How To Open A Coffee Shop
So you’ve decided you’re ready to take the plunge, and open a coffee shop of your own. For long, you’ve dreamed of breaking out of your typical 9-5 grind, and focusing all your efforts on a different, tastier grind.
Owning your own business, especially a coffee shop, can be a wonderful experience. However, entrepreneurship is no easy feat, and it’s essential to be as prepared as possible for all the twists and turns that will get thrown your way. From legal issues, to marketing, to supply chain management, getting your coffee shop up and running is a long uphill battle. Don’t be discouraged though, with proper planning and execution, you can make your dream a reality.
The first question on many peoples’ mind is “How much will it cost me to open a coffee shop?” Starting a coffee shop is less capital intensive than a full-service restaurant, but it’s not going to be cheap. For an average sized shop with indoor seating, expect to spend between 100k-300k just to get up and running. For small coffee stands or kiosks, costs will be closer to 80k. It’s important to note that costs can change drastically depending on the physical location of the shop and other variables which we’ll go into further detail later in this article.
PART 1: TIME FOR A PLAN
First, let’s talk strategy. A business without a plan is like a ship without a rudder. Before you begin anything else, you’ll need to formulate a business plan that helps put structure around both the tangible and intangible aspects of opening a coffee shop. If you plan on obtaining financing from a bank or credit union, you’ll have to create a very extensive business plan which covers everything from your marketing strategy to sales forecasting. More information about creating business plans to obtain funding can be found on websites such as BPlans. However, if you are not applying for financing, your business plan might be 1-3 pages talking about your mission statement, vision, overall strategy, and competitive advantage.
Not only do business plans help you formulate your vision for the business, but they serve as reference points years down the line when you’re making big decisions. It’s common for business owners to use their original business plan as a reminder of what their company set out to do and what it stands for long after it has become successful.
You might also want to put some thought into which niche you want to serve. One fallacy of new business owners is they want to create something for everyone. They figure that if they cast an extremely wide net, they’ll be able to bring in lots of customers. However, if you spread yourself too thin, you’ll be sacrificing the quality of your products. Consider specializing in a certain type of coffee, such as having the best Mochas and Frappes in town. If you are able to focus the company vision on a specific group of customers, you’ll be able to better serve those customers and actually increase market share.
PART 2: LOCATION, LOCATION, LOCATION
When you’ve established what your mission is, and how you’ll achieve it, it’s time to start the long grueling process of finding a proper location. You might be ecstatic to get your business up and running, but it is essential to not rush the location scouting process. Do not make the mistake of taking the first available lease in town just because you’re excited. In fact, looking for the proper location may take months, and patience is a virtue here.
When scouting locations to open a coffee shop, you’ll need to take a couple of variables into effect. The first, and most obvious, is the physical location of the storefront. Is it in a highly trafficked area? You’ll need a steady stream of foot traffic and exposure if you’ll want to be successful. Are there other competitors right in the area? In populous areas, you’re likely to have at least one competitor on your block, which is normal and acceptable. However, being surrounded by coffee shops, especially those similar to the one you wish to create is a major red flag.
CONSIDER A BROKER
If you’re currently working full-time, scouting locations can be tough to fit into your schedule. You may opt to hire a broker, who specializes in commercial property leases to help you find the ideal spot. Brokers often have connections and are the first to hear about new lease opportunities, which can make them a valuable tool in this process. However, you’ll have to pay the broker a fee for their services, something which may be hard to justify when you’re on a tight budget.
You’ll also have to keep in mind that a coffee shop has special requirements for its operations that might not come standard in a unit for lease. Grease traps, for example, might be required by your city’s health department and can run from a few hundred to a few thousand dollars to get installed. If the previous tenant of a leased location was not in the food and beverage industry, there may be many similar features that will have to be added to the construction list. Therefore, you might save yourself countless headaches by scoring a place that used to be a restaurant or café, although it is certainly not necessary.
When you’ve found the seemingly perfect spot to open a coffee shop, there’s a few more steps you’ll have to take before you sign a lease. First, you’ll want to negotiate a few months of free rent with the landlord. Opening a coffee shop is going to take time, a few months usually, and you won’t want to be paying rent that entire time.
PART 3: PERMITS & COMPLIANCE REQUIRED TO OPEN A COFFEE SHOP
Now, it’s time to reach out to city hall. There are a number of licenses required and civil codes that businesses have to adhere to. You’ll first need a business license, as well as an Employer Identification Number (EIN) to establish your company as legitimate. You’ll also need a Certificate of Occupancy and a Food Service License. If you plan on offering any alcoholic options, you’ll also need a Liquor License.
You might be surprised to find out how many changes you’ll have to make to your plan in order to be compliant with local and federal regulations. For example, you might be required to add an extra exit door, a handicap ramp, or a bathroom. These types of issues can seriously hinder your useable space (and add significant costs) so it’s essential to run the plans by city hall before you lock in a lease. This won’t be your only contact with the city, you may have to return after you’ve signed a lease to talk about other updates. However, getting a general list of requirements from them before signing a lease will take away a lot of the headache involved in the process.
If you have any uncertainty about the lease terms or feel that the landlord is being ambiguous about the details, hire a lawyer to read over the terms. They’ll be able to provide expert insight into the contract, and make sure you aren’t getting the short end of the stick. A lawyer might be a costly investment, but the cost pales in comparison to that of a year-long lease. We also recommend hiring an accountant at this point. You might think that you have all the finances figured out, but an accountant will be more likely to provide a non-biased forecast, know about hidden fees and expenses you’ll come across, and may be able to provide some business consulting.
PART 4: THE BUILDOUT
When you’ve passed everything through city hall and signed a lease on your new place, it’s time to start the fun (albeit daunting) tasks.
You’ll likely need to hire a construction crew to make the necessary changes to your café. As with anything, be sure to shop around, read reviews, and request quotes from a couple of different vendors. Now is not the time to test your DIY skills or hire your neighbor’s nephew who enjoys tinkering around in the garage. Get a reliable company that will be able to complete the projects in a manner that is both budget friendly and timely. If you need help locating a good crew, take to search engines such as Yelp or Houzz which are great for finding highly rated construction companies.
When working on plans with your contractor, it can be easy to get so carried away with the interior that you forget about the exterior. The outside of your business is the first impression for many potential customers, and it’s crucial to make it aesthetically pleasing. String lights, shrubs, and exposed wood are all the rage right now. No matter which style you opt for, make sure it’s welcoming, eye-catching, and comfortable. Your customers have literally countless options for grabbing their morning coffee, you’ll need to make sure your shop is visibly irresistible.
LAYOUT IS KEY
Another feature to keep in mind during this phase is the existing layout. If you’ll want indoor seating, you’ll need to be able to create a layout that allows the baristas ample room to work, an area for lines to efficiently form, and a spot reserved for seating. The layout can have a surprising effect on the ultimate success or failure of your business. Not only do you want enough room for customers, but you’ll want your baristas to have a layout that increases their efficiency.
Being able to accomplish the maximum amount of work with a minimum amount of movement is important. Ray Kroc, of McDonald’s fame, was considered a pioneer in revolutionizing restaurant design. He put countless hours into simulating the movements of his line cooks, tweaking processes, and rearranging supplies so his cooks could make hamburgers at record speed. If your baristas are getting ice from one side of the café, then running to the other side to use a blender, you’re losing precious time that will cost you serious money in the long run.
PART 5: START MARKETING LONG BEFORE YOU OPEN A COFFEE SHOP
As construction gets underway, it’s a good idea to begin your marketing initiatives. Many people don’t think about marketing until they open, but getting the word out early is essential to hit the ground running. You’ll want to take a multifaceted approach to marketing, utilizing both digital and traditional marketing tactics.
DIGITAL MARKETING
Social media is one of your greatest tools here. Setting up social media accounts is free and easy. At the very least, you’ll want to setup Facebook and Instagram. Invite your family and friends to follow your company page and start reaching out to the community. If you don’t want to take care of the social media yourself, don’t panic. Finding a social media marketer online is quick and easy. You’ll be able to find a tech-savvy college student to handle your social media for a small fee each month, allowing you to focus on other projects.
A website is not absolutely necessary, but it’s a good idea. Web design companies typically charge around $2,000 for a new site, but if you’re tech savvy, you’ll be able to build your own with a drag and drop website builder such as Wix or Weebly. Many of these platforms require no coding, so they’re ideal for small businesses who want a website that doesn’t break the bank. You’ll also need a company logo. If you have no graphic design experience, this is a great task to outsource. Check out companies such as Fiverr, which allow you to hire graphic designers for cheap.
TRADITIONAL MARKETING & NETWORKING
Other marketing initiatives to take up include sending samples of your coffee products to local businesses along with a flyer announcing your grand-opening date, or handing out coupons at a nearby business park. Creating buzz before you open is a great tactic to increase your revenue during the first few months.
It is also recommended to join local small business networking groups. These groups can be found through a quick Google search and either meet online (through forums or Facebook Groups) or meet face-to-face on a monthly basis. By networking with these groups, you’ll not only be able to gain advice from local entrepreneurs, but you may even meet a business owner who’s capable of helping you out, such as the owner of a marketing agency or a business consultant.
PART 6: OPEN FOR BUSINESS
Now that you’ve accomplished all these massive feats, and it comes time to launch, you can finally relax and watch the profits roll in…right? Wrong.
Your adventure is just getting started. It’s important to understand that growing a company takes time, and you likely won’t be profitable overnight. You need to accept that your business might be in the red for the next few months and can take years to reach its full potential. You’ll need to make sure you have enough funds set aside for your living expenses, as you might not be taking a paycheck in the early stages. Having six months of living expenses set aside or working another job part-time might be the key to survival.
As money starts coming in, and more and more customers frequent your shop, it can be tempting to start scaling and increasing your number of employees. However, you’ll want to avoid scaling too fast, a mistake which makes you “payroll heavy” ultimately leading to decreased profits and/or fired employees. Also, be aware of seasonal trends. If a majority of your café’s beverages are hot, you can expect an increase in traffic in the cooler months and a decrease in the summer. If you notice traffic picking up in the Fall, you’ll need to know if that level of traffic is just a seasonal fluctuation or actual organic growth of your company. Each possibility may require a different approach to scaling and handling the workload.
Also be aware of fluctuations in sales throughout the course of the day. You’ll likely experience very busy morning hours, then tapered business throughout the rest of the day. Since you’re paying employees and rent even when business is slow, try to come up with a daytime or evening product that can carry your sales after the morning rush.
LEARN THE BUSINESS
As an owner, you may want to avoid pouring the coffee, and instead handle the administrative stuff. However, it’s essential for a small business owner to understand what goes on in the front lines. Even if you have enough baristas to cover the workload, spend a small chunk of time each day behind the counter helping customers. You’ll notice process inefficiencies, hear customer complaints and suggestions, and gain deeper insight into your business.
Doing so provides a wealth of information that will help you differentiate your shop from the competitor down the street. Furthermore, you and your employees should work to recognize regular employees and learn their usual orders. Regulars contribute to a massive percentage of a coffee shop’s profits, so you’ll want to make sure they’re treated like royalty when they visit.
SUPPLIES CHECKLIST
So where does your money go? Afterall, gearing up to make a $200k investment, you’ll want to know exactly what you’ll need to be paying for. Here is a list of expenses, either essential or optional, that you are likely to incur. This is not an exhaustive list but should get you off to a solid start. Expenses include:
GENERAL SUPPLIES NEEDED TO OPEN A COFFEE SHOP:
- Espresso machine
- Grinders
- Blenders
- Gourmet drip brewers
- Frappe mixes
- Chai mixes
- Refrigerator/Cold storage
- Shelving
- Milk & milk alternatives
- Ice machine
- Syrups (Chocolate, caramel, vanilla etc.)
- Display case for pastries
- Whipped cream
- Cup and lid holders
- Aprons
- Pitchers
- Jars/Canisters
- Drying mats
- Measuring cups/scoops
- Jiggers
- Hot cups
- Cup Sleeves
- Cold Cups
- Cup lids
- Cup carrying trays
- Lid stoppers
- Straws
- Stir sticks
- Napkins
- Plastic Utensils
- Cleaning Supplies
- Mop and bucket
- Mop sink
- Floor cleaner
- Multi-purpose cleaner
- Bathroom cleaning supplies
- Windex
- Point of Sale (POS) System
- POS Software
- Cash register
- Menu Boards
- Menu display software (if applicable)
- Trash cans
- First aid kit
BACK OFFICE EXPENSES:
- Rent
- Phone Lines
- Internet service, modem, and router
- Gas/Electric
- Water
- Insurance
- Pest control
- Security system
- Basic office supplies
- Safe
- Bank Bags
- 3rd party accounting and payroll service
- Licenses and permits
- Interest expenses on business loans
- Repairs and maintenance
- Payroll expenses
- Payroll taxes
- Income taxes
- Advertising expenses
As you may have learned throughout the course of this article, if you want to open a coffee shop is will take more than signing a lease and making great coffee. There is a LOT of hard work, and unforeseen circumstances that must be tackled in order to turn a profit. This article is not exhaustive, and there will likely be more speedbumps and hidden fees that will pop-up when you open a coffee shop. However, this should give you a good idea as to the scope of the project you are looking to take on.
TO RECAP:
- Create Business Plan
- Hire a broker if necessary
- Find a location
- Get the needed city & state permits
- Hire a contractor
- Keep the layout in mind during the build
- Begin marketing before opening
- Purchase supplies
- Have a grand opening
- Work the counter occasionally
IF YOU’RE READY TO OPEN A COFFEE SHOP, WE’RE READY TO HELP.
While it may seem like a daunting task, MOCAFE™ is here to help. If you’re looking to open a coffee shop, ask us about our Blender Program. When you purchase a new commercial blender, we’ll send you 3 free cases of any MOCAFE™ product. This equates to roughly $450 in free specialty coffee mixes.
At MOCAFE™ we strive to make café ownership easier for our clients by taking the difficulty out of specialty coffee drinks. Our delicious frappe, chai, and mocha powders can be used to make countless different drinks that your customers will love. By decreasing the number of ingredients required, and providing pre-measured scoops, you’ll be able to increase the consistency of your drinks, while avoiding complex mixing instructions.
When you make the switch to MOCAFE™, you’re not just doing your customers a favor. You’re doing a favor for your baristas, your shop, and your bottom line.
Ready to learn more about us? Sign up for a free wholesale account right here.
