What does the scorecard say?
The coffee industry is full of good people. Making a difference is part of their DNA. We love that. It’s what we strive to do. Business should build better lives – for owners, the people they work with, and customers. As they say, “Seize the day and enjoy the moment!” To help do that, we want to help you deliver coffee and other drinks.
We started by building our own platform for that. We soon realised we could do more. The entire industry could use our invention. Anyone keen to grow their business can deliver coffee to customers wherever they are, hot and not spilled!
To show the impact on a store, we used the ROAM model, our business scorecard, and discussed how the delivered “Marginal cup” adds sales that lift the ATO. We showed they can have an even higher profit margin (ROS%) than in-store sales giving you a higher ROAM%.
How big will the difference be? All theory? Let’s look at the scorecard. We have numbers from a coffeeshop that started with our CoffeeLIFT platform in 2020 when lockdown first hit us. That’s when tough times followed for many of us.
Many customers will pay more for convenience, so we raised menu prices for delivery by 15%. This reduces the impact of its cost to the business. Deliveries were about 30% of total sales.
| In-store sales | Deliveries | Total | |
| Sales | R 883 760 | R 383 109 | R1 266 869 |
| Variable Cost | R 362 342 | R 134 207 | R 496 549 |
| Platform Cost | R – | R 134 088 | R 134 088 |
| Fixed Cost | R 265 128 | R 265 128 | |
| Cash Profit before tax | R 256 290 | R 114 814 | R 371 104 |
| Cash Profit after tax | R 184 529 | R 82 666 | R 267 195 |
| Asset Value | R 350 000 | R 350 000 | |
| Return on Sales | 21% | 22% | 21% |
| Asset Turnover | 2,53 | 3,62 | |
| Return on Assets Managed % | 52% | 76% |
With no drop in the ROS% due to a delivery charge, the big benefit is a higher ATO. Its multiplier effect kicks in and lifts ROAM from 52% to 76%. That’s a 46% productivity improvement any business owner would find very tasty!
The benefit comes from more sales with few or no added assets. Remember the question that ATO asks, “For every Rand of assets how many Rands of sales do we generate?” Instead of R2,53 in sales for each Rand of assets, we now get R3,62 – a 43% improvement.
- You only pay platform cost when you deliver.
- Platforms spend millions on marketing to attract new customers. For you it’s free.
- The higher sales prices might cause some customers to resist ordering online. They may rather visit your store which is what you’d prefer.
- You manage the times when your store is available online. This prevents the need for added people or equipment when too busy.
It’s having your cake and eating it. With good coffee! Your own of course.
The benefit of deliveries is a no-brainer. Sure, there are coffee shops where it might not make sense. From a pure financial viewpoint, deliveries are worth it. Find yourself the right partner and get going.
Here’s a follow-up question:
Should you use a third-party platform, or do it yourself? In the next blog we’ll tell you how we enabled our delivery service. Building apps can be expensive. It doesn’t need to be.
Please note: We spilt no coffee writing this blog…
