Le bon café et thé : a cross border business opportunity

GRADO: Administración y Dirección de Empresas Course 2016/2017 Le Bon Café et Thé - A Cross-Border Business Opportunity Author: Jacqueline Torres Project Directors: Iñaki Heras and Anjel Errasti Donostia-San Sebastián, March 6, 2017 Le Bon Café et Thé - A Cross-Border Business Opportunity Index 1. Introduction 5 2. Project Objectives 5 3. Methodology 6 4. Successful Entrepreneurship and Business Planning Red Ocean Blue Ocean Business Strategy 6 6 5. The Business Plan Business Plan Strategy 5.1 Entrepreneur’s situation 5.2 Entrepreneur’s Background and Skills Observations 5.3 Planning the Business Structure 8 8 9 9 9 10 6. Mission Vision Values and Objectives 6.1 Business Concept 6.2 Mission Statement 6.3 Vision 6.4 Values 6.5 Objectives 10 10 11 11 11 11 7. Business Model Canvas Sections 7.1 Customer Segments 7.1.1 Spain 7.1.2 France 7.2 Commercial Offer and Value Proposition for Each Segment Spain and France 7.3 Locations 7.4 Distribution channel 7.5 Customer Relations 7.6 Revenue Streams 7.7 Key Resources 7.7.1 Suppliers 7.7.2 Human Resources 7.8 Key Activities 7.9 Key Partners 7.10 ​Initial Investments 12 12 12 13 14 14 15 19 20 21 22 22 23 24 24 26 1 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.11 Competition Analysis 7.12 Strategic Marketing and Marketing Plan 7.12.1 Marketing Objectives 7.12.2 Market Branding 7.12.3 Marketing Phases 8. Analyzing Cross-Border Differences 8.1 Choosing a Business Entity 8.1.1 Options of Business Entities in France 8.1.1.1 Entreprise Individuelle 8.1.1.2 Auto – Entrepreneur 8.1.1.3 L’entreprise individuelle à responsabilité limitée (EIRL) 8.1.1.4 Société à Responsabilité Limité (SARL) L'entreprise unipersonnelle à responsabilité limitée (EURL) 8.1.1.5 La Société Anonyme (SA) La société par actions simplifiée (SAS) 8.1.2 Options of Business Entities in Spain 8.1.2.1 Empresario Individual (Autónomo) Autónomo Dependiente 8.1.2.2 Emprendedor de Responsabilidad Limitada (ERL) 8.1.2.3 Sociedad de Responsabilidad Limitada (SL) 8.1.2.4 Sociedad Limitada Nueva Empresa (SLNE) 8.1.2.5 Sociedad Anónima (SA) 8.2 Corporate Tax Laws and Tax Reductions 8.2.1 Corporate Tax in Gipuzkoa, Basque Country, Spain 8.2.2 Corporate Tax in France 8.3 Unemployment Aid 8.3.1 Unemployment in Gipuzkoa Spain 8.3.2 Unemployment in France 8.4 Minimum Wage and Social Security 8.4.1 Minimum Wage in Spain 8.4.2 Minimum Wage in France 8.5 Government Aid and Grants 8.5.1 GIPUZKOA, BASQUE COUNTRY, SPAIN 8.5.2 PYRÉNÉES ATLANTIQUES, FRANCE 8.6 Other factors 8.7 Incorporated Financial Analysis R​esources and Needs Sales Forecast 2 28 34 34 34 35 37 37 38 38 39 40 41 41 41 42 43 43 45 45 46 47 47 49 49 49 50 50 51 52 52 55 58 58 62 66 68 68 69 Le Bon Café et Thé - A Cross-Border Business Opportunity 9. Conclusions 9.1 Which location should the entrepreneur invest in? 9.2 Personal Conclusions 71 71 73 10. Attachments 74 10.1 Financial Analysis Bayonne 74 10.2 Financial Analysis San Sebastian 89 10.3 VAT information France 106 10.4 VAT information Spain 109 10.5 General Costs 112 10.5.1 Telecommunications Offer France 112 10.5.2 Telecommunications Offer Spain 112 10.5.3 Energy Costs Spain 113 10.5.4 Insurance Costs Spain 114 10.5.5 Filing Fees S.L. Diputación Foral Gipuzkoa 114 10.6 Filing Fees Price Sheet for Consulting Agency in France 115 10.7 Example External Costs for Fast Food Restaurant with 3 employees in Aquitaine, France 116 11. References 116 3 Le Bon Café et Thé - A Cross-Border Business Opportunity 1. Introduction After recently completing academics in Business Administration from the University of the Basque Country, possessing full language proficiency in English, Spanish, and French as well as a profound interest in entrepreneurship, it is the intention of the head of this investigation to set up a business in Europe upon graduation. Strategically located on the border of the Basque Country region, this entrepreneur seeks to highlight, analyse and compare the ​cross-border differences involved setting up a specific business idea between two locations situated in Spain and France​. To be more precise, this cross-country analysis focuses solely on the most relevant bordering provinces of Gipuzkoa in the Basque Country, Northern Spain, and les Pyrénées Atlantiques, also in the Basque Country, South-western France. It is interesting to point out that most provinces in Spain, such as Catalonia, Valencia, the Basque Country, etc., have varying laws with respect to entrepreneurship. Hence, each of these normally have specific policies for corporate tax rates, tax deductions, and grants. While this is not the case in France, where business laws remains the same throughout the country, each department does indeed have their differences in terms of government aids and grants for new businesses. 2. Project Objectives The primary objectives of this investigation are: ● To lay out a ​general Business Plan​ for Le Bon Café et Thé, an innovative coffee and tea shop offering the high quality hot and cold beverages, as well as “Bubble Tea” an innovative product already storming the market in big cities which would be an exclusive product in both of the regions being analyzed. ● To identify, analyse and ​compare the cross-border differences ​involved in setting up the same business in each of the two locations. ● To ​decide on the most favorable country ​for the entrepreneur to invest her project based on the criteria and information collected. 4 Le Bon Café et Thé - A Cross-Border Business Opportunity 3. Methodology This project has been carried out using a variety of tools and research. The sources will be cited in each section. The document also includes a final list of references and attachments used in determining the financial analysis for the business plan. Theoretical concepts have been applied stemming from the entrepreneurs education in Business Administration. Additionally, much of the information collected comes from real sources in the industry, such as ​coffee shop owners’ experiences and consulting agencies in both Spain and France. The sales projections and estimated business costs are based on real life scenarios in both locations. Some data from similar companies in the industry has been used to calculate sales and costs. Much of this information was learned throughout the business owner’s internship in an accounting firm in France dealing with small to medium sized enterprises. Additionally there was very valuable data was provided by some suppliers on estimated clientele. All of the costs and details that can be accounted for will be attached in the attachments section of this document. The final financial analysis will be carried out through a high grade software by RCA Editeurs de Logiciels, allowing for a full vision of the contrast of all the variables in each location. 4. Successful Entrepreneurship and Business Planning Starting up a business is a truly complex endeavor, and usually implies a risky investment that should be studied in depth beforehand. In Europe, a striking amount of new micro enterprises, businesses with less than 10 employees, are born each year, with many ceasing to operate in the same period. According to the European Commission, as many as one third of new Small and Medium enterprises created in 2011 failed within the first two years (European Commission SME Performance Review, 2016). With entrepreneurship being the indirect theme of this document, it is absolutely essential to lay out some important entrepreneurship and business plan theories as a starting point for creating a successful business. Red Ocean Blue Ocean Business Strategy This modern business concept divides industries into two types, Red Oceans and Blue Oceans. The analogy of the Red Ocean refers to a sea filled with sharks competing for the same prey or customers. It refers to a blood-thirsty competitive environment, where feeding and surviving is difficult. This describes and encompasses the vast majority of existing markets, where the business models and the competitors are very defined. (Kim, W.C. and Mauborgne, R. 2014). 5 Le Bon Café et Thé - A Cross-Border Business Opportunity The Blue Ocean is the exact opposite scenario. It is an open, easy to swim environment with plenty of new customers and little to no competitors. It is the ideal situation and the main point of this theory is to try to set your business in a Blue Ocean context. (Kim, W.C. and Mauborgne, R. 2014) The Blue Ocean Strategy can be implemented by creating uncontested markets. This doesn’t necessarily mean a new product or service, but could simply be to create a new variation of these capable of producing a Blue Ocean scenario. This means new demand would be created, competition wouldn’t be as relevant, and all of the business’ activities would be able to align with both differentiation and low cost. (Kim, W.C. and Mauborgne, R. 2014) The first priority in a Blue Ocean is to ​attract people who have never purchased in an industry in order to make it grow (Kim, W.C. and Mauborgne, R. 2014). A good example of this is the video game console Nintendo Wii which was able to appeal to families and older adults. In an uncontested market, there is virtually no competition because either they don’t know about it or they don’t know how to ​compete. With the right implementation, like Nintendo Wii so far, competitors won’t be able to enter a Blue Ocean for many years without failing. According to Michael Porter on Competitive Strategy, a business must choose between high value and low cost strategies (Porter, M.E. 1988). However, Kim and Mauborgne’s theory disrupted that concept by stating that you can indeed have both at the same time. It is just as crucial to diversify as it is to rid every corner of the organization and process of any unnecessary costs. ​Anything that doesn’t contribute to value, must be eliminated or reduced​ (​ Kim, W.C. and Mauborgne, R. 2014). Figure A. Red Ocean Blue Ocean Strategy Differenc​es Source: h ​ ttp://www.corporatestrategy.com/red-ocean-vs-blue-ocean/ 6 Le Bon Café et Thé - A Cross-Border Business Opportunity 5. The Business Plan Business Plan Strategy The first desired objective is for the author to create a foolproof business plan based on their resources and skills, that is capable of being implemented in both Spain and France, and matching the characteristics of the market in the Basque Country. A business plan serves to be many things, including a sales pitch or a selling document to prospective venture capitalists and banks. However, it has a more pure purpose, to be a roadmap, a written out strategy, a framework and a business forecast for an entirely new company. There are many theories and templates that help entrepreneurs develop very thorough business plans, considering the many areas a business’ environment such as the SWOT Analysis1, Porter’s 5 Forces Model2, and the Boston Matrix​.3 Nonetheless, for this project it is essential to lay out a groundwork business plan that could be implemented in either the province of Gipuzkoa in Spain or the department of the Pyrénées Atlantiques in France. For that matter, the main template used will be the ​Business Model Canvas​, developed by Alex Osterwalder co-founder of Stategyzer.com, which will summarize the most important underlying facts of the business plan. (​ Osterwalder and Pigneur, 2010). ​Albert S. Humphrey​ was the founder of the SWOT Analysis which helps break down the ​Strengths, Weaknesses, Opportunities, and Threats of a business. 2 Michael Porter’s 5 Forces serve to analyse a company’s competitive strength and position in a market based on the 5 key elements. 3 The Boston Matrix breaks existing and developing products into four product categories in terms of their market potential in order to create strategies for each of the product​ categories. 1 7 Le Bon Café et Thé - A Cross-Border Business Opportunity 5.1 Entrepreneur’s situation The pioneer of this project is a 26 year old entrepreneur, living near the border of the Basque Country between Spain and France, who wants to start up her own corporation in either of the two countries following an innovative business idea. The entrepreneur has some savings of about 8000 euros and has high probability of obtaining an angel loan from family and friends which will serve as the kickstarting capital for the business. This angel loan can be paid back in the second and third year of business and can reach up to 15,000 euros. Depending on the total investment amount needed, she may or may not need to ask for a corporate loan to start up her business. The subject at hand is single, has no children, and has the ability to claim unemployment in France as well as Spain. The requirements for claiming unemployment in both countries will be specified in section 8.3 Unemployment Aid. 5.2 Entrepreneur’s Background and Skills The project owner is a soon to be graduate in Business Administration with experience in Social Media Marketing, Accounting, Event Organization and Financial Planning. She has no experience in the hospitality industry other than her personal encounters and frequent visits to coffee houses and salon de thes. As the entrepreneur has a deep passion for coffee and desires more experience in the coffee industry, she decides to complete an intensive coffee roasting and brewing course in Naples, Italy for 2 days, where she will learn the essentials of making an excellent cup of coffee from the experts of quality coffee in Italy. Observations The entrepreneur of Le Bon Café et Thé has spent time in countries such as Spain and Italy where quality coffee, notably espresso made of 100% arabica beans, is an integral part of their culture and highly consumed. Having observed these markets and upon comparing them to their neighbor country, the author has concluded ​that France is a big potential market still waiting to be developed in terms of quality coffee​. Big cities such as Paris and Nice are already developing the coffee industry and show huge potential for the rest of France. However, Spain is still a very interesting market for coffee products, and ​innovative, quality tea products are just starting to emerge in bigger cities in Spain such as Barcelona and Madrid where they are doing very well. This means that in both the Northern Spanish market and the South-western French market, Le Bon Café et Thé has the possibility of developing a growing market. The groundbreaking product in mind that will pave the way for a Blue Ocean Strategy is a new product called 8 Le Bon Café et Thé - A Cross-Border Business Opportunity ¨Bubble Tea¨. This beverage first became popular in Taiwan, and it is already making a storm in big cities such as Madrid, Paris and London. Bubble Tea is a very easy product to make with particularly high margins with respect to coffee beverages. It is simply iced tea that is infused with flavors of choice and paired with flavor filled bubbles made of gelatin. The bubbles burst in your mouth releasing another explosion of flavors. Although these products are even more popular in the summer, they are also quite consumed in the winter, as they can be served with or without ice. 5.3 Planning the Business Structure Choosing a type of corporation or business structure is a decision which should especially take into account each individual business owner’s patrimonial, fiscal and strategic aspects. The entrepreneur plans on opening a company with the following aspects: ● ● ● Limited Liability, so as to only have to respond with the money invested in the corporation. Be the only owner or at least own more than 50 percent of the company. Flexible enough to attract some investors within the next 3 years, and achieve expansion. The different types of legal entities in Spain and France will be analyzed later on in section, 8.1 Choosing a Business Entity. 6. Mission Vision Values and Objectives 6.1 Business Concept The principle idea is to create a coffee and tea shop that serves hot and cold beverages and snacks for coffee lovers and non coffee lovers. The business aims to reach those who do not usually visit coffee houses by offering them enjoy an excellent beverage of their choice, and sparking their interest for an exclusive product in the area, Taiwan’s favorite Bubble Tea, available in 20 flavor combinations. This concept could be successful in France as its coffee market is growing with much potential. The French market has a very traditional method of preparing long, watered down coffee without much variety of flavor. Therefore, this business would introduce pure espresso and different blends into the French market and present them to more vivid options of coffee. On the other hand, new quality loose leaf tea beverages offered by the company would allow the business to profit from Spain’s growing tea market. 9 Le Bon Café et Thé - A Cross-Border Business Opportunity 6.2 Mission Statement To transmit the passion for high quality coffee and tea by inspiring and delighting our guests with the experience of every cup and with every visit. 6.3 Vision To be the region’s most unique and highest quality Coffee and Tea house, bringing coffee lovers and non coffee lovers together to discover their perfect cup of hot or cold beverage. 6.4 Values ● ● ● ● ● ● To create a welcoming, open environment where all of our customers are our guests. To create a culture of passion for real quality coffee and tea. To offer high quality ingredients for our products. To help preserve the environment through all of our organization’s processes by recycling and reducing energy consumption. To treat others with dignity, openness, acceptance and respect. To strive to offer our best in all that we do. 6.5 Objectives The following business objectives have been established for the first three years in business based on the predictions of the financial analysis. ● ● ● ● Sales Revenue​: reach 128,000 euros in sales in the first year in business, the approximate amount to reaching the ​breaking point​. Profit​: generate a business profit of at least 80,000 euros during the first 3 years. Profit Margin​: Maintain a minimum of 15% profit margin throughout the first 3 years. ROI​: Obtain a personal Return on Investment of at least 47,000 euros within the first 3 years. 10 Le Bon Café et Thé - A Cross-Border Business Opportunity 7. Business Model Canvas Sections 7.1 Customer Segments All of the customer segments identified below are composed of the youth and young adults from ages 15-35, and include male and female subjects. 7.1.1 Spain 1. Coffee Lovers: These customers share a common liking or passion for a good cup of coffee. They know what they like in a cup of coffee and their preferences vary greatly on the type of coffee they drink. They are usually interested in 100% Arabica and espresso blends. They like to occasionally have coffee at a coffeehouse or bar with friends anywhere from 1-5 times a week. There is a large female portion of this segment that is normally very interested in more choices of coffee flavors such as vanilla cappuccinos or frappes, but Gipuzkoa does not have a large selection to offer this kind of product. 2. Tea Lovers: Mostly made up of women aged 18-35, these customers share a common interest or love for tea, whether it be iced or hot. They love to drink high quality tea in the form of loose leaf, and like when there are many options of tea available to choose from. They do not have many options of good tea houses in Gipuzkoa and value when there is an emphasis placed on a menu for tea. 3. Non Coffee Lovers This group is the center of our Blue Market Strategy. They do not like coffee and sometimes not even tea. They are used to drinking water, juice or soda. They usually have hot chocolate or orange juice when at a bar, but are not completely satisfied because no one is making an effort to please their preferences. They like trying new flavors, sometimes even mocha frappuccinos , but are usually not willing to try anything with coffee flavor. This segment is mostly composed of younger people aged 15-25. Their preferences may include chocolate, vanilla and fruit flavors. 11 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.1.2 France 1. Coffee Lovers: Similar to the Spanish segment, they know how they like their coffee and their preferences vary greatly on the type of coffee they drink. Usually they drink very long, watered down coffee. However, they have yet to discover many types of brews, particularly in the espresso variety. They do not know the difference between 100% Arabica and Robusta blends. They like to occasionally have coffee at a coffeehouse or bar with friends anywhere from 1-2 times a week. There is also a female portion of this segment that is interested in more choices of coffee flavors such as vanilla cappuccinos or frappes, but there is not a large selection to offer this kind of product in Southwestern France. 2. Tea Lovers: Almost identical to the Spanish segment, this segment is quite larger in France. Made up of women aged 18-35, these customers share a common interest or love for tea, whether it be iced or hot. They love to drink high quality tea in the form of loose leaf, and like when there are many options of tea available to choose from. They do not have many options of good tea houses in the area and value when there is an emphasis placed on a menu for tea. 3. Non Coffee Lovers Also in the case of France, this group is the center of our Blue Market Strategy. This market is even larger in France, where coffee is not an integral part of their culture. They do not like coffee and sometimes not even tea. They are used to drinking water, juice or soda. They usually have hot chocolate, sodas or juices when at a bar, but could be more satisfied if there was a more targeted option for them. They love trying new flavors. While some even try sweet coffees, others are usually not willing to try anything with coffee flavor. This segment is mostly composed of younger people aged 15-25. Their preferences may include chocolate, vanilla and fruit flavors. 12 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.2 Commercial Offer and Value Proposition for Each Segment Spain and France Commercial Offer Per Segment - Beverages 1. Coffee Lovers Commercial Offer - Le Bon Café et Thé selection of Coffee Brews These customers need a selection of many types of quality brews, hot and cold, with or without milk including espresso, ristretto, macchiato, cappuccino, caffè latte, and more. Some of our cappuccinos and frappés include flavors such as mocha, caramel and vanilla. The coffee beans will be quality 100% arabica coffee toasted fresh each week from a local Coffee Toaster. 2. Tea Lovers Commercial Offer - Le Bon Café et Thé selection of Loose Leaf Teas A selection of 7 teas will come directly from a provider in the UK including flavors such as Rose Petals, Lavender, etc…. Customers will be able to smell the different teas before choosing one. Once they have chosen, they will be given a tea pot with boiling water where they can scoop their tea leaves into. 3. Non Coffee Lovers Commercial Offers a. Le Bon Café et Thé selection of Bubble Tea: ​People in this segment will get to experience a whole new concept called Bubble Tea, a flavored iced tea with flavor filled bubbles which can be drunk at room temperature. There are over 20 flavor combinations in total. It is refreshing in both the summer and the winter. Customers will get to choose from 7 tea flavors and 4 bubble flavors. a. Selection of Soda, Juice, and Water: ​The selection of Soda, Juice and Water can be useful when there is an extrinsic need to purchase one of these products. b. Le Bon Café et Thé Hot Chocolate: ​Hot Chocolate and Coffeeless Frappés are also available for those out of this segment who still prefer a hot beverage with no coffee or tea. Commercial Offer - Food ● A Selection of Pastries, Cookies and Croissants ​will be available to enjoy with each beverage or separate. These will be delivered daily from a nearby bakery. ● A Selection of Sandwiches​ to choose from for hungry visitors will also be prepared fresh daily. 13 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.3 Locations The size of the Coffee and Tea house should between 30-90 square meters in order to fit all of the equipment necessary, as well as a seating area for customers reaching up to capacity of about 20 seats. However, depending on the overall location and neighborhood of the store, less seating space with better positioning might be more valuable over worse positioning and more square meters. Le Bon Café et Thé needs to be strategically located in a major city and as close to the city center as possible. For this reason, the cities of Bayonne, France and San Sebastian-Donostia, Spain have been chosen. Taking into account the necessary characteristics for the commercial space, the following locations have been selected: 7.3.1 Bayonne, Pyrénées Atlantiques (France) Location of Choice​: Centre Ville, Bayonne Address​: 3 Allée Paulmy 64100 BAYONNE Commercial Building, ground floor Agent​: Jean-Pierre Abbadie Mandataire Judiciare Size​: - 47 square meters of store and the storage room 20 square meters of terrace 1 bathroom Central Heating and Air Conditioning Rent per month​: - Droit au Bail plus fees: approximately ​30,500 euros - 1059 euros​ monthly rent - 88 euros​ monthly rent for the terrace - Optional 83 euros a month for parking - 30 euros​ community fees Renovations​:​ ​No major investments, only in store furniture, and branding. Location​: City Center, close to the cathedral, 5 minute walk from the Place des Basques. 14 Le Bon Café et Thé - A Cross-Border Business Opportunity Source: h ​ ttps://www.leboncoin.fr/bureaux_commerces/1075773916.htm?ca=2_s Source: ​https://maps.google.com Droit Au Bail: ​The “Right to Lease”, this is a concept commonly used in France for commercial lease agreements. It can be present in the lease agreement as part of the provision of business assets or “fonds de commerce” or separately, as in this case. It represents the amount the buyer owes to the previous tenant for provisions and rights as well as the undervaluation of rents in relation to the market price. (Facon, 2013) 15 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.3.2 San Sebastian, Gipuzkoa (Spain) Location of Choice​: Gros, San Sebastian Commercial Building, ground floor Agent​: Inmobiliaria Areizag Source: h ​ ttp://www.areizaga.com/inmueble/alquiler/local/donostia-san-Sebastian/gros/G31643?index=4 Size​: - 42 square meters for the store - 5 square meters of storefront - 15 square meters of private use - 12 square meter attic for storage Details​: - Possibility of renting terrace from the city hall in the future. - 1 bathroom in the top floor. - Central Heating and Air Conditioning Rent per month​: - Initial deposit of 2 months rent plus notary fees: approximately ​3200 euros - 1450 euros​ monthly rent - 30 euros​ community fees Renovations​:​ ​No major investments, only in store furniture, and branding. 16 Le Bon Café et Thé - A Cross-Border Business Opportunity Location​: Next to Dia Supermarket, 15 minute walk from the city center 17 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.4 Distribution channel Le Bon Café et Thé includes various products and differing supply chains for each product offered. The Table below demonstrates the distribution channels for each main product line. As shown in the column other, this category includes everything other than coffee, tea or bubble tea supplies (packaging, milk, sugar, chocolate, etc.) 18 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.5 Customer Relations Le Bon Café et Thé Customer Fidelity Card Each customer can acquire a free customer fidelity card where they can accumulate stamps in order to receive a free beverage of choice after 20 purchases. To receive the card, all that’s necessary is for them to fill out their email address and zip code. With every purchase at Le Bon Café et Thé they can receive a stamp. Once they have accumulated 20 stamps they will be able to exchange their fidelity card for a new one and receive a free drink. Social Media and Les Bonnes Idées Les Bonnes Idées is a special feature designed for the company to engage with customers through its Facebook and Instagram pages. It consists in the company posting “Bonnes Idées” or good ideas for inspiration and day to day motivation. This in turn is a challenge for customers to get inspired with their cup of coffee or tea, and share their inspiration or Bonne Idée with other people following the company’s page. The process is simple. All customers can grab a protector at the serving station once they have had their coffee. Each protector has a sticker with an inspirational quote. The rest of the space is meant to be filled out, whether it be with drawings or writing. Each customer can choose to upload and share their creation on the company’s social media pages or to even leave comments and communicate about the service provided or the products. 19 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.6 Revenue Streams Not only is it important to have a business plan, but to implement it efficiently. For this reason, it is essential to set rational prices to match the product markets in Spain and France, as well as to chart a sales forecast based on other Coffee Shop’s experiences, the seating space and business location. Concerning Le Bon Café et Thé’s menu, prices will vary from Spain to France, as products have slightly higher average price in France. These prices reflect the price ranges at Coffee Shops in San Sebastian and Bayonne. Le Bon Café et Thé Menu SPAIN FRANCE Selection of Coffee and Hot Chocolate Ristretto, Espresso, Macchiato, Lungo €1.50 €1.80 Caffe Latte €2.25 €3.00 Cappuccino with flavor (Plain, Mocha, Vanilla, Caramel) €2.85 €3.50 Hot Chocolate €2.85 €3.50 Coffee Frappes (Plain, Mocha, Vanilla, Caramel) €3.25 €3.85 Non Coffee Frappes (Plain, Mocha, Vanilla, Caramel) €3.35 €3.85 Breakfast Tea, Apricot Green Tea, Green Tea, White Peach Tea) €2.50 €3.25 Spearmint, Strawberry Mint, Fresh Berry Herbal Tea, Cardamom €2.50 €3.25 Other Beverages (Water Bottles, Juice, etc) €2.00 €2.50 Tea Flavors: (Coconut, Strawberry, Mango, Peach, Pineapple, Raspberry, Litchi) €3.25 €3.50 Bubble Flavors: (Litchi, Mango, Strawberry, Peach) €3.25 €3.50 Pastries, Cookies and Croissants €1.85 €1.95 Sandwiches €3.00 €4.00 Le Bon Café et Thé T-shirts €15.00 €17.00 Le Bon Café et Thé Canvas Shopping Bag €12.00 €14.50 €4.00 €5.00 Selection of Frappes Selection of Tea Selection of Bubble Tea Selection of Merchandise Le Bon Café et Thé Mug 20 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.7 Key Resources Le Bon Café et Thé will have the following list of suppliers for its multiple products. Suppliers for beverage products will be the same regardless of the which of the two locations is chosen. However, the provider for food products will vary depending on the city. 7.7.1 Suppliers Coffee: - Sakona Coffee​: Located in the city of Irun, Gipuzkoa, about 20 minutes from San Sebastian and 45 minutes from Bayonne. The coffee beans, imported from small farmers in South America and Africa, are roasted fresh each week in Irun. The coffee will therefore be purchased weekly to maintain freshness and quality. The two chosen blends will be the “Jaizkibel” and “Decaf”. The coffee will be purchased at 18 euros/kilo. http://www.sakonacoffee.com/ Bubble Tea: - The Inspire Food Company​: Based in the Netherlands. This online site sells all the products needed for making bubble tea. Orders will be placed bi-weekly for 4 different bubble tea pearls at 8.50 euros/kilo. Shipping can be negotiated with a purchasing contract. http://www.inspirefoodcompany.com/es/?gclid=CO2AnIWSv9ECFW8B0wodCNoBNg - Delidrinks - Monin Syrups​: This French online website ships free starting from 180 euros. Orders will be placed bi-weekly for 9 different syrup flavors at 7.50 euros/700 ml bottle. The order amounts are expected to always exceed 180 euros. http://www.delidrinks.com/monin-sirops.html Loose Leaf Teas: - Whittard of Chelsea Teas​: A prestigious English Tea company. The online store sells all of its products offering free shipping for orders of 35 pounds or more. Orders will be placed bi-weekly for 8 different loose leaf tea flavors. Prices range from 6.30 - 13.76 euros per 100g. https://www.whittard.co.uk/?currency=EUR&gclid=CJy-75-1v9ECFY8Q0wod4ZQAAA Local Bakery: ​chosen for best quality pastries and proximity. Orders placed daily. - Gogoko Goxua ​(San Sebastian) for San Sebastian location Le Fournil de la Licorne​ (Anglet, France) for Bayonne location 21 Le Bon Café et Thé - A Cross-Border Business Opportunity Packaging: - First Pack Packaging: Based in France, this website offers recyclable packaging products for beverages to go. All Bubble tea beverages will be served in cups and with straws purchased from here. Orders will be bi-weekly. http://www.firstpack.fr/gamme/les-gobelets-verres-accessoires/ Other Ingredients and Products: For other necessary products such as water, juice, milk, chocolate, vanilla, etc. purchases will be made weekly at the following hypermarkets chosen for their lower prices: - Makro (France) Carrefour (France and Spain) 7.7.2 Human Resources Initial Team The owner of Le Bon Café et Thé will work a ​full time shift carrying out all of the principle tasks involved in the business. Given the opportunity of claiming unemployment benefits, she will not receive a salary during the first year, but claim 20% dividends in the case of generating a business profit. She has worked in both Spain and France, and is therefore entitled to benefits for approximately one year in both countries (see section 8.3 Unemployment Aid). Key tasks: - General management: organize, plan, delegate, and control - Placing purchase orders and accounts payable management - Arranging stock and inventory management - Product elaboration and serving the public - Administrative tasks and outsourcing management - Human resources management - Employee training - Financial Planning - Public Relations and Marketing There will also be a ​full-time worker earning the minimum wage for four months during the summer to meet the high demand of customers throughout this period. In the opening weeks, a ​volunteering ​family member will help meet the high demand expected upon the announcement of being the first café to serve “Bubble Teas” in the region. 22 Le Bon Café et Thé - A Cross-Border Business Opportunity Employee Key Tasks: - Product elaboration and serving the public - Arranging Stock - Purchase Orders Team Members at Le Bon Café et Thé People are the highest resource at Le Bon Café et Thé. All employees are team members and represent a vital part of the company’s backbone. The following program will be put in place for team members: - Two week training program: as a Barista apprentice, tea selection overview, and Bubble Serving techniques. - Team member manual: on company values, culture, protocol objectives and customer satisfaction. - Discounts: ​Free Coffee, Tea and Snacks half an hour before and after work hours, and 50% discount outside of work hours. 50% discount off company merchandise. 7.8 Key Activities Le Bon Café et Thé is primarily dedicated to serving quality hot and cold beverages, snacks and sweets to customers for onsite or offsite consumption. It will also sell company merchandise at its store to customers including canvas shopping bags and T-shirts. The company’s activities can thus be broken down into: - Offering initial guidance for customers by team members on the variety and qualities of coffee and tea. Serving of onsite hot and cold coffee, tea, bubble tea, and other beverages. Serving all of the company’s products to go. Selling of company merchandise including T-shirts and shopping bags. 7.9 Key Partners Charity Donations Le Bon Café et Thé is prepared to ​donate 1% of its profit to the International Women in Coffee Association IWCA​, which is dedicated to helping female participants in the coffee chain achieve success. Women represent some of the 25 million coffee farmers who work in substandard conditions. The IWCA carries out social service projects including scholarships for children of coffee families, health screenings for women coffee farmers, and handcrafting workshops to help women add new sources of income. 23 Le Bon Café et Thé - A Cross-Border Business Opportunity https://www.womenincoffee.org/ Association Memberships Le Bon Café et Thé is interested in joining ​The Specialty Coffee Association of Europe SCAE following its third year of Business in order to expand its presence on a broader international level. ​It supports its members through networking events, organising competitions and communications. The SCAE is also recognized on a global scale, with partner members in Asia and also in North America, with the Specialty Coffee Association of America. Founded in 1998, The SCAE is an association composed of coffee quality friends, with a common vision of offering ''a perfect cup of coffee to the consumer.'' This vision of a specialty coffee consists of quality beans grown at a designated location and processed under the highest quality standards for raw processing, roasting, storing, all leading up to the final brew into a beverage. Company membership fees range from 175 euros - 1000 euros. It is unsure whether or not these rates may increment in 2 years. However, at the designated time, the return on investment of becoming a SCAE member will be weighed out and analyzed before applying for the membership. 24 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.10 INITIAL INVESTMENTS EQUIPMENT COSTS This project needs to carry out initial investments4 for the following equipment regardless of the final chosen location: 1. Semi-automatic Coffee Machine a. 1 Egro ONE TOUCH Top Milk XP NMS Coffee Machine Price: 9,854.00 + 478.00 + 569.00 + 1000= 11,901 euros 2. Iced Tea Machine a. BUNN TB3Q 3-Gallon Iced Tea Brewer ​= ​465 euros https://www.amazon.com/BUNN-TB3Q-3-Gallon-Iced-Brewer/dp/B00345WZVU/ref=pd_sbs _328_4?_encoding=UTF8&psc=1&refRID=FZJ0R9J38CWRJ1KKX034 http://www.coffeeespressopro.com/bunn-tb3-commercial-iced-tea-brewer.html 3. Hot Tea Machine a. Buffalo Manual Fill Water Boiler 20Ltr 2.6kW Capacity 20Ltr = 60 euros http://www.nisbets.co.uk/Buffalo-Manual-Fill-Water-Boiler-20Ltr/GL347/ProductDetail.ractio n?cm_sp=PeeriusFeaturedProducts-_-categoryRecs-_-GL347 4. Tea and Coffee Containers for storage and display a. Chalkboard display signs Pack of 20 b. Other display= 80 euros 5. Bubble Tea syrup Station a. Monin Syrup Pump = 5 euros http://www.nisbets.co.uk/Monin-Syrup-Pump/DP269/ProductDetail.raction?cm_sp=Peerius FeaturedProducts-_-categoryRecs-_-DP269 b. Stand for Syrup bottles Ikea= 20 euros 6. Fridge for Milk and products a. Polar Under Counter Fridge White 150Ltr= 480 euros http://www.gastro-europe.com/gb/33-polar-fridge7. Silverware and Crockery​ =250 euros Standard 8. Panini Grill a. H.Koenig GR20 - Grill panini, 2000 W= 45 euros https://www.amazon.es/H-Koenig-GR20-Grill-panini-color/dp/B006E1GZA8 9. Dishwasher a. Dishwasher BEKO DFS05011X= 289 euros http://www.electrofutur.com/FichaArticulo~x~Lavavajillas-BEKO-DFS05011X~IDArticulo~19 817.html 10. Ice Maker a. Mr.Black-Frost 13kg = 190 euros http://es.klarstein.com/Electrodomesticos/Maquina-de-Hielo/Mr-Black-Frost-Maquina-de-hie lo-150-W-negra-13kg.html?force_sid=h7it14ni9d1dhtqsren16ffd61& 11. Whipped Cream Machine 4 These prices listed include shipping costs and do not include taxes. 25 Le Bon Café et Thé - A Cross-Border Business Opportunity a. 12. 13. 14. 15. Ibili 750910 - 1L= 38.86 euros https://www.amazon.es/Ibili-750910-Sif%C3%B3n-nata/dp/B0056Y4P5Q/ref=sr_1_4?s=kitc hen&ie=UTF8&qid=1485008689&sr=1-4&keywords=maquina+nata Coffee Accessories, Latte Art a. Latte Art Pack = 10 euros https://www.amazon.es/Little-Poplar-Dispensers-inoxidable-Plantillas/dp/B01GRY2VUY/ref =sr_1_1?s=kitchen&ie=UTF8&qid=1485008758&sr=1-1&keywords=latte+art b. Dailyart - Stainless Steel Jug 12oz (350ml) 10.99 euros https://www.amazon.es/Dailyart-Jarra-leche-espuma-jarra-inoxidable/dp/B01AUKBTFO/ref= sr_1_18?s=kitchen&ie=UTF8&qid=1485008829&sr=1-18&keywords=latte+art Menu Display a. Menu Display Sign= 66 euros ​https://www.rotulowcost.es/es/rotulos-sin-iluminacion.html Logo Display Sign a. Round Sign Lit-Up = 137.94 euros https://www.rotulowcost.es/es/banderola-luminosa-redonda-dos-caras.html b. One Sided Display Sign = 121 euros https://www.rotulowcost.es/es/rotulos-sin-iluminacion.html c. Opening Soon Sign = 60 euros https://www.rotulowcost.es/es/lona-impresion-digital-una-cara.html Store Furniture and Decoration a. Furniture Tables and Chairs GIFI = 1200 euros b. Decorations and Accessories Ikea = 150 euros budget 16. Cash Register a. Olivetti Ecr 7100= ​ ​95 euros http://www.pcexpansion.es/olivetti-ecr-7100.php?gclid=CjwKEAiA8JbEBRCz2szzhqrx7H8S JAC6FjXXElriqT3iDhKLZ4qoJZo-xwxfqhvyrd1cTd1NXtJXChoCxSjw_wcB 17. Credit Card Processor a. Ingenico ​TPV Verifone VX520 gprs/ctls 128MB Flash, 32MB 100 euros https://www.milanuncios.com/impresoras/datafono-tpv-214709164.htm Total Equipment Costs ​: 16,215 euros (excluding VAT tax) 26 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.11 Competition Analysis An analysis of the competition has been carried out for each of the relevant cities, selecting the top 5 competitors within reasonable distance from the chosen commercial locations. A map of with stars has been added in each case to visualize the competitor placement (each star indicates a competitor location). The red marker indicates Le Bon Café et Thé’s location. BAYONNE, FRANCE Map of Competitor Placement source: h ​ ttp://maps.google.com The chosen location in Bayonne is next to the Place des Basques, very close to the city center and the cathedral. A few competitors are situated nearby, the closest being Mug Up, a very small Coffee Shop with only 3 outdoor tables and mostly to go service. This competitor as well as French Coffee Shop and Josie Factory focus more on coffee products. The only similar product in quality is Mug Up. Nevertheless, these competitors constitute mostly a challenge to win over the coffee segment, while they pose no competition for Bubble Tea or loose leaf tea products. 1. Mug Up Address: 20 Rue Victor Hugo, 64100 Bayonne, France 27 Le Bon Café et Thé - A Cross-Border Business Opportunity Opening Hours: Tuesday-Saturday 10:30–18:30 2. Josie Factory Dirección: 3 bis rue marengo, 64100 Bayonne, France Opening Hours: Tuesday-Saturday 10:00–18:00 3. French Coffee Shop Address: ​11 Rue d'Espagne, 64100 Bayonne, France Opening Hours: Tuesday-Saturday 8:30–19:00 and Sunday 14:00-19:00 4. Blue Bask Coffee Address: Zone commerciale Ametzondo IKEA, 64100 Bayonne, France Opening Hours: ​Monday-Saturday 1​0AM–8PM 5. ​Colombus Cafe & Co. Dirección: Centre commercial BAB2, 64600 Anglet, Francia Opening Hours: Monday-Saturday ​8:30–20:00 28 Le Bon Café et Thé - A Cross-Border Business Opportunity 29 Le Bon Café et Thé - A Cross-Border Business Opportunity SAN SEBASTIAN, BASQUE COUNTRY, SPAIN Map of Competition Placement source: h ​ ttp://maps.google.com The chosen location in San Sebastian for Le Bon Café et Thé is very close to the city center in the neighborhood of Gros. Competitor locations are marked with a star symbol, while the business’ location is situated in the red marker near “Dia Market”. Only two of the analyzed competitors are situated on the right bank of the city, and the closest shop is Café Panchito, a to go location which does not have a seating area. It is important to point out that the competition is chosen based on coffee while this business’s star product, Bubble Tea, make nearby competition more irrelevant. 1. Café Panchito (4 locations) -Plaza de guipuzkoa 16 – 20014 -Panchito Coffee to go – San Sebastian – c/ San Marcial 28 – 20005 -Panchito Coffee to go – San Sebastian – c/ Secundino Esnaola 9 – 20001 -Panchito Coffee to go – San Sebastian – c/ Reina Regente 2 – 20003 30 Le Bon Café et Thé - A Cross-Border Business Opportunity Opening Hours: Monday-Saturday 8:00 - 20:00 2. Koh Tao Address: ​Bengoetxea Kalea, 2, 20004 Donostia, Gipuzkoa Opening Hours: Monday-Thursday 7:30 - 22:00 Friday 7:30 - 2:00 Saturday 9:30 - 2:00 Sunday 9:30 - 22:00 3. Belgrado Address: Nafarroa Hiribidea, 2, 20013 Donostia, Gipuzkoa Opening Hours: Monday-Sunday 8:00–23:30 4. Old Town Address: Mercado San Martin, Urbieta 9, Planta 0, Puesto 8, Mercado San Martin, 20006 San Sebastian, Guipúzcoa 31 Le Bon Café et Thé - A Cross-Border Business Opportunity Opening Hours: Monday-Saturday 8:00 - 20:00 5. Starbucks - San Sebastian Address: Askatasunaren Hiribidea, 40, 20004 Donostia, Gipuzkoa Opening Hours: Sunday-Thursday from 7:30AM–10PM Friday and Saturday from 7:30AM–11PM 32 Le Bon Café et Thé - A Cross-Border Business Opportunity 7.12 Strategic Marketing and Marketing Plan 7.12.1 Marketing Objectives In the first three years of Business, Le Bon Café et Thé’s Marketing Plan will be focused on two different phases, the first being a promotional phase and the second serving as a reinforcement, growth, and engagement phase. The Marketing objectives for the first three years of business are as follows: ● ● ● ● Make the company’s target groups ​aware of Le Bon Café et Thé’s value proposition and make them ​feel identified ​with the products offered. Bring target groups into the store​ to try the product and experience the environment. Create a relationship ​with the customer so as to make them feel welcome to come back whenever they desire. Build an image of Le Bon Café et Thé as a unique coffee and tea house that inspires, offering something for everyone, whilst focusing on quality, minimalism, and cleanliness. 7.12.2 Market Branding The Brand or Image for Le Bon Café et Thé that is intended to be transferred to the public is as stated in the Marketing objectives: a coffee and tea house for all types of people which brings inspiration with every single cup, while focusing on quality, minimalism, and cleanliness. The main pillar for reaching the company’s Blue Ocean and Red Ocean target groups will be through a campaign of storytelling, where the desired target groups will be able to feel identified with characters like themselves enjoying a product that they also enjoy. This creates an emotional link between the potential customer and Le Bon Café et Thé’s value proposition. The storytelling campaign will be otherwise referred to as the ​Afternoon Break Stories​. They will be diffused through the different media tools described in Phase 1 and 2. The campaign consists of three characters, one representing each target market, with different jobs and different tastes in beverages. Nonetheless, all three have one thing in common: getting inspired on their afternoon break. The campaign will include an advertisement photo including each character with their beverage of choice. The characters are detailed below: - The Tea Lover: a writer who needs a little inspiration to complete a scene he’s writing. He’s seen sipping on a cup of tea as he stares at his laptop. The laptop screen is filled with a colorful scene, which is the inspiration that the writer is experiencing as he drinks his tea. 33 Le Bon Café et Thé - A Cross-Border Business Opportunity - - The Coffee Lover: a financial analyst who is staring at his laptop with a cup of coffee in one hand. The laptop screen shows the analyst’s inspiration for beautifully laid out graphs. The Non Coffee Lover: a fashion designer who is sipping on a bubble tea is sitting at a desk with her charcoal pencil in her other hand. On her notepad, you can see her inspiration, a beautifully designed dress. 7.12.3 Marketing Phases Promotion - Phase 1 For the first opening months, Phase 1 will serve to achieve the first two objectives mentioned in the Marketing Plan, creating awareness and bringing target groups into the store. For this reason it will be a mostly promotional phase. The actions included in this phase are detailed below. 1. Launchrock Promotional Page​: Launchrock is an application free of charge that allows companies to create a preview page or prototype of an application in order to send it out and obtain customer information. It primarily works for obtaining email addresses from customers who are interested by the Launchrock page. This will be used for 3 months before opening the business and will be free of charge. The main objective with this is to collect emails for a customer base, and see the public’s reaction to the value proposition. 2. Company Webpage​: This webpage will be hosted by Weebly and will have a free domain name. The costs of making the website is free using the weebly host. 3. Social Media Accounts​: 2 months before the opening, the company’s Instagram, Facebook and Pinterest will be opened in order to start creating awareness about the novelty product Bubble Tea coming to the area. Photos of feature products will be shared on a weekly basis in order to get customers excited about the opening day. Pinterest photos of the company’s products will especially serve to create awareness on a broader basis, since appealing photos are shared on this website very frequently. The company’s ​Afternoon Break Stories campaign will be featured on the social media pages 2 weeks before opening. 4. Bloggers and Influencers​: A month before opening, it is important to start reaching out to bloggers and influencers, cold calling and writing emails especially to young influencers in the nearby locations of the Basque Country. They will be offered free drinks at the establishment as well as free merchandise such as canvas shopping bags. These will mostly include bloggers who recommend places to visit, eat or drink in the 34 Le Bon Café et Thé - A Cross-Border Business Opportunity area. Their blogs or websites drive a lot of traffic and may especially help promote the novelty product, Bubble Tea. 5. Local Newspaper Ads​: Two weeks before opening, there will be a Newspaper advertisement promoting the opening day of Le Bon Café et Thé. Engagement - Phase 2 Following the creation of awareness from the three target markets, the next marketing phase will focus on reinforcing growth and driving engagement from customers. The customer’s participation in this phase is especially important. In the 1st phase, the company’s Afternoon Break Inspiration campaign was released, which would make customers feel identified with the Le Bon Café et Thé’s value proposition. This phase focuses on taking that feeling of identification and creating a two way communication channel between the company and the customer in order for them to diffuse that identity and share it with others. 1. Social Media Campaign “Les Bonnes Idées”​: This consists in growing the campaign previously mentioned in the section of Value Proposition, involving customer participation by sharing their ideas or quotes scribbled on the company’s cup heat protectors on the company’s Instagram page. 2. Other Social Media expansion​: Facebook ads, Sponsored Instagram posts. 3. Google Adwords: ​presence on google so customers can find the location, SEO for webpage 4. Bloggers and Influencers​: This consists in expanding the company’s reach through the help of features, reviews or interviews by bloggers and influencers. There will be a target list of bloggers and influencers in the area of the Basque Country, Spain and France to contact, as well as bloggers on a broader scale to reach tourists during the high season. 5. University Deals Campaign​: This consists in offering a special fidelity card for university students. In order to receive the card, they must be under 30 years of age and present their university card each. This card offers a promotion of a free beverage of choice after 10 purchases, instead of 20. Each time a purchase is made, the customer must provide their card to collect a stamp as well as their university card. 35 Le Bon Café et Thé - A Cross-Border Business Opportunity 8. Analyzing Cross-Border Differences 8.1 Choosing a Business Entity When choosing a type of corporation, the entrepreneur should take into account capital, fiscal and other strategic aspects. (Brouster, G.L. 2017) CAPITAL ASPECTS In both Spain and France, like in most countries, there is the option of establishing a company with limited liability, in which the associate only responds to the amount of money it has invested in the company. This is usually the case when setting up a corporation, also known as “sociedad” in Spanish and “société” in French. Alternatively, there is the option of forming a company with unlimited liability, in which the shareholders are liable to respond with all of their personal assets if necessary. (Brouster, G.L. 2017) FISCAL ASPECTS Businesses can also be divided into two categories according to their fiscal character. In the case of a corporation where the owner is a physical person, the company is subject to the IR (Impôt sur les Revenus or Income Tax) in France and to the IRPF (Impuesto Sobre la Renta de las Personas Físicas) in Spain. When the corporation is a legal entity it is subject to the IS (Impot de Sociétés or Corporation Tax) in France and to the ISB (Impuesto Sobre Beneficios de las Sociedades). This varies in that, when the corporation is not a legal entity, the company’s earnings or losses are to be reflected in and declared as part of the owner’s personal revenue. In the case of a legal entity, it is the company in itself responds solely to the IS. (Brouster, G.L. 2017) STRATEGIC ASPECTS It could also be said that strategic reasons could be the decisive factor when choosing which type of business to create. This is because it can determine to which extent the owner can make decisions, raise capital or invest, and carry out certain activities. One of the main strategic factors lies on the intention of whether or not to share control of decision making. (Brouster, G.L. 2017) If the intention is to develop the business idea and sell part or all of the company in the future, in France a SAS (Société Anonyme) is said to be more appropriate or a SA (Sociedad Anónima) in Spain, whereas, if the owner’s intention is to develop the business and hold the majority of shares a SARL (Société de Responsabilité Limitée) in France or SL (Sociedad de Responsabilidad Limitada) in Spain is recommended. There is a large variety of business entities in Spain and France, but for the purpose of this study, only those business forms relevant to Le Bon Café et Thé’s Business Plan will be 36 Le Bon Café et Thé - A Cross-Border Business Opportunity analyzed. First, the business forms which the company is eligible to apply for will be listed in a comparative table. Then a more thorough description of the characteristics will be listed to choose the most interesting business form. 8.1.1 Options of Business Entities in France The following table highlights the main characteristics for the legal business entities in France which are available to this entrepreneur, those with a minimum of 1 shareholder and that are not meant for professional activities requiring a specific license. Type Number of Shareholders Minimum Capital Required Shareholder Responsibility Fiscal Regime Owner’s Social Status Entreprise Individuelle 1 none Unlimited IR Dirigeant Entrepreneur EIRL L’entreprise individuelle à responsabilité limitée 1 none Limited IR or IS Dirigeant Entrepreneur Auto Entrepreneur 1 none Unlimited or Limited (as EIRL) IR or IS Dirigeant Entrepreneur EURL - Société à Responsabilité Limité 1 none 5 Limited IR or IS Gérant SAS 1 or more none Limited IR or IS Président 8.1.1.1 Entreprise Individuelle An Entreprise Individuelle is the equivalent of what is usually referred to as a Sole Proprietorship in English. This option is available for solo entrepreneurs only. It consists of It is important to note that while there is no minimum capital required for corporations in France, it is highly recommended for an EURL or SAS to have a minimum capital of at least 2000 euros in order to avoid any government penalty fees. 5 37 Le Bon Café et Thé - A Cross-Border Business Opportunity connecting a business with an individual, as opposed to creating a separate entity or legal form. (Froger, V. 2014) Therefore, it has the following characteristics: ● The company is a physical person: the owner. ● The owner is liable to respond with their all of their assets in case of debt or bankruptcy. ● No minimum capital required to set up this form of business. ● Quick and easy filing process ● The accounting should be rigorous, especially to reclaim the regularized payments for social fees ● Comptabilité de Caisse: The imposable revenue is calculated based solely on effected payments and received payments. Taxes are only paid on the received profit. ● The VAT (Value Added Tax) is invoiced and can be recovered. ● Required to register in Registre du Commerce et des Sociétés RCS in order to obtain a VAT number. ● The social fees also take into account effective charges and revenue. This means social fees are also only based on actual received profit. ● In case of a deficit, the company can apply for tax reductions in the preceding periods. ● The owner’s salary is non deductible from tax payments. ● Social Security Fees (called Cotisations Sociales) are paid in advance for each period and then regularized according to the effective revenue. (Froger, V. 2014) 8.1.1.2 Auto – Entrepreneur An Auto-Entrepreneur is not a separate Business Form on its own. It is simply an Entreprise Individuelle which is subject to a particular fiscal regime called « micro-social ». Since its creation in 2009, this is a very popular option for entrepreneurs in France. It has the following characteristics : ● The company is a physical person: the owner. ● The owner is liable to respond with their all of their assets in case of debt or bankruptcy. ● No minimum capital is required to set up this form of business. ● Quick and easy filing process ● No Filing Fees/ Constitution : Free ● Owners are not required to declare to the Registre du Commerce et des Sociétés RCS which must be paid for in all other forms of businesses. ● Social fees (Les charges sociales) are paid according to cash inflow. This means there is social fee payments are only made when Sales are positive. Payments are made each month or each trimester, and correspond to the Sales for the previous period. These social fees depend on the activity being realized. ● The tax imposition on profits also varies according to the professional activity being carried out. ● The Annual Revenue must be inferior to 81.500 euros for commercial activities and 32.600 euros for other services. 38 Le Bon Café et Thé - A Cross-Border Business Opportunity ● ● Auto-Entrepreneurs do not charge customers VAT tax (Value Added Tax). However, they also do not have the right to recuperate VAT tax paid in the purchases. Taxes based on profit are always payable if sales are positive, meaning in case of deficit, the company still must pay their taxes. This is because the profit taxes are calculated based on the Revenue and not on the Profit. It is really only interesting to apply for the Auto-Entrepreneur regime in 2 specific situations : ● ● Launching an activity involving services ​: This regime allows entrepreneurs to create their business and verify its viability very simply without paying too much. If it is a service, the VAT tax impact will usually not be as significant. Establishing a complementary activity : Many auto-entrepreneurs are usually either retired, students, or contracted employees. It can be an interesting option to make extra money on the side. Normally, in all other scenarios, it is preferable to form an Entreprise Individuelle as the tax impositions and social fee calculations are more flexible and fair. 8.1.1.3 L’entreprise individuelle à responsabilité limitée (EIRL) An EIRL is another form of Entreprise Individuelle that presents two major differences. (Petite-Entreprise.net, n.d.) 1. The liability of the owner is limited. The owner’s capital is divided into 2 separate parts, much like in a corporation. The private capital represents the guarantee pertaining to private creditors such as the bank. The professional capital would serve as collateral to creditors such as the company’s suppliers. 2. The owner can ​choose which fiscal regime to file taxes through. An EIRL has the option of deciding between filing their taxes through ​L’impôt sur le revenu (IR) like a classic Entreprise Individuelle (in this case the social fees are calculated on the business’ revenue) or through L'impôt sur les sociétés (IS)​, like other corporations. In this case the company’s revenue is the base for taxation, and dividends can be distributed afterwards. The social fees in this scenario will be calculated based on the owner’s salary instead of the company’s revenue. The owner’s salary would also be deductible from the IS. These two characteristics make the EIRL seem almost identical to an SARL. However, it is not a “Société” meaning that the company does not have a legal entity, the company cannot be transferred or sold to another owner, the filing fees are less costly as an EIRL, there is a comptabilité de caisse (Cash flow accounting), and the social fees differ. It is also interesting to 39 Le Bon Café et Thé - A Cross-Border Business Opportunity point out that there is the option of forming an EIRL with an Auto-Entrepreneur status. (Petite-Entreprise.net, n.d.) 8.1.1.4 Société à Responsabilité Limité (SARL) The ​Société à Responsabilité Limité or SARL is a limited liability corporation. It consists of creating a separate legal entity, the company, from the entrepreneur. The business owner or shareholders have a separate legal and fiscal identity, so the liability of the entrepreneur is limited to their personal investment in the company. There is a symbolic minimum capital of 1 euro to open a SARL in France, but most corporations add a capital of 2000 euros (Cléon, P. 2015). The main characteristics of a SARL are as follows: ● ● ● ● ● Limited Liability: the entrepreneur is only responsible to respond for the capital they invest in the company. Number of shareholders: 1 or more. There is no maximum. The Minimum Capital for an SARL is ​1 euro​. It is required to publish Annual books. Taxes are filed through the Impot des Sociétés or “IS”. ​(Cléon, P. 2015) L'entreprise unipersonnelle à responsabilité limitée (EURL) This is one of the most common forms of setting up a business in France for sole entrepreneurs. A EURL is a “Société à Responsabilité Limité SARL” that has only one shareholder. This means that it has limited liability and offers great flexibility to the owner for important decision making. It shares all the traits of an SARL. (​The Business Plan Shop Blog, n.d.) The only other difference between a EURL and an SARL is that the owner of a EURL can decide whether to set up paying their taxes through their personal revenue (IR) or choosing to file corporate tax (IS). (​The Business Plan Shop Blog, n.d.) 8.1.1.5 La Société Anonyme (SA) A ​Société Anonyme ​or SA is also a limited liability corporation in which the owner is a separate entity from the company. ​(Cléon, P. 2015) The regulations for this type of corporation are detailed in ​articles L-225 of the French Code de Commerce, or Code of Commerce. ​The main characteristics of an SA are the following: ● ● ● ● ● ● Limited Liability. Registry Fees: the SA must be publicly registered, and has higher formalization fees than an SL, as more documents are required. Complex filing process: similar to SL, but requires more complex documentation. Number of shareholders: 1 or more. There is no maximum. The Minimum Capital for an SA is ​37,000 euros ​if there are 2 or more shareholders. The capital is represented by stocks, and the stocks can be traded freely. 40 Le Bon Café et Thé - A Cross-Border Business Opportunity ● ● It is required to publish Annual books, and hold annual shareholder meetings. Taxes must be filed through the “IS”. ​(Cléon, P. 2015) La société par actions simplifiée (SAS) This type of business form is a simplified version of the Société Anonyme (​The Business Plan Shop Blog, n.d.)​. ​Although it is easier to start up, this type of business as well as the société anonyme are not ideal for sole business owners which are not interested in selling their company soon. When there is only one owner it is legally referred to as la Société par Actions Simplifiée Unipersonnelle or SAS. It presents the following differences with respect to the traditional Société Anonyme. (​The Business Plan Shop Blog, n.d.) ● ● ● ● Quicker and easier to set up than a SA. The Minimum Capital for an SAS is ​1 euro​, as opposed to the SA. Filing Fees still apply but are slightly less. Advantages in flexibility: Owners are more flexible to make decisions. 41 Le Bon Café et Thé - A Cross-Border Business Opportunity 8.1.2 Options of Business Entities in Spain The following table highlights the main characteristics for the legal business forms in Spain which are available to this entrepreneur. Type Number of Shareholders Minimum Capital Required Shareholder Responsibili ty Fiscal Regime Subject To Empresario Individual (Autónomo) 1 none Unlimited IRPF Emprendedor de Responsabilidad Limitada 1 none Limited IRPF Sociedad de Responsabilidad Limitada 1 or more 3015 euros Limited IS Sociedad Limitada Nueva Empresa 1- 5 socios 3015 - 120,000 euros Limited IS Sociedad Anónima 1 or more 60000 euros Limited IS In Spain, the options for forming a business are quite similar to France but with different tax rates and regimes. As in the case of France, only the business options that are relevant to this entrepreneur will be analyzed. This includes business forms with a minimum of 1 shareholder and that are not meant for professional activities requiring a specific license. 8.1.2.1 Empresario Individual (Autónomo) Identical to the Entreprise Individuelle in France, as an Empresario Individual, the company is a physical person, the owner (Infoautonomos, eleconomista.es, 2017). ● ● They are are completely responsible for deficits or debts resulting from their business activity. This means that in the worse case scenario, short term creditors have the possibility of confiscating your assets such as your homestead in the case of nonpayment. Taxes are filed as a physical person through the ​Impuesto sobre la Renta de las Personas Físicas IRPF​, or tax for personal revenue. 42 Le Bon Café et Thé - A Cross-Border Business Opportunity ● ● ● ● ● Not required to sign up in the Registro Mercantil (Spain’s National Registry for Businesses). Simple filing process: register in Hacienda (for VAT declarations) and Seguridad Social (Spain’s Social Security). No Filing Fees No Minimum Capital Required Social Security Fees: “​La Cuota del Autónomo​” is a required monthly payment made to Spain’s Social Security. (Infoautonomos, eleconomista.es, 2017) Being an Autónomo requires making a monthly payment to Spain’s Social Security called “La Cuota del Autónomo”. This payment is destined to the entrepreneur’s future pension. The way the system works is the owner can decide between a minimum base or a maximum base to calculate their payment. It is normally more interesting to choose a minimum base to pay less each month (Calvo Martinez, J.A 2015). However, some Autónomos are interested in designating more money towards their retirement. This monthly payment usually changes each year with the “Ley del Emprendedor” or “Entrepreneurial Law” which is officially the ​Ley 14/2013, de 27 de septiembre 6 ​. The estimations of the “Cuota” will be made based on the law of 2016 which is currently effective (Calvo Martinez, J.A 2015). The form of calculation is detailed below: 1. The payment is calculated using the expected salary the owner will receive. However, there is a set minimum base (893.10 euros) and a maximum base (3642 euros) to calculate the payment. The rate can be applied to any salary between these limits. 2. The “Tipo de Cotización” or rate applied to the base is currently ​29.8%​. In the case where the owner has not contracted work accident insurance (cobertura AT) and professional illness insurance (cobertura EP), an additional 0.1% is added to their payment. This makes a total applicable rate of​ 29.9%​. 3. The monthly payment for a minimum based salary is approximately ​267 euros ​and can reach up to 1086 euros with the maximum base. (Calvo Martinez, J.A 2015) BASIC MONTHLY FEES OF AN AUTONOMO The amount of monthly payments for an autónomo in Spain are quite high because of the monthly social security payment. However, with the special reduction, or Tarifa Especial, the social fees are reduced considerably during the first 18 months. Below is a detailed list of what our entrepreneur would have to spend in order to operate as an autónomo. (Calvo Martinez, J.A 2015) 1. Initial Fees=0 2. Cuota del Autónomo: a. First Semester= 53.4 euros b. Second Semester= 134 euros c. Third Semester= 187 euros d. Afterwards: Approximately 267 euros 6 ​https://www.boe.es/buscar/act.php?id=BOE-A-2013-10074 43 Le Bon Café et Thé - A Cross-Border Business Opportunity 3. Accounting and Management= 60 euros approximately The laws for Autónomos change every year and this makes it essential to outsource accounting and tax declarations to consulting firms or accounting firms. The monthly payments depend on the level of the company’s activity as these firms charge by the hour. Usually a simple starting business will cost anywhere from 40-70 euros a month. (Calvo Martinez, J.A 2015) Autónomo Dependiente This is a specific type of Autónomo that can be formed in the situation where the owner carries out an economic or professional activity regularly, personally and directly with a client (either a physical or legal entity) on whom it depends for a minimum of 75% of its revenue. In other words, the company has one main client that is responsible for three fourths of its revenue. The only thing necessary apart from the usual process of setting up business as an Autónomo, is to sign a contract with the Public Service for National Employment electronically. However, this is not a valid option for the entrepreneur at hand, since the clients in restauration are obviously numerous. (Infoautonomos, eleconomista.es, 2017) 8.1.2.2 Emprendedor de Responsabilidad Limitada (ERL) An Emprendedor de Responsabilidad Limitada is almost identical to an Autónomo. However, it differs in that is has limited liability in certain conditions. (Gedesco, R. 2015) ● ● ● ● ● ● The entrepreneur is completely liable with their personal assets to pay back company debts, however has the option of protecting their homestead. In order to ​separate their home from their commercial activity​, the entrepreneur must their property as their homestead in el Registro de la Propiedad, Spain’s Property Registry and register their company as an ERL at the Registro Mercantil specifically stating to exclude that property. Still, it is important to note that value of the homestead property must not exceed 300.000 euros. There are some filing fees for Registro de la Propiedad as well as the Registro Mercantil: No Minimum Capital Required Annual Books filing fee for the Registro Mercantil Taxes must be filed through the Impuesto sobre la Renta de Personas Físicas or IRPF (Gedesco, R. 2015) COSTS AS AN ERL The amount of monthly payments for an ERL is slightly higher than an autónomo because of the fact they have protection from responding to liabilities with their homestead property. The estimated costs include the Registro de la Propiedad filing fee which depends on the value of the property, number of owners and other factors, the Registro Mercantil filing fee, Annual Books Publication costing about 350 euros, and the Cuota del Autonomo, exactly as in the case of Empresario Individual. (Gedesco, R. 2015) 44 Le Bon Café et Thé - A Cross-Border Business Opportunity 8.1.2.3 Sociedad de Responsabilidad Limitada (SL) The Sociedad de Responsabilidad Limitada is almost identical to an SARL in France. It creates a separate legal entity which is the corporation. The business owner or shareholders have a separate legal and fiscal identity. This means that the liability of the entrepreneur is limited to their personal investment in the company. The corporation will always have a minimum amount of capital made up of the shareholders’ investments which is thereby divided into shareholder participations. These are indivisible and can be accumulated. (iPyme Dirección General de Industria y de la Pequeña y Mediana Empresa, 2017) ● An SL in Spain has limited Liability just like in the case of an SARL in France, which ● ● ● ● ● ● means that the entrepreneur is only responsible to respond for the capital they invest in the company. Registry Fees: In order to establish a SL, the corporation must be publicly registered, which requires a set of elevated constitutional fees involving a public notary and other specialists. Complex filing process: certify and register in Registro Mercantil (Registry of Commerce), deposit capital in the company’s bank, publish official company statutes (Articles of Association), write escritura publica (Public deeds by a Notary), apply for CIF Hacienda (Public VAT and tax number for declarations), register in Impuesto Sobre Actividades Económicas IAE7 (Economic Activity Tax) and Seguridad Social (Spain’s Social Security). Number of shareholders: 1 or more. There is no maximum. The Minimum Capital for an SRL is ​3,005.06 euros and must be presented entirely at the time of constitution. It can be divided into shareholder participations that cannot be represented by stocks or titles. It is required to publish Annual books. Taxes must be filed through the Impuesto sobre Sociedades “IS”. ​(iPyme Dirección General de Industria y de la Pequeña y Mediana Empresa, 2017) COSTS AS AN SL The costs of establishing an SL are much higher than those of an Autónomo. However, the amount of monthly payments are similar to the payments made by an autónomo for certain amounts of revenue. It is important to note that every SL must have at least one administrator (this can be the entrepreneur), who is registered as an autonomo and pays the monthly cuota del autónomo. ​(iPyme Dirección General de Industria y de la Pequeña y Mediana Empresa, 2017)​ The estimated costs are as follows: 1. Public Notary Fees= about 400 euros. This includes the company’s official documents and statutes, and establishes the board of administration. The IAE is a mandatory tax calculated based on a scale of tariffs which any subject conducting business must register for upon initiating their commercial activity. However, corporations with under 1.000.000 euros in revenue and and business owners during their first two years of activity are exempt from paying this tax. 7 45 Le Bon Café et Thé - A Cross-Border Business Opportunity 2. Corporate Name Registration= About 150 euros (Emitt Blog, n.d) 3. Registro Mercantil filing fee= About 180 euros8 (Registro Mercantil Gipuzkoa, 2017) 4. Annual Books Publication = About 300 euros in Accounting Fees, 30 euros in Notary fees and 16 euros in Registry fees per volume to elaborate the annual books. 5. Consulting and Accounting fees are higher because of annual books. (Emitt Blog, n.d) 6. Other fees and taxes detailed in the financial analysis for San Sebastian. 8.1.2.4 Sociedad Limitada Nueva Empresa (SLNE) A Sociedad Limitada Nueva Empresa is a variation of SL detailed in the Ley 7/2003 de 1 de abril. This type of SL was designed for small entrepreneurial projects in order to facilitate the formalization process, making it easier to set up an SL and with full legal guarantees. (CIRCE Gobierno de España, 2017) The SLNE has the same characteristics as an SL, but there are some major differences that set apart this type of SL: ● ● ● ● ● ● ● ● ● ● There is a minimum and maximum of shareholders: 1-5 physical shareholders. Legal entities are not allowed to be a shareholder of a SLNE unlike in an SL. A shareholder registry listing the names of the shareholders is not necessary. The administrators of a SLNE must be the actual shareholders, and there is no board of administration, unlike the SL where the statutes can name a board of administration including other administrators. (CIRCE - Gobierno de España, 2017) More flexibility to make important decisions or to develop different business activities without modifying the company’s statutes. The filing process can be done online or in person. The company’s statutes can be based on basic models approved by the Spanish Ministry of Justice, and can be validated by a public notary in a time frame of 48 hours. The business name must be composed of the first and last name of one of the shareholders followed by a numerical code. Following the company’s formation, the business name can be modified into a different name, free of charge if done during the first three months following the formation. Deferment of payment to Impuesto de Sociedades or IS for the first two fiscal periods of business or first two years. Deferment of payment to IRPF during the first year. ​(CIRCE - Gobierno de España, 2017) 8.1.2.5 Sociedad Anónima (SA) A Sociedad Anónima or SA is the equivalent to a Société Anonyme in France. It is a limited liability corporation in which the owner is a separate identity from the company, a separate legal entity. The overall concept of a SA is similar to that of a SL ​(CIRCE - Gobierno de España, 2017). ​The main characteristics of an SA are the following: ● 8 Limited Liability. The estimated price from the Registro Mercantil is included in the attachments section of this document. 46 Le Bon Café et Thé - A Cross-Border Business Opportunity ● ● ● ● ● ● Registry Fees: the SA must be publicly registered, and has higher formalization fees than an SL, as more documents are required. Complex filing process: similar to SL, but requires more complex documentation such as a shareholder registry, board of administration and complex statutes. Number of shareholders: 1 or more. There is no maximum. The Minimum Capital for an SA is ​60,000 euros and must be presented entirely at the time of constitution. It is represented by stocks, and the stocks can be traded freely. It is required to publish Annual books, and hold annual shareholder meetings. Taxes must be filed through the Impuesto sobre Sociedades “IS”. ​(CIRCE - Gobierno de España, 2017) 47 Le Bon Café et Thé - A Cross-Border Business Opportunity 8.2 Corporate Tax Laws and Tax Reductions 8.2.1 Corporate Tax in Gipuzkoa, Basque Country, Spain The Corporate Tax rate in Spain varies depending on the province. In the case of Gipuzkoa, it is the Gobierno Vasco, or Basque Government, which delegates the commerce laws. The current law in place in Gipuzkoa by the Basque Government is LA NORMA FORAL 2/2014, de 17 de enero, del Impuesto sobre Sociedades del Territorio Histórico de Gipuzkoa. (Documento de Hacienda y Finanzas - Gobierno Vasco, 2017) One can find information about the corporate tax rate in the 56th article: Artículo 56. El tipo de gravamen. The article states that the general tax rate is 28%. However, this rate is reduced to 24% for small and micro enterprises defined in the 13th article of the same Norma Foral. (NORMA FORAL 2/2014, de 17 de enero, 2014) According to legislation, a Micro enterprise is defined as a company whose revenue or volume of activity does not surpass 2 million euros, has less than 10 employees, and is not vinculated directly or indirectly by 25% or more with any company that does not meet the previous two requirements. (NORMA FORAL 2/2014, de 17 de enero, 2014) This firm is therefore considered a micro enterprise according to the Basque law. Additionally, this company is eligible for a special deduction of 20% of the applicable rate, which is only designated for micro enterprises. Therefore, the impuesto de sociedades or corporate tax rate will ultimately be ​19.2%​ in the case of Le Bon Café et Thé. 8.2.2 Corporate Tax in France The Impôt sur les sociétés or normal corporate tax rate in France is situated at 33 and 1/3% of the total taxable profit. (Droit-finances.net, 2017) A reduced rate is applied to small firms which meet the following conditions : ● ● ● Total Revenue, without taxes, is less than 7 630 000 euros At least 75% of the capital is possessed physical corporations directly or through interposed companies. The capital of the company is completely cleared. (Droit-finances.net, 2017) In 2017, the reduced tax rate is: ● ● 15% for companies with a profit between 0 and 38 120 € 28% for companies with a profit between 38 120 € and 75 000 € (Droit-finances.net, 2017) 48 Le Bon Café et Thé - A Cross-Border Business Opportunity Since this company meets the requirements for a small firm, and it expects a profit less than 38,120 euros during the first five years, the corporate tax rate applicable to Le Bon Café et Thé in France would be​ 15%. 8.3 Unemployment Aid 8.3.1 Unemployment in Gipuzkoa Spain The Spanish Government sets the laws for unemployment aid throughout all of the country. However, in order for a person in the Basque Country to claim unemployment, they must register in their local employment office, Lanbide Servicio Vasco de Empleo. Requirements to receive personal unemployment contribution or aid: 1. To have worked, officially contributing to unemployment during at least 360 days in the preceding 6 years before being unemployed. These contributions must not have been used to receive other subsidies or aid. 2. To be in the legal situation of unemployment, or unemployed. The law only allows registering for unemployment in the case of job loss for extrinsic reasons to the worker, such as a layoff, expired temporary contracts, expired contracts due to incapacity, etc. 3. To be registered in a regime that contemplates unemployment aid, normally the general regime of the Social Security, and eligible to receive such aids. 4. To be registered as a jobseeker, unemployed and subscribed to the “compromiso de actividad” or activity agreement. 5. To not have reached the age of retirement or working for hire, “por cuenta propia”. (Citapreviainem.es, n.d.) How much does the unemployed aid amount to? The aid is calculated through a percentage on the regulatory base of the individual. 1. The Regulatory Base The regulatory base is an average based on the daily amount of social contributions made by the employee during the last 6 months of employment. (Citapreviainem.es, n.d.) 2. The percentage rate Once the daily regulatory base is calculated, a percentage of that base is paid out to the unemployed individual depending on the time frame: - During the first 6 months, the daily unemployment aid will be 70% of the daily regulatory base of the worker. - After the first 6 months, the amount of unemployment aid is reduced to 50% of the regulatory base. (Citapreviainem.es, n.d.) Each year the maximum and minimum legal amounts that can be received in the form of unemployment aid are fixed through the Spanish legal system. In 2017 the minimum monthly amount for individuals without children is 497.00 €, while the maximum is 1,087.20 €. The 49 Le Bon Café et Thé - A Cross-Border Business Opportunity minimum for that of a parent is 664.74 € while the maximum is 1,242.52 € for one child and 1,397.84 € in the case of more than one child. (Citapreviainem.es, n.d.) During how much time can one receive unemployment aid? The minimum timeframe for unemployment aid is 4 months and the maximum is 2 years. Se cobra como mínimo cuatro meses y como máximo dos años. The length of the aid depends ultimately on the contributions accumulated during the last 6 years. The graph below shows the corresponding timeframe for the aid depending on the number of contributed work days. Our entrepreneur has worked 900 days in Spain and is therefore entitled to 10 months of unemployment aid. This is very roughly enough to help with the entrepreneur’s living expenses during the first year of business. (Citapreviainem.es, n.d.) Source: ​http://www.citapreviainem.es/prestacion-por-desempleo/ 8.3.2 Unemployment in France The Employment Office which registers unemployment in France is called Pôle Emploi. Each department has their own local office. The office corresponding to Bayonne, France is Pôle Emploi Bayonne. Conditions for the Aide au Retour de L’Emploi (ARE) or Unemployment Aid: ● ● ● ● Applicants should justify the periods of affiliation corresponding to the work completed in one or more companies considered in the list of eligible sectors for unemployment benefits. The job seeker must justify 122 days of affiliation or 610 work hours throughout the last: ○ 28 months ​preceding the end of the work contract for those under 50 years old. ○ 36 months​ preceding the end of the work contract for those over 50 years old. The maximum number of hours taken into account for the length of affiliation is 260 hours a month. (Pole-Emploi, 2017) Applicants should: ○ Be registered as a job seeker or carrying out professional education registered in the Pole Emploi’s PPAE or projet personnalisé d’accès à l’emploi. 50 Le Bon Café et Thé - A Cross-Border Business Opportunity ○ ○ ○ ○ ○ Effectively seeking a permanent job. Not have reached the legal age of retirement (60 years old for those born before 01/07/1951, 60 years and 4 months or more depending on the birth year of preceding generations). Be physically apt to exercise a job. Be in a situation of unemployment involuntarily, except for in the case of legitimate resignments. Live in the territory relevant to the registered Pole Emploi office. (Pole-Emploi, 2017) 8.4 Minimum Wage and Social Security 8.4.1 Minimum Wage in Spain In the year 2017, the Ministerio de Empleo y Seguridad Social (Ministry of Employment and Social Security) fixed the minimum interprofessional Wage for the minimum of 40h a week in Spain at: ● Daily Brut Minimum Wage: 23.59€ ● Monthly Brut Minimum Wage (12 payments) : 707.60€ ● Yearly Brut Minimum Wage (including 2 extra payments June and December): 9,906.40€ ● Monthly Brut Minimum Wage (including vacations) : 825.53€ ​(Salariominimo.es, 2017) To calculate the actual cost of hiring an employee in Spain, it’s essential to take social charges and taxes into account. In Spain, these charges usually make up about 33.4% of the salary. In other words, with a salary of 825 euros a month, plus 34% of charges, the total monthly cost of an employee would be about 1106 euros. This is not including deductions, however. (Salariominimo.es, 2017) The detailed charges and deductions are illustrated below in the following graphics: 51 Le Bon Café et Thé - A Cross-Border Business Opportunity Source: h ​ ttp://www.citapreviainem.es/cuanto-cuesta-un-trabajador/ 52 Le Bon Café et Thé - A Cross-Border Business Opportunity Contratación Indefinido - Indefinite Employee Contract: 23.6% Contingencias comunes 5.5% Pago de Prestaciones por Desempleo 3.5% Pago por accidentes de trabajo etc 0.20% Fogasa cobertura de despidos de empresas en quiebra 0.60% Formación Profesional Total: 33.4% of Brut Salary Contratación Temporal - Temporary Employee Contract : 23.6% Contingencias comunes 6.7% Pago de Prestaciones por Desempleo 3.5% Pago por accidentes de trabajo etc 0.20% Fogasa cobertura de despidos de empresas en quiebra 0.60% Formación Profesional Total: 34.6% of Brut Salary 53 Le Bon Café et Thé - A Cross-Border Business Opportunity 8.4.2 Minimum Wage in France In 2017, the France fixed the minimum wage based on a legal time period of 35h a week at: ● ● ● Daily Brut Minimum Wage: 49.34 ​€ Monthly Brut Minimum Wage: 1,480.27 ​€ Yearly Minimum Wage : 17,700 € ​(Droit-finances.net, 2017) In order to calculate the actual cost of hiring an employee, one must take into account the social charges and taxes to be paid. In France, these charges usually make up from 45% of the salary. In other words, with a salary of 1480 euros a month, plus 45% of charges, the total monthly cost of an employee would be 2146 euros. This is not including deductions, however. (Droit-finances.net, 2017) With the ​Employment Similator ​provided by Les-aides.fr9 the actual cost of taking on a full time employee under minimum wage is calculated in a few steps. The actual cost of an employee after social charges, taxes and instant and deferred deductions is 1380 euros. (CCI, 2017) For the purpose of simplicity, the deferred aides will be disregarded, and we will consider the cost of an employee ​1651 euros ​per month. This would translate into a sum of ​19,812 euros a year. The detailed charges and deductions are broken down in the following table. 9 This tool can be found at ​http://les-aides.fr/embauche 54 Le Bon Café et Thé - A Cross-Border Business Opportunity Cotisations Employeurs - Social Payment Responsibilities Employers AGS -3.70 € AGFF -17.76 € APEC 0.00 € AGIRC 0.00 € AGIRC GMP 0.00 € ARRCO -68.82 € Assurance chômage -59.20 € Cotisation exceptionnelle temporaire 0.00 € Allocations familiales -77.70 € Vieillesse (déplafonnée) -28.12 € Vieillesse (plafonnée) -126.54 € Maladie -190.03 € Contribution solidarité autonomie -4.44 € Formation professionnelle -8.14 € Participation à l'effort de construction Taxe d'apprentissage 0.00 € -10.06 € Fonds national d'aide au logement -1.48 € Contribution au dialogue social -0.24 € Prévoyance obligatoire cadre 0.00 € Versement transport 0.00 € Forfait social 0.00 € Accident du travail -16.28 € Contribution supplémentaire à l'apprentissage 0.00 € Taxe sur les salaires 0.00 € Complémentaire santé -- Aides Employeurs Immédiates - Immediate Deductions and Aid for Employers Réduction générale sur les bas salaires (ex-Fillon) Réduction de cotisation d’allocations familiales 55 415.44 € 26.64 € Le Bon Café et Thé - A Cross-Border Business Opportunity Jeune entreprise innovante 0.00 € Apprentissage 0.00 € Aides Employeurs Différées - Deferred Deductions and Aid for Employers Crédit d'impôt pour la compétitivité et l'emploi (CICE) Aide à l'embauche d'un premier salarié Aide à l'embauche pour les PME 103.60 € 0.00 € 166.67 € The total amount of social charges is approximately ​45% of the Brut Salary​ not including the available deductions. (CCI, 2017) 56 Le Bon Café et Thé - A Cross-Border Business Opportunity 8.5 Government Aid and Grants 8.5.1 GIPUZKOA, BASQUE COUNTRY, SPAIN As mentioned earlier, each province in Spain has it’s own regulations. Government aid also varies from province to province. Gipuzkoa is a region of the Basque Country in Spain, which has a separate delegation and its own regional laws differing from the rest of Spain. “El Gobierno del País Vasco” has various differences with respect to Spain in its commerce laws, specifically different corporate tax rates, unemployment aid and financial government grant options. Below is a list of interesting government grants that this entrepreneur would qualify for: 1. Ayudas de apoyo a las personas emprendedoras para la puesta en marcha de nuevos proyectos empresariales Organization​: Lanbide - Basque Employment Services Objective​: To impulse the creation of new business projects by entrepreneurs with a defined business idea. (Lanbide, 2017) Qualifying applicants​: Entrepreneurs, residents of the Basque Country, that have a business plan for creating a new company in the region and wish to carry out the necessary procedures for its creation. The entrepreneur must be the sole project leader and under the supervision of a collaborating organization authorized by Lanbide. They must also be registered as unemployed and searching for employment in Lanbide. Requirements​: ● ● ● ● Comply with all the rules, support services and consulting events organized by the collaborating organizations authorized by Lanbide. Not receive any other government aid for the same purpose. Register in the IAE within 3 months of the government sponsored process. Not have received any government aid for entrepreneurship by Lanbide in the last 4 years. ​(Lanbide, 2017) Type of aid: ● ● ● The maximum amount of monthly aid is 1500 euros per entrepreneur. This amount would be incremented in 15% if the entrepreneur is between 18-30 years old at the moment of presenting the application and in another 15% in the case of a women. In the case of our entrepreneur the maximum monthly aid would amount to 30% more, that is 1950 euros . 57 Le Bon Café et Thé - A Cross-Border Business Opportunity 2. Ekintzaile: ayuda de acceso a la financiación. Organization​: Agencia Vasca de Desarrollo Empresarial (SPRI). Objective​: Offer financial help to entrepreneurs with projects monitored through CEIs (Centros de Empresas e Innovación). A list of CEIs can be found at http://www.spri.eus/es/creacion-de-empresas/polos-de-creacion-de-start-ups-de-euskadi (SPRI, 2017) Type of Aid: 1.- Consulting Aid ​to the entrepreneur and promotion team in the process of maturing the business ideal and elaboration of the business plan until its functioning. 2.- Aid for access to Finance ​of the necessary investments to carry out the business plan. It consists in the reduction of the financial cost for any loan operations formalized according to the agreement subscribed with the financial firm ​Luzaro, Establecimiento Financiero de Crédito​. Qualifying Applicants: All applicants must be registered residents of the Basque Country. ​(SPRI, 2017) - Small and Medium Enterprises SMEs or PYMES according to the Basque Country: ○ ○ ○ - Less than 250 employees. Annual revenue must be less than 50 million euros Not associated to any other company that is not a PYME or does not meet the previously mentioned conditions. Autónomos Physical Entities/People Requirements for Financial Aid: - Innovative Industrial or Related Service Business Activity Generate at least 3 jobs in 3 years. Have its headquarters or at least one center of activity situated in the Basque Country Be a new Business created after the 1st of January of the previous year before applying for the grant. Not have expired debt with any corporation from the SPRI group or with collaborating organizations. Not owe any debt to the public administration or Social Security. Qualify as a PYME. ​(SPRI, 2017) Requirements for Investments Financed: 58 Le Bon Café et Thé - A Cross-Border Business Opportunity 1. They should qualify as a long term asset destined for installation, amplification or improvement of long term assets purchased from third parties. 2. They should be auto financed with the entrepreneur’s capital by at least 30%. Eligible Costs for Reimbursement: ● ● Consulting Aid: Up to 100% of costs are eligible for reimbursement with a limit of 30,000 euros within a maximum period of 18 months. The grant covers costs including professional education (specific sector or Business education) or counseling (600 euros/month), external counseling or outsourcing, documentation and prospection investigations, assistance to fairs, business trips, developing prototypes, and others. Financial Aid: Consists of obtaining a loan operation with the following characteristics: a. Minimum amount: 40,000 euros. b. Maximum amount: 180,000 euros. c. Interest rate: Euribor 6 months + 1.25. d. Loan period: 7 years. e. Payments: At the end of each trimester f. Guarantee: Contract confirming the execution of the Business Project. g. Exempt from Filing fees and Opening commissions Once Luzaro informs SPRI of the payment, SPRI will transfer the aid corresponding to the following concepts: ● ● Interests generated from the opening date of the loan to the final current trimester. The interests generated each trimester throughout the following 8 trimesters. The loan must be only used to finance the following concepts: 1.- Tangible Assets, excluding lots and building construction. This includes reform or conditioning of commercial space, machinery, equipment, tools, industrial vehicles, technical installations, furniture and other investments in fixed assets. 2.- Intangible Assets including software, industrial property, intellectual property, research and development costs. 3.- Filing Fees and Initial Company Registry Fees Timeline: Starting date: 01/01/2017 Deadline: 31/12/2017 ​(SPRI, 2017) 3. Programa para promoción de Sociedades Emprendedoras en Gipuzkoa: Barnetekin Organization​: Diputación Foral de Gipuzkoa 59 Le Bon Café et Thé - A Cross-Border Business Opportunity Objective​: To accompany new business projects that contribute to the diversification of the entrepreneurial community in Gipuzkoa through a transformational character, high added value and placing special emphasis on those contributing to a green and circular economy. (Diputación Foral de Gipuzkoa, 2017) Qualifying applicants​: Physical and Legal entities with primary residence in Gipuzkoa which have an idea for an innovating or technological business project. Eligible Costs for Reimbursement: The grant will serve to offer counseling from BIC GIPUZKOA to new businesses, and to reimburse, with a limit of 30,000 euros per company, up to 100% of any costs associated with: ● ● ● ● ● ● Spain Dedication of the entrepreneur maximum of 600 euros/month. Acquiring Business skills, specific to managing the business project. Consulting and external technical assistance costs. documentation and prospection investigations assistance to fairs and business trips developing prototypes ​(Diputación Foral de Gipuzkoa, 2017) 4. Tarifa Especial de la Cuota del Autónomo - Social Fee Reduction: All of For the ​first 18 months​, business owners are offered a special reduction on social fees through what is known as the “Tarifa Especial”.10 This reduction grants Autónomos the possibility of paying a fixed monthly fee or “Cuota” of 53,4 euros during the first 6 months and a reduced fee during the following 12 months. (Infoautonomos, 2017) Qualifying applicants: Eligible business owner should meet the following requirements: ○ ○ ○ ○ Not having been an Autónomo at any time during the previous 5 years. Not contracting any employees during this period. Must not be an owner of any other business. Must not carry out any other sort of business activity during this period. Type of Aid: Those eligible for the fixed monthly fee for the first 6 months will be able to apply for more reductions during the first year and a half. This aid is divided into 3 stages of reductions. The reduction is calculated using the minimum base of 267 euros. (Infoautonomos, 2017) The stages of payments are as follows: The Tarifa Especial will be considered in the financial analysis, where the owner and administrator will have a reduced social fee during the first year. 10 60 Le Bon Café et Thé - A Cross-Border Business Opportunity ○ ○ ○ ○ First Semester: 80% reduction of fees= 53,4 euros Second Semester: 50% reduction of fees= 134 euros Third Semester: 30% reduction of fees= 187 euros Afterwards: The minimum base will be applied 267 euros. If the profit exceeds this baseline, the cuota will be calculated between the two set limits. (Infoautonomos, 2017) 8.5.2 PYRÉNÉES ATLANTIQUES, FRANCE France has a much more centralized legal system for its departments than Spain. Although France’s regions have the same laws of commerce, and many government aid are available in all of its regions, each province and town hall in France does also offer its own selection of government grants for business owners. 1. Exonération d'impôts pour création d'entreprise : all of France Objective​: ● ● Newly created businesses are exonerated under certain conditions from the Cotisation Foncière des entreprises (CFE), one of the two components of the Contribution Économique Territoriale (CET) tax. New corporations or sociétés, that choose to file taxes under the IS or l'impôt sur les sociétés, are also exonerated from the advanced payment transfers to the IS. (CCI, 2017) Type of Aid​: ● ● ● The company is exempt from advanced payment transfers to the IS during its first year of activity. The imposable base of the CFE or cotisation foncière des entreprises is reduced to 50% in the first year and is not due until the following period. Only fiscal services have the competency to judge the company’s eligibility to this aid. Beneficiaries: ● Entrepreneurs, corporations of physical entities, with a new enterprise created within the last 3 years and meeting the eligibility of France’s fiscal services. (CCI, 2017) Organization​: DDFIP Direction Départementale des Finances Publiques 61 Le Bon Café et Thé - A Cross-Border Business Opportunity 2. FGIF - Fonds de Garantie à l'Initiative des Femmes : all of France Objective​: ● ● ● ● The FGIF (Fonds de Garantie à l'Initiative des Femmes) de France Active, or Guaranteed Funds for Womens’ Initiative, has the objective of financing the creation, purchase or development of businesses. The FGIF supplies a guarantee to facilitate female entrepreneurs, with whichever management status, legal business form, or activity, in obtaining credit with banks. The guaranteed credit can finance investment needs and the Besoin en Fonds de Roulement or Working Capital Requirement The personal guarantees are excluded with the FGIF’s guaranteed credit. (CCI, 2017) Type of Aid: ● The guarantee covers up to 70% of the total loan, with a 45 000 € limit. ● The sum the loan should be at least 5 000 €. Beneficiaries​: ● Female entrepreneurs, whether corporations of physical entities, with a new enterprise created within the last 3 years and meeting the eligibility of France’s fiscal services. ● All Fiscal and Social payments must be up to date, and the company should possess a healthy financial situation. ​(CCI, 2017) 3. Micro-crédit pour la création d'entreprises: All of France Objective​: ● ● This is a micro-credit for entrepreneurs proposed by the ADIE. Its objective is to allow people without access to bank credit to get past their situation by creating their own job or developing an existing activity. (CCI, 2017) The ADIE supports the project manager in the preparation of their business plan, informing them on existing aids and procedures that need to be done. They search for local partners which can assure the project gets put together and propose support. The Depending on the entrepreneur’s situation, the micro credit can be carried out through other means (AGEFIPH, NACRE). Type of Aid: ● ● The maximum amount of intervention from the ADIE is 10 000 €. The total sum of the micro credit can reach up to 10 000 €. (CCI, 2017) 62 Le Bon Café et Thé - A Cross-Border Business Opportunity ● ● Can also intervene in the form of an honor loan at a 0% rate with a maximum of 3 000 €. This could potentially be used as a ​Crédit TVA11​. The ADIE deducts 5% of the total loan sum and transfers this amount to a solidarity fund. This applies to all loans contracted with the ADIE. Beneficiaries​: ● All new companies registered as any legal business forms excluding Entreprise Individuelle as agricultural farmers and all Associations. Organization: ​ADIE Association pour le Droit à l'Initiative Economique ​(CCI, 2017) 4. Prêt SOCAMA Création: All of France Objective​: ● ● The SOCAMA Création loan supports business creation projects financially. It finances tangible and intangible investments related to the creation of enterprises. As part of the European Program, COSME, this loan serves as a guarantee agreement between the Fédération nationale des SOCAMA, or National Federation of SOCAMA, and the FEI (Fonds Européen d'Investissement), or European Investment Fund. (CCI, 2017) Type of Aid: ● The total sum of the SOCAMA loan can reach a maximum of 30 000 €. Beneficiaries​: ● All new companies registered as any legal business forms. Organization​: SOCAMA ​(CCI, 2017) A Crédit TVA is a short term credit which can be negotiated with some banks in order to finance the VAT payments of initial investments. The honor loan offered by the AIDE can serve as a perfect Crédit TVA with a 0% interest rate. 11 63 Le Bon Café et Thé - A Cross-Border Business Opportunity 5. ACCRE Aide au Chômeur Créant ou Reprenant une Entreprise: All of France Objective​: The ACCRE12 consists in exonerating entrepreneurs from social fees throughout one year, offering a possible loan, and advancing their unemployment payments. (Agence France Entrepreneur, 2017) Organization​: French Government Beneficiaries​: ● Entrepreneurs benefitting from unemployment aid which either fit the criteria for unemployment aid or receive unemployment aid by Pole Emploi (France’s Unemployment Office). ● Other categories: ○ Unpaid individuals who are job searching and registered at Pole Emploi for at least 6 months during the last 18 months. ○ 18-26 year olds. ○ Those who are under 30 and do not meet the conditions to apply for unemployment (not enough work years, etc). ○ Individuals who benefit from RSA, Allocation de Solidarité or Allocation Temporaire d’Attente. (Agence France Entrepreneur, 2017) Type of Aid: ● The ACCRE offers the possibility of taking on a loan with 0% interest of a sum of 1000-10,000 euros, to be payed back in 1 to 5 years. ● Exoneration of Social Charges on personal income during one year. ● ARCE Pole Emploi Aid for Unemployed Entrepreneurs: ○ Those eligible for or receiving unemployment benefits have the right to request an advance payment of ​45% of their total benefits ​(with the ARCE, monthly unemployment periods are reduced to one year) ​at the beginning ​of their business activity. (Agence France Entrepreneur, 2017) 6. Plate forme d’initiative locale BULTZA: Department of ​Pyrénées Atlantiques Objective​: BULTZA is local platform initiative, offered only in the region of Pyrénées Atlantiques, which creates a financial and human push for entrepreneurs setting up their business in a precise territory and responding to a certain number of conditions. (CCI, 2017) The ACCRE will be considered in the financial analysis for Le Bon Café et Thé. During the first year, the owner will be exonerated from social fees. 12 64 Le Bon Café et Thé - A Cross-Border Business Opportunity It seeks to mobilise finance through honor loans with 0% interest with no personal or physical guarantees necessary, and through personal guidance and during the life of the loan. Organization​: Association BULTZA with CCI Bayonne Pays Basque - Chamber of Commerce Type of Aid: ● The total sum of the honor is between 1,500-15,000 euros. ● Unemployed entrepreneurs under 30 years of age can also solicit aid from the NACRE fund in addition to the BULTZA loan. This can grant between 1000-8000 euros per applicant. (CCI, 2017) Beneficiaries: ● Entrepreneurs setting up a business in the region of Pyrénées Atlantiques. The aid in the form of a loan is granted to the physical entrepreneur, never to the company. (CCI, 2017) 8.6 Other factors Opening Days Per Year Based on the neighboring competition in both locations, Le Bon Café et Thé plans on opening all year long, and closing for two weeks in the month of February due to low frequentation. The business will be open 6 days a week from Wednesday to Monday. This translates into 300 work days per year. Living Expenses The expected living costs in Bayonne for this entrepreneur is approximately 1050 euros per month. The expected living costs in Spain for this entrepreneur is approximately 950 euros per month. Salaries The owner is considering hiring a full time worker for 5 months from May to September in order to meet the high flow of clients during the summer season. The entrepreneur will not receive a salary until the second year of business since she has the possibility of claiming unemployment for the first 10 months in either Bayonne or San Sebastian. The monthly salaries in each scenario are as follows: 5 month contracted employee 13 14 Bayonne San Sebastian 148013 82614 Minimum Wage in France Minimum Wage in Spain including 2 extra payments in June and December. 65 Le Bon Café et Thé - A Cross-Border Business Opportunity Owner’s salary (year 2 and 3) 1500 1200 VAT Tax Official government information on VAT tax in both countries can be found in the attachments section. In Spain, the VAT tax stays constant throughout all the provinces. The general rate is 21%​, however there is a reduced tax for the food and beverage industry of ​10%​. The general VAT tax rate in France, also constant throughout the country, is presently ​20%​. There is also a reduced rate for the restaurant and beverage industry of ​10% percent. Therefore, given the nature of the business activity, the food and beverage service sector, the applicable tax rate on sales and purchases in both scenarios is ​10%​. External Finance The owner plans on obtaining a loan in both cases to finance initial business costs. After doing some investigating and contacting local banks in San Sebastian and Bayonne. Both banks offer the possibility of obtaining a loan with monthly payments for 7 years at an annual interest rate of 2% (interest rates in 2016 were at an all time low and plan to remain this way throughout 2017). Other Costs There are a multitude of costs and variable factors involved in setting up this business such as insurance costs, electricity, etc., even more so to consider in each location. In order to make this an authentic study, the financial analysis has included data from real life businesses: balance sheets of companies with similar activities in the area, information from accounting firms, and provided quotations. All the documents indicating used for calculating external costs in the financial analysis are included in the attachments section. Initial Stock Product Category Estimated Cost GRAND TOTAL €1,582.89 Coffee Milk and extras Loose Leaf Tea Bubble Tea Other Beverages Packaging Food €73.98 €163.00 €170.78 €329.35 €183.00 €596.78 €66.00 66 Order Timeframe Weekly Weekly Bi weekly Bi weekly Weekly Monthly Daily Le Bon Café et Thé - A Cross-Border Business Opportunity 8.7 Incorporated Financial Analysis As part of the cross-border analysis, two financial plans have been carried out using a financial software called ​Prévision Flash15 by RCA, one for the Bayonne location and another for the San Sebastian location. Both plans are based on the characteristics which have been specified throughout the business canvas model, including the essential costs and varying economic situations of each location. The following tables provide a summary of differences for the costs and revenue of each scenario. RESOURCES AND NEEDS FRANCE SPAIN Besoins Necesidades NEEDS: Equipment Costs Investissements Filing Fees Frais de Constitution* Deposit Rent Caution Loyer - Fianza Alquiler Droit Au Bail Droit Au Bail 30500 Droit Au Bail Various Divers 500 Otros gastos VAT Tax TVA 20%** TOTAL 16215 1750 3693 Inversión Inicial 16215 Gastos de Constitución* 900 3200 500 IVA 21%** 3699 52658 24514 *The Filing Fees will appear as general costs under the category of Legal Fees for the first year. **The VAT tax is not included in the Income Statement, but is reflected in the Cash Flow analysis. RESOURCES: Ressources Recursos Capital Capital Social 2000 Personal Savings Current Account Apport Personnel 8000 Angel Loan Emprunt Famille 15000 Préstamo Familiar 10000 Bank Loan Emprunt Banque 30500 Préstamo Banco 10000 TOTAL Capital Social 3015 Aporte Personal 55500 6000 29015 RCA’s Prévision Flash is used by Expert Accountants in France to elaborate financial business plans. The official language is in French. However, even variables such as corporate tax rates, social fees, and VAT rates can be customized to reflect the scenario of a business in another country. The software can be tested for a 15 day free trial on its website. ​https://rca.fr/gamme-conseil/prevision-flash/ 15 67 Le Bon Café et Thé - A Cross-Border Business Opportunity Sales Forecast The sales forecast takes into account the same amount of average daily customers in both locations, considering the information provided by nearby business selling coffee and drinks in both cities. According to business owners of local establishments, there is an expected amount of : - 100 daily purchase tickets on average - 125 clients a day on average These averages vary with respect to seasonality, which is expressed in the sales forecast. The sales forecast for both locations therefore is calculated using the same amount of customer flow while incorporating the ​varying average price​ of each country for each product category. SAN SEBASTIAN, GIPUZKOA, BASQUE COUNTRY, SPAIN Daily clients av. 100 sales/124 clients Opening days 300 days a year Sales Dist. by Daily Product Category Average Coffee Tea Bubble Tea Other drinks Snacks* Average Price Daily Average Sales Total Yearly Sales 25% 31 €2.85 €89.06 €26,718.75 25% 31 €2.50 €78.13 €23,437.50 45% 56 €3.25 €182.81 €54,843.75 5% 6 €2.00 €12.50 €3,750.00 + Extra 35% 44 €2.50 Total Sales €109.38 €32,812.50 €471.88 €141,562.50 *an estimated 25% of all customers include a food or snack purchase in their order. Seasonality Coffee Sales Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total Tea Sales Bubble Tea Sales Other Bev. Sales Food & Snack Sales 5% €1,335.94 €1,171.88 2,742 € €187.50 €1,641.18 2% €534.38 €468.75 1,097 € €75.00 €656.47 5% €1,335.94 €1,171.88 2,742 € €187.50 €1,641.18 6% €1,603.13 €1,406.25 3,291 € €225.00 €1,969.41 8% €2,137.50 €1,875.00 4,388 € €300.00 €2,625.88 13% €3,473.44 €3,046.88 7,130 € €487.50 €4,267.06 16% €4,275.00 €3,750.00 8,775 € €600.00 €5,251.76 16% €4,275.00 €3,750.00 8,775 € €600.00 €5,251.76 11% €2,939.06 €2,578.13 6,033 € €412.50 €3,610.59 8% €2,137.50 €1,875.00 4,388 € €300.00 €2,625.88 4% €1,068.75 €937.50 2,194 € €150.00 €1,312.94 6% €1,603.13 €1,406.25 3,291 € €225.00 €1,969.41 100% €26,718.75 €23,437.50 54,844 € €3,750.00 €32,823.50 68 Le Bon Café et Thé - A Cross-Border Business Opportunity According to the prices of the menu in France, the ​average price for most product categories is slightly ​higher​. This results in a higher amount of sales for each period. The opening days, sales distribution, number of clients per day, and seasonality remains the same. BAYONNE, PYRENEES ATLANTIQUES, BASQUE COUNTRY, FRANCE Daily clients av. 100 sales/124 clients Opening days 300 days a year Sales Dist. by Daily Product Category Average Coffee Tea Bubble Tea Other drinks Snacks* Average Price Daily Average Sales Total Yearly Sales 25% 31 €3.50 €109.38 €32,812.50 25% 31 €3.25 €101.56 €30,468.75 45% 56 €3.50 €196.88 €59,062.50 5% 6 €2.50 €15.63 €4,687.50 + Extra 35% 44 €3.00 €131.25 €39,375.00 Total €554.69 €166,406.25 *an estimated 25% of all customers include a food or snack purchase in their order. Seasonality Coffee Sales Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total Tea Sales Bubble Tea Sales Other Bev. Sales Food & Snack Sales 5% €1,640.63 €1,523.44 2,953 € €234.38 €1,968.75 2% €656.25 €609.38 1,181 € €93.75 €787.50 5% €1,640.63 €1,523.44 2,953 € €234.38 €1,968.75 6% €1,968.75 €1,828.13 3,544 € €281.25 €2,362.50 8% €2,625.00 €2,437.50 4,725 € €375.00 €3,150.00 13% €4,265.63 €3,960.94 7,678 € €609.38 €5,118.75 16% €5,250.00 €4,875.00 9,450 € €750.00 €6,300.00 16% €5,250.00 €4,875.00 9,450 € €750.00 €6,300.00 11% €3,609.38 €3,351.56 6,497 € €515.63 €4,331.25 8% €2,625.00 €2,437.50 4,725 € €375.00 €3,150.00 4% €1,312.50 €1,218.75 2,363 € €187.50 €1,575.00 6% €1,968.75 €1,828.13 3,544 € €281.25 €2,362.50 100% €32,812.50 €30,468.75 59,063 € €4,687.50 €39,375.00 69 Le Bon Café et Thé - A Cross-Border Business Opportunity 9. Conclusions 9.1 Which location should the entrepreneur invest in? After taking a look at the essential data in the financial analysis, the following numbers stand out: ● The ​revenue in France is 24,845 euros higher the first year, and maintains a similar proportion the following periods due to the higher price range in this country. ● Opening in Bayonne involves ​27,300 euros more of initial investments, ​not including filing fees. This is due to the elevated cost of the Droit au Bail (30,500 euros) which will be fully financed through the bank loan for the same quantity. This translates into much higher annual finance costs in France. The personal capital put forward by the entrepreneur will also be 1000 euros more in the case of Bayonne (this mainly covers the higher costs of forming a SARL). In the case of Spain the bank loan amounts to 10,000 euros. ● While the annual interest rate for a business loan with a financial entity in both locations is the same (​2​%), the annual cost of external finance in the case of Bayonne is much higher due to the higher quantity needed to be financed. The annual loan payment amounts to ​4668 euros in France versus 1536 euros In Spain. This translates into 3132 euros more per year. ● The ​annual cost of a full time employee with a 5 month contract is ​5155 euros more​ in the case of France. During the first year, the ​ACCRE aid in France allows the business owner to save 2425 euros of social fees that are required in Spain (cuota del autónomo). Nonetheless, the social fees amount to ​4819 euros more ​per year in France the following periods. ● ● The highest costs involved in business operations in both locations is Personnel and External Costs. ​Wages represent 37% ​of total costs in the case of San Sebastian and 47% in the case of Bayonne​. On the other hand, augmented by the high price of rent, external costs represent 37% ​of total costs ​for San Sebastian and ​32% in the case of Bayonne. ● The price of rent per year in San Sebastian is 3636 euros more per year. ​However, the price of finance for the Droit au Bail in France is approximately 3000 euros more per year. 70 Le Bon Café et Thé - A Cross-Border Business Opportunity ● The ​net profit in France is 10,739 euros less in the first year due to the amortization of the Droit Au Bail during the first year. This also translates into lower corporate taxes the first year. However, in the following years the ​net profit rises to be 2051 euros and 2258 euros more per year respectively in the case of Bayonne. ​This means it would take between 4 to 5 years to make up for the lower profit in the first year if the business model stays constant. ● The ​most profitable product​ ​categories​ in both scenarios are ​Bubble Tea and Food. ● Both scenarios present a ​positive monthly cash flow during the first 36 months, a strong cash flow position and prove to be more than ​capable of financing its external debt16. In view of the findings throughout this business analysis, the owner has decided that it is ​more favorable in their case to open Le Bon Café et Thé in San Sebastian, Gipuzkoa due to the high initial investment required in Bayonne provoked by the 30,000 euro Droit au bail. In reality, ​France is a more profitable country to invest in ​in terms of revenue ​in this kind of industry. The costs involved in operations are higher concerning wages (evidently minimum wage and social fees are more expensive) and external costs (especially accounting and other outsourcing), yet these costs are balanced out by the higher prices and revenue. Had it not been for the Droit au bail, the entrepreneur would have been able to carry out the same business with less initial costs and smaller annual finance payments, resulting in a larger revenue. The business owner has concluded that in the future France will be a good country to invest in, but until they have the necessary capital to purchase a Droit au bail without external finance, Le Bon Café et Thé will be opening its doors in San Sebastian. All in all, there are some main points that can be additionally extracted as general information from this cross-border business plan analysis: ● For a young entrepreneur with little capital, opening a business which involves a physical location in France entails a much larger amount of initial investment due to the concept of Droit Au Bail. Nevertheless, without this cost, business is more profitable in France because of higher price ranges. ● There are many variables involved in setting up and running a business in each country but more specifically in each province. In the case of the Basque Country, the local This is evident through the ​Autofinancement net​ which can be found under the table “Capacité d’autofinancement” on page 8 of the financial analysis. If the Autofinancement net is positive, it means the company is capable of paying back its external debt. 16 71 Le Bon Café et Thé - A Cross-Border Business Opportunity government presents its own regulations, which are quite different from the other provinces of Spain. It is not possible to analyse in which country it is more profitable to invest in without focusing on a particular province in Spain, as the variables are too many. ● In order to determine in which country it is more profitable to open up a business in, it is necessary to analyze each case separately, since each legal entity, business model and sector has its benefits and disadvantages. 9.2 Personal Conclusions This project has proved to be very valuable in determining the feasibility of opening a location in San Sebastian or Bayonne, but also in serving as a learning experience for the entrepreneur. After finishing a degree in Business, this analysis has helped the business owner put into practice all of the concepts learnt throughout the previous four years. They were able to broaden their scope by creating a Business plan through the Business Canvas Model, with a cross-border contrast which served to expand the vision of the entrepreneur for future business ventures. It also involved elaborating two financial plans, which were invaluable for making the business owner conscious of the financial situation of setting up Le Bon Café et Thé. It is evident that opening a business encompasses an enormous variety of factors, obligations, and details, but it was surprising to learn that, although situated in two different countries, much of the framework for opening a business is quite similar in both locations. The most unexpected thing learned throughout this investigation was that although some aspects of business appears to be favorable in one country, such as the lower corporate tax rate in France, it doesn’t account for the whole picture. This is what needs to be looked at all together to determine the most favorable spot. Perhaps the greatest learning point taken from this investigation is that, for a young entrepreneur, the starting costs for opening a business with a physical location is not a wise decision in both locations if they do not have enough personal capital to invest, and it is also not so favorable regardless in terms of return on investment. This has made the head of the project consider it more recommendable for young entrepreneurs to start off with a virtual or e-commerce business model. 72 Le Bon Café et Thé - A Cross-Border Business Opportunity 10. Attachments 10.1 Financial Analysis Bayonne 73 Le Bon Café et Thé - A Cross-Border Business Opportunity 74 Le Bon Café et Thé - A Cross-Border Business Opportunity 75 Le Bon Café et Thé - A Cross-Border Business Opportunity 76 Le Bon Café et Thé - A Cross-Border Business Opportunity 77 Le Bon Café et Thé - A Cross-Border Business Opportunity 78 Le Bon Café et Thé - A Cross-Border Business Opportunity 79 Le Bon Café et Thé - A Cross-Border Business Opportunity 80 Le Bon Café et Thé - A Cross-Border Business Opportunity 81 Le Bon Café et Thé - A Cross-Border Business Opportunity 82 Le Bon Café et Thé - A Cross-Border Business Opportunity 83 Le Bon Café et Thé - A Cross-Border Business Opportunity 84 Le Bon Café et Thé - A Cross-Border Business Opportunity 85 Le Bon Café et Thé - A Cross-Border Business Opportunity 86 Le Bon Café et Thé - A Cross-Border Business Opportunity 87 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.2 Financial Analysis San Sebastian 88 Le Bon Café et Thé - A Cross-Border Business Opportunity 89 Le Bon Café et Thé - A Cross-Border Business Opportunity 90 Le Bon Café et Thé - A Cross-Border Business Opportunity 91 Le Bon Café et Thé - A Cross-Border Business Opportunity 92 Le Bon Café et Thé - A Cross-Border Business Opportunity 93 Le Bon Café et Thé - A Cross-Border Business Opportunity 94 Le Bon Café et Thé - A Cross-Border Business Opportunity 95 Le Bon Café et Thé - A Cross-Border Business Opportunity 96 Le Bon Café et Thé - A Cross-Border Business Opportunity 97 Le Bon Café et Thé - A Cross-Border Business Opportunity 98 Le Bon Café et Thé - A Cross-Border Business Opportunity 99 Le Bon Café et Thé - A Cross-Border Business Opportunity 100 Le Bon Café et Thé - A Cross-Border Business Opportunity 101 Le Bon Café et Thé - A Cross-Border Business Opportunity 102 Le Bon Café et Thé - A Cross-Border Business Opportunity 103 Le Bon Café et Thé - A Cross-Border Business Opportunity 104 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.3 VAT information France 105 Le Bon Café et Thé - A Cross-Border Business Opportunity 106 Le Bon Café et Thé - A Cross-Border Business Opportunity 107 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.4 VAT information Spain 108 Le Bon Café et Thé - A Cross-Border Business Opportunity 109 Le Bon Café et Thé - A Cross-Border Business Opportunity 110 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.5 General Costs 10.5.1 Telecommunications Offer France 10.5.2 Telecommunications Offer Spain 111 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.5.3 Energy Costs Spain 112 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.5.4 Insurance Costs Spain 10.5.5 Filing Fees S.L. Diputación Foral Gipuzkoa 113 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.6 Filing Fees Price Sheet for Consulting Agency in France 114 Le Bon Café et Thé - A Cross-Border Business Opportunity 10.7 Example External Costs for Fast Food Restaurant with 3 employees in Aquitaine, France 115 Le Bon Café et Thé - A Cross-Border Business Opportunity 11. References (2016, ). European Commission. ​SME Performance Review - Annual report on European SMEs 2015/2016. Retrieved January 2017, from http://ec.europa.eu/growth/smes/business-friendly-environment/performance-review-2016_en (n.d.). Alex Osterwalder. ​Alex Osterwalder. Retrieved January 2017 from h ​ ttp://alexosterwalder.com/ (n.d.). Businessballs Online Learning for Careers, Work, Management, and Education. ​Albert Humphrey TAM model. Retrieved January 2017, from http://www.businessballs.com/alberthumphreytam.htm Kim, W. C. and Mauborgne, R. (2014). 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