START & RUN A COFFEE BAR

Investing in Coffee Shop Business

INTRODUCTIONthe coffee bar business whats in it for you ?Coffee WorldviewThe coffee business is an exciting industry, far- reaching in its economic impact and rich in history.It is the world's most popular beverage with over 500 billion cups consumed each year. It is produced in 70 countries with the top three producers being Brazil, Vietnam, and Indonesia. In 2010, the global coffee market was worth upwards of $80 billion USD with 25 million small producers relying on coffee for a living.Coffee BarsAccording to the Specialty Coffee Association of America, the US coffee bar industry includes about 25,000 stores with combined annual revenue of about $13 billion, or an average of $520,000 per coffee bar. This means there is an average of approximately one coffee bar for every 12,000 people. While some industry analysts predict saturation at the 10,000 mark, we believe the number to be significantly lower than that especially when compared to European countries such as Italy, where there is one coffee bar for every 300 people!Coffee bars today tend to take advantage of two very distinct cultural trends, having two very distinct target markets.

The First targets are the on-the-go, hurry- up morning coffee crowd; people hurrying to work, rushing to drop their children off at school. These coffee bars recognize the in- crease in value we put on our time and focus on fast, efficient service. They are generally located in convenient, on-the-way-to-work areas with many offering drive-thru service. Keep in mind that with 65 percent of all coffee being consumed in the morning, large fast-food restaurant chains are now competing for that morning gourmet coffee dollar with companies like McDonalds serving quality premium coffee at all their drive-thrus.The second type of coffee bar takes advantage of the trend toward local cocooning. These community coffeehouses place importance on relaxation and conversation with the emphasis on warm, inviting, comfortable spaces; places where long conversations can be enjoyed over the perfect hot latte.

Preparing a Business PlanMany entrepreneurs whether experienced veterans or First timers often miss the vital step of preparing a business plan when pre- paring to start a business. As a result, many fail in their efforts to achieve wealth and fame through their business. It is critical that you take time to prepare a business plan so you are clear on where you want to go with your coffee business and are better prepared to deal with the challenges that inevitably will arise along the way.Why is preparing a business plan for your coffee business so important?Preparing a business plan will help crystallize your reasons for getting into the coffee business and your goals for the business. If you do not have a strong sense of why? and what? you will be without focus, direction, and satisfaction in your efforts.Preparing a business plan will help crystallize your concept. A clear, con- case, well-thought-out concept will form the foundation for every decision you make: everything from choosing which color to paint the walls of your coffee bar to what kind of biscotti to serve with a cup of coffee.Preparing a business plan will help crystallize your vision of the opportunities and the limitations of the market you are in. Where is the most potential in the coffee industry? Who will your competitors be? How will you compete against them?

Why Prepare a Business Plan?

Preparing a business plan will help crystallize your vision of exactly who you will be serving. If you are not clear on who your customers are, you will not be able to meet their needs and your business will not succeed. The knowledge you acquire about your target market will be invaluable to you in your concept and marketing efforts.Preparing a business plan will help determine what products you will offer your customers. Once you know the demographic and psychographic characteristics of your target market, you are in an excellent position to decide what products will appeal to it.Preparing a business plan will help determine what services you will offer to your customers: Home delivery service? 24-hour ordering service? Whole- sale service? Drive-thru?Preparing a business plan will force you to look at the dollars involved, from initial setup through your first few years in business. Budgeting and financial planning will be vital to your success.Preparing a business plan will force you to look at the risks involved in owning your own business. Eighty percent of businesses fail in the first five years. This is usually because of lack of planning and preparation, lack of capitalization, and a lack of man- agement and marketing skills.Preparing a business plan will help you outline the exact steps required to get your business up and running smoothly and profitably.Finally, preparing a business plan will hopefully inspire and motivate you to take action! Knowing what you want to do isnt very useful unless you actu- ally do it.

Your Vision for YouTake out a pen and a piece of paper, or sit yourself down in front of your computer as you read through the rest of Part I. Write down your thoughts and answers to the questions we raise. Taking action now will give you a good head start on your business plan and will help you formulate what exactly it is that you want to do and how you are going to do it. Take action now.What is your vision for Your day-to-day activities? What will you do on a daily basis? Do you see yourself serving customers? Do you see yourself networking with other business owners in your local area? Your lifestyle? Are you early to bed, early to rise? Do you see yourself working six days a week? Do you want annual holidays?Your time? How do you want to spend your time? Think of leisure, family, work, itness, and private time for yourself.Your future? Do you plan to own your coffee bar long term or sell it down the road? What do you see your- self doing a year from now, ive years from now, ten years from now?If your goal is to run the coffee bar as an absentee owner, hiring a good manager will be vital to the success of your business. If you plan to work the coffee bar yourself, hiring staff will be a higher priority. If you are a late riser, plan on hiring and training staff who can open the coffee bar. If you have high family priorities, keep in mind that you may need to spend a considerable amount of time in and on your business, especially in the early stages. And if you have a clear vision for your future, it will help you get where you want to go, whether that is lying on a beach in Hawaii or running a multiple location franchise.

Your vision for your coffee barWhat is the vision you have for your business? Do you want to create a community space where people come to gather in a warm, inviting environment? Or do you see yourself catering to the fast-paced morning-coffee crowd? Are social and environmental concerns important to you? Do you want to make a positive impact at the local or global level? What message do you want to convey to your customers and/or your community? How do you want to differentiate yourself from your competition? do you see yourself promoting quick service at a busy drive-thru?How serious do you want to be about your coffee? Are you going to provide sampling? Are you going to brew cups on demand using unique one-of-a-kind bean blends? If you dont have a clear vision, spend time creating one ... research what other successful coffee bars are doing, what they are offering, what they look and feel like. Google the Top 10 coffee bars across the country, visit websites, look at menus, jot down ideas that appeal to you

target market research later in the book but now is also the time to start thinking about the style of coffee bar that will appeal to your specific target market:Does your target market love social causes? What kind of decor do they find appealing? Are they going to feel more comfortable sitting on an expensive, upscale settee, or lounging in an arm chair you got from the second hand store? Do they like fast service and consistent on-the-run products? Or would they prefer to take time in choosing the perfect, high-quality bean to take home and serve to their friends and family? How important is taste and quality to your customers? How important is value? What is going to keep your customers coming back to you regardless of economic conditions? What concepts are consistent with todays trends?

market research

A franchise can offer you many benefits, including name recognition and clout in negotiating better pricing. Many franchises also offer assistance in obtaining financing, site selection, coffee bar design, training, and marketing. A good franchise will save you money, give you a proven system, and increase your odds of making money.However, one disadvantage is that the assistance provided by most franchises costs you in the form of an initial franchise fee as well as monthly royalties. You may also be restricted in terms of product lines and menu items and may be required to get written approval for use of names and logos in any advertising you do. You may be given a very small territory, which limits your ability to expand.Franchises dont always deliver what they promise. Many franchisors mark up the products they sell to you, thereby defeating one of the major purposes behind franchising that is, the chance for franchisees to purchase supplies that were bought in bulk at a lower price than an independent store would pay.As well, if the franchise gets a bad name or bad publicity, you are often stuck along for the ride.

How should i start Out?should i buy a franchise?

Buying an existing business can save you the time, effort, and expertise necessary to find a good site, plan and build the coffee bar, and then develop a client base. If the business you are considering purchasing is profitable, you may find you can start earning a profit immediately.Keep in mind, though, that you will end up paying for someone elses time, effort, and expertise through the purchase price of the business. This is where you must weigh the trade- off. Ultimately, you will need to decide which option will net you the best return.Make sure you thoroughly research any business that you are interested in buying. Find out about the marketing systems being implemented. Spend a lot of time in the coffee bar watch traffic patterns, count customers, look for what is being done well. Look for areas you could improve and estimate how that would influence sales.In determining areas you would improve, it may help to think of yourself as a customer in the business. What would you look for? A better atmosphere? Better service? Better products? Better marketing? And if these things were improved, would it make you want to come back and bring friends? How much more money would you spend if these improvements were made? Keep in mind that even a 25 percent increase in the average amount a customer spends can result in thousands of extra dollars per year in pure profit.When considering whether to buy an ex- isting business, remember that it is difficult to change customers perception of a business once that perception is ingrained. If an exist- ing business has developed a bad reputation in the community, you may be ighting an uphill battle trying to win customers back.

should i buy an existing business?

Starting a business from scratch has its ad- vantages and disadvantages. One advantage is that you have more flexibility than you would if you bought a franchise or bought an existing business. You wont be locked into the location, lease, and contracts that are already in place. It will also be easier for you to incorporate your own coffee bar design, and introduce your own menu.On the other hand, starting from scratch means you dont get the benefits or support a franchise can offer, or those that come with a successful, established business.One of the most important factors in any business is a marketable location. If the location of an existing business isnt suitable, or the franchisor is not able to find you a good site, youll end up paying the price for a poor location. Finding a good location and beginning from scratch can sometimes be the best option.

should i start my business from scratch

Cafs are the European model of coffee bars. They typically focus on liquid coffees (not bean sales) and often serve both lunch and dinner items. Sometimes they are licensed and, in fact, could be considered restaurants. What Type of Coffee Bar is Best?

CafsCoffee barsCoffee bars are typically high trafic locations that focus on liquid coffees. Product lines often include gourmet and specialty coffees, and baked goods. These operations can be very profitable with low risk if done well.Coffee barscoffeehouses typically have dim lighting, comfy sofas, and poetry nights. They attract a younger crowd and focus on long visits and lots of conversation over steaming hot cups of java.

Retail coffee shops typically focus on bean, tea, and giftware sales. They may or may not offer liquid coffee sales and are often found in mall locations or gift districts.retail coffee shops Drive thrusDrive thrus can work well on the right site. The most successful locations are those with high volume on the going-to-work side of the street. Drive thrus focus primarily on liquid coffees and baked goods.CartsThese mini-stores focus almost solely on liquid coffees. They can work well in high- traffic areas, but are challenged by difficulties in building customer loyalty. Because they are mobile, there is little, if any, equity creation as the business grows (unlike the types of coffee bars listed above).Teahouseskeep in mind that while tea is a popular drink, it typically represents only 3 percent to 7 percent of the total gourmet beverage market. This means you will need to be five times better than the normal to do even 20 percent of what a coffee bar will do.

As the name suggests, roaster/retailing contains two key elements:On-site roasting of green coffee beansRetailing of coffee and coffee productsWe believe that roster/retailers are the wave of the future. They offer you a number of advantages that spell out strong bottom-line profit.roaster/retailersRoasters typically mark up green coffee $2 to $4 per pound. The money you save by roasting your own coffee directly converts to lower food cost in your operation.lower food cost = Profit

If your coffee business goes through 100 pounds of roasted coffee per week, you are spending at least an extra $200 per week, or $10,000 per year, because of the mark-up from roasters. Think of how many trips to Hawaii you could take with that money!

savings = Profitsavings = ProfitTodays consumer wants the best. Youll be left behind by your competition if you dont give customers the freshness they are demanding. Coffee loses about half of its flavor within the first 14 days after it is roasted. It is tough to meet customer freshness demands if youre not doing your own roasting.

In-store roasting means you are adding an additional profit center to your coffee bar: whole- sale. Because you arent paying someone else to roast your coffee for you andyou are paying only $3 or $4 per pound (including shipping, handling, brokerage, and exchange rates), you can afford to offer dis- counts competitive with other coffee roasters to wholesale customers. Car repair shops serving coffee - Coffee bars - Coffee shops- Corner stores - Gas stations serving coffee Offices - Supermarkets

an additional revenue stream = Profit

What products will appeal to your customers? Will you offer beans for home use? Food and baked goods? Gourmet teas? Coffee-related gift items? Brewing equipment? Below are some of the basic products and services most successful coffee bars offer.

Choosing Your Products and servicesProductsWhat products will appeal to your customers? Will you offer beans for home use? Food and baked goods? Gourmet teas? Coffee-related gift items? Brewing equipment? Below are some of the basic products and services most successful coffee bars offer.

gourmet coffees

Flavored coffees represent up to 40 percent of the liquid coffee market. By offering at least one flavor a day, you are satisfying the needs of flavored-coffee lovers.

Flavored coffeesspecialty and iced coffeesA signature medium-roast house blendA dark roastAt least one flavored coffeeDecaffeinated coffee (if the demand is high)Specialty coffees include the espresso-based drinks such as cappuccinos, lattes, and mochas, served hot or cold.

gourmet teas

Freshly squeezed juices and health blends can be a great addition to your product line and offer your customers a cool, healthy alternative to coffee.Juices and smoothiesFlavored PowdersThere are a number of beautifully packaged, high-grade teas that can be a nice complement to your coffee selection. Loose teas are very popular among tea lovers because they are typically made from higher grade tea leaves.These products include quiches, soups, salads, sandwiches, paninis and wraps.

Baked goodsGift items include mugs, coffee plungers, other coffee makers, and espresso equipment.

Coffee-related gift itemsBreakfasts, lunches, and other foodsBaked goods include muffins, scones, cakes, biscotti, and cookies, The key here is to provide a wide enough range of baked goods to appeal to your trafficA wide range of frappe , Latte , Milk Shakes flavors can be used and great addition to your menu

Other potential risks Poor siteToo high rentPoorly designed coffee barUnaccounted-for cost overruns during constructionPoor staff hiring and training practicesPoor business, product, staff, facilities, and financial management practicesInferior quality productsPoor customer serviceFailure to market the businessLack of funds to market the businessPoor marketing strategiesLack of willingness on the business owners part to build wholesale business

Types OF COFFee BarsType of operationTypical size (sq. ft.)Rent cost/ft.Fun levelEase of staffingSet-up budgetsProfitabilityOverall opportunityCaf1,0001,500midhighlowmidlow$75195,000lowHigh risk, just like restaurantsCoffee bar4001,200midhighhighhigh$45125,000highLow risk, competition vulnerableCoffee- houses1,2002,200lowmidhighhigh$95275,000lowhighRent and marketing determines riskRetail coffee shops7001,200midhighmidhighmid$55125,000midLocation, location, locationDrive thrus2502,200lowhighlowhighmidhigh$55300,000midVaries tremendously dependingon siteCarts85125very highlowmidlow$1530,000lowhighGood cash flow, no equityRoaster/ retailer6002,200lowhighmidhighmidhigh$95225,000highVery strong, long-termTea- houses1,2002,000lowmidhighhigh$85245,000lowmidRent and marketing determines risk

Business Plan Once you have addressed each of these issues, you must prepare the actual business plan. There are a number of resources available to you at this stage. 1. Executive Summary1.1 Business Overview 1.2 Business Model 1.3 Market Analysis 1.4 Financial Projections 1.5 Financial Needs 1.6 Debt Repayment Plan

2. Business Overview2.1 Vision and Goals 2.2 Business Location 2.3 Ownership Structure 3. Business Model 3.1 Overview 3.2 Revenue Model 3.3 Cost Model 4. Market Analysis4.1 Industry / Market Overview 4.2 Demographics 4.3 Competitive Analysis 5. Marketing Plan5.1 SWOT Analysis 5.2 Market Segments 5.3 Marketing Strategy 6. Management Team 6.1 Management 6.2 Personnel 7. Financial Plan 7.1 Revenue Projections 7.2 Expense Analysis7.3 Startup Expense 7.4 Capital Expense 7.5 Profit and Loss Statement 7.6 Balance Sheet 7.7 Cash Flow Analysis 8. Use of Funds8.1 Use of Funds

9. Debt Repayment Plan 9.1 Debt Repayment Plan

10. Appendix 10.1 P&L Statement Year 1 & Year 1-5 10.2 Balance Sheet Year 1 & Year 1-5 10.3 Cash Flow Statement Year 1 & Year 1-5

Weve seen numerous coffee shops open up in a variety of settings across the country. Here are a few factors to consider in choosing a successful coffee shop location. Finding a prime location is extremely important and sometimes well worth the investment. A prime location doesn't always mean the busiest one. The customer on the high street is usually a little different than a customer on a side street. 1. Visibility How visible is your coffeehouse? Are you buried in a strip mall or pushed back from the road? If you choose to open a coffee shop in a location thats not very visible, how will you overcome this challenge?2. Easy in & out access The majority of customers stop by in the morning, and many of these people will be on the way to work. Make sure there is an easy and efficient way for these customers to enter and exit your coffee house.3. Neighborhood Know your neighbors. Do people in your target market live or work nearby? Will they pass your location on the way to work? Is there strong pedestrian traffic in the area during your chosen business hours?4. Cost Can you afford the space? If the rent in a particular location is expensive, the cost can be justified only if projected sales will more than cover the expense.

Choosing the Right Coffee Shop Location

Decorating your cafe appropriately can help to enhance the customers experience of your business - and make it about more than just the products you serve. Your cafe should be decorated in accordance with your overall concept or theme there are a few things worth bearing in mind when decorating:Colors think about the experience that you want to give customers in your cafe - and indeed the demographic that you intend on attracting - and choose your cafes main colors based on this. For instanceLighting consider not only the fixtures, but the actual levels of light in the room. You may want your cafe to be bright and sunny, or you may want to create an ambience with dimmed lighting.Sound the music that you play in your cafe adds to the atmosphere. Think carefully about the style of music that you play, as well as the volume at which you play it. Temperature you should keep your cafe at a comfortable temperature so that customers are neither too hot nor too cold. Keep an eye out for signs that the temperature may be wrong for example customers wearing coats indoors. Cleanliness making sure that your cafe is always clean particularly in restrooms is an important part of ensuring a positive customer experience. Furniture and wares your cafes tables, chairs, cutlery and even cups and saucers should all reflect the overall design and dcor theme.

coffee shop design

Design Samples

The size and shape of the premises you have chosen will ultimately influence the way that you lay out your cafe for example where the entrance is, and where the main counter should go. You may find it useful to use tools such as FloorPlanner.com to help you visualize how best to place in your cafe, as well as the logistics of queues and walkways. You may have to try a few different layouts before you get one that really works.

Premises size and layout

One often overlooked aspect of opening a coffee shop is choosing your business name. Your coffee shops name is its identity, its part of your brand. Get it right and your target customers will likely understand what your shop is all about, and become interested in what it has to offer. Get it wrong and theyll likely be confused or uninterested. Youll also want to make sure that your name is unique and doesnt infringe upon the intellectual property of othersSince your business name is often the first thing potential customers will see or hear, think of it as one of your key tools for leaving a lasting impression. The right name, like a firm handshake, can play a role in your brands perception. So make sure its strong, catchy, and unique, but most importantly sends the right message about your business.

Coffee Shop name and branding

Catchy Coffee Shop Name Ideas

Once you have decided what types of food and drink your cafe will be selling, you can start thinking about designing and creating your menu. Remember, your cafe menu does not necessarily need to be a small booklet that customers leaf through while sat at a table. If you want to open a grab and go style coffee shop, then your menu could be displayed entirely on large boards above the counter.Whatever its format, your menu should be an extension of the idea behind your cafe if your cafe has a theme, the menu should follow it. The menu is a chance for your business to speak directly to customers and pitch products to them, so its important that you put some thought into it. Some of the things that you may want to bear in mind while creating your cafe menu are:Color scheme the colors and any images you use should be appropriate for your cafes concept. They can also be used to draw attention to certain areas of the menu, for example any specials or products that you particularly want to promote.Tone this should also be a reflection of your cafes overall character. Layout customers are likely to start reading your menu from the upper left corner as they would a book and finish towards the bottom right. Bear this in mind when considering your menus layout.Photos You should use photographs of your products, and only if they have been professionally taken. Bad photographs can easily discourage customers from ordering.Attention to detail menus with typos, incorrect prices or formatting errors look unprofessional and the mistakes can even be enough to put a potential customer off.

Coffee Shop menu

Cafe equipment checklistIts likely that youre going to require a lot of specialist equipment in order to get your cafe up and running. Its important to properly budget for the purchase of this equipment, as the cost can add up quickly. The list below details some of the most common pieces of cafe equipment that you may want to consider for your business:

run a successful cafeOpening timesIs your business opening at the right times of day? Defining what the right times of day are for your business will depend largely on factors such as the location of your premises and your customer profiles. For instance, a cafe located in a quiet area may be able to save money by opening around midday rather than in the morning if there are few potential customers around early on. Similarly, a cafe catering to young professionals could benefit by staying open or re-opening in the evening to make the most of their social activity.Stock and productsReconsidering your products and stock management techniques could help to you to save money by reducing waste, as well as increase sales. If your menu is extensive, try cutting unpopular items and sticking to the best sellers. This means that you will be able to reduce the amount of products that you have on site, and limit the amount of unused and wasted stock particularly with food products. This will also give you the chance to focus on improving the quality of the items left. By only selling your most popular items, you have the chance to boost turnover through increasing the number of sales you make.

Service styleCafes and coffee shops can adopt different serving styles based on their unique propositions. For example, if you dont currently offer a takeaway service, consider making it part of your proposition. Alternatively, you could add more seating options to cater for people who want to sit-in rather than take-away. Whatever your current style, changing it slightly could increase the footfall and custom that your cafe gets.Many cafes charge different prices for sit-in or take-away products, which can give you the opportunity to both boost sales and increase custom if you strike the right combination.Cafe customer service tipsYour customers are one of the most important factors in your cafes success after all, without them, you wouldnt be able to operate. Adopting a customer-centric focus across the entire business can help to encourage return custom, build your cafes reputation and grow your overall customer base. A high level of customer service can also be an important differentiator between you and your competitors. Here are some of the top tips you can follow to put your customers at the heart of your business

Hiring cafe staffHiring cafe staffYou may get to the stage where you decide to take on staff to help you run your business. If you have never done this before, it can seem like a complicated process. Beyond recruitment, you will need to have effective training and management strategies in place, as well as a disciplinary process in case you encounter any issues. Read on for help and advice for every part of the recruitment and management process:Do you need staff?There are many benefits of recruiting cafe staff, including reducing your own workload so you have more time to focus on other areas of the business. However, there are also certain downfalls that can come with having employees, such as those associated with not hiring the right people (discussed below), and entrusting the fate of your business to a stranger.Only you can decide whether your cafe truly needs staff or not but some considerations that may help you come to this decision are:What your competitors are doing are there any cafes of a similar size and stature nearby? If so, how many additional staff members do they have?Are there other areas of the business that you wish you had the time to focus on?Would you need permanent staff, or just temporary ones perhaps on a seasonal basis?

What to look for in cafe staffIf you have decided that your cafe could benefit from taking on staff, the next step is to advertise. Before doing this, its worth considering the type of person that would be best suited to fulfilling your cafes needs.For baristas and waiting staff the employee should be a people person. Those with happy and bubbly personalities are ideal, as they are most likely to deliver a friendly, personable service to customers. Experience is preferable, but not essential as it is the personality that matters most.For kitchen staff you will probably want to consider hiring kitchen staff that are experienced to begin with. This means looking for someone who has already worked in a kitchen, and is able to cope with high-pressure situations.When writing your job advertisement, make sure that you include a note of any personality requirements, or other prerequisites that you feel are appropriate. Dont be afraid to set the bar high in order to get what your cafe needs.

Staff managementOnce you have hired the perfect employees for your coffee shop, some training may be required. If this is the case, then you may find it useful to put together a training plan to make sure that all bases are covered. Many cafe owners decide to hire staff on a trial basis to begin with, so that their suitability can be assessed. short-term training plan for baristas and waiting staff is below:

Cafe marketingTo increase the exposure, customer base and revenue of your cafe, chances are youve given some thought to the marketing options available to you. As a small business, its likely that you dont have an endless marketing budget - but that doesnt mean that you cant still plan and execute an effective marketing strategy. There are three main areas that you should focus on when marketing your cafe:Online marketingThe world of online marketing is a big one, and tapping into it can produce a number of positive results for your cafe. As its likely that you will be doing most - if not all - marketing yourself, this guide covers some of the techniques that are simplest to implement. In the future, its worth remembering that employing the help of a professional digital marketer can often be beneficial, once you have exhausted most of the DIY marketing options.A websiteSocial mediaFacebook Twitter Instagram

Offline marketingWhile the world that we live in is increasingly digital-based, its important to remember the offline world, too. There are still a number of more traditional, offline marketing techniques that can be highly effective in boosting your business, and should not be overlooked.Word of mouthPosters and flyersNetworkingEventsReward customer loyalty

Your POS systemFinally, your coffee shop needs a practical point of sale system, ideally one designed to accommodate the needs of a coffee shop owner. Thats right, not all point of sale systems are created equal. Coffee shop customers expect fast service and often have unique requirements.Make sure to select a POS system that not only satisfies your customers expectations of speed and customization, but can also capture customer information, optimize staffing, manage inventory, adjust pricing, accept a variety of payment types, generate useful reports, and integrate with popular accounting systems such as QuickBooks. Get the POS system right before opening your coffee shop, and many of your coffee shops key management processes will become much more manageable.

Investing in Coffee Shop Business

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