How to open a coffee shop
A coffee business provides unbelievably high profit margins, more than most other types of businesses. It is estimated that a cup of coffee can generate upwards of 50% in profit. The great thing about a coffee business is that, though cyclical as people will consume less hot drinks during the summer, it is nevertheless becoming more common for people to drink coffee even in the summer.
Recent trends have shifted from ordinary coffee to more speciality coffees. This trend has partly been emphasised by Starbucks, which recently announced a project to open 40,000 new stores worldwide. There is no doubt that new coffee culture is brewing and one that bodes well for new entrants in the market.
Business plan – Before opening a coffee shop, everything has to be planned and fully costed with approximations. In this regard, a coffee shop is no different to any other business.
- Will your business be geared to the market that intends to stay and drink their coffee food, or is it simply one that intends to sell to people that pass by.
- If its latter, it could be that you are planning to open a small shop to serve only passers by.
Location - When developing your business plan, it is crucial that you choose a location very carefully. No matter how nice the coffee shop and the variety of coffee, tea, a shop serves, if there no one there to buy it, it will effectively be .
Some ideal coffee shop locations:
- A busy road that attracts a lot of regular and passers by, especially the morning crowd on their way to work.
- A spot close to a busy public transport hub. This will attract a lot of customers before they board or come off.
Competition - How much competition will there be in the area where you intend to open the business. If there are other coffee businesses in the area it may eat into your potential revenues. You need to seek out competitive advantage in some way to generate more business.
Raise money for the business - As part of your business plan you will have to find funding to start the business. This might come from your savings or might need to be raised from backers. If you are planning to raise the capital in loans, you will have to convince the lenders that it would be viable and generate enough sales to cover all expenses and return enough profit to be able to meet repayments.
It could also be that you are planning to raise money from people that will gain share in the business. If this is the case, you have to convince yourself whether this is the right way to go because you will have to answer to these stakeholders in terms of sales, profits the business is generating.
Cost of rent and overheads – Make sure you know how much rent you will be paying on a monthly basis and budget for the likely cost of overheads. A coffee shop is in fact quite a low maintenance because the overheads are relatively low. The equipment in a coffee shop are quite cost effective to operate once the initial payment for their purchase has been made.
Complementary food – A coffee shop in many cases will sell other types of food to complement the coffee and tea. It is very important that you research what type of food that will best complement the coffee because often the preferences differ by location. For example, the complementary foods you serve will have to take into account the preferences of the local community or if its in a very busy business district.
For example, the complementary foods Starbucks sells differ from one country to another, likewise, tastes can vary significantly from one locale to another.
Design – Design of a coffee shop is very important. A coffee shop designed like modern Italian café bar is quite the tend in countries like the UK and the US, partly because of the popularity of Italian coffees, but also because it more attractive to the customers than a typical coffee house that looks like a typical shop but selling coffee.
The modern coffee bars also tend to attract more affluent customers who are likely to purchase the more specialty coffees. The shop should have a nice, cosy atmosphere. It should be spacious at the same time have a compact feel to it.
A design and layout of the shop will determine whether people stay in to drink their coffee and return in the future.
Supplies – An important element in opening a coffee shop is the requirement to strike a deal with suppliers. You may need more than one supplier - one providing the coffee and one or more others supplying the food. Shop around for suppliers providing speciality coffees because costs will no doubt vary among suppliers.
However, do not compromise on the quality of the beans, everything should be authentic and create the best taste possible. You want customers returning because they like the taste and aroma of the coffee, otherwise they will find somewhere else.
Internet café – A recent trend by some coffee shops has been to incorporate internet facilities. This has worked well for some but not so for others. For the successful shops, it attracts coffee drinkers and internet users as well as some who do both. However, for some other coffee shops providing internet access has proved to be a turnoff for coffee drinkers because they want to be in a coffee shop and nothing else.
Marketing the coffee shop - In most cases, coffee shop draws the customers naturally due to its location. However, you may carry out local marketing when first launching if it provides some unique aspect that you feel the local people should know about.