HomeMy WebLinkAboutG- 19 Library Coffee concession & Gift Boutique Rot_,_
* TheCityofAzusa (ie Al
City Library *729 No. Dalton Street *P.O. Box 1395 *Azusa, CA 91702-1395
Tel : (818) 812-5271 *FAX (818)334-4868
AGENDA ITEM
TO: HONORABLE MAYOR& MEMBERS OF T CITY COUNCIL
FROM: PAYMANEH MAGHSOUDI, CITY LIBRARI
VIA: HENRY T. GARCIA, CITY ADMINISTRATOR
DATE: FEBRUARY 12, 1997
SUBJECT: LIBRARY COFFEE CONCESSION & GIFT BOUTIQUE
Background
At the November 4 regular meeting,the City Council considered the concept of a coffee concession
and gift boutique in the City Library. An established member of the Azusa business community,
Costanza Coffee, has worked with the City Library Commission to develop a proposal for an
attractive coffee cart/gift item display area with a minimum start-up loan from the General Fund.
This report presents the details and recommends Council approval.
Findings
At the November 4 regular meeting,the City Council considered the concept of a coffee concession
and gift boutique in the City Library. Council directed staff to work with the City Library
Commission in consulting members of the Azusa business community to learn how to approach such
a business venture and to identify the costs versus its potential payback. In keeping with Council's
direction to foster a partnership with Azusa business, staff and the Commission met with Mr. Chris
Parker of Costanza Coffee on many occasions during the past three months. An established member
of the Azusa business community with operations in the new Azusa Promenade Center, Costanza
Coffee, Mr. Parker has developed a proposal for an attractive coffee cart/gift item display area with
a minimum start-up loan from the General Fund. Following are the details.
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Honorable Mayor& Members of the City Council
February 12, 1997
Page 2
Depreciable Equipment
Any viable business venture requires an initial investment in depreciable capital equipment. In the
case of the coffee cart, equipment and retail display furniture, the usable life is anticipated to be
seven to ten years. For the purposes of the Azusa Library proposal,the cost of the equipment shall
be fully amortized, or repaid, within 36 months. This is made possible by renting the coffee cart
itself from Costanza, creating a"win-win" situation for both the City and an Azusa business:
Espresso Machine, 2-Group $ 7,463
Airpot Coffee Brewer 575
Airpots (8) 346
Espresso Grinders (2) 1,070
Coffee Grinders 1,450
Refrigerator, Upright 1,055
Refrigerator, Counter 850
Freezer 487
Ice Machine 1,990
Scale 250
Blender 433
Espresso Accessories 150
Sink 633
Cash Register 225
Subtotal 16,977
Less: Available on Costanza Cart (7,463)
Total Equipment $ 9,514
Monthly amortization for 36 months $ 264
Consumable Supplies
To remain viable and able to serve customers promptly without time-consuming shuttling of
supplies,a business establishment must lay-in approximately a 30-day back stock of the supplies that
it consumes as a function of its sales. For the Library shop these would be as follows. Staff has been
working with a local furniture maker to obtain sturdy oak display furniture at truly cut-rate pricing.
Once again,the budgeted amortization period is 36 months. However,the merchandise display
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Honorable Mayor& Members of the City Council
February 12, 1997
Page 3
cabinets may actually be purchased by the Friends of the Library, which would hasten the pay-back
period:
Architectural $ 3,000
Cabinets for Coffee& Food 5,000
Cabinets for Merchandise 5,000
Floor Sink or Floor Drain, as Req. 4,000
Floor Covering (Tile) 1,500
Cordon Roping 1,000
Employee Training 400
Product- 30 Days:
Coffee $400
Milk 300
Sugar 75
Syrups 180
Beverage 200
Misc. 245 1,400
Supplies - 30 Days:
Cups $300
Lids 100
Stirrers 50
Trays 100
Java Jackets 500
Misc. 50 1.100
Total Consumable Supplies $22,400
Monthly Amortization over 36 Months: $622
Other Costs of Business Operations
There are several other categories of cost that go into operating a business, as follows:
a. Insurance-Primarily Workers' Compensation,to be carried by Costanza. The City would cover
liability insurance through its existing self-insurance program.
b. Professional Fees - A monthly payment to Costanza Coffee in return for providing day-to-day
supervision, staging and stocking of baked goods and bulk coffee beans, scheduling and managing
staff, and shuttling of supplies as needed.
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Honorable Mayor& Members of the City Council
February 12, 1997
Page 4
c. Miscellaneous supplies and maintenance: A monthly cost for towel service, equipment repairs
and reciprocal participation in the promotions of Costanza Coffee.
d. Office Supplies: The cost of business cards,promotional advertising, labels and general supplies.
e. Payroll:All payroll expenses,such as recruitment,scheduling,training and rotating of employees;
payroll taxes and workers' compensation will be handled by Costanza and billed to the Library. The
proposal includes 80 payroll hours per week and 11%in payroll tax burden. The Library will assign
an existing City employee to serve as liaison, and the Friends of the Library will assist with sales
coverage on a volunteer basis during peak periods. Hours of coffee house operation will coincide
with the hours during which the Library is staffed,roughly 7 AM to closing, six days per week.
f. Ongoing cost of goods sold: Roughly 33%of sales revenue will be spent on replenishing stocks
of items offered for sale. This includes the coffee beans, milk,baked goods, canned goods, sugar,
etc.
g. Ongoing cost of consumable supplies. This cost item is for the replenishment of stocks of paper
cups, lids,java jackets, napkins, stirrers, etc.
h. Taxes: Sales Tax remittances to the State, cost of County Health License, and payments to the
City of Azusa for Permits, Building Inspection, etc.
g. Equipment Lease: Monthly cost to rent the espresso machine and cart from Costanza Coffee.
h. Utilities: The one single item that would be "contributed"by the City.
Cost Summary and Projection of Net Sales Margin
The following chart illustrates, on a monthly projection basis, how each of the above items of cost
compare against the revenue anticipated from sales of beverages and food. The cost/sales of gift
items has not been included in order to present the most conservative scenario and thus provide
Council the most comfort with regard to this decision. The plan calls for an advance of$15,000
from the General Fund. Note,however,that the Sales Margin becomes positive in the 4th month and
that all monies owed to the General Fund are repaid in the 36th month. After that, the Library
Commission plans to allocate the Net Sales Margin to a Foundation for the establishment of a new
Azusa Town Center Library.
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Honorable Mayor& Members of the City Council
February 12, 1997
Page 6
Recapitulation
A final recap of the General Fund's investment,to be repaid in 36 months, is as follows:
Equipment $ 9,514
Initial Supply Stock 22,400
Operating Cash flow 15.000
Total $46,914
Mrs. Alice Williams,who has been newly selected to serve as President of the Library Commission,
will be available at the Council Meeting to speak for the Commission and to answer any questions
that Council may have. Likewise, Mr. Parker will be in attendance to further amplify the potential
success of this important partnership between the government of the City of Azusa and its business
community. Staff is recommending approval.
Recommendation
Staff recommends that Council approve the City-business partnership with Costanza Coffee for the
Library Coffee Lounge and direct staff and the City Attorney to prepare as soon as possible the
appropriate contract documents for final approval by the Library Commission and City Council.
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ESTIMATED OPERATING EXPENSES BY SALES MAGNITUDE • N 4
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MONTH DAY MONTH DAY MONTH DAY MONTH DAY MONTH DAY MONTH DAY • MONTH DAY Io
1 SALES $4,500.00 $225.00 $5,000.00 $250.00 $6,000.00 $300.00 $7,000.00 $350.00 $8,000.00 $400.00 $8,500.00 $425.00 $9,000.00 $450.00 4
_BEVERAGE UNITS 2368 118 2632 132 3168 158_ 3684 184 4211 211 4474 224 4737 237 la„
2 EXPENSES y
3 INSURANCE AVG $100.00 $3.33 $100.00 $3.33 $100.00 $3.33 $100.00 $3.33 $100.00 $3.33 $100.00 $3.33 $100.00 $3.33 Oi-ot
4 PROFESSIONAL FEE $300.00 $10.00 $300.00 $10.00 $300.00 $10.00 $300.00 $10.00 $300.00 $10.00 $300.00 $10.004. $300.00 $10.00 ""'t,
5 MISC. AVG a $115.00 $3.83 $115.00 $3.83, $115.00 $3.83 $115.00 $3.83 $115.00 $3.83, $115.00 $3.83 $115.00 $3.83- co
- n
6 OFFICE SUPPLIES AVG $50.00 $1.67 $50.00 $1.67 $50.00 $1.67 $50.00 $1.67 $50.00 $1.67 $50.00 $1.67 $50.00 $1.67.,
7 PAYROLL AVG $2,000.00, $66.67 $2,000.00 $66.67 $2,000.00 $66.67 $2,000.00 $66.67 $2,000.00 $66.67 $2,000.00 $66.67 $2,000.00 $66.67 (")
8 PRODUCT 33%OF SALES $1,485.00 $48.50 $1,660.00 $55.00 $1,980.00 $66.00 $2,310.00 $77.00 $2,640.00 $88.00 $2,805.00 $93.50 $2,970.00 $99.00 =
9 SUPPLIES 7%OF SALES $450.00 $15.00 $500.00 $16.67 $600.00 $20.00 $700.00 $23.33 $800.00 $26.67 $850.00 $28.33.. $900.00 $30.00 n,
10 TAXES 2%OF SALES 1 $90.00 $3.00 $100.00 $3.33 $120.00 $4.00 $140.00 $4.67 $160.00 $5.33 $170.00 $5.67 $180.00 $6.00
11 CART LEASE $250.00 $8.33 $250.00 $8.33 $250.00 $8.33 $250.00 $8.33 $250.00 $8.33 $250.00 $8.33 $250.00 $8.33
12 UTILITIES AVG $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
13 DEPRECIATION $264.00 $8.80 $264.00 $8.80 $264.00 $8.80 $264.00 $8.80 $264.00 $8.80 $264.00 $8.80 $264.00 $8.80
1
14 AMORTIZATION $622.00 $20.73 $622.00 $20.73 $622.00 $20.73 $622.00 $20.73 $622.00 $20.73 $622.00 $20.73_ $622.00 $20.73
15 EXPENSES TOTAL • $5,726.00 $190.87 $5,951.00 $198.37 $6,401.00 $213.37 $6,851.00 $228.37 $7,301.00 $243.37 $7,526.00 $250.87 $7,751.00 $258.37
14 NET 01,226.001 $34.13/ ($951.00) $51.63 ($401.00) $86.63 $149.00 $121.63 $699.00 $156.63 j $974.00 $174.13 $1,249.00 $191.61