Does your life depend on the fruity and floral aromas of an Ethiopian roast wafting through your kitchen during your 6 am wake up call (and 2 pm pick-me-up)? Is your morning commute incomplete without stopping in at your favorite coffee shop for a quick espresso and a chat? Do you ever dream about quitting the rat-race and making something of your own? Maybe you should consider a new life as a coffee shop owner.
Opening a coffee shop, though a somewhat competitive space, has the potential to be a really successful business venture. Fear-not the big name coffee chains that are occupying every corner, there is still space for you and we will help guide you there.
Is There a Market for Opening a Coffee Shop?
First things first. French press yourself a cup of joe (actually, brew an entire carafe, because we may be a while). Now, let’s discuss the market for coffee shops. Before you even dive into crafting your small business plan, you’ll need to do some market research in order to figure out how competitive this space really is.
According to Business Wire’s global forecast of the coffee shops from 2019-2025, the market is projected to grow by $58.7 Billion within the next couple of years and reach over $143.4 Billion by 2025. The industry’s expansion will be seen globally, with the US experiencing a 4.2% annual growth.
While the market is becoming increasingly saturated, the key takeaway is the general public’s love of a good cafe is not going away anytime soon so your coffee shop will be welcomed. However, be prepared to go above and beyond to think outside the box in order to set yourself apart from others in the space.
Coffee Franchise vs Local
When you think of being a small business owner, you certainly don’t think Starbucks, Dunkin’, or Tim Hortons. You think of your friendly neighborhood barista working from a small espresso machine tucked away in a storefront surrounded by local boutiques and mom and pop restaurants. You think of your regular stop on the way to work, where the staff knows your name and order by heart. There are a million reasons to love a local coffee shop, and the current coffee craze certainly skews in favor of the charming small coffee owner. But this doesn’t mean this is the right choice for your business venture.
If you’re looking to get into the coffee industry but don’t feel you possess the in-depth knowledge of roasting beans, then perhaps buying into a franchise is the best option for you. When you pay a franchise fee, much of the business decisions, roasting, and coffee inventory is mapped out for you. Additionally, if you’re a part of a major franchise, then the bulk of building a brand and marketing it to the community is done for you.
If you’re looking to really get your hands dirty and become intimate with the coffee process from the farmer’s hands to your customer’s cup, then starting from scratch may be the route you’d like to take. While this requires the maximum amount of effort, it also comes with maximum flexibility and money back into your pocket.
One last option is buying an existing coffee shop. Similar to buying into a franchise, this can help you skip over the legwork that is needed to start a cafe. However, the opportunities here are typically scarce.
How to Open a Coffee Shop
Read through these essential steps to help guide your journey to opening a coffee shop.
Write a Coffee Shop Business Plan
Developing a business plan for your small business, no matter the type of business, is crucial for laying down a foundation on which to build your future success. Your business plan will grow your understanding of the current coffee market, your industry competitors both nationally and locally, and provide you with ideas for how to enter this space. It will also help you calculate a realistic projection of just how much money you’ll need to open and run your cafe.
Long-form business plans are the standard for most new business owners. If you’re simply generating the idea of your coffee shop, save yourself some time and start with a lean business plan. This will essentially be an elevator pitch that will deliver your concept, what your cafe will look like, who you will serve, where you will be located, etc. If you need to request substantial funding from investors, then consider a long-form plan. Right now, this will simply help you create a concrete vision in your head.
Understand The True Cost
Cafes come at a considerably steep cost, which may be surprising to the many who live off of low-cost coffee grounds from the local grocery store. There’s a reason your morning extra dry quad-shot vanilla cappuccino costs well over $5 a pop. The time, energy, and money that your local cafe invests into purchasing the beans, roasting them, grinding them, pulling the espresso and crafting the milk (along with the cost of all the equipment needed to make this magic happen) can only be justified by a fairly pricey cup of coffee. Be sure to open a separate bank account for your coffee shop so you can save accordingly for the necessary operating costs.
Before we even talk about equipment costs, there are other factors you’ll need to consider:
- Renovations: Finding the perfect location is one thing. Transforming your cafe into the perfect space and ambiance is another project entirely.
- Training: Crafting quality espresso drinks is an artform (literally, people make art in lattes). This takes time, patience, and lots of practice. You’ll not only want to invest in paying your staff in the months leading up to opening for espresso bar training, but you may want to invest in outside barista training as well.
- Espresso Machines: We’re not talking your Mr. Coffee percolator. We’re talking about a state of the art stainless steel semi-automatic espresso machine with at least two group heads to pull espresso through, fully functional boilers for temperature control, configuration controls for perfect espresso ground to water ratios, and a flexible steam wand. Most will run you around $6,000. The holy grail of machines, like the La Marzocco, which hails from Italy, will run you an easy $10,000-$15,000.
- Installing a Water Filtration System: Water is the base of all coffee beverages. Having a clean and consistent supply is vital for your operations.
- Your Point of Sale System: Do yourself a favor ahead of time and invest in electronic point of sale (POS) systems like Square. This will help streamline your operations and make transactions a breeze. However, Square isn’t the only POS available. Shopkeep, Clover, Intuit GoPayment, or Breadcrumb are also viable options, each having their own monthly fees.
- Coffee Beans: Ah, yes. The bread and butter of your coffee shop. Although high-quality coffee equipment and extensive bar training will help deliver a decent drink, at the end of the day you’re only as good as your beans. You’ll first want to decide if you’re going to roast your own beans. If this is the case, you’ll want to research local or international farmers available to you. If you are looking to support local roasters, you can buy directly from them or partner with other cafes that do their own roasting.
- Roaster: Should you decide to go all-in and roast your own beans, expect to pay between $25,000 and $55,000 for a commercial coffee roaster.
- Extras: Start shopping for vendors to supply the essentials for your product delivery, like cups, sleeves, lids, etc. You’d be shocked at how much you can save (or lose!) depending on the vendor you choose.
Scope Out the Perfect Location
With a market that’s becoming increasingly saturated, you may feel as though there isn’t space for your brick and mortar cafe. Finding the right location is tricky. You want a spot that not only gets consistent foot traffic but also belongs to an area inhabited by your target market. Things to consider when scoping out the perfect location for your business:
- Who are your neighbors?: What businesses would your coffee shop be surrounded by? Do they have a positive or negative reputation in the community? This could impact the associations made between your business and theirs, and minimize surrounding foot traffic. What type of business is it? You’re a coffee shop, so aim to surround yourself with restaurants and retail shops where people may want a drink after lunch or while they stroll.
- Accessibility: Is the location easy to find? If you have a university nearby, would students — who may not have their own car — be able to walk to it? Additionally, if you have a customer in a wheelchair or who has another physical challenge, would they be able to access your shop?
- Lease Terms: If you’re not buying a stand-alone building, would you be able to secure a long-term lease? Additionally, would the annual cost of this rent be fixed or could it increase over time? Lastly, would your landlord be open to renovations so you can achieve the cafe layout you’re dreaming of?
Design Your Cafe
Design is what will help your cafe not only function smoothly but also help your customers feel at home, encouraging them to become regulars. Things to consider when designing your cafe:
- Style: Are you going for a minimalist, Scandinavian feel? Perhaps you want a cozy, Hygge vibe that imitates cuddling up on the couch with a hot drink during a thunderstorm. Maybe you’d like a cool, Instagram-friendly spot where young creatives can collaborate and work. Determining your aesthetic will help with branding down the road and guide your furnishing choices. Considering your target audience will also help determine your style.
- Workspace: Give your employees plenty of square footage to move around, especially if you anticipate having multiple people on shift at once. Your employees will be navigating morning and afternoon rushes with high-temperature liquids. Allow space to minimize accidents. Additionally, allow for plenty of counter space for equipment.
- Foot Traffic: Provide optimal space between tables in the seating area to help workers smoothly move about the shop. This will also help customers easily move around without interrupting other tables. Once your shop becomes buzzing, you’re going to have long lines. Be sure to create a setup that allows reasonable space for a line to form without disturbing tables.
Understand What Equipment is Needed
There are many moving parts behind the scene that work to provide your customers with their favorite pour-over or flat white. Here is a comprehensive list of basic supplies and equipment you’ll need to get brewing:
- An espresso machine with at least two group heads (2-4 group heads is ideal for double barring, which is when two baristas are working on the same machine simultaneously).
- An automatic coffee maker for regular drip coffee
- At least three carafes for your drip coffee. You’ll want one for a dark roast and another for a light or medium roast. The third will help for having a back up as your rotate drips to refill so you won’t be out at any given time. Your customers’ caffeine fix waits for no one.
- A coffee bean grinder, if your espresso machine doesn’t have one attached to it
- Plenty of milk (dairy and dairy-free options). Anticipate going through a lot of milk in any given week. On average, one latte uses 6-8 oz of milk. Popular small cafes with a lot of foot traffic can anticipate going through at least 8-10 gallons of milk a day. You can get shelf-stable versions of non-dairy milk, which has a longer shelf life so it won’t spoil.
- Plenty of refrigeration for all of that milk.
- Measuring cups and spoons for refilling sugar, cocoa, etc, as well as for creating specialty drinks
- Containers for excess beans, cocoa powder for mochas, sugar reserves, etc.
- Pumps for syrups
- Napkins, cups, sleeves, straws, stirrers, and lids
- Additional cooking devices, like ovens or toasters, if your cafe offers a small food menu. Even if it’s just basic pastries and bagels that you have delivered from a separate local bakery, you’ll at least need a toaster for heating up.
- POS equipment (credit card machine)
- Shelving units behind the counter to keep your workspace organized. Shelving is also helpful for the seating area if you have merchandise or beans for sale.
Develop a Top-Notch Product
This is where you can get creative. If you’re trying your hand at roasting, you’ll want to dedicate significant time to creating the perfect roasts to serve to your customers. Aim to create a variety of roasts, from light and fruity and mild and nutty, to dark and earthy.
If you’ve already got roasting covered, then start to play around with ratios for espresso drinks. There are standard ratios for each type of drink. For example, a latte is typically 3 parts milk, 1 part espresso, and comes in a variety of sizes. A cappuccino is served in one small size, usually a 6 oz cup, and is about 4 oz milk foam. These ratios may need to be adjusted according to the shape and size of the cups and mugs you use. Additionally, you may find that 2 pumps of syrup make a more palatable drink than 4, or vice versa. Playing around with your recipes will help you perfect your product and find a consistency that works for your customers.
Build a Talented Team
The individuals you hire will serve as the faces of your coffee shop. Look for individuals who are just as passionate about coffee and customer service as you are. Dedicate yourself to consistent training to help foster your employees’ talent. Prioritize your relationships with your employees to help keep talent and encourage them to uphold the integrity of your shop every shift.
Build Community Relationships
If you’re the new guy in town, establishing yourself amongst other small businesses is important for both your success and reputation. When customers spend money on your coffee, they’re not just investing in your product but also in what you and your cafe stand for.
Go the extra mile to reach out to other coffee shops in the area. Advertise for them on your social media platforms or team up with them on projects. This will show your support for the local community’s economy. Introduce yourself to other small businesses outside of your immediate coffee industry. If you moved into a new house, you’d talk to your neighbors wouldn’t you? This isn’t any different.
Establish Brand Presence
Visibility is huge when pulling in foot traffic and gaining a following. A brand is important because it represents who you are and will directly impact how others feel about you. If your brand resonates with customers, this will bring them into your cafe. Building a brand from scratch seems like a huge feat but we promise it isn’t impossible. It will, however, take dedication and patience. Some things to do to get you off and running:
- Have a Mission: Having a passionate mission statement [Interlink to upcoming mission statement post] for your coffee shop will provide you with a central theme on which to base your marketing. Take advantage of this opportunity to create an angle that sets you apart from other cafes. Do you support local artists? Maybe your cafe will be decorated with local art and proceeds from every specialty drink sold will go back to the community art scene. Put this work at the center of your mission statement. Supporting local is incentivized when the business is a team player that cheers on other small entrepreneurs.
- Be Transparent: Would you donate to a charity if you didn’t know where the money was really going? Customers want to support a business they trust. Trust is a vital component of any solid relationship. Be upfront about how your product is made. Tell the story of the farmer who grew the beans, how they got into your hands, and the love and thoughtfulness that went into the roasting process. Use locally sourced ingredients for your menu. Be sure to shout out the community shops you got those ingredients from.
- Be a Family: Create a set of core values that you operate on and dedicate yourself to upholding them on a daily basis. Put these core values up in your shop for customers to see. Show that you value them, their time, and dedication to your business. Customers become regulars because they feel appreciated, as though they are a valued part of your family.
- Do it For The Gram: Brand awareness, in the digital age, cannot be sustained without social media. After spending countless hours designing your cafe and finding its perfect and unique style, don’t hide it from the world. Take regular pictures of the cafe and its products in order to showcase its personality to users. Candidly share your coffee shop’s mission statement and values, and help them shine through each post.
Opening a successful coffee shop is an adventure worth taking. Consider this guide a tool kit to help you start your adventure off on the right foot. Happy brewing.