5.2.

1 Sales Forecast

Food costs are assumed at 25% for coffee beverages and 50% for retail beans and pastries. Proximity to
the University campus will dictate certain sales seasonality with revenues slightly decreasing during the
school vacation periods.

The chart and table below outline our projected sales forecast for the next three years.

Internet Coffee Shop Marketing Plan

JavaNet Internet Cafe

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Financials, Budgets, and Forecasts

The marketing plan is built on these truths:

The marketing budget is based on a percentage of sales value. Currently, that value is set at 20%.

Building a strong brand and brand loyalty is critical to the success of JavaNet.

Marketing is a critical component of the JavaNet business plan.

The relationship between marketing dollars spent and revenues generated is positive only to a certain
point. We don't feel that a marketing budget based on 20% of sales is close to that point where
additional marketing dollars spent won't create additional revenue. If we can manage, we plan to spend
more than 20% of sales on marketing in future years. However, we want to keep this relationship in mind
as we consider spending more on marketing efforts.

Our understanding of the need for strong branding and emphasis on marketing gives us a competitive
edge over other cafes in our area and potential competitors.

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Break-even Analysis

JavaNet is operating in an industry capable of supporting high gross margins. Variable costs in
relationship to per-unit revenues are low. Variable costs are equal to roughly 25% of per-units revenues.
It is our hope that as we move into the future and continue to build relationships with our suppliers, this
value will decrease further, approaching a value of 20%.

Fixed costs for JavaNet equal almost $7,500. Fixed costs include: payment of debt, facility lease costs,
hardware costs, and other costs JavaNet must maintain on a monthly basis. These costs are fixed and
aren't impacted by an increase or a decrease in sales.

Currently, JavaNet will break even at a monthly sales point of $10,000.

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Break-even Analysis

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Break-even Analysis

Monthly Units Break-even 2,986

Monthly Revenue Break-even $10,002

Assumptions:

Average Per-Unit Revenue $3.35

Average Per-Unit Variable Cost $0.84

Estimated Monthly Fixed Cost $7,500

Sales Forecast

Revenues for the first year of operation are based on an almost 10% growth rate from month to month.
This is an aggressive estimate, but we feel that our strong emphasis on marketing will have positive
results. Annually, beyond the first year of operations, we're predicting a growth rate of roughly 10%.
We'll have a better idea of potential growth rate beyond year one as we make our way through our first
year. The plan will be updated as we receive more information.

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Sales Forecast

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Sales Forecast

2001 2002 2003 2004 2005

Unit Sales

Coffee (based on average) 16,230 17,853 19,639 21,602 23,763

Specialty Drinks (based on average) 9,129 10,042 11,047 12,151 13,366

E-mail Memberships 12,173 13,390 14,729 16,202 17,822

Hourly Internet Fees 60,255 66,280 72,908 80,199 88,219

Baked Goods (based on average) 54,777 60,255 66,280 72,908 80,199

Other 0 0 0 0 0

Total Unit Sales 152,564 167,820 184,602 203,062 223,368

Unit Prices 2001 2002 2003 2004 2005

Coffee (based on average) $1.00 $1.00 $1.00 $1.00 $1.00

Specialty Drinks (based on average) $2.00 $2.00 $2.00 $2.00 $2.00

E-mail Memberships $10.00 $10.00 $10.00 $10.00 $10.00

Hourly Internet Fees $2.50 $2.50 $2.50 $2.50 $2.50

Baked Goods (based on average) $1.25 $1.25 $1.25 $1.25 $1.25

Other $0.00 $0.00 $0.00 $0.00 $0.00

Sales

Coffee (based on average) $16,230 $17,853 $19,639 $21,602

$23,763

Specialty Drinks (based on average) $18,259 $20,085 $22,093 $24,303

$26,733
E-mail Memberships $121,726 $133,899 $147,289 $162,018 $178,219

Hourly Internet Fees $150,636 $165,700 $182,270 $200,497 $220,547

Baked Goods (based on average) $68,471 $75,318 $82,850 $91,135

$100,248

Other $0 $0 $0 $0 $0

Total Sales $375,323 $412,855 $454,141 $499,555 $549,510

Direct Unit Costs 2001 2002 2003 2004 2005

Coffee (based on average) $0.50 $0.50 $0.50 $0.50 $0.50

Specialty Drinks (based on average) $2.50 $2.50 $2.50 $2.50 $2.50

E-mail Memberships $0.63 $0.63 $0.63 $0.63 $0.63

Hourly Internet Fees $0.31 $0.31 $0.31 $0.31 $0.31

Baked Goods (based on average) $0.00 $0.00 $0.00 $0.00 $0.00

Other $0.00 $0.25 $0.25 $0.25 $0.25

Direct Cost of Sales

Coffee (based on average) $8,115 $8,927 $9,819 $10,801 $11,881

Specialty Drinks (based on average) $22,824 $25,106 $27,617 $30,378

$33,416

E-mail Memberships $7,669 $8,436 $9,279 $10,207 $11,228

Hourly Internet Fees $18,679 $20,547 $22,601 $24,862 $27,348

Baked Goods (based on average) $0 $0 $0 $0 $0

Other $0 $0 $0 $0 $0

Subtotal Direct Cost of Sales $57,286 $63,015 $69,317 $76,248

$83,873

Expense Forecast
The marketing budget will consistently equal approximately 20% of sales. One of our strongest strengths
is our marketing and brand building capabilities, and the aggressive marketing budget is a reflection of
the importance we attribute to our marketing activities.

Currently, the marketing budget beyond year one remains set at 20% of sales. It is our hope to increase
this budget should sales and efficiencies of scale allow us to do so.

Explanation of Major Marketing Expenses:

Local TV spots... In our first year of operations, we will spend $23,000 on TV spots. TV spots allow us to
reach a large audience and effectively target our market.

Print Materials... Print materials always require a significant budget. They include: flyers, literature
distributed internally, novelties for customers, coupons, and anything else we can squeeze into this
budget.

Local Newspapers... An important part of our marketing efforts. Newspapers ads will give us a vehicle for
consistently getting our message/brand in front of a large number of potential customers. We believe
this vehicle will get our message to seniors, which make up a large portion of our target market. In
addition, the business section will provide us with a means for communicating with our business
customers.

Local Radio Spots... These are an inexpensive way to secure a large number of daily impressions.

JavaNet Events... This will include local radio and TV events where radio and TV stations broadcast from
the JavaNet site offering freebies to first-time customers for stopping by. JavaNet will also run
educational programs and community events throughout the year.

Customer Happiness Representative... This employee will monitor the level of happiness amongst
JavaNet customers. They will be responsible for: developing customer satisfaction programs, monitoring
happiness levels, responding to customer concerns, and the general well being of every JavaNet
customer.

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Marketing Expense Budget

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Marketing Expense Budget

2001 2002 2003 2004 2005

Local TV Spots $23,000 $25,300 $27,830 $30,613 $33,674

Print Materials $6,750 $7,425 $8,168 $8,984 $9,883

Other $3,300 $3,630 $3,993 $4,392 $4,832

------------ ------------ ------------ ------------ ------------

Total Sales and Marketing Expenses $33,050 $36,355 $39,991 $43,990

$48,389

Percent of Sales 8.81% 8.81% 8.81% 8.81% 8.81%

Linking Sales and Expenses to Strategy

Our marketing expenses are tied directly to our sales revenue. As sales increase, the marketing expenses
will increase. Currently our marketing expenses equal roughly 20% of sales, and we hope to increase that
value in the future. Our programs will be monitored for efficiency and return on investment. Most
notably, we want to pay close attention to the value of the "Customer Happiness Representative." This
component of our marketing budget is expensive, and we want to track the value of the program to
make sure we're optimizing our budget. Periodically, we will survey our customers to determine the
effectiveness of our programs, and we'll adjust the marketing mix appropriately based on our findings.

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Contribution Margin

The Contribution Margin chart and table presents a strong outlook for JavaNet's first year of operations.
Sales increase an average of 10% per month in the first year.

Contribution margin runs at roughly 50%.

The marketing budget is consistently based on 20% of total revenue.

A strong focus on local TV and radio is apparent in the expense breakdown.

The marketing budget is spread evenly throughout the year.

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Contribution Margin

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Contribution Margin

2001 2002 2003 2004 2005

Sales $375,323 $412,855 $454,141 $499,555 $549,510

Direct Cost of Sales $57,286 $63,015 $69,317 $76,248 $83,873

Other Variable Costs of Sales $3,000 $3,000 $3,000 $3,000 $3,000

------------ ------------ ------------ ------------ ------------

Total Cost of Sales $60,286 $66,015 $72,317 $79,248 $86,873

Gross Margin $315,036 $346,840 $381,824 $420,306 $462,637

Gross Margin % 83.94% 84.01% 84.08% 84.14% 84.19%

Marketing Expense Budget 2001 2002 2003 2004 2005

Local TV Spots $23,000 $25,300 $27,830 $30,613 $33,674

Print Materials $6,750 $7,425 $8,168 $8,984 $9,883

Other $3,300 $3,630 $3,993 $4,392 $4,832

------------ ------------ ------------ ------------ ------------

Total Sales and Marketing Expenses $33,050 $36,355 $39,991 $43,990

$48,389

Percent of Sales 8.81% 8.81% 8.81% 8.81% 8.81%

Contribution Margin $281,986 $310,485 $341,833 $376,317 $414,249

Contribution Margin / Sales 75.13% 75.20% 75.27% 75.33% 75.39%