If you strive for entrepreneurship and love coffee, learning how to open a coffee shop could be the path for you! Done right, opening a coffee shop can be a lucrative investment- in fact, in 2022 there were over 65,000 coffee shops in America, and in Canada, Tim Hortons is raking in around 1.84 billion (yes billion) in sales each year.
If there's one place warm and welcoming to people from all walks of life, it's the quintessential coffee shop around the corner. The perfect place to catch up, have a cozy chat, or grab your favourite cold brew before rushing off to work.
So what do you say, are you ready to open your very own coffee shop? Then read on!
Because it's a booming industry! Between 2020 and 2021, over 167 million bags were consumed around the globe! (Yum) North America stands out as among the world's top coffee drinkers. In 2019 U.S. coffee shops made over $82 billion, which is likely to increase yearly.
The numbers say it all everyone wants a good cup of coffee, and are willing to pay for it.
In this article, we bring you the nine essential steps on how to open a coffee shop, so you can be part of the continually burgeoning coffee shop industry.
Like any business, a coffee shop will also require an initial investment and working capital to keep it running. In this section we will review how much it costs to open a coffee shop, and some important factors that will impact expenses.
There is no simple way to determine coffee shop costs because there are many variables involved. But just to give you an idea, a small coffee shop may cost as much as $60,000 while a large one will be around $300,000.
You have the following options:
Let's check out the crucial variables that will affect the cost of opening a coffee shop:
A coffee shop in the middle of a business district will cost more than a coffee shop in the city outskirts because rent! However, it's also worth noting that a coffee shop in the middle of a business district may also be more profitable because of the increased foot traffic.
While considering location, be sure to think about how many other coffee shops are in the area - in the words of Warren Buffet, if you own the only coffee shop in town, you will be rich. (I may be paraphrasing)
Obviously, the smaller the shop, the less capital you need for the construction, furniture, fixtures, equipment, and utilities. But size also affects labor costs because the bigger the place, the more people you have to employ.
Think of size in a strategic way - if you have a small indoor space, perhaps you can opt for outdoor seating. If you have a large space, maybe you want to consider using part of for co-working or storefront to subsidize rental costs.
What kind of coffee shop are you opening? If it's a kiosk, then you just need a small place with a limited number of equipment and items for making coffee. A coffee truck may be more expensive than a kiosk but still costs less than a sit-down coffee shop.
For a sit-down coffee shop, you also have to consider the theme. T also requires an understanding of space aesthetics. A high-end concept will require luxurious furniture and fixings, and vice versa.
The supplies will depend on your menu, which is also dependent on your concept. Most coffee shops offer light snacks and refreshments, aside from the main staple of coffee and tea. Some also offer meals like regular restaurants. It's important to link up with a regular supplier for convenience and buy most things—items that don't need to be fresh like coffee beans, milk, sugar, etc.—in bulk.
JJ Bean for example has an external "warehouse" that they run where they produce and distribute all of their signature baked goods. Other coffee shops offer a selection of local goods to buy - and finally, coffee shop bakeries like Brekka have an in-house bakery for ultimate freshness.
Every coffee shop needs a team comprising a manager and baristas, some of whom will also work as cashiers. Most coffee shop baristas also do the cleanup in the shop or you could outsource janitorial services. Either way, that will be part of the labor costs.
Labor is the largest expense for most business owners, making upwards of 30% of overall costs - be strategic about scheduling and consider how you might lower labor to increase your profits at all times.
Software is one of the vital costs in modern coffee shops. The pandemic taught the hospitality industry, particularly restaurants and coffee shops, to go digital. And if they already have an online presence, they should up their digital game.
A reliable piece of software will handle many of the digital tasks of a coffee shop. For example, today's coffee shops should be available for online orders and delivery. That's always a good way to maximize profit.
Moreover, the software is important for managerial tasks like automated scheduling of staff, time tracking, human resource activities, and payroll. Push Operations, for example, provides all services you will need in software for coffee shops and restaurants. It also has offers point-of-sale (POS) system integrations so you can pull your data vs sales reports and make more profitable decisions.
Starbucks is probably the most widely recognized coffee shop in the world. Its founders were coffee lovers with little money when they opened the first Starbucks in Seattle in 1971. What they did have were the passion for coffee and determination for their business.
You need money to open a coffee shop, but if you don't have it, you can leverage your knowledge and resources to get it The following are your financial options if you don't have the savings to open a cafe:
A business plan states the amount you will need to open a coffee shop and a detailed account of where the money will go. There should also be a clear short-term and long-term goal and target market. Coffee should be for everybody, but the target market will clarify the concept or theme of the shop.
While your family and friends may not require a business plan, financial loan companies do. So, if you are applying for a business loan, home equity line of credit, and credit card funding, you should have a well-researched business plan. The same goes when you want investors to throw in money for your business through a formal investor program or crowdfunding.
When writing a business plan for investors, you should emphasize their possible return on investment. Investors only put their money into something when they know they have a bigger chance of making a profit from it.
To prevent future conflicts, prepare a contract when you borrow money from family or friends. It also shows serious intention to pay back the money you owe. The agreement must outline the payment plan.
Of course, when you borrow from formal institutions, they will take care of the contract part.
The roles of investors may not be truly up to you since they could take a hands-on or hands-off approach. However, you should clarify the roles with them so you can properly document everything for formality. Some may want to be included in the budgeting or the hiring of personnel. Other investors want to be active in handpicking products to be included in the store.
You have to open a business account for the coffee shop. Don't use your personal account.
It makes sense to come up with the name of the coffee shop before you open the bank account since it should be under the coffee shop's name.
The steps on how to open a coffee shop don't have shortcuts, and some paperwork is a necessary requirement.
Yes! You don't need to apply for a federal license unless you are selling alcohol. However, there will be paperwork to get licenses and permits from both the state and the county. Many states, counties, and cities allow you to apply for licenses and permits online.
You will also need a business insurance policy. There will be various options available, so this will take some research. The more common types of coverage are general liability and workers' compensation policy.
There are additional permits necessary when you are running a coffee shop:
Finding the right location is crucial for any business. To make this part easier on you, find a credible real estate agent that can assist you in locating the right commercial space for your coffee shop. The right place should fit into your concept, but most importantly, should have your target market.
Yes, you should lease a coffee shop location because it's more affordable. But you must be savvy about checking the lease terms before signing anything.
While a real estate agent can help you find the best location for your store, you can make it easier on them by providing them with a list of criteria to trim down the options.
What's the right location for your coffee shop?
Being a coffee-lover is a good reason to start a coffee shop, but it should be complemented with some knowledge of the business.
Some duties involved in the everyday operations of a coffee shop require specific skills such as accounting and bookkeeping skills, and barista skills. Accounting should be handled by a professional while coffee-making should be done by people who have undergone training. Although coffee-making is also a good skill for a coffee shop owner to learn.
The following are necessary skills to have when opening a coffee shop:
No, you don't need the experience to open a coffee shop, but it's a pretty positive advantage. Baristas often make ideal coffee shop owners because they know what goes on behind the scenes. However, everything can be learned with patience and determination. There are many online resources too.
You can launch your coffee shop within a year or a year and a half. It all depends on various variables—how fast you can complete the requirements, how quickly the workers can finish the construction, and how swiftly the supplies arrive.
The concept of the coffee shop is crucial because it will be the business identity for years to come. You don't want the coffee shop to change its concept or identity every year.
There are so many concepts to choose from, but since the shop is your baby, the theme should be inspirational to you. You can get inspiration from your family, your travels, and your surroundings. One important thing: choose a timeless theme. Don't be inspired by fads because they will easily go away just as quickly as they came.
Here are some themes:
Even if your inspiration is not unique, the overall vibes of the coffee shop should stand out from the competition.
Make sure your theme will attract the people within the vicinity.
The people who serve in a coffee shop are a big part of how welcoming it feels.
Since you already have a concept, you must include that in your recruitment strategy. The people you hire should embody the coffee shop's identity. Before you start calling for employees, make sure you know the employment laws and ordinances in your county and state.
You need versatile staff to reliably run the coffee shop every day. The most important staff is the barista, someone who can make regular and specialized coffee and can also handle the register and some cleaning. Baristas should also be sociable and knowledgeable about coffee.
Other staff members to include in a coffee shop:
The coffee shop owner can handle the managerial and even the accountant roles, the latter with the assistance of accounting software. They can also handle social media management.
Every business in the hospitality industry needs a solutions stack to run things smoothly. There are many technologies to choose from but there is a handful that are must-haves for a coffee shop.
You need a technology stack that will make you save time and energy. Reliable technology also allows you to save money since it will do the work that multiple people used to do. No one can replace a person's creativity and affability, but technology can surely make things better.
Here is the solutions stack you need to run a coffee shop:
We discussed the general idea of a business plan earlier. Here, we talk about what to include in a comprehensive business plan, which helps encourage investors and financial institutions to put money into the business.
What are 8 things to include in a coffee shop business plan?
Running a coffee shop is stressful enough. As an owner, you want the other parts of the business to be simpler, and that's where Push Operations comes in. It is a software solution that simplifies everyday administrative operations so ownership and management can focus on scaling their coffee shop business.
Push Operations simplifies human resources, payroll, schedule, and time tracking services, among other things. The software, along with this complete guide on how to open a coffee shop, should help you get started on your dream of sipping coffee in your own shop.
“In the labor numbers, we were reporting about a $300 to $400 difference than what we were getting through Push!”
-Tara Hardie, ZZA Hospitality Group, 16 locations