Coffee Shop Business Plan Exit Strategy

Welcome to the Coffee Shop Sample Business Plan Exit Strategy

Table Of Contents
FINANCIAL PLAN   IMPORTANT ASSUMPTIONS   KEY FINANCIAL INDICATORS   BREAK-EVEN ANALYSIS   PROJECTED PROFIT AND LOSS   PROJECTED CASH FLOW   PROJECTED BALANCE SHEET   BUSINESS RATIOS   EXIT STRATEGY

There are three scenarios for the investors and management to recover their investment--two with significant returns on each dollar invested.

Scenario One:
Coffee Shop becomes extremely successful and has requests from other communities to be opened there. This opens the door for franchising opportunity. When one looks at the wealth that has been created by the likes of McDonald's, Wendy's, Kentucky Fried Chicken, Burger King, and Taco Bell, the value of franchising a great idea cannot be dismissed. However, developing a franchise can be extremely costly, take years to develop, and be destroyed by one or two franchisees who fail to deliver the consistency or value on which the founding company had built its reputation.

Scenario Two:
Coffee Shop chooses to become the Drive-thru version of Starbucks, obtaining several million dollars through an initial public or private offering that would allow the company to open twenty to thirty facilities per year in the region of the country between the mountain ranges, in both major and small metropolitan communities. This is the preferred Exit Strategy of the Management Team. The danger in this is that competitors would rise up and establish a foothold on a community before--or in the midst of--the arrival of THE LOST TREASURE OF ‘ARABICA’, causing a potential for a drain on revenues and a dramatic increase in advertising expenditures to maintain market share. Knowing these risks--and planning for them--gives THE LOST TREASURE OF ‘ARABICA’ the edge needed to make this scenario work.

Scenario Three:
By the third year, the growth and community support for Coffee Shop will have made the news in more than just the metropolitan area. It can be assumed that competitors, such as Starbucks or Quikava, will have seen the press and realized the value proposition in THE LOST TREASURE OF ‘ARABICA’'s business plan. This will make THE LOST TREASURE OF ‘ARABICA’ an attractive target for buyout. The company could be purchased by a much larger competitive concern by the end of the third year. Taking a conservative approach to valuation and estimating that THE LOST TREASURE OF ‘ARABICA’ would be valued at $7.5 million, and assuming that all 250 units of ownership in THE LOST TREASURE OF ‘ARABICA’ are distributed to investors, a cash purchase of THE LOST TREASURE OF ‘ARABICA’ would net each unit $30,000. With each unit selling at $4,250, that constitutes a Return on Investment of 705% over the three years. However, any buyout will most likely involve a cash/stock combination. A cash/stock buyout would be favorable, since the buying company would pay a higher price and the transaction would not have such severe tax consequences to the sellers.

Conclusion:
Of the three scenarios, the management team prefers Scenario #2. The same numbers would relate to a public or private offering as are used in Scenario #3, but to make an offering available, there would be a dilution of shares that would provide additional shares for sale to the new investors. Assuming the capital acquisition described in this plan is completed, there will be 250 units of the company in the hands of investors, constituting 100% of the authorized and issued units. For purposes on future fundraising, it will be necessary to authorize a stock split of, perhaps 5,000 to one, turning the current 250 units into 1,250,000 units. Using the balance sheet for the third year, which estimates a Net Worth of just over $1.45 million, cash balances of $1.29 million and earnings of $1.06 million, based on 13 Drive-thrus and four Mobile Cafes, it is not unrealistic to put a market value of $15 million to $25 million on the company. At present, such companies are trading in multiples of 20 to 30 times earnings, and it is simple mathematics to multiply the success of THE LOST TREASURE OF ‘ARABICA’ by the number of commuter heavy metropolitan areas in the United States. With a corporate valuation of $7,500,000, each of the new units would have a market value of $6/unit. By authorizing an additional 750,000 units, there would be a total of 2,000,000 units with a market value of $3.75 per share. By offering the 750,000 shares at the price of $3.75 per unit, THE LOST TREASURE OF ‘ARABICA’ would raise an additional $2,812,500 in expansion capital, which would be sufficient to open locations in an additional three to five cities.