Notes Coffee Roasters & Wine Bar
Notes is a coffee shop & wine bar concept with 5 prime London locations in Canary Wharf, the City & the West End. Customers are attracted by the all day offer, which sees the coffee shops transformed into wine bars every night. With a proven track record including 4 successful openings in the past 12 months, Notes is now ready to open new locations and grow their coffee roastery.
“Best coffee I’ve had in years at Canary Wharf this morning”
Way back in 2008 Rob was serving coffee in one of London’s cobbled street markets. Recently arrived from Brazil, Fabio was looking to start his own coffee business, following in the footsteps of his grandparents who grew coffee back home. Rob was on the look out for a business partner, and after a chance encounter on the street, they went into partnership.
Notes was born in 2010 when the two of them joined forces with husband & wife team Alan & Marion. Spotting the opportunity in the high quality coffee market, Ed jumped ship from the City to complete the team.
Today, Notes is a coffee shop & wine bar concept with 5 prime London Locations:
- Trafalgar Square, our first branch, is a beautiful Grade II listed building on St Martin’s Lane with floor-ceiling antique mirrors. It is well known as an oasis of calm in the West End, and is coming up to its 5th birthday!
- Moorgate, our first City location on the ground floor of the iconic CityPoint building, opened in summer last year and proved our concept was adaptable to high volume, take-away centric locations.
- Canary Wharf Jubilee is a take-away only unit in one of London’s busiest underground stations. We opened in February this year, and are showing impressive trading over our first 4 months.
- The Kings Cross branch, which also opened in February this year, is in the heart of one of London’s most exciting new developments. We are adjacent to a newly built tube entrance, and positioned in Pancras Sq which boasts 6000 sq foot of offices.
- Canary Wharf Crossrail, just open on May 1st represents a huge jump forward for Notes. Competition for this site was intense, and being chosen by arguably the most discriminating landlord in the UK represents a major endorsement of our brand
“In line with our customer feedback we were keen to attract a new, fresher coffee brand to Canary Wharf as part of our Crossrail development … They have exceeded our expectations and are a very welcome addition to Canary Wharf.” – Canary Wharf PLC
We stand out in a crowded market by serving high quality coffee, food and wine in warm, inviting day-to- evening spaces
Our points of differentiation on the high street are:
- Serving high quality speciality coffee roasted at our very own roastery in Kings Cross
- Friendly, knowledgeable, passionate staff, trained intensively on our high coffee & service standards
- All day offer – customers enjoy coming for breakfast, lunch and returning for a different evening atmosphere
- High-end spaces with a focus on design and attention to detail
Our roastery facility ensures consistently high quality coffee across our stores, and enhances our profitability. In addition, it gives us two extra revenue streams
- we supply on average approximately 1 tonne of coffee/month to 3rd party buyers – independent coffee shops around the UK and Europe
- following increased demand on our existing webshop, in June 2015 we will launch a new subscription-based webshop to extend our reach into the home-brew market. Our packaging is now post-box friendly!
“@NotesLondon fantastic flat white thanks for saving me from chain coffee shops #coffeelove #riseandshine #morning”
We want to grow
We are raising money so we can open new outlets, and grow our roastery.
Having successfully opened 4 sites over the past 12 months we are planning another 3 over our next financial year (begins 1st July).
Our roastery was designed to supply a handful of Notes outlets and 3rd party accounts. With our recent high-volume openings we need to invest in the roastery, to satisfy both our own needs and growing demand in the 3rd party and home-brew markets.
From 2016 onwards we plan 5 sites per annum. We envisage a modest debt raise of 2x EBITDA in late FY 2016 / early FY 2017 to further support the growth of the business.
“@NotesLondon your staff at the St Martin’s Lane branch are as lovely as ever. Thank you. You are miles apart from the rest!”
The trend towards quality offerings in the food and beverage market has come at a perfect time for Notes. This presents an excellent opportunity for the concept to expand quickly in an already established and growing market. The coffee shop & wine bar concept has created a differentiated proposition. This formula appeals to landlords who want their premises occupied day and night, by specialist operators. This will aid the roll out strategy and allow Notes to work in a number of different types of location.
Within the UK, and specifically London, there has been positive trend for micro chain speciality coffee shops. We believe Notes has established itself as one of the key operators within the subsector. There is space for growth, and we do expect competition from the speciality coffee chains and bigger brands for good sites. The profile of our current locations demonstrates our ability to secure such sites – this has been due to our differentiated offer, the quality of our products and great service.
Some exciting stats
Our primary market is coffee and we sit within an attractive and exciting subsector of the UK Coffee Market
- The UK coffee shop market was estimated to be 18,832 outlets and £7.2bn turnover in 2014
- Last year the market grew by 10.7% in terms of turnover
- It has achieved 16 years of continuous growth and is one of the most attractive sectors in the UK
- Allegra predicts the total UK coffee shop market will exceed 27,000 outlets and £16.5bn turnover by 2019
- Within this branded coffee shops are forecast to exceed £5bn turnover across 7,870 outlets by 2020 with outlets predicted to grow at 5.3% compound annual growth rate (CAGR) and revenue at 10.0% CAGR over the next 5 years
Edward Halfon – Strategy
During 8 years in Mergers & Acquisitions at Rothschild within the leisure sector, Ed worked on the acquisitions of Carluccio’s, Strada, wagamama, Manchester United, Arsenal and Center Parcs (amongst many other deals). His father Chicco was a founder investor, and Ed joined Notes in October 2012.
Drinking habits: morning – skinny flat white, evening – Kernel IPA
Fabio Ferreira – Product
Fabio took up coffee as a hobby after 10 years in pharmaceuticals in Brazil. Inspired by his grandparents’ coffee farm, in 2007 he won the prestigious Brazilian Coffee in Good Spirits barista competition.
Drinking habits: morning – a cup of Kamwangi AA; evening – a glass of El Gordito
Robert Robinson – Operations
After studying PPE at Oxford Rob got a job in coffee in Paris in 2008; he became the first franchisee of Alto Café bringing the mobile coffee concept to London. In 2008 he left to set up new coffee cart business with Fabio. And in 2010 they joined forces with Alan & Marion, and Notes was born.
Drinking habits: morning – flat white; evening – an Aperol Spritz
Marion Goulden – Financial Controller
Involved in business administration since leaving the French Lycee in London, Marion co-founded MDC in the 80s and ran the admin for the 9 shops. She is responsible for the daily administration of Notes.
Drinking habits: morning – single origin filter of the day; evening – a glass of Vinvita Prosecco
Alan Goulden – Investment and Property Management
Alan joined his father’s property company. His passion for classical music turned into a business when he set up MDC with Marion, building the brand to become the largest independent retailer of classical music in the UK.
Drinking habits: morning – single cortado; evening – half a bottle of Devaux Champagne!
Bruce Golden – A prominent technology investor, has made a personal investment into Notes. He was named by Forbes in their 2011, 2012, 2013, and 2015 Midas List of the top 100 venture investors.
Paul Kempe – Managing Director of City and Provincial Properties Ltd
Francis Norton – A major shareholder in SJ Phillips
These notes should be read alongside the Financial Snapshot
SALES: Key sales drivers
- New site openings – we are planning to open 3 new sites in 2016 and 5 per annum thereafter.
- LFL sales growth of 5% in the first year due to increasing brand presence and widening the customer base, in following years we have forecast to grow at inflation which we believe to be prudent. We expect sites opened recently to mature over FY 2016, and trade at improved levels as new customers are attracted.
- Growth in Wholesale accounts for our coffee beans. To date we have not been proactive in getting new customers, we believe there is significant potential growth in this area as the brand continues to grow.
USE OF FUNDS: Outline how you plan to use the funds you raise on Crowdcube?
- Contibution towards the opening costs of Canary Wharf Crossrail branch. New site openings, assuming £230k capex cost per site. We aim to open 3 in 2016 and 5 every year aftewards. We will expand our roastery to be able to grow our wholesale business. We have allocated £150k towards buying a roaster with double capacity and move premises.
EXPENSES AND PROFITABILITY: Please comment on your expense levels, gross and EBITDA margins
- We target currently c. 70% gross margin, which we have been achieving at our Moorgate shop and are close to reaching at Trafalgar Square. We are confident that as we grow, with increased buying power, we will be able to lower supplier prices and increase Gross Margin to 72%
- Staff costs vary according to shop type. For a site with a lot of takeaway (e.g. Canary Wharf tube station) our target is 30% of sales, for a site with a lot of sit down service in the daytime (such as Trafalgar Square) and less takeaway, we target 35%. As such we are forecasting 32% of sales for new sites
- On a site level we strive for an EBITDA margin of 20%, this is based on hitting the targets above. Over the past year we have started to invest in our central team, in our accounts and training departments, as well as hiring a PR firm. We will continue to invest in our central team to ensure that growth is supported by a strong framework. We expect central costs to increase from 5% of sales to 7% in 2016 and then return towards 5% thereafter
EXISTING DEBT OR EQUITY INVESTMENTS: Please outline the background to any existing debt or equity finance on the company balance sheet
- The debt in the business at year end will be £80k held with Coutts, plus £180k of short term shareholder debt attracting 6% cash pay interest pa.. We would like to re-finance both these facilities with a new debt package at the end of FY2016 We also have a £60k overdraft facility with Coutts. There are also £590k of shareholder investment held in long term notes, that would be repayable on an exit. The interest is non cash pay and is accruing at 6% per annum.
CASH: Cash burn rate, Operational cashflow, when will you need to raise the next round?
- We are looking to refinance our debt package at the end of FY 2016, this will provide the ability for continued growth and enhance investor returns on exit. The raise we have assumed is modest at 2x EBITDA.
The Exit Strategy
Ed’s M&A experience at Rothschild gives us a strong understanding of exit strategy and expectations.
We are forecasting an exit for investors 4 years post investment. Businesses in the sector are valued predominately on an EBITDA multiple basis, and based on comparable transactions within the sector we would expect to achieve a multiple of at least 10x EBITDA. Whitbread’s (Costa) most recent acquistions, Coffee Nation and Coffeeheaven, were at 10.3x and 14.6x current year EV/EBITDA respectively. Two fast growing casual dining restaurant chains, Cote and Byron, were bought by Private Equity firms in late 2013 and they achieved 10.5x (Byron) and 8.7x (Cote) current year EV/EBITDA multiples.
Routes to exit can be achieved through a sale to Private Equity, who have been very active in the sector over the past 10 years, or through an IPO. Private Equity are attracted to the sector due to scalability of concepts and the clarity of returns on investment in each site. If we achieved a 10x multiple of our forecasted year 4 EBITDA, we would potentially return to investors a ~4x return on their investment (plus all the great perks enjoyed during the life of the investment), which equates to over 40% Internal Rate of Return.
Rewards with monetary value over £1000 can affect the amount of EIS you may be able to claim. Please obtain independent tax advice if there is any concern as Crowdcube does not provide legal or tax advice.
· Invest £100 and get
Five complimentary coffees! Not a local? Then we’ll post you a 250g bag of beans.
· Invest £500 and get
A complimentary coffee every month for two years! Alternatively, we’ll send you a 250g bag of beans out to you 4 times a year for two years.
· Invest £1,000 and get
Not only a complimentary coffee every month, but also a beer or a glass of wine every month for two years too!
· Invest £5,000 and get
Over 2 years, as well as a monthly coffee and a monthly glass of something delicious, we’ll send you a New Year thank you gift with a trio of our best selling red, white and bubbly wines, a bag of coffee beans and a highly sought-after Notes KeepCup.
· Invest £10,000 and get
For the life of the investment, as well as a monthly coffee and a monthly glass of something delicious, we’ll send you a New Year thank you gift with a trio of our best selling red, white and bubbly wines, a bag of coffee beans and a highly sought-after Notes KeepCup.
· Invest £20,000 and get
The Investors’ Package! As well as New Year gift, you get free coffees, 50% off food, and 30% off all wine beer, for life of the investment.
This company is offering both A and B shares. If you invest £10,000 or more you will receive A-shares which have full voting rights. If you invest less than £10,000 you will receive B-shares which have no voting rights or pre-emption.
Notes Coffee Roasters & Wine Bar has submitted their plans to raise money, details of their structure and trade etc. to HMRC and is awaiting advice on whether or not the proposed share issue is likely to qualify for Enterprise Investment Scheme (EIS) tax reliefs relating to their shares.
Tax relief is available to individuals only, who subscribe for shares in an Enterprise Investment Scheme (EIS). Relief is at 30 per cent of the cost of the shares, to be set against the individual’s Income Tax liability for the tax year in which the investment was made.
If you sell, give away, exchange or otherwise dispose of shares, tax reliefs can reduce your Capital Gains Tax bill. Your shares must meet certain conditions to qualify for these reliefs.
The availability of any tax relief, including EIS and SEIS, depends on the individual circumstances of each investors, and may be subject to change in the future. If you are in any doubt about the availability of any tax reliefs, or the tax treatment of your investment, you should obtain independent tax advice before proceeding with your investment.
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