Lone Star Daiquiris Business Plan

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Executive Summary
Daiquiris bars have been a staple of hot climates in the Southern United States for
dozens of years. Austin, one of the largest nightlife hubs in the world with a huge young
professional population, currently does not have a single frozen beverage bar. One of its
most popular tourist neighborhoods, South Congress, lacks venues for tourists to sit
down and enjoy a drink in a casual environment.
South Congress has high pedestrian traffic and is the home of many festivals,
including First Thursdays, which happen monthly, and the Republic of Texas Rally. It is
also home to a weekend flea market.
Lone Star Daiquiris plans to attract these tourists as well as local residents to offer
them a unique experience catered towards the Austin culture. Patrons will enjoy a wide
selection of daiquiri flavors and local menu items. The bar will also boast a take out
window, should patrons prefer to enjoy their beverage while visiting the South Congress
neighborhood. Austin ordinances currently allow open alcohol containers in this
neighborhood.
Pain Points
South Congress (SoCo) is primarily a tourist-targeted neighborhood destination in
Austin. It offers a variety of shopping and small restaurants, none of which are chains or
national brand names. The area is highly walkable with a scenic view of Downtown
Austin and the Capitol in the distance. At night, the demographic changes significantly,
still maintaining some tourists but mostly attracting locals from around South Austin.
Some locals, especially those from the 78704 ZIP code, enjoy getting a drink in South
Congress before going to Downtown for nightlife. The area, however, still has a few
market opportunities that are currently unfulfilled.
SoCo Is Mostly for Shopping and Most Shops Target Only Females
Shops in SoCo are mainly for clothing and other small baubles and antiques. With
the exception of a couple Western wear shops, a style that non-Texans may not want,
SoCo has little venues that interest men. In conducting informal interviews with male
visitors during the day, most of them were “dragged” there by their significant others

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and said that they wish there was more they could do or visit. There is only one bar,
Doc’s, in SoCo, and it is towards the southernmost end of the shopping district, far from
half of SoCo venues. All other restaurants that have bar areas focus more on their food
than they do on their drinks or bar fare-type snacks. A couple men indicated they would
like a venue with TVs and Wi-Fi for something to do if they are alone.
Summers Can Be Extremely Uncomfortable without Something Cool to Drink or Eat
Only Amy’s Ice Cream focuses on serving products to help visitors feel more
comfortable during the summer months. Other venues offer chilled drinks, but none of
them offer a multitude of frozen beverages. Market research shows only Güero’s, a Tex-
Mex restaurant, offers a frozen beverage, their house frozen margarita. Their margaritas
are small but potent, but it would make more sense to serve a larger less potent
beverage that could be enjoyed over time.
Tourists Visit Austin for Live Music, But There Is No Live Music in SoCo during the Day
The Continental Club is the only venue that focuses on music to attract customers.
Our proposed venue does not intend to compete with the Club, but the Club is only
open at night. Other venues occasionally have music during the weekends but not
always.
There Are Plenty of Bars in Austin, But None of Them Serve Daiquiris
While some bars do serve a few frozen beverages, none of them specialize in
frozen beverages or concentrate in this category. There is not a single daiquiri bar within
the Austin metro area. Bars try hard to differentiate themselves from their competitors
in Austin because there are so many choices, but none have chosen to specialize in
frozen drinks. This is surprising because Austin has a large population that was displaced
from New Orleans after Hurricane Katrina and is why the city features so many crawfish
boils in the spring at many other bars and restaurants.
The Market
As mentioned before, visitors in South Congress are primarily tourists during the
day and locals at night. Tourists generally visit the area during the day, but some also

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come at night. Research shows that the age of visitors varies substantially during the
day, but it is focused on the 25-34 age demographic at night.
Travis County alcohol sales are huge. The Austin metro area consumes more
alcohol than any other metro area in the United States, including cities that significantly
outnumber it in population. Since 2008, alcohol sales have jumped 50% to $568 million
in 2014. Austin continues to be one of the fastest growing metro areas by population in
the United States, particularly among the young professional demographic.
Over 70% of Texas’ visitors are here for leisure, although it is not uncommon for
business visitors, particularly those here for trade conventions, to imbibe and have fun.
Over 20 million people visited Austin in 2014, and that number is expected to increase
at double-digit rates.
Although Austin boasts the most bars per capita and most bars in a ZIP code
(78701, or Downtown Austin,) the market continues to expand. The Austin metro area
also has half the bar venue turnover rate. The Austin market appears to be able to
support more hospitality industry venues, but product differentiation and efficient and
friendly operations remain important to stay competitive.
Marketing Plan
When consulting other experts in the business, we discovered that most bars
rarely employ any sort of external resources to support marketing experts except when
a bar first opens. Often these resources are very cheap, usually ranging from creating a
Facebook page for the venue to posting ads on Facebook to establishing a social media
presence on Twitter. One expert pointed out that technology industry patrons are more
likely to follow bars on Twitter than Facebook, and he recommended keeping a Twitter
account current for technology-related events like South by Southwest. Another expert
said that posting specials regularly to Facebook could increase weekly revenues by
almost 20% per his own experimentation.
Each target demographic will have different pricing strategies. Target
demographics will change given the time of day and day of the week. See Exhibit 1 and

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Exhibit 2 for further details. Some specials will be explained later in this proposal. Prices
and specials are based on market rates in South Austin.
The Proposed Venue
Many people associate the Deep South with frozen daiquiris. (For purposes of this
business plan, the terms “frozen daiquiris” and “frozen beverages” and “frozen drinks”
are the same.) Notable areas that serve a large number of these traditional beverages
include Lowcountry South Carolina, Savannah, Floridian beach areas, the Houston-
Galveston Metro Area, and, most notably, New Orleans.
Lone Star Daiquiris will provide a venue with these beverages served properly but
with a unique Texas flair with regards to drink selection and venue décor. Current Austin
open container ordinances also currently allow alcoholic beverages to be consumed in
public areas in South Congress, a unique marketing opportunity that no venue has taken
advantage yet. The venue will have a traditional dine-in area as well as a to-go window
connecting directly to the sidewalk.
Food Menu Offerings
Traditionally, frozen drink venues focus on their drinks, keeping food offerings as
an afterthought. Food served is not necessarily of poor quality but lacks creativity with
regards to most venues’ semi-tropical theme, including pizza and cheeseburgers as
examples of menu items.
Food appears to be important to Austinites. Analysis drawn from primary research
shows that Austinites prefer an experience rather than just going to a venue for a certain
food or drink item, which is why food is so important. Offering food also increases
length of stay and average spend per patron. Lone Star Daiquiris intends to serve an
easy-to-eat menu including local favorites like tacos, tortas, and barbeque. We would
also like to serve a small selection of Creole dishes for those who expect a Cajun
experience, given the proximity of New Orleans and Southeast Texas to Austin. Several
types of Cajun food, like gumbo and jambalaya, also boast longer shelf lives and can be
reheated after cooked, allowing for a high profit margin. A third-party food truck

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partner is possible if space allows, but due to per square-foot prices in SoCo, all food will
likely have to be cooked in-house in a restaurant kitchen.
A whopping 72% of respondents to our survey indicated an interest in having
brunch at a frozen drink venue in SoCo, showing that having a brunch selection for the
weekends is extremely important to patrons. That number increased to almost 80%
when looking at only respondents aged 25-34. Respondents also showed a strong
interest in frozen bellinis, mimosas, and sangria during brunch.
Drink Menu Offerings
Lone Star Daiquiris plans on offering frozen beverages as well as beer and mixed
drinks for purchase. The beer selection will be primarily Texas brews with a couple
national brands. Most frozen beverages will use bottom- or middle-shelf liquor brands,
as the mixers added to frozen drinks often mask the quality of the alcohol and profit
margins can be kept higher with cheaper liquors. At times, a few frozen daiquiris will
feature top-shelf liquors, such as Spike Cactus Vodka or Deep Eddy Grapefruit Vodka, in
order to add a Texas emphasis to some of the flavors to contribute to the theme of the
venue. Patrons will be allowed small samples of any of the frozen drinks to help them
make their selection and bartenders will be trained to help them. Shots will also be
available, including a couple specialty recipes. Almost 58% of respondents said they
would like to see shots served at the venue, making it an important menu item.
Premium shots and premium frozen drinks will cost extra than their non-premium
counterparts to recover the loss in profit margin.
Beer will carry approximately a 20-30% profit margin. Daiquiri target profit margin
will be approximately 60-80%. Shots and mixed drinks will carry a 30-40% profit margin.
These profit margins are based on industry averages and best practices. Prices will be
reduced for happy hour and brunch for select beverages.
Nearly half of respondents said they would be interested in diet and/or sugar-free
daiquiri options. We believe that featuring a subset of drinks with this attribute could
differentiate us in the market, not only nationwide with other frozen drink bars but also
in Austin. Very few Austin bars offer any sort of unique diet cocktail, often using only

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premade mixes rather than house recipes, making most diet alcoholic drinks poor in
quality or creativity.
Most daiquiri bars carry 12-15 different frozen flavors. We plan to carry a number
of flavors within that range.
Amenities
The top-requested amenities by respondents included an outdoor patio (88%),
dog-friendliness (70%), and TVs/sports viewing events (53%). Live music, surprisingly,
served as a deterrent for almost half of respondents, saying they would deliberately
avoid the venue with live music. We believe this is because many patrons would go to
the bar with their friends, but those during the day, namely tourists, are more likely to
be attracted to live music. Public Wi-Fi will be offered. In the future, gaming amenities,
like pool tables and arcade games, will be considered based on average table utilization.
Each seat in a bar or restaurant is worth tens of thousands a year in revenue, so it is
important to consider the positives and negatives of removing tables from floor space.
Parking was a concern of some potential patrons in informal interviews. However,
none of them drove to South Congress that day. We believe that dedicated parking
would be helpful to have but not impossible to deal without. Free public parking is
available throughout the neighborhood and a few low-cost garages exist.
Emphasis on Cleanliness, Service, and Upkeep
Bar experts agree that cleanliness and service are consistently important for bar
patrons to revisit. In particular, bar areas should be deep cleaned weekly (eg. Beer taps
flushed, sinks scrubbed, soda guns cleaned, etc.) Female patrons expect extremely clean
restrooms to give repeat business. Currently, there are few public restrooms available in
South Congress, providing us a possible business advantage to bring visitors to the
neighborhood back if they know there is one available while visiting the venue. The
return and reputation of female patrons is extremely important to bring back male
patrons as well, because males tend to follow female patrons to bars.
Poor service can completely sink a bar business. Often angry patrons complain
about service via social media (most commonly Facebook and Yelp.) This decreases the

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likelihood of new visitors since so many people, particularly tourists, rely on social media
to find a place to eat or drink. Staff should be experienced and well trained to serve
patrons; unsatisfactory performance should result in immediate termination. Staff
should never serve intoxicated patrons and be recognized by shift managers for turning
away drunken patrons.
Upkeep and outward appearance of bar venues still remains one of the best ways
to attract passerby potential patrons. Outside signs should be highly visible and well lit,
and any damaged furniture or décor should be immediately repaired or replaced. An
interior designer will be hired to furnish and decorate the venue. The higher the
perceived value of the interior, the more willing patrons are likely to spend per item
ordered. A clean appearance matching a Western/Austin/Central Texas theme will also
keep undesirable, low-revenue patrons out; we cannot allow our venue to be associated
with “low-class” venues that many have seen in New Orleans on Bourbon Street. See
Exhibits 3 and 4 for examples.
Souvenir Cup
A trademark item seen from many daiquiri bars is a customized souvenir cup.
Creating a souvenir cup not only ensures some return visitors, but also allows for street-
level advertising by patrons themselves. We want people on the street to ask our
patrons, “Where did you get that?” Patrons who purchase the souvenir cup for a special
upcharge will be permitted discounts in the future if they return with the same souvenir
cup. Discounted daiquiris will only receive a small additional discount (50¢ to $1, for
example) on top of current drink specials. Returning customers during times without
drink specials will receive a more substantial discount.
We would like to create the cup in the shape of a cowboy boot to reflect the
Western décor of Lone Star Daiquiris. When taking our survey, respondents were asked
if they were interested in purchasing the souvenir cup. About a third indicated yes if
they were discounted drinks in the future. Nearly three-quarters of those who said if
they purchased the cup, they would return to the bar in the future. Very few
respondents cared whether the cup would fit in a conventional vehicle cup holder.

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Texas Alcoholic Beverage Commission Licensing
Lone Star Daiquiris will require separate licenses and egresses for the dine-in area
and carry out window, conforming to Texas law. We believe this will be the first “hybrid”
bar in Texas to utilize both features, apart from brewpubs, which are permitted to sell
carry out growlers. The to-go window will only be a service window for frozen drinks;
due to Texas law, beverages connected to this window cannot be carried into the dine-
in area until patrons have emptied their cup. During hot days or high traffic times, only
frozen beverages may be purchased from this window to avoid sidewalk crowding. Carry
out beverages require a “seal” and lid on top of the cup. This seal need only be a piece
of scotch tape or similar easily removable seal.
Financials
There exist a lot of unknowns at this time for the possible venue. In particular,
prices will vary on how many units of each item are purchased and any volume
discounts from restaurant equipment dealers and manufacturers and alcohol retailers.
Food prices are often seasonal. More research into financials can be completed once a
potential rental unit is identified. Startup costs are highly dependent on the actual size
and layout of the bar.
An estimated breakdown is available in Exhibit 5. These values are based on very
conservative estimates, allowing for a more pessimistic case of revenues and costs. They
do not account for food sales. The number of patrons per day is highly variable, but new
bars in Austin often see a huge initial surge of visitors in their first three months. For
example, Craft Pride, a bar on Rainey Street in Austin, saw almost 300 patrons per day
during weekends (Thursday through Sunday) in its first few months. We believe that this
business venture can breakeven just past its first year at 61 months.
We believe that $175,000 in startup capital will be acceptable. The industry range
varies between $100,000 and $500,000 for bars, and the smaller size of this bar,
combined with low Austin cost-of-business rates and high traffic in South Congress,
makes this number appropriate. Exhibit 6 shows the approximate breakdown after the

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first month of business. Note that kitchen equipment, food costs, and food revenues are
not in this equation, and commercial kitchens in bars require around $50,000 of capital.
The remainder of cash left after the first month is to serve as ”padding” for
unexpected costs, such as purchasing new additional equipment to optimize operations
or patron experience (eg. Pool table, arcade games, etc.)
Risks
Risks are described in Exhibit 7. The venue will hold at least $1 million in liability
insurance. The average settlement against alcohol providers was $500,000 in 2006 in
Texas, although they are relatively rare. The average premium for a bar is less than
$2,000 per year for such a large liability limit, and all policies include alcohol-related
incidents caused by patrons (eg. Drunk driving accidents and medical expenses.)
Leadership
Monty Johns is a candidate for a Masters in Business Administration at the
University of Texas at Austin for the Class of 2015. He received his Bachelors of Science
in Computer Engineering at the University of Virginia in 2010 and served as a network
engineer at Freddie Mac and Rackspace Hosting before returning for his MBA education.
He is specializing his MBA in Operations and Supply Chain Management and plans to use
these new skills at Lone Star Daiquiris.

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Exhibits
Day(s) of the Week Hours Target Demographic Strategy
Monday through Wednesday 4-8pm Happy Hour Crowd, all ages Happy Hour Specials
Thursday 4-close Thirsty Thursday Crowd, 25-34 years Happy Hour Specials 4-8pm, drink specials after 8pm
Friday 4-7pm Weekend Kickstarters, all ages Happy Hour Specials
Friday through Saturday 7-close Party Crowd, 25-34 Regular Pricing
Saturday through Sunday 10am-4pm Brunch Crowd, all ages Brunch Specials, drink-related specials end at 3pm
(Major Sports Games) Varies Sports Crowd, all ages Reduced drink profit margin 20-30% specials, Happy Hour food specials
(All Other Times) Varies Tourist Crowd, all ages Regular Pricing
Exhibit 1: Pricing Strategies
Exhibit 2: Major Pricing Strategy Details

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Exhibit 3: Décor Example (Michael’s Wine Bar, Humble, TX) Exhibit 4: Décor Example (La Condesa, Austin, TX)

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Exhibit 5: Approximate Breakeven Data
Exhibit 6: Approximate First Month’s Balance Breakdown
Risk Mitigation
Theme and/or location not attracting
patrons.
Research was already conducted to prove
the viability of this bar. South Congress
visitors expect an upscale, clean, hip venue
for social activities. This bar is appropriate
for this neighborhood, but it is not suitable
for a heavy drinking neighborhood (eg.
Dirty Sixth in Downtown Austin) due to
risks associated with drinking large
amounts of daiquiris with high alcohol
content. Respondents to the survey
showed overall very positive reaction to
the potential venue

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Security-related incidents. The safety of patrons is paramount to any
bar or restaurant. However, given South
Congress’ stellar crime record (or lack
thereof,) this is an unlikely risk.
Austin City Council is unhappy about open
containers and threatens to classify South
Congress into a no open container
designated area.
We intend to approach Austin City Council
prior to opening the venue. We believe
working directly with SoCo’s district
representative will alleviate problems and
concerns. Older residents, during the
survey, as well as shop owners are
concerned of rampant drunkenness in the
streets. We want to reassure them of our
stringent “no overserving patrons” policy
and our strict adherence to Texas law.
At the worst-case scenario, whereby
Austin City Council does make the
neighborhood open container-free, Lone
Star Daiquiris will only lose the capital
invested in the to-go liquor license and the
capital invested in making the to-go
window. It will still be permitted to
operate as a typical dine-in establishment.
Alcohol, food, safety, or fire laws are
violated.
All employees who serve alcohol will be
required to be TABC-certified. We intend
to fully cooperate with health and fire
department authorities to ensure
consistent excellent compliance. An
experienced general manager will be hired
prior to opening the venue to enforce
these high standards. Employees caught
overserving will be warned once then
terminated on second violation. A possible
“no overserving” incentive program could
be put in place.
In the event an overserved patron is
identified, the general manager will be
required to offer the patron a cab or safe
ride home.
ABSOLUTELY ALL PATRON AGES MUST BE
VERIFIED AS OVER 21 BY GOVERNMENT ID.

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A patron becomes violent. Occasionally, security personnel will be
required to escort out a patron, though
this typically happens only on weekends.
A security staff member will be hired for
peak times during the bar, particularly for
weekend nights or during sporting events.
Exhibit 7: Risks and Mitigation Strategies

Lone Star Daiquiris Business Plan

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