Executive Summary

Jasmine Teahouse is a new tea room in the quaint New England town of Simsbury,
Connecticut. Jasmine Teahouse is a Limited Liability Corporation, managed by its
owners, Earl and Lady Grey. Earl Grey has five years of experience managing a
successful boutique coffeehouse in a similar locale in Maryland. His love and
knowledge of teas will make the transition to owning and running a teahouse a natural
step. Lady Grey has 3 years of training as an herbalist and worked for 4 years as a
teatender in Boston. She is currently training to be a nutritionist; her knowledge of the
health benefits of tea will help our marketing and sales efforts.
Jasmine Teahouse will offer a full range of teas (hot and iced), as well as pastries,
premium chocolates, tea accessories, and loose teas for taking home or giving as gifts.
Lady Grey is a master teatender, and Earl has been learning proper brewing
techniques from her for the last four months. We will train all of our teatenders in the
proper storage, brewing, and serving of each kind of tea.
The American tea market is growing rapidly. Tea sales have increased 165% over the
last fifteen years, with the number of tea rooms offering sit down service rising about
15% to about 1,500 shops. American interest in tea certainly owes some of its increase
to the proliferation of gourmet coffee shops around the country in this same period.
Most of working America has accepted the idea of expensive hot beverages as
affordable luxuries, thanks to the marketing efforts of Starbucks, Seattle's Best, and so
on. At the same time, fashion is always on the move - now that fancy coffee drinks are
so widely accepted, savvy consumers are looking for new, more unique treats to enjoy.
Starbucks estimates that 7% of its $12 billion annual sales currently come from tea.
In Simsbury, our potential clientele is divided between local residents and tourists
(roughly 100,000 per year, in all seasons). We expect to easily generate sales to
existing committed tea drinkers, who will immediately recognize the quality of our
products and services. Marketing to the much larger local groups who are not yet
familiar with premium teas will emphasize our atmosphere (cozy, intimate, luxurious),
our prestige-value (high prices, the sophistication of having a favorite "exotic" tea
type), and our wide array of potential gifts (gift baskets, chocolates, loose teas and tea
accessories). Sales to tourists depend on a highly-visible location, association with the
quaint charm of our town, and promotional efforts in cooperation with other local
businesses.
We have no direct competitors in our area. Dunkin' Donuts and a local cafe cannot
compete with our upscale approach, and the nearest Starbucks is 5 miles away.
Simsbury's growing affluence and gentrification work in our favor, as our upper-

middle class customer base seeks out new status markers and mini-luxury experiences
in a convenient, nearby location.
Our well-researched and conservative sales forecasts project sales over $190,000 in
the first year, with continued moderate increases through year 3. We project a net
profit in the first year of over $13,000, with steadily increasing net worth for the
foreseeable future.
The owners are investing $10,330 of their own money into the business. Jasmine
Teahouse is seeking an additional 6 year loan of $53,633 to fund our startup costs.

1.1 Mission
Our goal is to provide the finest premium teas and chocolates to residents of the
Simsbury, CT area in a relaxed and fun atmosphere.
1.2 Objectives
To operate a successful tea and chocolate store in Simsbury, employing one to
two employees the first year.
To obtain a minimum of 200 regular customers in the Simsbury market the first
year of operation.
Achieve first year sales of $190,000.
Maintain an average gross margin of 58 percent.
To produce a reasonable net profit by the end of the third year of operation.

1.3 Keys to Success

1. Experienced Owners/Managers. Earl and Lady Grey have years of experience
in this and related industries.
2. Product Quality. We sell only the finest whole-leaf loose teas, pastries, and
chocolates.
3. Excellent Customer Service. Each customer will be treated as would an
honored guest in our homes.
4. No direct competition. We are the only teahouse in 20 miles.
5. Enough working capital to survive the first year as we build a customer base.
6. Broad cross-seasonal offerings. In addition to hot teas, we offer iced teas,
chocolates, and gift baskets to cover seasonal variations in customer demand.

Company Summary
Jasmine Teahouse is a start-up business on a well-trafficked street in Simsbury, CT.
Our primary focus is in the over 50 kinds of loose tea we offer, including black teas,
green teas, herbal teas (infusions), and flavored teas (black or green tea plus other
flavors). We serve our teas hot and iced, and sell loose teas by the ounce.
In addition, we sell premium chocolates and gift baskets, and offer daily pastries to
accompany tea orders. Since we are not intending to compete with coffee giants such
as Starbucks, we brew only one kind of coffee daily, as a courtesy to our customers.
About Simsbury
Simsbury is one of Connecticut's oldest communities, incorporated in 1670. The
population in Simsbury has grown from 5,000 in 1950 to today's population of over
23,000. While Simsbury has seen some development, the town is committed to
maintaining its rural environment and historic charm. Simsbury old New England
appeal has also made it a popular tourist destination for residents of Hartford, Boston
and New York City.
Simsbury has four State parks, several wildlife habitats, and Talcott Mountain, a great
hiking destination. Tourists flock to Simsbury in all four seasons for outdoor activities,
historic sightseeing, and shopping. In Summer, the Talcott Mountain Music Festival
draws crowds from Hartford, and in Autumn, the city-dwelling "leaf-peepers" stop to
enjoy our antiques and craft fairs. Winter brings cross-country skiiers, candlelight
tours of the historic downtown, and ice skating, while Spring introduces the Simsbury
Light Opera season and the River Run Road Race.

2.1 Company Ownership

As a Limited Liability Company in the State of Connecticut, ownership of Jasmine
Teahouse is identified as belonging to its managers. These partners, Earl Grey and
Lady Grey, each control 50% of the business.
Earl Grey has five years of experience managing a successful boutique coffeehouse in
a similar locale in Maryland. His love and knowledge of teas will make the transition
to owning and running a teahouse a natural step. Lady Grey has 3 years of training as
an herbalist and worked for 4 years as a teatender in Boston. She is currently training
to be a nutritionist; her knowledge of the health benefits of tea will help our marketing
and sales efforts.

2.2 Start-up Summary

Equipment and Inventory will make up 75% of start-up requirements. Leasehold
improvements and general expenses comprise the remaining 25%. The owners are
contributing $10,330 of investment to the business. We need a total of $63,963, and
are seeking a long-term loan of $53,633; we plan to pay this loan back in full within 6
years, at a 9.25% interest rate.
Long-term Assets, $13,808

Refrigerated Chocolate Case: $3,500

Tea Racks: $2,300
Coffee Maker: $908
Hot Water and Steam machine: $1,100
Dishwasher: $3,000
Other Hardware & Appliances: $3,000

Short-term Assets, $6,605

Coffee Grinder: $564
Iced Tea Shakers: $541
Furniture: $5,500
Expensed Supplies, $1,200
Napkins, Stirrers, cleaning supplies, tea-balls, tasting cups

START-UP REQUIREMENTS
Start-up Expenses
Legal

$750

Stationery etc.

$800

Brochures

$200

Insurance

$500

Rent

$3,000

Leashold Improvements

$10,000

Start-up Supplies

$1,200

Dishes, Teacups, Teapots

$2,000

Other

$100

TOTAL START-UP EXPENSES

$18,550

Start-up Assets
Cash Required

$15,000

Start-up Inventory

$10,000

Other Current Assets

$6,605

Long-term Assets

$13,808

TOTAL ASSETS

$45,413

Total Requirements

$63,963

START-UP FUNDING
Start-up Expenses to Fund

$18,550

Start-up Assets to Fund

$45,413

TOTAL FUNDING REQUIRED

$63,963

Assets
Non-cash Assets from Start-up

$30,413

Cash Requirements from Start-up

$15,000

Additional Cash Raised

$0

Cash Balance on Starting Date

$15,000

TOTAL ASSETS

$45,413

Liabilities and Capital

Liabilities
Current Borrowing

$0

Long-term Liabilities

$53,633

Accounts Payable (Outstanding Bills)

$0

Other Current Liabilities (interest-free)

$0

TOTAL LIABILITIES

$53,633

Capital
Planned Investment
Owners

$10,330

Other

$0

Additional Investment Requirement

$0

TOTAL PLANNED INVESTMENT

$10,330

Loss at Start-up (Start-up Expenses)

($18,550)

TOTAL CAPITAL

($8,220)

TOTAL CAPITAL AND LIABILITIES

$45,413

Total Funding

$63,963

Products and Services

Jasmine Teahouse will specialize in premium teas, fine chocolates, and gift baskets.
Our full "teahouse" experience is complemented by an assortment of loose teas,
premium chocolates, tea accessories and gift baskets, all suitable as souvenirs and
gifts for our tourist customers. Our goal is to be a destination store for visitors and a
resource for locals seeking gifts, new experiences, and knowledge of tea.

52 kinds of tea
Our tea-tenders will know the best brewing temperature and time for each of the 52
kinds of teas we offer. These include straight black teas such as Assam, Ceylon,

Darjeeling and Keemun, blends like Chai, Earl Grey, and our own creations,
like "New London Garden Party," a Ceylon/Vanilla/Jasmine blend. We will also offer
a range of green teas, which are becoming more popular with the proliferation of local
sushi restaurants. Jasmine Teahouse's no-caffeine herbal infusions range from flavored
rooibus to fruit blends and medicinal brews (chamomile, ginseng, etc.).
All of these teas are available hot, iced, or loose for customers to take home and brew
at their leisure.
Pastries
To complement our beverages, we will offer a small selection of freshly-baked
pastries from a local bakery. Our alliance with this bakery allows us to offer highquality baked goods at a reasonable price, in exchange for co-advertising. These items
are not intended as a staple of our overall profit structure, but help us to create the
whole-service feeling of a real teahouse, without investing in cooks, bakers, or kitchen
equipment. Based on market research, we believe that up to 2/3 of our sit-down
clientele will order a cookie, piece of cake, scone, muffin, or savory croissant with
their tea. Not offering such treats could lose us customers.
Chocolates
In keeping with our upscale, indulgent feeling, we will sell premium chocolates such
as Godiva, Scharffen Berger, and Garrison, as well as environmentally-friendly
ones like Dagoba and vegan chocolates. We will offer a limited selection of truffles
and dipped chocolates (like chocolate covered cherries, orange peel, and candied
ginger), and a wider array of loose bars and chocolate gift baskets.
Coffee
We are a teahouse; we focus on tea. Since we are not intending to compete with coffee
giants such as Starbucks, we brew only one kind of coffee daily, to satisfy those
accompanying true tea lovers on their visits to our store.

Tea paraphernalia
Tea paraphernalia includes specialty teapots, teaballs, decorative tea tins, "art of tea"
books, and various small, seasonal, non-food, tea-related items.
Gift Baskets
We offer a selection of pre-made gift baskets, and will work with customers to create
custom baskets for any occasion. Our tea tins come in a range of sizes and designs,
and we will keep at least five colors of baskets and liners in stock at all times.

Market Analysis Summary

The Tea Market
The American tea market is growing rapidly. Tea sales have increased 165% since
1990, with the number of tea rooms offering sit down service rising about 15% to
about 1,500 shops. The number of tea rooms selling loose tea and accessories rose
over the same period to about 200 shops.
American interest in tea certainly owes some of its increase to the proliferation of
gourmet coffee shops around the country in this same period. Most of working
America has accepted the idea of expensive hot beverages as affordable luxuries,
thanks to the marketing efforts of Starbucks, Seattle's Best, and so on. At the same
time, fashion is always on the move - now that fancy coffee drinks are so widely
accepted, savvy consumers are looking for new, more unique treats to enjoy. Starbucks
estimates that 7% of its $12 billion annual sales currently come from tea.
Spurred by studies touting tea's health effects, and increasing familiarity with Asian
and South Asian cuisine and its tea customs, American consumers have been turning
towards tea as a more original, more "natural" affordable luxury. In addition, the
cultural connection of tea with all things "civilized" (largely from American
understandings of British high tea) has made tea knowledge, including the choice of a
favorite teahouse, a mark of sophistication among many American middle class
women.
Simsbury itself is a rural town getting slowly gentrified, and gradually adopting the
sophisticated tastes of its tourists. Recent moves towards organic farming in several of
the surrounding towns reflect the changing tastes and priorities of local residents.
Local high schools have seen dramatic increases over the last 10 years in the
percentage of juniors and seniors enrolled in courses for college credit - newer
residents are much more concerned with education than their predecessors, as the
community's affluence grows. All of these trends bode well for the success of an
upscale teahouse.
The Chocolate Market
Annually, $408 million of premium chocolates such as Godiva, Scharffen Berger,
Ghirardelli and local private labels such as Garrison's are sold throughout America.
Despite the 19% per year growth rate from 1996-2002, the U.S. chocolate market has
not yet matured, leaving room for continued growth. Europeans consume twice as
much chocolate as Americans, with a per capita consumption of 22.4 pounds vs. 12.2

pounds. It is estimated that the premium chocolate market will grow from 408 million
dollars per year in 2002 to 1.2 billion dollars per year by 2005.
Market Size
Locals
Hartford County's population is 885,000 people, with 80,000 living within a 5 mile
radius of Simsbury Center. Of these, 37%, or 30,000, are between the ages of 25
and 60 - our target age group. Given our upscale comestibles selection and prices,
and based on U.S. census data for local income levels, we estimate that roughly 2/3 of
these of these people have pre-existing brand loyalties or economic constraints that
would discourage them from visiting our teahouse. Our local target market is
therefore roughly 10,000 people.
Tourists
According to a 2001 study by the Connecticut Center for Economic Analysis (U.
Conn), Connecticuts travel and tourism industry generated gross revenues in 1999 in
excess of $4.9 billion, or almost 4% of Connecticuts 1999 estimated gross state
product. The same study found that travel and tourism is one of the fastest growing
industries in Connecticut. Simsbury itself benefits economically from tourist visits all
year round, with our combination of scenic outdoor activities and seasonal cultural
events. Based on data from the Simsbury Chamber of Commerce, we estimate a
potential market of at least 100,000 tourists annually for our business.
4.1 Market Segmentation
While we anticipate a split between locals and tourists, all members of our target
market are between the ages of 25 and 60, and have a moderate to sizable disposable
income.

MARKET ANALYSIS
YEAR
1

YEAR
2

YEAR
3

YEAR
4

YEAR
5

Potential
Customers

Growth

CAGR

Local
Residents

5%

10,000

10,500

11,025

11,576

12,155

5.00%

Tourists

3%

100,000

103,00
0

106,090

109,27
3

112,551

3.00%

Total

3.19%

110,000

113,500

117,115

120,84
9

124,706

3.19%

4.2 Target Market Segment Strategy

Jasmine Teahouse will provide the local upper-middle-class community with a place
to socialize, indulge themselves with fine teas and pastries, and find unique chocolates
and tea for gifts. For tourists, Jasmine Teahouse will be a destination stop in their tour
of the town, whether as a break from shopping, a warm-up visit after skiing, or a place
to buy unique gifts as souvenirs of their holiday.
These customers will be glad to pay the price premium for our products in exchange
for the high quality, great taste, and sense of prestige they receive. In fact, higher
prices for some items (Assam golden tippy versus regular Assam) may encourage
higher sales - these kinds of customers eagerly accept the idea that higher prices equal
higher quality, and want to buy "only the best," regardless of whether their palate is
educated enough to appreciate the subtle differences.
4.3 Service Business Analysis
The tea market is relatively new in rural and suburban areas such as Simsbury.
Currently, locals and more sophisticated tourists looking for a cup of coffee or tea can
either go to the local Dunkin Donuts or Peaberry's cafe, or travel up to five miles out
of town to reach the nearest Starbucks. None of these options is geared toward the tea
drinker, and none of them offer the convenience or upscale feeling, let alone
knowledgeable service, available at Jasmine Teahouse.
Teahouses have long done well in urban areas; Tealuxe in Boston and the Russian Tea
Room in New York are both internationally renowned. In smaller tourists areas,

however, smaller, more eclectic teahouses have also done very well in recent years.
The Berkshires, a tourist area roughly 50 miles north of Simsbury with a similar
tourist base, now has over 15 specialty teahouses throughout the county. In talking
with the owners of three of these establishments, we have learned that their proximity
to cultural events, shopping districts and fine restaurants has brought in hundreds of
walk-in tourists monthly, while advertising with local hotels and bed and breakfasts
boosted their clientele only slightly. Word of mouth, visibility, and year-round tourist
appeal are very important for a teahouse's success in areas like Simsbury.
Tea Myths
Most people do not consume tea as a morning ritual as they do with coffee.
Tea is consumed in the afternoon and before bed.
People drink tea only during cold weather, making the business seasonal.
Tea is associated solely with the image of old ladies, china cups and doilies.
Tea Facts
Tea is growing in popularity and more people are drinking tea in the mornings
as a substitute for coffee.
Tea is being consumed throughout the day; its milder caffeine effect allows for
multiple cups without the "jitters."
Today's tea drinkers do not limit their purchases to one season, but drink tea all
year long.
Tea has become the drink of choice for today's baby boomer, and tea's health
effects are giving tea a more active, youthful, and healthy image.

Premium Chocolate Sales

In the Hartford area, the premium and near-premium chocolate market is made up of
three major competitors: Godiva, Munson's and Lindt. Both Godiva and Munsons sell
their products out of their own stores, while Lindt's products are sold through retailers
such as Target. Lindt is beginning to expand in the market with 90 stores as of
2003, the nearest one in Westport, CT. With the higher than expected growth rate in
the premium chocolates market, retailers like Godiva are expected to open new
locations. Due to the nature of the business it is hard to gauge the overall net sales of
these privately held companies. Godiva, owned by Campbell, has reported that their

sales in the confectionary division are $484 million. Their overall sales have
remained flat with the exception of their Godiva division, whose sales increased by
9.7%. With the economy on the rebound, Campbell's expects Godiva's sales to be
much stronger in 2004. Lindt has reported that their chocolate sales world wide are
expected to grow 7 to 10% a year with a high growth rate in the U.S., due to an
increase in the number of stores.
According to chocolate statistics, Americans purchase 3.1 billion pounds of chocolate
a year. This translates into $13.7 billion dollars. Briefly stated, these outlets fall into
the following categories:
1. Premium. Premium chocolate boutiques carry chocolates that are produced by
the top manufacturers, such as Godiva. These companies have a small network
of dealers or company owned outlets throughout the country who are chosen
based on the high image of the outlet. Some outlets represent the manufacturer
exclusively, others carry multiple high end chocolates. It is not unusual to find
the chocolates selling for up to $2.50 per candy.
2. Boxed Chocolates. A step down from the first category, made up of retailers
such as Munson's and Herbert's chocolate. They sell chocolates targeted to
low to middle market buyers. A piece of chocolate sells for about .50 cents
3. Mass Market Boxed. These chocolates are sold through supermarkets, drug
stores and departments stores, such as Wal-Mart. These outlets sell your
mass producers chocolates such as Russell Stover. The chocolates typically sell
by the box for $13.00 to $15.00 dollars.
Jasmine Teahouse offers only premium chocolates.
Valentine's Day still means chocolate. Americans spend $1.06 billion for
Valentine's day on candy, making it the third biggest holiday of the year for
chocolates (after Christmas and Easter).
Today, chocolate is not only for women. American men say they'd rather
receive chocolate than flowers on Valentine's Day, especially those over the age
of 50, which represents about 15,000 men in Simsbury alone. Sixty-eight
percent of men age 50 or older say they'd prefer receiving chocolate over
flowers from their sweetheart on Valentine's Day, while just 22% said they'd
rather have flowers.
4.3.1 Competition and Buying Patterns
In the gourmet teahouse industry, competition depends on quality of teas,
knowledgeable teatenders, and cultivation and education of a loyal customer base.

Consumers used to Lipton teabags and other low-quality, tea-dust offerings in grocery
stores are amazed at the range of tastes, textures, and fragrances from real, high
quality tea. Offer them a good cup, and they will usually return for the rest of their
lives. However, getting them to enter your store in the first place can be a major
challenge.
Our potential customers vary in knowledge of tea, and are seeking a wide range of
experiences and products.
Tea Drinkers
Tea drinkers are looking for a pleasant, relaxing place in which to indulge their love of
tea, share it with friends, and learn more about tea varieties, cultivation, and health
properties. Committed tea drinkers will always choose quality over price or
convenience, seeking out the freshest whole-leaf and tippy varietals in the area.
Friends of ours have driven 50 miles to buy quality loose teas to bring home with
them. Our challenge with these consumers is getting out the word that we are here,
and holding events to showcase our quality.
Local Socializers
The middle and upper-middle class women of Simsbury and surrounding towns
currently have no place where they can go to be spoiled at a moderate price outside of
a full restaurant. Starbucks, at 5 miles away, can be inconvenient, noisy,
and overcrowded with teenagers. Local restaurants can also be noisy, and require a
large chunk of time and money for an outing. This market segment is seeking a cozy,
comfortable, upscale/exclusive locale with a similar clientele, where they can meet
friends, have some good food and beverages, and stay as long or as short as they want.
Our challenge with the socializers is to create a buzz from the very beginning that we
are exclusive, pleasant, and high-quality, without generating such overcrowding that
we lose our intimate feeling.
Comestible Gift Buyers
Currently, the only upscale comestibles in the Simsbury area suitable for gifts are
organic meats and local cheeses from surrounding boutique farms - tasty, but certainly
not romantic. Husbands and wives looking for something different from the standard
bouquet can currently choose a cheap box of chocolates from the grocery store, or
hoof it to the city to try to find something more indulgent. We will offer local residents
a convenient, attractive, and always-satisfying gift buying experience at a reasonable
price, with a bit of cachet.
Tourists
Tourists vary widely in their reasons for visiting Simsbury, but they generally share a

sophisticated urban palate, a moderately high disposable income, and a desire to

"discover" quaint local charm. They are seeking high-quality foods, beverages, gifts,
and service. While here, they much prefer local, small-scale businesses to larger
chains (like Dunkin Donuts), but want to be assured of quality. Our challenge with
tourists is being visible enough to be noticed, without losing our local charm. Once
such a visitor has tried our teahouse, they will definitely want to return.
Other Potential Customers:
New Tea Drinkers (who have never tried good tea)
Health-Food Aficionados

Strategy and Implementation Summary

We will combine heavy print advertising with special events and targeted promotions
to introduce Simsbury's residents and tourists to Jasmine Teahouse, and to premium
teas in general. Repeat sales depend on consistently high quality products and service.
We will thus train every part-time teatender in the proper storage, brewing, and
serving of our 52 kinds of tea.
Our teas and chocolates are offered at a price premium that discourages customers
seeking cheap, low-quality goods. This not only enhances the feeling of prestige
customers get when patronizing our teahouse, but also ensures that customers will
have similar expectations of service and quality, based on their socio-economic class.
The status and sophistication indicated by suggesting an outing to Jasmine, or a gift
basket with our logo on it, will soon become valuable in themselves.
5.1 Competitive Edge
Key Competitive Strengths
Earl Grey's experience managing a successful boutique coffeehouse in a
similar locale.
Lady Grey's four years of experience as a teatender, and 3 years of training as
an herbalist.
We are the only full-scale teahouse within 20 miles.
We have arranged competitive distribution contracts with high-end tea growers
around the world.

 We are the only retailer offering such a wide array of premium chocolates east
of the river.
Our interior design will give Jasmine Teahouse an intimate, cozy, comfortable,
and chic feeling, without reminding customers of doilies and lace.
We are committed to providing only high-quality products and services.
Competitive Weaknesses
Our primary weakness is that we are a new business competing against
established chains, for customers who may not know how great our products are. To
significantly build sales, we must not just find new customers - we must take
customers away from existing stores and from their coffee-drinking habits. We can
accomplish this only by offering a superior selection of teas and chocolates, and
focusing on high-quality service and full service delivery.

5.2 Marketing Strategy

Our marketing strategy needs to accomplish two things: first, to make potential
customers aware of Jasmine Teahouse's opening and location; second, to educate
potential customers as to what a teahouse is, and why it is so wonderful. Clearly, with
committed tea drinkers, the first will suffice. However, for the rest of our target
market, we must strategically define ourselves as the answer to the many different
things each group is seeking. Our highly visible location in the historic shopping
district of downtown Simsbury will encourage walk-in traffic.
The marketing budget will not exceed 3% of our gross annual sales.
Tea Drinkers
Appeal to their gourmet palates:
Advertisements in the "entree" and food sections of all local papers within a 30
miles radius.
Flyers in gourmet grocery stores and coffeehouses in the same area.
Ads in local magazines: Fairfield Review, Connecticut Magazine, Westchester
Magazine.
Review by the food writer for the Hartford Courant.

Socializers
Appeal to their sense of prestige and good taste. Within the local market, we will
initially target women looking for an intimate social gathering space. A cozy chat over
a cup of tea is just right for exchanging gossip, planning outings, or simply relaxing
and pampering oneself.
Advertise through local churches and women's organizations.
Monthly "Tea Tasting" party with a different theme each month.
Coupons in the local papers for "free friends" pots (with your tea order, a friend
gets a free pot, to try out our teas for the first time).
Flyers in local upscale boutiques, salons, and restaurants.
Gift Buyers
Focus on our wide gourmet selection and convenient location:
Ads in all local papers
Press releases to local papers, including gift suggestions
Tourists
Walk-ins: In mild weather (Spring through Autumn), our best chances are to
increase the visibility of our store to encourage visits from tourists strolling
through downtown. The storefront design (in our highly visible location) will
include our name and logo, and we will place standing signs pointing towards
our store at both nearby intersections. Our menu, prices, and hours will be
posted in the windows at all times.
Destination Visitors: We will place ads in the programs of all plays, operas, and
other cultural events in Hartford County throughout the year, billing ourselves
as a "mini-getaway" from the pace of urban life. We will provide brochures in
every local historical site, visitor's center, and state park information booth.
Alliances with local Inns: Each guest staying at a local inn or bed & breakfast
will receive a coupon for a half-price pot of tea at Jasmine Teahouse, along
with a brochure.
5.3 Sales Strategy
Because Jasmine Teahouse is a new entity, we understand that we will have to prove
our company's worth to upscale tea and chocolate buyers in order to earn their respect
and business. Our Sales Forecast depends on establishing a loyal customer base who

visits our teahouse at least once every month; we expect a few committed tea drinking
"regulars" who will come in more than once a week. In order to achieve this kind of
repeat business, every customer, whether on the first visit or their hundredth, will be
treated graciously and with respect.
Part of our mission is to educate our customers about tea and tea brewing; however,
this must only be done in a respectful fashion. Our knowledge is a resource, and must
never be used to make a customer feel uncomfortable or ignorant.
Tea Profiles
In addition to our extensive menu describing all 52 teas, the Greys have developed a
"Tea Profile" card for new tea drinkers, or customers looking to broaden their tea
experience. These cards include questions about taste preferences which will help our
teatenders guide the customer to a tea they will enjoy. Our teas vary widely in taste,
aroma, smokiness, fruit, and pungency, and very few people will enjoy them all
equally. A customer who finds his or her personal tastes met is much more likely to be
a repeat customer than one who simply orders a popular tea.
"Tea Tasting" Plates
Every week we will offer a different selection of our teas as a "tasting:" 4 to 5 small
cups of different teas, labeled and described, with appropriate pastry accompaniments.
These plates will allow customers to try new kinds of tea without committing to a full
pot. These tastings will be priced at 1 1/2 times the price of a regular pot.
Special Events
In addition to our monthly tea tasting parties, Jasmine Teahouse will offer customers
the option of reserving the entire teahouse for a party or special event. We anticipate
business for bridal and baby showers, as well as a few children's birthday parties.
5.3.1 Sales Forecast
The following table and chart give a highlight of our forecasted sales. We expect sales
to start off conservatively and increase extensively during the Christmas, Valentine's
Day, Easter and Mother's Day holidays.
Jasmine teahouse expects average sales of just over $16,000 per month for the first
year, as we build name recognition and status in the community. In the second and
third year we look to see increased sales of roughly 10% per year, as we gain a larger
percentage of the market share and increase our customer base beyond Simsbury and
into the connecting towns.
Pricing

 Hot Tea: We offer two sizes of sit-down hot tea: small pots, at $3.50 each, and
large pots, at $5.25 each (for two people). For customers wishing to take tea
with them, we offer a flat rate of $2.50 for a 16oz. cup or a customer's own
mug.
Iced Tea: Iced Teas are served in 12oz. or 16oz. cups, at $2.00 and $3.00,
respectively.
Pastries: Our pastry prices range from $1.25 for a lavender-lemon sugar cookie
to $4.00 for a slice of cake. Prices depend on our daily cost of such items from
the local bakery, and should be only 25 to 30 cents higher than the price of that
item sold in the bakery itself.
Chocolates: Chocolate prices vary widely, from $85 cents for a chocolate
covered piece of candied ginger, to $4.00 for large truffles.
Gift Baskets: Gift baskets start at $15, and can range up to $150 for the largest
chocolate and tea selection combinations at holidays. We expect the average
gift basket sale will be about $25.

SALES FORECAST
YEAR 1

YEAR 2

YEAR 3

Hot Teas

$52,400

$62,000

$66,000

Iced Teas

$22,400

$24,000

$25,500

Pastries

$14,400

$15,000

$16,000

Chocolate

$88,000

$92,000

$100,000

Tea Paraphernalia

$3,000

$3,200

$3,400

Gift Baskets

$3,895

$4,000

$4,200

Sales

Loose Teas

$10,150

$10,920

$13,104

TOTAL SALES

$194,245

$211,120

$228,204

Direct Cost of Sales

Year 1

Year 2

Year 3

Hot Teas

$15,720

$18,600

$18,480

Iced Teas

$7,168

$7,680

$7,650

Pastries

$9,504

$9,900

$10,240

Chocolate

$39,600

$41,400

$43,000

Tea Paraphernalia

$1,500

$1,600

$1,666

Gift Baskets

$1,558

$1,600

$1,596

Loose Teas

$4,060

$4,368

$4,980

Subtotal Direct Cost of

Sales

$79,110

$85,148

$87,612

Management Summary
We are a small company owned and operated by Earl and Lady Grey, husband and
wife, as a Limited Liability Corporation. Lady is the designer and marketer of the
products, and Earl manages the store. As mentioned above, both partners have
extensive experience in this and related industries, and will be leveraging their
knowledge of tea purchasing, brewing, and marketing, as well as knowledge of
running small upscale beverage business, to create success for Jasmine Teahouse.

Our management style reflects the participation of the owners; we are not very
hierarchical, and encourage all employees to learn as much as possible about all
aspects of the business. The company respects its community of co-workers, and will
treat all workers well. As a family business, we understand that our teatenders,
cleaners, and other help are not just workers; they are people with their own lives,
personalities, and hopes. In such a small town, it is likely that many customers will
know our part-time teatenders (probably local students and housewives) personally, so
it is important to us that they enjoy their jobs and feel well-rewarded for their work.
6.1 Personnel Plan
The Personnel Plan chronicles the growth of the organization to approximately 4
employees in the first 3 years. Future years may require a few additional people
besides those indicated, depending on the growth of the company.
PERSONNEL PLAN
YEAR 1

YEAR 2

YEAR 3

Earl Grey

$24,000

$30,000

$35,000

Lady Grey

$6,000

$12,000

$14,000

Part-time teatenders

$13,600

$14,000

$14,500

TOTAL PEOPLE

Total Payroll

$43,600

$56,000

$63,500

Financial Plan
Our Financial Plan is based on sound research into similar businesses in similar
communities, and cost estimates obtained for equipment, rent, and other operating
expenses. As an owner-operated business, we have some leeway in adjusting our own
compensation if sales are low in a given month, but our forecasts are conservative.

Our top financial priorities in the first three years are repaying our long-term loan,
paying our employees fairly, covering our expenses on time, and generating a modest
profit.
We are opening this shop because we love tea, we love tea drinkers, and we will enjoy
all the hard work we must do to maintain the business. We do not expect to get rich
doing this, but we do anticipate steadily increasing profits and net worth as Jasmine
Teahouse becomes well-known and establishes a loyal clientele.
Sales growth will be aggressive the first 18 months as we sharpen our merchandise
assortment, size scales, and stock levels to better meet our customer's requirements.
We anticipate a sales increase of roughly 10% during our second year of operation.
Marketing expenses are budgeted at approximately 3% of total sales.
We will invest residual profits into reducing debt.
Company expansion, while not a necessity, will be an option if sales projections are
met and/or exceeded. The location we have chosen contains an additional area we can
annex for extra seating if and when it becomes necessary, for a small additional rental
charge.
7.1 Important Assumptions
Tax and interest rate assumptions for this plan are on the following table. In addition,
there are some non-financial assumptions guiding our forecasts. We assume:
No other teahouses opening in Simsbury in the next year. (A safe assumption)
A continued gradual increase in the population and socio-economic class of the
Simsbury area.
Continued tourist interest in our area.
Increasing consumer interest in tea and other "health" foods.
That premium chocolates will continue to symbolize luxury and romance as
gift choices.

GENERAL ASSUMPTIONS

YEAR 1

YEAR 2

YEAR 3

Plan Month

Current Interest
Rate

9.50%

9.50%

9.50%

Long-term
Interest Rate

9.25%

9.25%

9.25%

Tax Rate

30.00%

30.00%

30.00%

Other

7.2 Break-even Analysis

Our break-even analysis is based on our cost and price structure for the first year. As
we grow, the fixed costs will grow in proportion to the number of employees. We
should surpass our Break-even point early on.

BREAK-EVEN ANALYSIS
Monthly Revenue Breakeven

$11,612

Assumptions:
Average Percent Variable
Cost

41%

Estimated Monthly Fixed

Cost

$6,883

7.3 Projected Profit and Loss

The following table shows our profit and loss projections for the next three years. We
will become profitable early in the first year, with net profits continuing to rise as
sales increase. Sales and Marketing expenses include the costs of all advertisements,
plus promotions like the monthly tastings and 1/2 off coupons for tourists.
Depreciation reflects a straight-line depreciation of our long-term assets over 10 years.

PRO FORMA PROFIT AND LOSS

YEAR 1

YEAR 2

YEAR 3

Sales

$194,245

$211,120

$228,204

Direct Cost of

$79,110

$85,148

$87,612

Other Costs of

$0

$0

$0

$79,110

$85,148

$87,612

Gross Margin

$115,135

$125,972

$140,592

Gross Margin

59.27%

59.67%

61.61%

Payroll

$43,600

$56,000

$63,500

Marketing/Pro
motion

$5,400

$6,000

$6,000

Depreciation

$1,380

$1,380

$1,380

Rent

$18,000

$19,000

$20,000

Sales

Goods
TOTAL COST
OF SALES

%
Expenses

Utilities

$8,010

$8,200

$8,600

$1,200

$1,200

$1,200

Insurance

$5,000

$5,000

$5,000

Payroll Taxes

$0

$0

$0

Other

$0

$0

$0

Total Operating
Expenses

$82,590

$96,780

$105,680

Profit Before
Interest and Taxes

$32,545

$29,192

$34,912

$33,925

$30,572

$36,292

$4,513

$3,721

$2,894

Taxes Incurred

$8,410

$7,641

$9,606

Net Profit

$19,622

$17,830

$22,413

Net Profit/Sales

10.10%

8.45%

9.82%

Monthly
disposable supplies

EBITDA
Interest
Expense

7.4 Projected Cash Flow

Our projected cash flow is outlined in the following chart and table. The table shows
our planned loan principal repayment. We will be responsible for collecting and
repaying sales tax at the 6% rate charged by Connecticut.

PRO FORMA CASH FLOW

YEAR 1

YEAR 2

YEAR 3

Cash Sales

$194,245

$211,120

$228,204

SUBTOTAL CASH
FROM OPERATIONS

$194,245

$211,120

$228,204

Cash Received
Cash from Operations

Additional Cash Received

Sales Tax, VAT, HST/GST

Received

$11,655

$12,667

$13,692

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

$205,900

$223,787

$241,896

Expenditures

Year 1

Year 2

Year 3

Cash Spending

$43,600

$56,000

$63,500

Bill Payments

$117,261

$135,040

$140,758

SUBTOTAL SPENT ON
OPERATIONS

$160,861

$191,040

$204,258

Expenditures from
Operations

Additional Cash Spent

Sales Tax, VAT, HST/GST
Paid Out

$11,655

$12,667

$13,692

Principal Repayment of
Current Borrowing

$0

$0

$0

Other Liabilities Principal

Repayment

$0

$0

$0

Long-term Liabilities
Principal Repayment

$8,938

$8,938

$8,938

Purchase Other Current

Assets

$0

$0

$0

Purchase Long-term Assets

$0

$0

$0

Dividends

$0

$0

$0

SUBTOTAL CASH
SPENT

$181,453

$212,645

$226,888

Net Cash Flow

$24,446

$11,142

$15,008

Cash Balance

$39,446

$50,589

$65,597

7.5 Projected Balance Sheet

All of our tables will be updated monthly to reflect past performance and future
assumptions. Future assumptions will not be based on past performance but rather
economic cycle activity, regional industry strength, and future cash flow possibilities.
We expect solid growth in Jasmine Teahouse beyond the year 2005.
The accompanying pro forma Balance Sheet shows our steadily increasing net worth,
as we pay off our loans.

PRO FORMA BALANCE SHEET

YEAR 1

YEAR 2

YEAR 3

Cash

$39,446

$50,589

$65,597

Inventory

$7,400

$7,964

$8,195

Other Current Assets

$6,605

$6,605

$6,605

TOTAL CURRENT
ASSETS

$53,451

$65,158

$80,397

Long-term Assets

$13,808

$13,808

$13,808

Accumulated
Depreciation

$1,380

$2,760

$4,140

Assets
Current Assets

Long-term Assets

TOTAL LONGTERM ASSETS

$12,428

$11,048

$9,668

TOTAL ASSETS

$65,879

$76,206

$90,065

Liabilities and Capital

Year 1

Year 2

Year 3

Accounts Payable

$9,782

$11,217

$11,601

Current Borrowing

$0

$0

$0

Other Current
Liabilities

$0

$0

$0

SUBTOTAL
CURRENT
LIABILITIES

$9,782

$11,217

$11,601

Long-term Liabilities

$44,695

$35,757

$26,819

TOTAL LIABILITIES

$54,477

$46,974

$38,420

Paid-in Capital

$10,330

$10,330

$10,330

Retained Earnings

($18,550)

$1,072

$18,902

Earnings

$19,622

$17,830

$22,413

TOTAL CAPITAL

$11,402

$29,232

$51,645

Current Liabilities

TOTAL LIABILITIES
AND CAPITAL

$65,879

$76,206

$90,065

Net Worth

$11,402

$29,232

$51,645

7.6 Business Ratios

Business ratios for the next three years are shown below. Industry profile ratios based
on the Standard Industrial Classification (SIC) code 5812, Eating Places (including
cafes and tearooms), are shown for comparison.
The following table outlines some of the more important ratios from the Eating Places
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.
RATIO ANALYSIS
YEAR 1

YEAR 2

YEAR 3

INDUSTRY
PROFILE

0.00%

8.69%

8.09%

5.24%

Inventory

11.23%

10.45%

9.10%

2.72%

Other Current
Assets

10.03%

8.67%

7.33%

32.59%

Total Current Assets

81.14%

85.50%

89.27%

41.88%

Sales Growth
Percent of Total
Assets

Long-term Assets

18.86%

14.50%

10.73%

58.12%

TOTAL ASSETS

100.00%

100.00%

100.00%

100.00%

Current Liabilities

14.85%

14.72%

12.88%

21.75%

Long-term
Liabilities

67.84%

46.92%

29.78%

29.17%

Total Liabilities

82.69%

61.64%

42.66%

50.92%

NET WORTH

17.31%

38.36%

57.34%

49.08%

Sales

100.00%

100.00%

100.00%

100.00%

Gross Margin

59.27%

59.67%

61.61%

55.74%

Selling, General &

Administrative
Expenses

52.78%

52.47%

50.50%

37.46%

Advertising
Expenses

0.00%

0.00%

0.00%

2.06%

Profit Before
Interest and Taxes

16.75%

13.83%

15.30%

1.50%

Percent of Sales

Main Ratios

Current

5.46

5.81

6.93

0.81

Quick

4.71

5.10

6.22

0.51

Total Debt to Total

Assets

82.69%

61.64%

42.66%

53.68%

Pre-tax Return on
Net Worth

245.84%

87.13%

62.00%

2.39%

Pre-tax Return on
Assets

42.55%

33.42%

35.55%

5.16%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

10.10%

8.45%

9.82%

n.a

Return on Equity

172.09%

60.99%

43.40%

n.a

Inventory Turnover

10.67

11.08

10.84

n.a

Accounts Payable
Turnover

12.99

12.17

12.17

n.a

Payment Days

27

28

30

n.a

Total Asset
Turnover

2.95

2.77

2.53

n.a

Activity Ratios

Debt Ratios
Debt to Net Worth

4.78

1.61

0.74

n.a

Current Liab. to
Liab.

0.18

0.24

0.30

n.a

Net Working Capital

$43,669

$53,941

$68,796

n.a

Interest Coverage

7.21

7.85

12.06

n.a

Assets to Sales

0.34

0.36

0.39

n.a

Current Debt/Total
Assets

15%

15%

13%

n.a

Acid Test

4.71

5.10

6.22

n.a

Sales/Net Worth

17.04

7.22

4.42

n.a

Dividend Payout

0.00

0.00

0.00

n.a

Liquidity Ratios

Additional Ratios

SALES FORECAST

MONTH 1

Sales

MONTH
2

MONTH 3

MONTH 4

MONT
H5

MONT
H6

MONTH 7

MONT
H8

MONTH 9

MONTH
10

MONTH
11

MONTH 12

Hot Teas

$1,500

$2,500

$3,000

$3,000

$3,200

$4,000

$6,000

$6,200

$6,500

$6,000

$5,500

$5,000

Iced
Teas

$2,500

$3,000

$3,800

$3,400

$2,000

$1,400

$800

$600

$500

$900

$1,500

$2,000

Pastries

$1,200

$1,200

$1,200

$1,200

$1,200

$1,200

$1,200

$1,200

$1,200

$1,200

$1,200

$1,200

Chocolat
e

$3,000

$5,000

$8,000

$7,000

$7,000

$7,000

$7,000

$7,000

$14,000

$7,000

$9,000

$7,000

Tea
Parapher
nalia

$250

$250

$250

$250

$250

$250

$250

$250

$250

$250

$250

$250

Gift
Baskets

$200

$220

$225

$250

$300

$300

$800

$200

$600

$200

$400

$200

Loose
Teas

$600

$500

$500

$600

$700

$950

$1,100

$1,000

$1,000

$1,100

$1,000

$1,100

TOTAL
SALES

$9,250

$12,670

$16,975

$15,700

$14,650

$15,100

$17,150

$16,450

$24,050

$16,650

$18,850

$16,75