Reference no: EM133419908

Kat's Cat Café

When Katherine was young, she had big dreams of becoming a veterinarian. She always loved animals and befriended all the crows in her neighbourhood by training them to trade shiny objects in exchange for food.
She volunteered at the local SPCA growing up and did her residency at the local pet hospital- she ended up specializing in cats. Since starting her career, she has thoroughly enjoyed her job and has been a reliable, hard-working vet for her clinic. However, after 5 years of pulling long hours at the clinic, continued volunteer work at the SPCA, and her busy social schedule, Katherine is exhausted and in need of a vacation! She requested 1 month off from her various roles and booked a trip to Japan to unwind.
Whilst there amongst the cherry blossoms and hot springs, she discovered the very first Cat Café. She had heard about these types of establishments, but had never seen one. She wandered inside, was asked to register, pay a fee of $7, and purchase a drink and snack of her choice. From there, she was allowed to roam the property and familiarize herself with all the cats on the premises. The place was scattered with toys and treats- people and cats alike were able to come and go as they pleased!
Katherine grew excited and envisioned opening a similar concept in Vancouver. While on the trip, she also received an email from a recruiter to move to Prince George and work at a training facility alongside university students to help give them the hands on experience they needed as a Practicum Instructor. The job in Prince George boasts an annual salary of $155,000. Katherine recalls reading reports that they were in dire need of veterinarians to assist with running the education program there. Based on quick research, Katherine believes a lower cost of living and would likely be able to cut living expenses by about 30%.
Katherine felt overwhelmed and knew she had to crunch some numbers. Her current role paid about $3,500 every two weeks after payroll deductions. She paid approximately $3,000 for rent every month living with her partner, had car payments of $130 per month and typical amounts for food, gas, a gym membership, and social outings. She made sure to donate a minimum of $12,000 to the animal shelter each year and would not want to change that. She also supported her partner's education, which cost an additional $4,500 per semester, totaling $18,000 per year. Their cat, Steve, had a weekly cost of $30 in food and annual checkups and maintenance of $350.
As Katherine continued sitting in the café petting a young cat named Niko, she couldn't help but get excited about starting a Cat Cafe in Canada. She estimates that renting the location in the city center would be around $2,500 to $6,000 a month depending on the location. The cats could likely be sourced from the SPCA, whom she has had a long-standing connection with. She is thinking of selling the idea as a creative way to boost adoption rates and potentially save cats from being housed at the shelter. Katherine plans to maintain a mark-up of 40% on all food and drinks served. To start the business, she
Kat's Cat Café
would have to hire staff who can make artisanal coffee. She would also need a local source for quality baked goods.
Katherine is unsure of how many staff members she will need or appropriate wages. She lacks management expertise and needs an action plan for hiring and maintaining staff. Katherine is interested to learn more about specific accounting ethical principles and what she should look out for in hiring decisions, setting up well-designed processes/policies, etc.
To start, Katherine believes that 5 cats will be sufficient for the café, as it will be open 5 days a week. She will close shop on Mondays and Tuesdays to continue her volunteering with the SPCA. Katherine doesn't want to deal with all the paperwork at the SPCA and wants to give these cats a better home as quickly as possible so she is considering just putting them in her car at the end of her shift without notifying her colleague or manager.
Katherine expects to invest all her savings into the cat café. She is currently paying back her student loans- they charge an interest rate of 6.5%. She has diligently saved 20% of her salary since starting her career and keeps it in her chequing account- the account currently holds about $75,000. The bank recently sent her a letter about an investment opportunity that would provide 6.0% interest on a long- term savings account. Katherine was busy and used it to line the litter box.
To get the cat café started, Katherine will need the to purchase the following (in addition to renting a store):
- $13,500 of furniture
- A $ 4,000 industrial coffee maker
- $1,400 for the point of sales systems
- $ 700 worth of cat toys and homes
After initial expenses, she expects to pay $500 per month for electricity and heating, plus another $300 monthly for cleaning. Admittedly, it will be tricky having so many cats, food, and drinks in the same space. Katherine estimates all the assets will last a total of 8 years before having to be tossed out and replaced.
She'll likely also consult a lawyer who charges a retainer of $2,000 and an hourly rate of $550. She wants to make sure that the liability issues won't be a problem.
Given all these expenses, Katherine is uncertain about pricing. She believes that there will be an average of 20 customers per day in the first year and expects this number to grow by 10% per year for 5 years and then plateau for the next 4 years.
Kat's Cat Café
Her partner in business school keeps talking about the importance of building a budget and doing variance analysis. Katherine just checks her bank balance once a month and as long as it's still positive, she doesn't feel there's much to worry about. She doesn't understand why budgeting and variance analysis are so critical.
After calling her partner back home, Katherine realized she cannot address his inquiry about structuring the new business. Katherine just wants to run a successful business- she doesn't want to deal with decision making or bringing extra people into operations. She prefers spending her time with the cats rather than people, but maybe she can bring on her partner as an investor in the company. Katherine knows he's saving up to start his own tech start up, but she could use the $90,000 he has saved up to reduce her borrowing from the line of credit at 9.5%. Plus, he could put his degree to use and help with the numbers side of things.
Katherine has seen a number of Cryptocurrency vending machines popping up around the city and wonders if it might be a good investment for her to run on her property. She wants some advice on accepting crypto-currency payments and installing a vending machine on site including all potential risks and benefits.

Advise Katherine on her career path and outlook of the Cat Cafe business. Produce a business report, including comprehensive analysis, recommendations, and any questions you may need to ask Katherine.

Write a written report in Word with all calculations in an appendix.