Bean There Done That Coffee Company is a fair-trade coffee shop with three locations in Halifax. The locations are picked specifically to be near the universities and colleges in order to draw on the student crowds. Its cafés are designed so that there is plenty of comfortable seating and free WiFi is offered to customers. Study clubs, book clubs, and artists all find a space to be creative, relax, and enjoy the specialty coffees and pastries.
The company is proud of its eco-friendly focus and free-trade initiative. And the community has responded well. The shop draws good crowds most days and evenings from the academic and surrounding communities and has made enough profit in 3 years to put aside $100,000 for improvements. The owners, Abeer and Walid, have asked for input from customers, friends, and family on what they could invest in for the business and the choices that they have now are almost too overwhelming.
A number of people mentioned the furniture. The current furniture will probably last only 1 more year. When they opened the café, Abeer and Walid purchased some used furniture, picked up some from garage sales and recycle centres, and purchased only a few new pieces to fill the space. Recommendations from the survey cards included re- covering the furniture to give it a more cohesive look, and a number of people mentioned replacing all of the furniture with new pieces. Abeer looked into these options. Having a company re-cover all of the furniture would be somewhat complicated because the furniture can't be in the café while it is being re-covered, a limitation that would affect the available seating. The reupholstery company has stated that it can take two pieces at a time and transport them to its shop, do the re-covering, and then bring them back and pick up the next two pieces in order to minimize the inconvenience to customers.
This will increase the cost of the re-covering, though, so the cost of re- covering the furniture will be $35,000 in total. The furniture is anticipated to last 6 years with no residual value. New furniture is also expected to last for 6 years, but it will cost $25,000 and have a residual value of $2,000. Re-covering of the furniture is anticipated to generate additional cash flows of $10,000 per year for 6 years, while the new furniture is anticipated to generate $8,000 per year for 6 years in cash flow. Walid wanted to look into new equipment. New coffee machines would cost $17,000, last 8 years, and have a residual value of $3,000 while providing additional cash flows of $5,000 per year for the life of the machines. A new computerized system to integrate all of the financial, point-of-sale, and inventory systems of all three stores would cost $48,000, have a life of 5 years and no residual value, but the cost savings are expected to increase cash flows by $14,000 per year for the 5 years. Two major projects suggested were the creation of a patio at each location and to enlarge the busiest café near Saint Mary's University. Creating the three patios would cost $78,000, have a life of 14 years, have a residual value of $5,000, and generate additional cash flows of $90,000 per year for the life of the patio, but the investment would need to be made up front and it would take a year before the patios are ready to be used. Enlarging the one location would cost $22,000, last 10 years, and have a residual value of $10,000. This should generate an additional $30,000 in cash flows for 10 years, but similar to the patio constructions, the investment is made up front and it takes 1 year before the new construction can be used.
The employees asked about a benefits package. In order to set up a self-funding benefits package, Bean There Done That would need to put aside $100,000. It is estimated that with the interest generated, this fund should be able to provide some basic benefits to the café's staff for 25 years. Another employee asked about having the café sponsor her children's soccer team for $6,000. This money would buy the children new jerseys and equipment, and it would also help provide transportation to some of the big tournaments.
Abeer and Walid gathered all of this information, grabbed fresh cups of coffee, and sat down to discuss their options and come up with a plan.