If you’re reading this article, odds are you’re nearly set on opening a coffee shop. But in case you still need some convincing, we have some stats for you.
- Coffee drinkers in the United States are expected to spend over $90 billion on coffee in 2022 and nearly $100 billion in 2023. (Statista)
- Coffee drinkers spend 89% of their coffee budget outside of the home. (Statista)
- 7 in 10 Americans drink coffee every week, and 62% drink coffee every day. (National Coffee Association)
Coffee is central to American food and drink culture. We’re more reliant on caffeine than ever, plus, we just love the taste!
There’s a clear need, and you’re ready to fill it, right?
But wait – we’ve got two more unavoidably compelling stats for you:
- there are currently more than 37,000 coffee shops in the United States. (Fit Small Business); and
- coffee chains represent 70% of the coffee house market (more than half of those shops are Starbucks franchises), and 30% of coffee shops are independently owned. (Fit Small Business)
Although there’s plenty of competition, there’s also plenty of need to go around. Read on to discover the basics of how to start a coffee shop.
The business plan (we promise you’ll thank us later!)
Though writing a business plan seems like a ton of unnecessary work right off the bat, this essential document will guide you through the process and allow you to secure funding.
You’ll create a vision and put it into practice, and you’ll refer to and add to this document as you go. It’ll become a living, breathing bible for your business.
Just make sure you include the following key elements:
- Executive summary
- Company overview
- Industry analysis (competitive analysis, location survey)
- Operational plan
- Marketing plan
- Financial analysis
Financing and capital
(good luck starting without it)
Unless you’re starting your coffee shop from your parents’ front porch (stranger things have happened, after all) you’ll need some start-up capital to get your café off the ground.
Even a coffee truck or a pop-up shop will require some funding.
Finding capital to work with can be tough, so start with your bank. Many banks offer working capital loans, lines of credit and even equipment loans. Get in touch with you bank manager and be realistic about how quickly you will be able to pay back what you borrow.
Remember that business plan that you’ve already written? Take it with you to your meeting with the manager. You’ll look legit.
If you’re planning on starting small with a kiosk or mobile cart, you could need as little as $7,000 to get started. But for a café-style shop, you’ll be looking at between $150,000 and $400,000 in start-up costs, with even higher costs in high-end areas of bigger cities.
Licenses and permits
keep it legal, please…
Depending on where you’ll be opening your coffee house, you’ll need a few different licenses and permits before you get going.
It’s best to research your area to determine exactly what you’ll need, but common licenses and permits include:
- employee identification number (EIN);
- sales tax permits;
- vendor’s licenses and food service licenses;
- food business registration; and
- allergen labelling and information.
You’ll also want to research federal labor laws and state employee laws. You may want to hire an attorney to help you with this, as well as an accountant with recordkeeping and tax obligations.
All of this will cost money, of course. This is one of the many reasons you’ll need some start-up capital.
Theme or concept
here’s the fun part!
Whether you’ll be the Lean Bean or the Laugh Café (not great, we know), you’ll need a catchy name, recognizable branding, and excellent products to attract customers and turn them from new to loyal.
Standing out in a saturated market can be challenging, but with enough creativity, you’ll find your signature and become indispensable to your local community.
Below are a few key steps to developing your brand:
- choose a name that’s easy to remember;
- identifying your target audience;
- creating a visual brand identity that’s unique; and
- ensure consistency through all of your branding.
Without a stellar menu, you won’t be able to appeal to even the average coffee drinker.
Luckily, there are enough tried-and-tested resources out there to help you make the best drinks for all your patrons and stand out from the crowd with your own signature beverages.
Be sure to dive in and learn all that you can about coffee before opening your doors. Remember that you’ll often be serving coffee connoisseurs, so if you’re not on their level right now, you’ll need to get there before you start brewing.
There’s no need to rush, though. You can allow your menu to evolve over time, and make sure you develop an understanding of how your menu items will impact profitability.
The ‘tech stack’
The ‘tech stack’ is the technology you’ll use on a day-to-day basis. It should include:
- a point-of-sale (POS) system;
- web-based accountancy software;
- chip and PIN/contactless payment systems;
- purchasing and inventory; and
- a website that allows for online orders and bookings.
You should also set aside some funds to invest in managed guest WiFi, a loyalty platform, and business intelligence systems as your coffee shop grows.
last but certainly not least!
Staffing costs will be the most expensive part of your day-to-day operating costs, but you can’t afford to skimp on recruiting and retaining an amazing team.
Your team represents the human point of contact between your customers and your business.
Hospitality skills don’t emerge overnight, and the turnover rate for restaurant staff is shockingly high (in the US alone, it stands at a lofty 73%).
Whether you post your job openings on LinkedIn, Indeed, Glassdoor, or another site, or approach job agencies, recruitment efforts are key.
Opening a coffee shop is a daunting but thrilling task. As the owner-operator, you’ll be in for some late nights and early mornings as your establishment gets moving. But the feeling of pride you’ll experience as your new regulars enjoy their delicious home-brewed coffees is second to none!