

New Current Borrowing$0$0$0

New Other Liabilities (interest-free)$0$0$0

New Long-term Liabilities$0$0$0

Sales of Other Current Assets$0$0$0

Sales of Long-term Assets$0$0$0

New Investment Received$0$0$0

Subtotal Cash Received$203,440$220,053$238,054

ExpendituresYear 1Year 2Year 3

Expenditures from Operations

Cash Spending$74,160$76,968$86,916

Bill Payments$102,996$125,117$133,821

Subtotal Spent on Operations$177,156$202,085$220,737

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out$0$0$0

Principal Repayment of Current Borrowing$0$0$0

Other Liabilities Principal Repayment$0$0$0

Long-term Liabilities Principal Repayment$6,660$6,660$6,660

Purchase Other Current Assets$0$4,000$4,000

Purchase Long-term Assets$0$0$0

Dividends$0$0$0

Subtotal Cash Spent$183,816$212,745$231,397

Net Cash Flow$19,624$7,307$6,656

Cash Balance$50,224$57,532$64,188

8.5 Projected Balance Sheet

The following table shows our projected assets and liabilities over the next three years. We anticipate a steadily increasing net worth, as we pay off our loan and sales show modest increases. The Balance Sheet also reflects new current asset purchases in years 2 and 3.

Table: Balance Sheet

Pro Forma Balance Sheet

Year 1Year 2Year 3

Assets

Current Assets

Cash$50,224$57,532$64,188

Inventory$4,418$4,441$4,579

Other Current Assets$12,000$16,000$20,000

Total Current Assets$66,642$77,973$88,767

Long-term Assets

Long-term Assets$16,000$16,000$16,000

Accumulated Depreciation$2,004$4,004$6,004

Total Long-term Assets$13,996$11,996$9,996

Total Assets$80,638$89,969$98,763

Liabilities and CapitalYear 1Year 2Year 3

Current Liabilities

Accounts Payable$9,725$10,334$11,059

Current Borrowing$0$0$0

Other Current Liabilities$0$0$0

Subtotal Current Liabilities$9,725$10,334$11,059

Long-term Liabilities$73,340$66,680$60,020

Total Liabilities$83,065$77,014$71,079

Paid-in Capital$15,000$15,000$15,000

Retained Earnings($29,800)($17,427)($2,045)

Earnings$12,373$15,382$14,730

Total Capital($2,427)$12,955$27,685

Total Liabilities and Capital$80,638$89,969$98,763

Net Worth($2,427)$12,955$27,685

8.6 Business Ratios

The following table outlines some of the more important ratios from the Coffee Shop industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 5812.

Our business will be a little different from the standard coffee shop, in that we will also sell books and music. One of the major differences between us and the rest of the industry is our asset structure - most of our assets are short-term, rather than long-term, in part because of our extra inventory, but also because we will lease, rather than own, our space.

Table: Ratios

Ratio Analysis

Year 1Year 2Year 3Industry Profile

Sales Growthn.a.8.17%8.18%5.24%

Percent of Total Assets

Inventory5.48%4.94%4.64%2.72%

Other Current Assets14.88%17.78%20.25%32.59%

Total Current Assets82.64%86.67%89.88%41.88%

Long-term Assets17.36%13.33%10.12%58.12%

Total Assets100.00%100.00%100.00%100.00%

Current Liabilities12.06%11.49%11.20%21.75%

Long-term Liabilities90.95%74.11%60.77%29.17%

Total Liabilities103.01%85.60%71.97%50.92%

Net Worth-3.01%14.40%28.03%49.08%

Percent of Sales

Sales100.00%100.00%100.00%100.00%

Gross Margin77.56%78.63%79.65%55.74%

Selling, General & Administrative Expenses71.48%71.64%73.46%37.46%

Advertising Expenses0.99%0.91%0.84%2.06%

Profit Before Interest and Taxes8.86%9.96%8.78%1.50%

Main Ratios

Current6.857.558.030.81

Quick6.407.127.610.51

Total Debt to Total Assets103.01%85.60%71.97%53.68%

Pre-tax Return on Net Worth-679.90%158.31%70.94%2.39%

Pre-tax Return on Assets20.46%22.80%19.89%5.16%

Additional RatiosYear 1Year 2Year 3

Net Profit Margin6.08%6.99%6.19%n.a

Return on Equity0.00%118.73%53.20%n.a

Activity Ratios

Inventory Turnover10.9010.6110.74n.a

Accounts Payable Turnover11.5912.1712.17n.a

Payment Days272929n.a

Total Asset Turnover2.522.452.41n.a

Debt Ratios

Debt to Net Worth0.005.942.57n.a

Current Liab. to Liab.0.120.130.16n.a

Liquidity Ratios

Net Working Capital$56,917$67,639$77,709n.a

Interest Coverage11.8015.6516.50n.a

Additional Ratios

Assets to Sales0.400.410.41n.a

Current Debt/Total Assets12%11%11%n.a

Acid Test6.407.127.61n.a

Sales/Net Worth0.0016.998.60n.a

Dividend Payout0.000.000.00n.a

Sales Forecast

Month 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Sales

Fresh Brewed Coffee0%$3,239$3,271$3,304$3,337$3,371$3,404$3,438$3,473$3,507$3,542$3,578$3,614

Espresso Based Beverages0%$4,219$4,261$4,304$4,347$4,390$4,434$4,479$4,523$4,569$4,614$4,660$4,707

Specialty Drinks0%$2,738$2,765$2,793$2,821$2,849$2,878$2,906$2,936$2,965$2,995$3,024$3,055

Pastries/Desserts0%$1,140$1,151$1,163$1,175$1,186$1,198$1,210$1,222$1,234$1,247$1,259$1,272

Music/CDs0%$915$924$933$943$952$962$971$981$991$1,001$1,011$1,021

Books0%$915$924$933$943$952$962$971$981$991$1,001$1,011$1,021

Fresh Roasted Coffee0%$1,525$1,540$1,556$1,571$1,587$1,603$1,619$1,635$1,651$1,668$1,685$1,701

Misc Candies/Products0%$1,350$1,364$1,377$1,391$1,405$1,419$1,433$1,447$1,462$1,476$1,491$1,506

Total Sales$16,041$16,201$16,363$16,527$16,692$16,859$17,028$17,198$17,370$17,544$17,719$17,896

Direct Cost of SalesMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Fresh Brewed Coffee$108$109$110$111$112$114$115$116$117$118$119$120

Espresso Based Beverages$304$307$310$313$316$320$323$326$329$332$336$339

Specialty Drinks$569$575$580$586$592$598$604$610$616$622$629$635

Fresh Roasted Coffee$458$463$467$472$477$481$486$491$496$501$506$511

Pastries/Desserts50%$570$576$581$587$593$599$605$611$617$623$630$636

Candies, etc.50%$675$682$689$695$702$709$717$724$731$738$746$753

Books/Music$916$925$934$944$953$963$972$982$992$1,002$1,012$1,022

Subtotal Direct Cost of Sales$3,600$3,636$3,672$3,709$3,746$3,784$3,821$3,860$3,898$3,937$3,977$4,016

AppendixTable: Personnel

AppendixTable: Sales Forecast

Page 5

Page 5

Personnel Plan


Albert Brown - Operations Manager0%$1,500$1,500$1,500$1,500$1,500$1,500$1,500$1,500$1,500$1,500$1,500$1,500

Owner0%$0$0$0$0$0$0$0$0$0$0$0$0

Baristas0%$4,680$4,680$4,680$4,680$4,680$4,680$4,680$4,680$4,680$4,680$4,680$4,680

Total People666666666666

Total Payroll$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180

Pro Forma Profit and Loss


Sales$16,041$16,201$16,363$16,527$16,692$16,859$17,028$17,198$17,370$17,544$17,719$17,896

Direct Cost of Sales$3,600$3,636$3,672$3,709$3,746$3,784$3,821$3,860$3,898$3,937$3,977$4,016

Other$0$0$0$0$0$0$0$0$0$0$0$0

Total Cost of Sales$3,600$3,636$3,672$3,709$3,746$3,784$3,821$3,860$3,898$3,937$3,977$4,016

Gross Margin$12,441$12,565$12,691$12,818$12,946$13,076$13,206$13,338$13,472$13,607$13,743$13,880

Gross Margin %77.56%77.56%77.56%77.56%77.56%77.56%77.56%77.56%77.56%77.56%77.56%77.56%

Expenses

Payroll$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180

Marketing/Promotion$1,000$1,000$1,000$1,000$1,000$1,000$1,000$1,000$1,000$1,000$1,000$1,000

Depreciation$167$167$167$167$167$167$167$167$167$167$167$167

Leased Equipment$250$250$250$250$250$250$250$250$250$250$250$250

Utilities$300$300$300$300$300$300$300$300$400$400$400$400

Insurance$150$150$150$150$150$150$150$150$150$150$150$150

Rent$2,365$2,365$2,365$2,365$2,365$2,365$2,365$2,365$2,365$2,365$2,365$2,365

Website Hosting and Maintenance0%$25$25$25$25$25$25$25$25$25$25$25$25

Payroll Taxes15%$927$927$927$927$927$927$927$927$916$927$927$927

Other$250$250$250$250$250$250$250$250$250$250$250$250

Total Operating Expenses$11,614$11,614$11,614$11,614$11,614$11,614$11,614$11,614$11,703$11,714$11,714$11,714

Profit Before Interest and Taxes$827$951$1,077$1,204$1,332$1,462$1,592$1,724$1,769$1,893$2,029$2,166

EBITDA$994$1,118$1,244$1,371$1,499$1,629$1,759$1,891$1,936$2,060$2,196$2,333

Interest Expense$132$131$131$130$129$128$127$126$125$124$123$122

Taxes Incurred$174$205$237$269$301$333$366$400$411$442$476$511

Net Profit$521$615$710$806$903$1,000$1,099$1,199$1,233$1,326$1,429$1,533

Net Profit/Sales3.25%3.80%4.34%4.88%5.41%5.93%6.45%6.97%7.10%7.56%8.07%8.57%

AppendixTable: Cash Flow

AppendixTable: Profit and Loss

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales$16,041$16,201$16,363$16,527$16,692$16,859$17,028$17,198$17,370$17,544$17,719$17,896

Subtotal Cash from Operations$16,041$16,201$16,363$16,527$16,692$16,859$17,028$17,198$17,370$17,544$17,719$17,896

Additional Cash Received

Sales Tax, VAT, HST/GST Received0.00%$0$0$0$0$0$0$0$0$0$0$0$0

New Current Borrowing$0$0$0$0$0$0$0$0$0$0$0$0

New Other Liabilities (interest-free)$0$0$0$0$0$0$0$0$0$0$0$0

New Long-term Liabilities$0$0$0$0$0$0$0$0$0$0$0$0

Sales of Other Current Assets$0$0$0$0$0$0$0$0$0$0$0$0

Sales of Long-term Assets$0$0$0$0$0$0$0$0$0$0$0$0

New Investment Received$0$0$0$0$0$0$0$0$0$0$0$0

Subtotal Cash Received$16,041$16,201$16,363$16,527$16,692$16,859$17,028$17,198$17,370$17,544$17,719$17,896

ExpendituresMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Expenditures from Operations

Cash Spending$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180$6,180

Bill Payments$219$6,662$9,243$9,349$9,417$9,486$9,555$9,626$9,699$9,836$9,916$9,989

Subtotal Spent on Operations$6,399$12,842$15,423$15,529$15,597$15,666$15,735$15,806$15,879$16,016$16,096$16,169

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out$0$0$0$0$0$0$0$0$0$0$0$0

Principal Repayment of Current Borrowing$0$0$0$0$0$0$0$0$0$0$0$0

Other Liabilities Principal Repayment$0$0$0$0$0$0$0$0$0$0$0$0

Long-term Liabilities Principal Repayment$555$555$555$555$555$555$555$555$555$555$555$555

Purchase Other Current Assets$0$0$0$0$0$0$0$0$0$0$0$0

Purchase Long-term Assets$0$0$0$0$0$0$0$0$0$0$0$0

Dividends$0$0$0$0$0$0$0$0$0$0$0$0

Subtotal Cash Spent$6,954$13,397$15,978$16,084$16,152$16,221$16,290$16,361$16,434$16,571$16,651$16,724

Net Cash Flow$9,087$2,804$386$443$540$638$737$837$936$973$1,068$1,173

Cash Balance$39,687$42,491$42,877$43,320$43,861$44,499$45,237$46,074$47,010$47,983$49,052$50,224

Pro Forma Balance Sheet


AssetsStarting Balances

Current Assets

Cash$30,600$39,687$42,491$42,877$43,320$43,861$44,499$45,237$46,074$47,010$47,983$49,052$50,224

Inventory$6,600$4,000$4,000$4,040$4,080$4,121$4,162$4,204$4,246$4,288$4,331$4,374$4,418

Other Current Assets$12,000$12,000$12,000$12,000$12,000$12,000$12,000$12,000$12,000$12,000$12,000$12,000$12,000

Total Current Assets$49,200$55,687$58,491$58,917$59,400$59,982$60,661$61,440$62,320$63,298$64,314$65,426$66,642

Long-term Assets

Long-term Assets$16,000$16,000$16,000$16,000$16,000$16,000$16,000$16,000$16,000$16,000$16,000$16,000$16,000

Accumulated Depreciation$0$167$334$501$668$835$1,002$1,169$1,336$1,503$1,670$1,837$2,004

Total Long-term Assets$16,000$15,833$15,666$15,499$15,332$15,165$14,998$14,831$14,664$14,497$14,330$14,163$13,996

Total Assets$65,200$71,520$74,157$74,416$74,732$75,147$75,659$76,271$76,984$77,795$78,644$79,589$80,638

Liabilities and CapitalMonth 1Month 2Month 3Month 4Month 5Month 6Month 7Month 8Month 9Month 10Month 11Month 12

Current Liabilities

Accounts Payable$0$6,354$8,931$9,035$9,101$9,167$9,235$9,303$9,371$9,505$9,583$9,654$9,725

Current Borrowing$0$0$0$0$0$0$0$0$0$0$0$0$0

Other Current Liabilities$0$0$0$0$0$0$0$0$0$0$0$0$0

Subtotal Current Liabilities$0$6,354$8,931$9,035$9,101$9,167$9,235$9,303$9,371$9,505$9,583$9,654$9,725

Long-term Liabilities$80,000$79,445$78,890$78,335$77,780$77,225$76,670$76,115$75,560$75,005$74,450$73,895$73,340

Total Liabilities$80,000$85,799$87,821$87,370$86,881$86,392$85,905$85,418$84,931$84,510$84,033$83,549$83,065

Paid-in Capital$15,000$15,000$15,000$15,000$15,000$15,000$15,000$15,000$15,000$15,000$15,000$15,000$15,000

Retained Earnings($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)($29,800)

Earnings$0$521$1,136$1,846$2,652$3,554$4,554$5,654$6,852$8,085$9,412$10,841$12,373

Total Capital($14,800)($14,279)($13,664)($12,954)($12,148)($11,246)($10,246)($9,146)($7,948)($6,715)($5,388)($3,959)($2,427)

Total Liabilities and Capital$65,200$71,520$74,157$74,416$74,732$75,147$75,659$76,271$76,984$77,795$78,644$79,589$80,638

Net Worth($14,800)($14,279)($13,664)($12,954)($12,148)($11,246)($10,246)($9,146)($7,948)($6,715)($5,388)($3,959)($2,427)

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