Internet Cafe Business Plan
JavaNet, unlike a typical cafe, will provide a unique forum for communication and entertainment through the medium of the Internet. JavaNet is the answer to an increasing demand. The public wants: (1) access to the methods of communication and volumes of information now available on the Internet, and (2) access at a cost they can afford and in such a way that they aren’t socially, economically, or politically isolated. JavaNet’s goal is to provide the community with a social, educational, entertaining, atmosphere for worldwide communication.
This business plan is prepared to obtain financing in the amount of $24,000. The supplemental financing is required to begin work on site preparation and modifications, equipment purchases, and to cover expenses in the first year of operations. Additional financing has already been secured in the form of: (1) $24,000 from the Oregon Economic Development Fund (2) $19,000 of personal savings from owner Cale Bruckner (3) $36,000 from three investors (4) and $9,290 in the form of short-term loans.
JavaNet will be incorporated as an LLC corporation. This will shield the owner Cale Bruckner, and the three outside investors, Luke Walsh, Doug Wilson, and John Underwood, from issues of personal liability and double taxation. The investors will be treated as shareholders and therefore will not be liable for more than their individual personal investment of $12,000 each.
The financing, in addition to the capital contributions from the owner, shareholders and the Oregon Economic Development Fund, will allow JavaNet to successfully open and maintain operations through year one. The large initial capital investment will allow JavaNet to provide its customers with a full featured Internet cafe.
A unique, upscale, and innovative environment is required to provide the customers with an atmosphere that will spawn socialization. Successful operation in year one will provide JavaNet with a customer base that will allow it to be self sufficient in year two.
JavaNet’s objectives for the first three years of operation include:
- The creation of a unique, upscale, innovative environment that will differentiate JavaNet from local coffee houses.
- Educating the community on what the Internet has to offer.
- The formation of an environment that will bring people with diverse interests and backgrounds together in a common forum.
- Good coffee and bakery items at a reasonable price.
- Affordable access to the resources of the Internet and other online services.
1.2 Keys to Success
The keys to the success for JavaNet are:
- The creation of a unique, innovative, upscale atmosphere that will differentiate JavaNet from other local coffee shops and future Internet cafes.
- The establishment of JavaNet as a community hub for socialization and entertainment.
- The creation of an environment that won’t intimidate the novice user. JavaNet will position itself as an educational resource for individuals wishing to learn about the benefits the Internet has to offer.
- Great coffee and bakery items.
As the popularity of the Internet continues to grow at an exponential rate, easy and affordable access is quickly becoming a necessity of life.
JavaNet provides communities with the ability to access the Internet, enjoy a cup of coffee, and share Internet experiences in a comfortable environment. People of all ages and backgrounds will come to enjoy the unique, upscale, educational, and innovative environment that JavaNet provides.
The risks involved with starting JavaNet are:
- Will there be a demand for the services offered by JavaNet in Eugene?
- Will the popularity of the Internet continue to grow, or is the Internet a fad?
- Will individuals be willing to pay for the service JavaNet offers?
- Will the cost of accessing the Internet from home drop so significantly that there will not be a market for Internet Cafes such as JavaNet?
JavaNet, soon to be located in downtown Eugene on 10th and Oak, will offer the community easy and affordable access to the Internet. JavaNet will provide full access to email, WWW, FTP, Usenet and other Internet applications such as Telnet and Gopher. JavaNet will also provide customers with a unique and innovative environment for enjoying great coffee, specialty beverages, and bakery items.
JavaNet will appeal to individuals of all ages and backgrounds. The instructional Internet classes, and the helpful staff that JavaNet provides, will appeal to the audience that does not associate themselves with the computer age.
This educational aspect will attract younger and elderly members of the community who are rapidly gaining interest in the unique resources that online communications have to offer. The downtown location will provide business people with convenient access to their morning coffee and online needs.
2.1 Company Ownership
JavaNet is a privately held Oregon Limited Liability Corporation. Cale Bruckner, the founder of JavaNet, is the majority owner. Luke Walsh, Doug Wilson, and John Underwood, all hold minority stock positions as private investors.
2.2 Start-up Summary
JavaNet’s start-up costs will cover coffee making equipment, site renovation and modification, capital to cover losses in the first year, and the communications equipment necessary to get its customers online.
The communications equipment necessary to provide JavaNet’s customers with a high-speed connection to the Internet and the services it has to offer make up a large portion of the start-up costs. These costs will include the computer terminals and all costs associated with their set-up.
Costs will also be designated for the purchase of two laser printers and a scanner. In addition, costs will be allocated for the purchase of coffee making equipment. One espresso machine, an automatic coffee grinder, and minor additional equipment will be purchased from Allann Brothers.
The site at 10th and Oak 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.
2.3 Company Locations and Facilities
A site has been chosen at 10th and Oak in downtown Eugene.
This site was chosen for various reasons, including:
- Proximity to the downtown business community.
- Proximity to trendy, upscale restaurants such as West Brothers.
- Proximity to LTD’s Eugene Station. Parking availability.
- Low cost rent – $.85 per square foot for 1700 square feet.
- High visibility.
All of these qualities are consistent with JavaNet’s goal of providing a central hub of communication and socialization for the Eugene community.
JavaNet will provide full access to email, WWW, FTP, Usenet and other Internet applications such as Telnet and Gopher. Printing, scanning, and introductory courses to the Internet will also be available to the customer. JavaNet will also provide customers with a unique and innovative environment for enjoying great coffee, specialty beverages, and bakery items.
3.1 Competitive Comparison
JavaNet will be the first Internet cafe in Eugene. JavaNet will differentiate itself from the strictly-coffee cafes in Eugene by providing its customers with Internet and computing services.
3.2 Service Description
JavaNet will provide its customers with full access to the Internet and common computer software and hardware. Some of the Internet and computing services available to JavaNet customers are listed below:
- Access to external POP3 email accounts.
- Customers can sign up for a JavaNet email account. This account will be managed by JavaNet servers and accessible from computer systems outside the JavaNet network.
- FTP, Telnet, Gopher, and other popular Internet utilities will be available.
- Access to Netscape or Internet Explorer browser.
- Access to laser and color printing.
- Access to popular software applications like Adobe PhotoShop and Microsoft Word.
JavaNet will also provide its customers with access to introductory Internet and email classes. These classes will be held in the afternoon and late in the evening. By providing these classes, JavaNet will build a client base familiar with its services.
The computers, Internet access, and classes wouldn’t mean half as much if taken out of the environment JavaNet will provide. Good coffee, specialty drinks, bakery goods, and a comfortable environment will provide JavaNet customers with a home away from home.
A place to enjoy the benefits of computing in a comfortable and well-kept environment.
JavaNet will obtain computer support and Internet access from Bellevue Computers located in Eugene. Bellevue will provide the Internet connections, network consulting, and the hardware required to run the JavaNetwork.
Allann Brothers will provide JavaNet with coffee equipment, bulk coffee, and paper supplies. At this time, a contract for the bakery items has not been completed. JavaNet is currently negotiating with Humble Bagel and the French Horn to fulfill the requirement.
JavaNet will invest in high-speed computers to provide its customers with a fast and efficient connection to the Internet.
The computers will be reliable and fun to work with. JavaNet will continue to upgrade and modify the systems to stay current with communications technology. One of the main attractions associated with Internet cafes, is the state of the art equipment available for use.
Not everyone has a Pentium PC in their home or office.
3.5 Future Services
As JavaNet grows, more communications systems will be added. The possibility of additional units has been accounted for in the current floor plan. As the demand for Internet connectivity increases, along with the increase in competition, JavaNet will continue to add new services to keep its customer base coming back for more.
Market Analysis Summary
JavaNet is faced with the exciting opportunity of being the first-mover in the Eugene cyber-cafe market. The consistent popularity of coffee, combined with the growing interest in the Internet, has been proven to be a winning concept in other markets and will produce the same results in Eugene.
4.1 Target Market Segment Strategy
JavaNet intends to cater to people who want a guided tour on their first spin around the Internet and to experienced users eager to indulge their passion for computers in a social setting. Furthermore, JavaNet will be a magnet for local and traveling professionals who desire to work or check their email messages in a friendly atmosphere.
These professionals will either use JavaNet’s PCs, or plug their notebooks into Internet connections. JavaNet’s target market covers a wide range of ages: from members of Generation X who grew up surrounded by computers, to Baby Boomers who have come to the realization that people today cannot afford to ignore computers.
4.1.1 Market Trends
A market survey was conducted in the Fall of 1996. Key questions were asked of fifty potential customers. Some key findings include:
- 35 subjects said they would be willing to pay for access to the Internet.
- Five dollars an hour was the most popular hourly Internet fee.
- 24 subjects use the Internet to communicate with others on a regular basis.
4.1.2 Market Needs
Factors such as current trends, addiction, and historical sales data ensure that the high demand for coffee will remain constant over the next five years. The rapid growth of the Internet and online services, that has been witnessed worldwide, is only the tip of the iceberg.
The potential growth of the Internet is enormous, to the point where one day, a computer terminal with an online connection will be as common and necessary as a telephone. This may be 10 or 20 years down the road, but for the next five years, the online service provider market is sure to experience tremendous growth.
Being the first cyber-cafe in Eugene, JavaNet will enjoy the first-mover advantages of name recognition and customer loyalty. Initially, JavaNet will hold a 100 percent share of the cyber-cafe market in Eugene. In the next five years, competitors will enter the market. JavaNet has set a goal to maintain greater than a 50 percent market share.
4.2 Market Segmentation
JavaNet’s customers can be divided into two groups. The first group is familiar with the Internet and desires a progressive and inviting atmosphere where they can get out of their offices or bedrooms and enjoy a great cup of coffee.
The second group is not familiar with the Internet, yet, and is just waiting for the right opportunity to enter the online community. JavaNet’s target market falls anywhere between the ages of 18 and 50. This extremely wide range of ages is due to the fact that both coffee and the Internet appeal to a variety of people.
In addition to these two broad categories, JavaNet’s target market can be divided into more specific market segments. The majority of these individuals are students and business people.
4.3 Service Business Analysis
The retail coffee industry in Eugene experienced rapid growth at the beginning of the decade and is now moving into the mature stage of its life cycle. Many factors contribute to the large demand for good coffee in Eugene.
The University is a main source of demand for coffee retailers. The climate in Eugene is extremely conducive to coffee consumption. Current trends in the Northwest reflect the popularity of fresh, strong, quality coffee and specialty drinks. Eugene is a haven for coffee lovers.
The popularity of the Internet is growing exponentially. Those who are familiar with the Internet are well aware of how fun and addictive surfing the Net can be.
Those who have not yet experienced the Internet, need a convenient, relaxed atmosphere where they can feel comfortable learning about and utilizing the current technologies. JavaNet seeks to provide its customers with affordable Internet access in an innovative and supportive environment.
Due to intense 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 JavaNet realizes the need for differentiation and strongly believes that combining a cafe with complete Internet service is the key to success. The fact that no cyber-cafes are established in Eugene, presents JavaNet with a chance to enter the window of opportunity and enter into a profitable niche in the market.
4.3.1 Competition and Buying Patterns
The main competitors in the retail coffee segment are Cafe Paradisio, Full City, Coffee Corner and Allann Bros. These businesses are located in or near the downtown area, and target a similar segment to JavaNet’s (i.e. educated, upwardly-mobile students and business people).
Competition from online service providers comes from locally-owned businesses as well as national firms. There are approximately eight, local, online service providers in Eugene. This number is expected to grow with the increasing demand for Internet access. Larger, online service providers, such as AOL and CompuServe are also a competitive threat to JavaNet. Due to the nature of the Internet, there are no geographical boundaries restricting competition.
4.3.2 Business Participants
There are approximately 16 coffee wholesalers in Lane County. These wholesalers distribute coffee and espresso beans to over 20 retailers in the Eugene area. Competition in both channels creates an even amount of bargaining power between buyers and suppliers resulting in extremely competitive pricing. Some of these major players in the industry (i.e. Allann Brothers Coffee Co., Inc. and Coffee Corner Ltd.) distribute and retail coffee products.
The number of online service providers in Eugene is approximately eight and counting. These small, regional service providers use a number of different pricing strategies. Some charge a monthly fee, while others charge hourly and/or phone fees. Regardless of the pricing method used, obtaining Internet access through one of these firms can be expensive.
Larger Internet servers such as America Online (AOL), Prodigy, and CompuServe, are also fighting for market share in this rapidly growing industry. These service providers are also rather costly for the average consumer. Consumers who are not convinced they would frequently and consistently travel the Internet, will not be willing to pay these prices.
4.3.3 Distributing a Service
The dual product/service nature of JavaNet’s business faces competition on two levels. JavaNet competes not only with coffee retailers, but also with Internet service providers.
The good news is that JavaNet does not currently face any direct competition from other cyber-cafes in the Eugene market. There are a total of three cyber-cafes in the state of Oregon: one located in Portland and two in Ashland.
Heavy competition between coffee retailers in Eugene creates an industry where all firms face the same costs. There is a positive relationship between price and quality of coffee. Some coffees retail at $8/pound while other, more exotic beans may sell for as high as $16/pound.
Wholesalers sell beans to retailers at an average of a 50 percent discount. For example, a pound of Sumatran beans wholesales for $6.95 and retails for $13.95. And as in most industries, price decreases as volume increases.