Starting a coffee shop is often a passion project, but it also needs to incorporate the practicalities and planning of establishing a business in order to attract enthusiastic coffee drinkers and cafe goers.
In the U.S. alone, there are 150 million coffee drinkers. Sixty-four per cent of the adult population consumes coffee every day. It’s quite a market!
There are three typical ways to start your own coffee shop:
- Set it up from the scratch: This is the most challenging of all the options, but also the most rewarding since it allows you to truly be your boss.
- Buy into a franchise: You can also be a part of a larger franchise like Starbucks.
- Refurbish an existing coffee business: You buy into an established space, hopefully with an established clientele, but refurbish your coffee shop equipment and decor.
Success in running a coffee shop rests on three factors: the right location, the right coffee shop equipment and the right menu. Without the right location and menu, you might have a hard time attracting customers. Without the right coffee shop equipment, you’ll find it difficult to please your customers and build loyalty.
This step-by-step guide will help you with the basics of opening a coffee business and provide insights on the coffee shop business model. We hope to answer all your questions and give you some food for thought.
Step-by-step guide to opening a successful coffee shop
Establishing an independent coffee shop requires a lot of research. The research helps you accomplish two things: you learn whether you’re mentally and fiscally ready for such an undertaking, and you untangle a lot of the practical concerns.
Personal preparation includes understanding the budget you’re willing to shell out. Opening a coffee shop business can cost you anywhere from $10,000 to $250,000. You may have to balance your personal finances with your business ambitions. We recommend setting a rule for yourself that you won’t risk the wellbeing of your dependents by investing too much into your business. Almost every business requires time to take off, and it’s only natural to sustain some hits before it does.
Here’s the fun bit: Research also means that you can visit other cafes and coffee shops, explore their menus, find out where they buy bulk coffee beans, examine coffee shop equipment and discover the tastes of potential customers. It’s a great way to find out what works and doesn’t work in the coffee industry while also indulging in some great coffee and snacks guilt-free!
Research also includes learning all there is to know about coffee and its flavors. Invest in a barista certificate if you don’t have one. We also recommend that you secure a barista certification course for all your staff, so there’s consistency and high quality in their output. You’ll also want to learn the best food accompaniments, the best equipment for making coffee, how to create the ideal ambiance and how to hire the right staff.
2. Write a coffee shop business plan
Writing a solid business plan sounds tedious, and in all honesty, it can be a dry experience. However, putting pen to paper truly helps us identify challenges and opportunities, and gather new ideas.
Make sure your business plan covers the following:
- Your budget allocation
- The ideal foot traffic that you’re expecting
- Marketing plan
- What makes your coffee shop unique
Having this documentation will help you gain a better perspective and will make your efforts look more professional. It helps highlight all the requirements to open a coffee shop. Your landlord or business loan agent is more likely to favor your business when you have a solid plan.
3. Find the perfect location
The location can make or break your coffee business. Here’s what we suggest:
- Find a place that is not crowded with other coffee shops.
- Find a place that has other businesses or institutions, such as colleges or offices.
- Find a place that doesn’t have popular eateries that serve coffee, like McDonald’s (which also serves coffee).
- Make sure parking is not an issue.
- Make sure your coffee shop location has plenty of foot traffic.
4. Apply for permits and licenses
Opening a coffee shop also involves a lot of permits and licenses. Of course, you can’t open a coffee shop without the health department’s permit, so it’s important to find a contact in the health department. They’ll help you understand what you need to do in order to apply successfully for the permit. Some other important licenses include:
- Business license
- Certificate of occupancy
- Employer identification number
- Food service license
- Liquor license for serving alcohol-infused beverages
5. Identify the best suppliers
Having a great relationship with your supplier is a fundamental part of owning a successful business. As a coffee shop owner, you’ll need suppliers of fresh beans, produce, milk, sugar and other ingredients. You’ll also need suppliers of cutlery, napkins, cups and more. A particularly crucial relationship to cultivate is with your coffee bean supplier.
Cultivate strong partnerships with your suppliers and you’ll always be able to offer quality products. Make sure you’re diligent with your costs and margins to keep your association fruitful and profitable.
6. Look for appropriate commercial coffee shop equipment
Good equipment will help you consistently deliver high-quality coffee, which will in turn develop a loyal customer base. The scale of your investment will depend on the size of your coffee shop, but here’s what most coffee shop owners invest in:
- Bakery display case
- Cleaning supplies
- Disposable cup sets
- Coffee grinder
- Espresso machine
- Iced tea dispenser
- Industrial fridges
- Measuring units
- Pre-roasted coffee or coffee roasting machine
- Shelving units
- Smoothie blender
- Under-counter ice machine
- Other utensils
A lot of decisions regarding your coffee shop equipment can be made easier by considering availability of space, customer preferences and the expertise of your staff.
For instance, when you invest in an espresso machine you have several kinds to choose from, like manual, semi-automatic or automatic. This can be confusing, since the result is the same with all these machines. What should guide your decision in this case is the anticipated foot traffic. If you’re running your coffee shop in a very busy commercial location, it’s wiser to opt for an automatic espresso machine. This will speed up service and maintain consistency in the taste of the customer’s chosen beverage.
Another important decision is whether to buy a coffee roasting machine or opt for pre-roasted coffee.
All you need for pre-roasted coffee is a good supplier, then you can go straight to discussing your requirements, cost and delivery details. It can be a smooth and swift process.
Your own coffee roasting machine is an expensive choice that can pay off in the long run. It’s cheaper to buy wholesale raw coffee beans and roast them yourself. You’ll not only pay less to your coffee supplier, you’ll also be able to develop your own coffee flavors. If your customers have unique requests, a skilled roaster will be able to deliver.
7. Hire the right team
Hiring people with the right attitude makes all the difference to your cafe’s vibe. Baristas are the face of your cafe, and it’s crucial to hire baristas who are friendly and kind in their customer service. You may also want to hire a general manager if you cannot commit to the required time and duties.
Conversations with other business owners will quickly help you understand that good staff is hard to come by, and even harder to keep. Hiring experienced baristas and chefs may seem like a good call, but if they cannot sustain your coffee shop’s environment and mood, it can quickly become difficult. Remember, it’s easier to upgrade an employee’s skills than it is to instil the right attitude and values.
Crafting the perfect coffee shop menu is an integral part of wowing your customers. The perfect menu is a mixture of items that you’re knowledgeable about, your chef’s best items and your customers’ favorites.
Do research before getting started on your menu. Find out how many of the people in your area are vegans and vegetarians. Look for dairy-free options, too, for lactose-intolerant folks. Make sure you include local favorites.
Your menu must represent your customer’s needs and desires. This can also mean that you’ll have to introduce some finger food or other soda-free beverages like tea or chocolate beverages. Add an interesting story to your items in the menu to engage your readers.
9. Market your coffee shop
Market your opening using pamphlets, by spreading the word personally, advertising via images and videos on social media platforms like Instagram, Tripadvisor, or Facebook, and setting ads for your local demographic through Google Ads.
Set out nice, colorful decorations that grab the eye.
Consider conducting a soft launch so you can test out your menu and gain real-time feedback on what can be improved.
Create your coffee shop business’s profile on Google and Google Maps and encourage customers to leave reviews.
The best way to define your marketing efforts is to first decide what your coffee shop is about, your coffee shop aesthetic and your target market. Once you decide what makes you unique and what type of coffee shop you hope to create, making engaging marketing materials will take no time. For example, if you’re situated next to a residential area, market your coffee shop as a cozy place to catch up and relax. If you’re situated next to a college or office, market your coffee shop as a place where you can study or work peacefully with a good cup of coffee. You can also market it as a place where you can meet friends for a good time.
10. Open your coffee shop
When you’re ready, open your coffee shop and let the rest of the world take a sip of your marvelous offerings. We wish you the best of luck in building your special community of happy regular customers!
Coffee shop startup costs
The cost of opening a coffee shop can vary from $10,000 to $250,000, depending on the size and scale of your business. Factors that contribute to the cost include the location (a major portion of your expense goes towards rent), labor, equipment (including maintenance and repair) and more. If the budget feels out of reach, consider a smaller-scale option such as a coffee kiosk, small cafe or a drive-thru coffee shop rather than a full-size establishment. The location and size of your enterprise will be the key factors that determine not only your costs, but also your cash flow.
Are coffee shops good business?
Opening a coffee shop is a great business, for the following reasons…
Coffee shops are always popular
Unlike niche business ideas that carry an element of risk, coffee shop businesses are a safe bet. Statistics say that 64 per cent of American adults consume coffee on an everyday basis. Besides, a coffee shop does more than just serve coffee. It serves other food and beverages too, which means it can attract a wider range of clientele.
Invest with little money
Coffee shops do not require as big an initial investment as a restaurant, bar or similar establishments. Coffee shops also come in many sizes, which means that opening a smaller-sized cafe is a legitimate option. With cozy corners and a pleasing ambiance, your coffee shop will need little upkeep and repair costs as compared to most other businesses.
Become your own boss
Saving the best for the last, it’s indisputable that owning a coffee shop will help you be your own boss. Work on your schedule, build your community, decide on your menu and everything else. While owning your business undeniably carries some stress, that pales next to the satisfaction of being self-reliant.
Damon Shrauner, Senior Sales Consultant and VP on B2B Sales at CKitchen, has been working in the food service equipment sector since 1994. With his expertise in market analysis, product placement, sales and project management, he will always tell you what to do for the best of your business.