Why Should You Open a Coffee Shop
A coffee shop is one of the best businesses for a budding entrepreneur such as yourself. It would be ideal for anyone who can open up a coffee shop considering that it is not as stressful as other types of businesses. If you set up your café right, your working environment will always be conducive to relaxation.
Love drinking great coffee? If you want a tasty, freshly roasted bean you can buy online, try something from LifeBoost and thank me later. Click here to check it out and save 50%.
It is the perfect type of business for you if you are a huge coffee fan, too. Since this means that you are fond of your products, you will always look forward to the working day. You will love managing and operating your business and try to make it thrive in the industry.
However, keep in mind that coffee shops also come with their own sets of challenges. With that said, it would be better for you to prepare yourself before going into this business endeavor. To prepare yourself mentally for this kind of business, you have to learn everything you should know about opening up your own coffee shop, and this article might be of some help.
Benefits of Opening a Coffee Shop
Are you still trying to decide whether a coffee shop is the most suitable business for you? Then the following potential benefits of this business may give you the push you need.
Coffee Will Never Go Out of Style
Coffee has been in vogue for centuries and it will not be going away anytime soon. Although certain gimmicky coffees like frappuccinos are loaded with so many extra ingredients that you can hardly taste the coffee anymore and the liquid nitrogen cold-brewed coffee will come and go, there will always be a place for a good old cup of hot coffee in the hearts of many.
Coffee Is a Habitual Drink
Another fact about coffee that you have to be aware of is that drinking it is already a habit of many. In fact, many people find it harder to quit drinking coffee than it is to let go of smoking. It is also the reason why many options for decaf coffee can be as delicious as regular coffee. People cannot get enough of it.
At least 25% of Americans purchase their favorite caffeinated drinks from coffee shops three times a week on average. With that in mind, do not be afraid if there are already numerous coffee shops in your area. You can rest assured that you will still be getting customers.
Allows You to Enjoy a Sense of Freedom
You no longer need to convince your non-caring boss to give you the afternoon off to attend your children’s graduations or for any other personally-important occasions and situations. When you are operating your own business, you will have the freedom and flexibility to move things around whenever you need to.
It also gives you the chance to flex your creative muscles freely. If you are up against the pretty steep competition, then you have no other choice other than to adapt and figure out creative solutions on how your shop will stand out from the rest. You can think of how you can put your own personal spin on the usual coffee shop model and how it can attract more customers.
Has a Flexible Business Model
Another incredible advantage of being a coffee shop proprietor is that it provides a lot of flexibility. You can choose to keep it as a side-gig while still working on another full-time job. You may also turn it into your full-time job or anything else in between. It will all depend on how much capital and time you are willing to put into the business.
Gives You a Lot of Valuable Managerial Experience
Running a coffee shop can also give you the kind of managerial experience that will turn you into a valuable and successful entrepreneur. If you do not have any experience managing people, opening your own coffee shop is one of the safest ways to gain said skills.
One reason is that you are in a pretty relaxed environment and you will only oversee a couple of people depending on your shop’s size. Compare that to being in a high-stress, corporate environment where your bosses expect you to learn how to manage a team of people in just a short amount of time, and you will surely learn more in your coffee shop and at your own pace.
Now, if your coffee shop venture does not pan out for some reason, you will at the very least gain valuable managerial experience from it. Because you own a coffee shop, you will learn organization and communication skills. This type of business will also teach you to become more resourceful. Most importantly, you will learn how to be a good leader.
Pros and Cons of Opening a Coffee Shop
- High-profit margins. On average, coffee shops make a gross profit of around 70% per cup served. This rough estimate already includes the coffee beans’ cost and the other items needed to serve the said drink. Even a 60% profit margin is a conservative number for coffee start-ups. Compare that with the 33% average profit margin in restaurants, which is already an acceptable amount in the food industry.
- Wide customer base. Many people have a habit of drinking coffee is proof that you have a wide customer base to tap. When you sell something that everyone consumes daily, you will realize that you will always have customers. In fact, it is possible to get more foot traffic going into a coffee shop than in a restaurant.
- Gives you full control. If you are an employee, you do not control your company’s direction. You will most likely be just a cog in the machine. On the other hand, when you own your own coffee shop, you will become the boss and whatever you want goes. You will be responsible for the kinds of customers your establishment attracts, what you have in your menu, and your café’s look. You do not have to answer to anyone, but that also means being responsible for all your future choices.
- Allows you to manage your own schedule. Having the power to control your work schedule is a huge game-changer, and that is something that you can enjoy once you start managing your own coffee shop. It is still likely that you will be working more than 40 hours a week, but the difference is that you can get to choose when and where to work. You can also take some time off anytime. You do not have to file for a vacation leave and hope that your boss approves it.
- Allows you to work towards your own personal mission. If you have an advocacy that you have always wanted to support, being a business owner is a good way to do just that. If you want to give back to your community, you can start a summer hiring program to give a couple of the neighborhood kids part-time jobs. You may also want to set a portion of your profits to donate to a cause that you support.
- Extreme competition. Coffee shops are not a new thing. They have been around for many years and some of them may be already working in your area. This makes it more challenging to make yours stand out and attract more people.
- It is quite challenging to find startup funds. You may feel like opening a coffee shop is simple, but you will need quite a tidy sum to get the basic equipment and ingredients. You may even have an even harder time funding this business initially if you are thinking of opening a rather large one since it also means it will cost you more.
- Can be difficult to get the word out. It does not matter if you serve the best coffee in town. If no one knows that your coffee shop exists, then you will not have any customers. Yes, you can trust social media for a bit of attention, but that is not enough. You will need to do a lot of legwork if you want your business to succeed.
Types of Coffee Businesses
Now that you know the pros and cons of running a coffee business, it is time to learn its different types to decide which one exactly fits the business model you are hoping to set in place. Here are the most popular types of coffee shops that you can open up:
These establishments are the most high-end of the coffee serving businesses. Cafes typically focus on serving coffee-based drinks. Some even offer bread and pastries to go with the drinks. You can also find those that are already close to being a full-service restaurant, but you may need to register them as such.
Roasteries are different from the other services in the sense that they usually do not offer beverages. What they offer to patrons, instead, are ready to brew coffee. Many of them also provide custom-roasts and ground coffees.
Mobile Coffee Cart/Food Truck
You may also want to operate a mobile coffee cart or food truck. One reason is that this business model has lower startup costs and provides the kind of flexibility that you will not get from the other coffee businesses because of its mobility. If you run a mobile coffee cart or food truck, expect your main focus to serve brewed coffee and some packaged pastries.
You can make it quite successful if you commit to making your daily rounds through the locations that get a lot of foot traffic. Some examples are train stations. You may also want to set it up near fairs and festivals.
Coffee Kiosk or Stand
A coffee kiosk or stand is roughly the same size as coffee carts, though it is sometimes bigger. One thing that makes it distinctive is that it is stationary. With that said, you need to think of the ideal location for it. Usually, you can find a coffee kiosk or stand in malls and shopping districts.
Drive-Thru Coffee Shop
If you intend to open up a drive-thru coffee shop, then be prepared to invest in a larger lot area. It is because it requires you to place a drive-thru window in your establishment. It may require bigger initial capital, but it is quite profitable, especially if you set it up beside a busy thoroughfare.
It is typically the same as a regular coffee shop, but with the added gimmick of keeping a dozen or so housebroken cats that the patrons can play with. You can set up a cat café if you are a cat lover and you want to target those who love cats, as well. It can give your target customers a café where they can bond with cats while enjoying a warmer and cozier atmosphere.
Ways to Start a Coffee Shop
Now the question is, how can you start a coffee shop? Here are a couple of ways for you to start this kind of business:
Starting up a coffee shop from scratch can be the most difficult method. The reason is that it requires you to source almost all the equipment by yourself. You will also look for the perfect location on your own. Despite that, it is still more beneficial as it gives you the highest level of flexibility. Moreover, it gives you the ability to mold your café into something that meets your ideal vision.
Opening a Coffee Shop Franchise
When you pay a franchise fee, the provider will provide you with a turnkey business and a location for your coffee shop. Most of the time, they will be the ones to choose it for you. This means that you will barely need to do anything other than managing the place once set up. However, it can also be disadvantageous as you will have little to no say when it comes to business matters, including adding items to the menu or offering your own promos.
Buying an Existing Coffee Shop Business
This setup is similar to getting a franchise but usually a bit more affordable since the storefront, furniture, and appliances already come with the purchase. You just have to look for a thriving coffee shop business that is for sale. Make sure, however, that you choose to buy one that you can still revive. Note that you will usually find failed ones up for sale and it is kind of difficult to turn them around and make them profitable, so be wise when choosing a business to buy.
Things to Consider Before Opening a Coffee Shop
Once you have decided on the most suitable business model for you, it is time to begin your journey towards opening up your coffee shop. When doing so, it is a must to consider these key factors to increase your chance of growing a flourishing business:
If you are starting your coffee shop completely from scratch, you must find a location where there is plenty of foot traffic. The rent also needs to be reasonable. If you are purchasing a franchise or an existing business, you will have no control over the location, but you can research the recommended one and figure out for yourself if the spot is feasible or not.
It is also crucial to think about how you would intend to design your coffee shop’s interiors. If you are buying a franchise, you have little control over the coffee shop’s interior design. You just need to follow the same aesthetics as their brand.
If you are starting from scratch or buying an existing business, you can do whatever you want regarding the interior design. It would be best to hire a professional designer, though, to ensure that your coffee shop looks good and conducive to relaxation.
You need to build up your brand so that people can remember and recall your coffee shop. Some of the marketing strategies that will work for your coffee shop include thinking of a catchy name, designing a simple yet eye-catching logo, and making the interiors conducive to socializing and relaxation.
You can also launch your marketing campaign so that more people know about your business. You do not need to spend a fortune on advertising. Just start by using social media and convincing people to sign up for your e-mail alerts. You can also offer incentives, like stamp cards, to make your customers keep coming back.
Drink and Food Menu
Think about the drink and food menu you will be offering to your customers, too. If you want this area to be hassle-free, you can choose to go for a franchise since the franchise provider will take care of the menu items.
If you plan to run an independent coffee shop, then you need to tweak your menu so that it stands out and is memorable to customers. For instance, even though mocha has a distinctive chocolate flavor, you can add unorthodox spices and flavors to it, making your mocha drink stand out from the rest. You can also add various snack items that go well with your coffee, like pastries, cakes, and delicious chocolate-covered espresso beans.
Finding and Working With Suppliers
Ideally, you should find a supplier who will be with you throughout the lifetime of your coffee shop. Your regular customers should be looking for you whenever they crave their favorite drinks, and that is only possible if your suppliers stick with you.
Check out other coffee shops in your area and try your best to find out where they get their stocks from—sample as many coffees from different cafes as you can. Be almost obsessed with hunting down the best coffee beans and your future customers will truly appreciate your offers.
Remember that there is a fine line between coffees with the best price and those with the best value, so try to tread between them as much as you can.
Hiring and Managing Employees
Even if you only plan on opening up a small coffee shop, you cannot operate it alone. You will need someone to manage the register, a barista, and at least one server for a smooth operation. However, you should not hire too many people at the same time. It would be best to do it in stages over a long period.
Finding people whom you can trust can be tough. You cannot really gauge how trustworthy a person is during the initial interview, so always keep a close eye on your register and do not be afraid of hurting people’s feelings. If an employee is hurting your business, do not be afraid to let them go.
Equipment Needed to Start a Coffee Shop
What are the supplies and equipment you have to invest in once you decide to operate a coffee shop? Here are just a few of them:
Commercial Grade Espresso Machine
One vital piece of equipment that you will need to invest in for your coffee shop is good quality and durable espresso machine. The reason is that most of your menu items will contain espresso.
Now, the bad news is that industrial-grade espresso machines are quite expensive. In fact, the world’s best commercial espresso machine is almost the same price as a high-end sports car. However, if you know what to look for (like a built-in professional milk frother), then you will surely find an espresso machine that will serve you well for many years.
Water Filtration System
You may think that the espresso or the coffee drip machines are the most important equipment in any coffee shop, but the truth is, the water filtration system is the real hero, especially if the water in the area is not that clean. You want the flavor of the coffee to take center stage. For instance, Ethiopian coffee has floral and tea-like notes, but it will not shine through if you use unfiltered water with a weird aftertaste. With that in mind, you need to invest in the best water filtration system you can find.
Commercial Coffee Grinder
If you are serious about your coffee, you have to make it a point to grind your coffee beans in-house to ensure that you are only using the freshest coffee possible. You can choose from two types of grinders – the burr and blade grinders. The most common ones are the blade grinders that are basically scaled-down blenders.
Burr grinders have two “burrs” that are grinding surfaces. They basically crush and grind the coffee beans between the two burrs. Blade grinders are cheaper, but they result in an uneven grind, which is inappropriate for espresso machines. On the other hand, burr grinders are a lot more expensive, but they can produce grinds according to your specific needs. You can grind the beans as fine as you want.
You will also need a refrigeration system that can meet all the needs of your coffee shop. For instance, you will be using milk and cream for some of your drinks and you need to refrigerate them to keep them fresh. It is also advisable to have a refrigerator, which is big enough to hold other items, like milk substitutes (ex. almond milk and soy milk). If you are serving food in your establishment, then you will also need enough fridge space for your ingredients.
Standard black coffee will always account for a huge part of the orders you will get in a coffee shop, so it is always good to have a drip coffee machine or two running every day. With this equipment around, you can cater to anyone who orders a simple Americano, a glass of warm, milky latte, a foamy cappuccino, or just a mug of black coffee.
You will also need serving cups. What you will need are disposable cups for takeout orders and mugs and tumblers for dine-in customers. Other smaller yet just as important things you have to consider, like creamer and sugar packets, cutlery if you will be serving cakes and pastries, and takeout bags, among many others.
How Much Does It Cost to Start a Coffee Shop
Now, we will be discussing the real nitty-gritty parts of starting your coffee shop – the costs. You need to know that there is no standard price for a start-up coffee shop, so your mileage may vary. The following are just a few of the areas that you need to fund once you decide to run your coffee shop:
The starting cost involved in opening a coffee shop will include the business’s location and the type of coffee business you will be going with. When computing your starting cost, you will also have to consider whether you will be a franchisee or an independent proprietor. Moreover, you should consider the cost of the equipment, the ingredients, consumables, and others.
Real Estate Costs
Your rent will depend on the average cost in the area. If you are opening a coffee shop at an ideal location where there is a lot of foot traffic guaranteed almost every day, expect to pay an exorbitant price for the rent.
However, you should also consider the possibility of huge profits because of the prime location. As a rule, if you want your business to at least thrive, the rent should not exceed 15% of your projected sales.
The espresso machine and coffee grinders will be the workhorses of your coffee shop, so you must invest in high-quality ones. Remember that you will be using them almost non-stop during certain days, so the equipment should keep up with the demand without breaking down.
If you cheap out on an espresso machine and it breaks down after just a week or so, you will be shutting down your shop until it is fixed or you sourced another one. You will be losing a lot of money instead of saving. You should never buy secondhand coffee shop equipment unless you only intend to use them as a backup.
The cost of coffee beans, milk, different flavors of syrups, and other consumables (including pastries and bread if you will be selling them) should not exceed 40% of the projected sales of your coffee shop.
You are expected to pay your employees’ wages, payroll taxes, benefits, payroll processing, and worker’s compensation fees. These costs should be 35% or lower than your total projected sales.
Marketing Your Coffee Shop
Unless you are gifted with a bit of artistic talent and creativity, you will need to spend a bit of money on your coffee shop’s logo and branding. The good news is that you can save a lot of money in marketing these days as social media and other online methods of getting the word out there are now easily accessible. Despite that, you can still choose to buy a bit of air time from the local tv channel or radio station to plug your business if you want to spend more on marketing.
There will always be miscellaneous expenses to consider. These costs include utility bills, business permits and licenses, insurance, office supplies, repairs, and maintenance, among others. These are just some of the miscellaneous expenditures that most start-up business owners tend to forget, so avoid making the same mistake of neglecting them.
How to Start a Coffee Shop
Step 1 – Research the coffee business
Note that you will invest a lot of time and money when opening your café, so it is important to understand how the coffee shop business works and how to run one successfully. If possible, talk to other coffee shop owners and pick their brains for tips.
You can also visit as many coffee shops as you can so you can get a feel of what your future café should look like. Also, take this time to study your potential customer base – who will they be, what ages they will most likely be, and what time of the day would be busiest. You should study as much as you can about this industry to survive.
Step 2 – Make a business plan
This is the stage when you need to set goals for yourself and your future coffee shop, the costs associated with opening your business, and the potential risks that you may come across. Gather all your thoughts together and find the right balance between having a concept you like and a niche where you can find the most demand.
Step 3 – Choose a location and space
This is the time to search for the potential location for your coffee shop. Look for a big enough location for your concept and where many people pass by on the regular. While you are there, ask what the rent is to factor it into your calculations later. Once you decided on a location, draw up the necessary papers, and make it official.
Step 4 – Come up with a logo and branding for your shop
You will need a logo that can capture the attention of people and represent your personal brand. You may need to consult an experienced graphic designer for this part and believe me, paying for professional help with logo and brand design is money well-spent. Once you have a design, start getting signages, stickers, and other miscellaneous stuff that you can use to share your brand with as many people as you can.
Step 5 – Register your business and acquire all the necessary permits
The city government will not allow you even to start your coffee shop operation, at least not legally, and an underground café is not as awesome as you think it is. Go to your local city hall and secure all the permits and licenses that you will need to start operations. You will be spending a bit of money here, so make space for this step in your budget.
Step 6 – Purchase your furnishings and equipment
This is the time when you can start building your coffee shop. If you haven’t already, get help from a professional interior designer to give your café the kind of look that you have in mind. Regarding the equipment, it is advisable to buy brand new and high-quality ones.
If your so-called premium cappuccino maker breaks down, then you will need to shut down your café until it gets repaired or replaced, costing you thousands in potential profit. Keurig makes sleek looking coffee makers, so you might want to check them out when you are shopping for high-quality and durable equipment.
Step 7 – Look for reliable suppliers
Find out where the other cafes in the area get their coffee beans from and get in touch with them. You can also use the power of social media to get a couple of leads. Look for companies that have been in the business for a long time. It is an indicator that you can also expect a lasting partnership with them.
Step 8 – Hire employees
You do not need to hire your entire staff at once. In fact, it is important to take your time when hiring employees. Ensure that you will be hiring trustworthy people. If you are not trained on how to prepare coffee-based beverages yourself, you will need a good barista and maybe a server in the meantime. You can handle the cash register and take orders from the customers at the start. You may also want to get help from family and friends until you get the hang of it.
Step 9 – Come up with and implement your marketing campaign
Now that your coffee shop is operational do not expect people to simply come filing inside your establishment. Market your coffee shop to get the word out, making people you’re your business exists. If you don’t have that much to spend on advertising, you can use Facebook. Create a page for your coffee shop and use that account to post in your local commercial groups.
Do’s and Don’ts When Opening your Coffee Shop
- Invest in high-quality and brand-new machines. Your espresso and drip coffee machines and your coffee grinders are the heart of your coffee shop. If any one of them fails, you will need to stop operations until you have them repaired. On the bright side, most commercial-grade espresso machines also come with milk frothers and steamed milk is an essential part of some coffees, so you do not need to buy separate equipment.
- Hire a professional interior designer to decorate your café. If you have no experience in decorating spaces, then you should not trust yourself to design your coffee shop on your own. A professional designer knows how to style space to make it feel cozy and welcoming, so it would be best to hire one.
- Do not buy second-hand equipment. Even if the coffee making equipment is from a known brand and the model is one of the most reliable, you do not have any idea how much time it has left before it gives up on you. Only get second-hand machines if you are thinking of using them as backups if the ones you regularly use break down.
- Do not be hasty when hiring employees. You must not be in a rush when you are headhunting potential employees. Remember, you will be entrusting these people to help run your business, so take your time to study each potential applicant and choose the best candidates for the job.
FAQ About Starting Your Own Coffee Shop Business
What kind of coffee shop business will make me more money?
The type of coffee shop business is irrelevant when it comes to profitability. If you want your coffee business to do well, then you need to hustle and work hard to make your fledgling business get off the ground and fly towards success and profits.
How much does an average coffee shop make a day?
On average, a typical coffee shop can earn around $600 a day with all the other daily expenses already considered. Of course, you can increase the profit amount if you work hard and go through the daily grind as fast and as efficiently as you can.
Can I open a coffee shop without money?
Yes, you can open any business even when you do not have a big enough starting capital. You can opt to take a loan from the local bank. Of course, you will need to put up collateral or have someone co-sign your loan. If the bank approves your loan application, you can start building your dream coffee shop. Do not forget to pay off this loan before anything else.
Why do coffee shops fail?
There are many reasons why many start-up coffee shops cannot even make it past their first year of operation. The biggest culprit, though, is that the owners failed to plan. Some coffee shops shutter their doors and windows because their owners had no plan going forward after officially opening their café.
How much does a coffee shop owner make?
On average, a brick-and-mortar coffee shop can clear around $260,000 annually. This amount considers that the café gets at least 200 customers a day, including the weekends.
What are the risks of opening a coffee shop?
Many things can potentially go wrong when you open a coffee shop, including choosing a poor location with sparse foot traffic and high rent, poor employee hiring practices, poor management, low cash flow, and diminishing product quality. These are the risks that you have to try to avoid or minimize as much as possible.
How many cups of coffee does a cafe sell per day?
On average, a typical coffee shop in the US can sell around 250 servings every day. It can always go higher when you hustle hard.
Although there are many risks involved with opening your coffee shop in today’s economy, the potential for making huge profits is still good, especially if you prepared yourself beforehand. Just make sure that you have a good idea of the kinds of things that you can expect from operating your coffee shop. Yes, there will be a difficult road ahead of you, but with proper preparation and perseverance from your end, your quaint little coffee shop will grow and prosper.
Photos from: HayDmitriy / depositphotos.com, rglinsky / depositphotos.com, IgorVetushko / depositphotos.com, duckeesue / depositphotos.com, PixHound / depositphotos.com and jirkaejc / depositphotos.com.