Case Study – Rick's Cafe Americaine

Period considered: 01/06/2001 – 31/05/2006 (as to include period of no invoicing during permit inquiry – on the contrary if he go back to work he will be full-cashing from the first day) 2) No NPV calculated 3) Initial stock of RM is not considered in the initial investment 4) Depreciation period for investment = 5 years 5) Spanish VAT = 16% 6) Spanish Corporate Tax =35% 7) Spanish Public Holydays = 11 days/year MAIN ALTERNATIVES A1) NO BAR SUB-ALTERNATIVES ) Cost of Life = €900/month b) Cost of Life = €900/month +50% = €1,350/month Assumptions: * Apartment pay-off considered as a profit A2) ESTAMBUL’S CAFE Only 1 alternative Assumptions * The shop will be located in downtown, so it will catch 100% of the tourist population during the peak months. Therefore, July/August will have 31 days/month opening with daily invoicing increased by 306,97% (132,000 additional habitants vs. 43,000) * We will calculate revenues according to the information we have for Rick’s cafe. * Coffee supplier will be Estambul’s cafe coffee cost = €12 for Regular coffee / €24 for special coffee * coffee sale price = €0,80 for regular – €2,40 for special * COS for other consumables = 22% (anyway, we should calculate breakeven as to understand whether it is far from the daily sales amount of €450 forecasted by franchisor’s salesman). * No sales in the first 8 months (6 months for spirit permits + 2 months for building work) A3) RICK’S CAFE SUB-ALTERNATIVES a) Rent 1 local near Station = €450/month * Coffee supplier will be Torres Quindos * Daily Sales will be in the low range coffee cost = €9 for Regular coffee / €18 for special coffee * coffee sale price = €0,55 for regular – €1,40 for special * COS for other consumables = according to corresponding margins * COS for soft-drinks + no alcohol = according to tea margins * No sales in the first 5 months (3 months for spirit permits + 2 months for building work) * A simulation of revenues assuming we purchase the shop through a 5 years mortgage should be developed, too. b) Rent 2 locals near Station = €900/month * The shop will be higher level, so it will catch 25% of the tourist population during the peak months.

July/August’s daily invoicing will be increased by 76,74% (132,000 additional habitants * 0,25 vs. 43,000) * Coffee supplier will be Estambul’s cafe * Daily Sales will be in the top range (due to extended capacity to catch market clients as well as train travellers) * coffee cost = €12 for Regular coffee / €24 for special coffee * coffee sale price = €0,55 for regular – €1,40 for special * COS for other consumables = according to corresponding margins * COS for soft-drinks + no alcohol = according to tea margins (72%) * No sales in the first 5 months (3 months for spirit permits + 2 months for building work) ) Rent locals in downtown = €1,650/month * The shop will be located in downtown, so it will catch 100% of the tourist population during the peak months. Therefore, July/August will have 31 days/month opening with daily invoicing increased by 306,97% (132,000 additional habitants vs. 3,000) * Coffee supplier will be Cafes Ponce (better quality available) * Daily Sales will be in the top range (due to best shop location) * coffee cost = €15 for Regular coffee / €30 for special coffee * coffee sale price = €0,80 for regular – €2,40 for special (SAME THAN ESTAMBUL) * COS for other consumables = according to corresponding margins * COS for soft-drinks + no alcohol = according to tea margins (72%) * We will sell SPIRITS (15% of total revenues with 72% margins) * No sales in the first 8 months (6 months for spirit permits + 2 months for building work)