Steamy Brew Haven's Expansion
Determining the profitability of expanding hours and beverages
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Market Research Proposal
Market Research Proposal
Steamy Brew Haven primarily caters to the morning and afternoon crowd, offering a wide range of coffee selections and other non-alcoholic refreshment drinks. Given evolving preferences and demands of its diverse clientele, Steamy Brew Haven is exploring expansion of its current operations. This expansion involves two key elements:
Extended Operating Hours: Current hours are 6:00 AM to 3:00 PM, aligning with the typical coffee shop schedule. Extending hours of operation until midnight offers an opportunity to cater to a broader demographic and serve new customer segments. These extended hours would specifically target students who study late-night and students or faculty attending evening classes, offering them a convenient place to relax, study, or socialize during late hours.
Alcohol Offerings: To further differentiate Steamy Brew Haven from the competition and enhance the social experience, we explore the addition of alcohol selections, specifically beer and wine, to their menu. This strategic move aims to create a unique blend of coffee and alcoholic beverages, making Steamy Brew Haven a destination of choice for patrons seeking relaxation and social interaction.
Objective 1. Estimate the market size for extended hours and alcohol sales.
Objective 2. Assess the level of competition and market saturation.
Objective 3. Determine the profitability of extended hours.
Proposed Methodology
Competitor analysis
Research existing coffee shops and comparable businesses within a 2 mile radius that sell cafe drinks and/or alcohol within target hours. Analyze their offerings, price points, and customer volume to estimate market size and saturation.
To estimate customer volume, we’ll use publicly available data including google “business hours.” For offerings & price points, we will use data scraping to research existing online menus.
Employee Survey
Conduct a survey of current employees to determine interest in additional shifts, willingness to work extended hours, and number of potential new employees needed to cover extended hours.
Employees will receive 10 min during work hours to complete the survey. Sample questions:
“How do you feel about the prospect of extending our coffee shop's operating hours until midnight?” (not interested = 1, interested = 5)
“How comfortable would you be serving alcohol to customers in your role, if applicable” (not comfortable = 1, comfortable = 5)
Customer Survey
Conduct a survey among current patrons (college students, faculty and others) to understand their preferences and willingness to patronize the coffee shop in the extended-hours as well their attitudes on alcohol offerings.
Customers will be through QR codes included on receipts and located near check-out advertising a chance to win a free drink for completing a survey. For incentive we will offer 10 free drinks per 50 surveys completed, capped at 100 surveys (max cost $100). Sample questions:
“Would you be likely to visit our coffee shop during extended hours” (Yes/No/Maybe).
“How interested would you be in a coffee shop that offers a selection of alcoholic beverages (e.g., beer and wine)?” (not interested = 1, very interested = 5)
“How often do you think you would order alcoholic beverages at a coffee shop with extended hours?” (never = 1, frequently = 5)
Alcohol Supplier Research
Analyze cost associated with purchase of alcoholic beverages (beer & wine), as well as costs associated with acquiring an alcohol service license, and training for servers.
Check distributor pricing and determine in-store pricing.
Focus Group/Community Survey
Organize focus groups with potential customers to gather qualitative insights into their attitudes and preference towards coffee shops (both within the current opening time as well as the extended hours), alcohol-serving vendors, and possible concerns on either.
Distribute flyers on campus and around downtown campus, advertising $10 gift cards for Steamy Brew Haven for a 30 minute group interview (goal sample = 20, total cost = $200)
Projected Timeline
This project will take 2 months to complete. A projected timeline is provided below:
Month 1
Collect responses to customer survey across a four week period.
Complete competitor analysis.
Begin collecting feedback from focus group and community surveys.
Month 2
Conduct cost analysis for alcoholic beverages and alcohol service license.
Finish collecting feedback from focus group and community surveys.
Analyze data and generate report.
Findings and Results
Findings and Results
Data Collection & Analysis
Competitor Analysis
Data was compiled for competitors, both coffee shops and bars, for businesses located within a 2 mile radius of campus. Hours of operation were analyzed for both coffee shops and bars, and beer and wine offerings, along with average price for each, was compiled for those businesses where the relevant information could be found online.
Alcohol Beverage Profit Per Unit
Competitor offerings for beer and wine were compiled, and prices per unit were calculated based on the largest quantity available from local retail distributors (e.g. 30-pack vs. 12-pack of beer). Average price sold was calculated from information available on online menus from competitors to arrive at an estimated average profit per bottle of beer/glass of wine sold.
Return-Over-Investment (ROI) Calculation
Estimated investment costs over the next 10 years were based on a $0.47/hour annual increase in labor costs based on past trends, along with recurring cost of annual license fee. Return was calculated as net profit per unit of alcohol sold after accounting for break-even costs, with an assumption that beer would make up two-thirds of alcohol sales and wine one-third.
Calculations for estimated drinks sold per week were based on rough estimates of customer volume for the main competitor, Snakes and Lattes. Customer volume estimates were based on the number of total seats (taken from a video uploaded by the shop), and google “busy” hours, both of which can be viewed here. There was a base assumption about the number of seats for no wait, a 15 minute wait, a 30 minute wait etc. Using the responses from the customer survey question regarding frequency of ordering alcohol, we used the percentage of respondents who said they would “frequently” or “very frequently” purchase alcoholic beverages and multiplied this by the number of people per hour we’d expect based on the Snakes and Lattes customer volume estimate. Here we further assumed that ⅓ of alcoholic beverages would be wine, and ⅔ would be beer.
Customer Surveys
In the absence of actual customers to survey, survey results were randomly generated. We created six customer questions all on a likert scale. Then, we used ChatGPT to generate 50 customer responses. The raw responses are available here. Below, we include the key findings of the customer responses.
Figure 1. The chart on the left summarizes respondents' likelihood to visit during extended hours, while the chart on the right highlights the preferred visit times of those who would visit during extended hours.
Figure 2. The chart on the left summarizes the respondents' interest in the addition of alcoholic beverages to the menu and the chart on the right indicates the frequency at which respondents would order alcoholic beverages at Steamy Brew Haven.
Employee Surveys
As outlined in our proposal, we created an employee survey to determine if staffing needs would be met and if employees would be comfortable serving alcoholic beverages. 12 responses were then generated using ChatGPT. The raw responses are available here. Some key findings are tabularized below.
Figure 3. The chart on the left summarizes the willingness of current employees to work during extended hours (3pm onwards). The chart on the right indicates how comfortable employees are with serving alcoholic beverages.
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