Options for opening a coffee shop
When opening a coffee shop, you typically have three options to choose from:
Buying a franchise
Opening a coffee shop franchise is a good low-risk option and a smart choice if you want guidance and support. The company that owns the franchise (the franchisor) makes many business decisions for you, including the products you sell, marketing strategies and interior design.
Many aspiring coffee shop owners also see opening a franchise as a safe option since they can see that other locations have had success. One major drawback is that you have much less freedom compared to starting a store from scratch. You also have to pay a fee when you open a franchise and follow the company’s rules and restrictions.
Buying an existing business
When you choose to buy an existing coffee shop, there’s less infrastructure work for the business. In some cases, you can buy a coffee shop with a fully stocked kitchen and furnished lounge area. If the current owner is eager to sell, you might get a good deal on the business. Likewise, they may be willing to train you on how to run the shop.
One setback when buying an existing business is that it’s unlikely that a successful one is for sale. When purchasing a struggling coffee shop, you may need to spend time and money to completely rebrand the shop. If the previous business has a poor reputation, you’ll need to find ways to create a new image for your shop.
Starting from scratch
Starting a coffee shop from scratch is when you do everything, including buying all the equipment you need, creating a business model, finding a location, hiring staff and completing anything else that starting a business entails.
Benefits of starting a coffee business on your own
Although starting a coffee shop from scratch requires the most effort, it can also have the greatest payoff. Here are a few reasons to consider starting your coffee shop on your own:
- You get to make every major business decision.
- Your business can operate exactly how you want it to.
- You can create your own recipes and menu items.
- You are able to set your prices and special deals.
- Your schedule is flexible since you set your own hours.
- All of the money you make goes to you since you aren’t paying franchise fees.
- You can create a one-of-a-kind, local brand.
How to create a business model for your coffee shop
Follow these steps to create your business model when starting a coffee business:
1. Decide what type of coffee shop you want to open
The first thing you need is a vision for your coffee shop. For example, you can choose to open a coffee shop that encourages customers to sit down and stay awhile by providing free WiFi and community activities. On the other hand, you can cater your coffee shop to working professionals by offering coffee to-go and a mobile ordering app.
2. Make a vision statement and goals
Create your path for success by determining your values and goals. Create goals for different milestones in your business. For example, your goals for when you first open may look quite different than your goals for your first anniversary of business. Make sure your goals are realistic and attainable.
3. Determine what makes you special
Ask yourself what you can offer that no one else can. This could be special menu items, sustainable practices, a unique atmosphere or exceptional customer service. Your coffee shop needs at least one thing that helps you stand out from other cafes.
4. Find a success metric
Figure out how you’re going to measure your success. Find a way to keep track of your rate of growth, profits and how cost-effective your spending is.
5. Set your prices
This part of your business model requires research. See what kind of pricing models other coffee shops in your area are using. If you decide to open a specialty coffee shop, for example, you may want to charge higher prices. If you want to appeal to a more general audience, keep your prices a bit lower.
6. Talk to experts
Talking to other coffee shop owners is a great way to gain insight into the industry. Ask them what challenges they experienced when first opening their shop. Seek any guidance and advice you can find. Finding a support group of fellow business owners is a great resource if you ever have a question or need other people to share your ideas with.
Tips for marketing your coffee shop
Follow these tips to market your coffee shop and bring in more customers:
Create a social media presence
Creating a social media presence can help you connect with your community and keep them updated on your latest offerings. Share unique photos of the coffee drinks and food items you have to offer. One major benefit of social media is that patrons can geotag your coffee shop, which can provide free advertising through satisfied customers. Consider partnering with a local influencer since they have a wider online network.
Build an easy-to-use website
Many customers expect small businesses to have a website. As long as your website is easy to use, you can keep it simple. On your website, include the following sections:
- Food and drink menu
Since many people browse the web on a mobile device, make sure your website is mobile-friendly. There are many website builders you can use to get started, although you may consider hiring a website designer. Having a quality website can increase your web audience and showcase your brand.
Related: How to Hire a Web Designer
List your business online
Many major search engines offer navigation services, so make sure your business and address show up when people search for you online. This way, customers can easily find your location.
Pick your target audience
Choose your target audience and cater your business to them. You can base this off of your location or what kind of business you want to run. For example, if your coffee shop is on a college campus, consider gearing it toward college-aged students. Along with your marketing efforts, make sure your interior design, menu items and company values align with the tastes of your target audience.
Make an emailing list
Either set out a sign-up sheet for people to add their email or have your cashier ask for emails during each transaction. By creating an email list, you can keep customers updated on any new menu items, promotions or other information about your coffee shop. Offering customers a one-time discount for signing up for your email list may make them more willing to share their information.
Start your marketing efforts before your coffee shop even opens. Create your online presence and spread the word through other means of advertising. You may want to purchase traditional advertisements in print, TV or radio. Likewise, you can buy online advertisements through social media or websites. Choose where you advertise based on your target audience.
How to hire quality employees for your coffee shop
Follow these steps to hire qualified employees for your coffee shop:
1. Write an attractive job description
The first step to finding quality employees for your coffee shop is writing a job description that attracts candidates. Keep the tone of your job description upbeat and friendly. Include the job’s responsibilities and the skills and qualifications candidates need. To help bring in more applicants, consider adding some information about your coffee shop, including your company culture and values.
Read more: How to write a Barista job description
2. Search for candidates
Post your job description on job websites to reach candidates in your area. Share it on your business’ social media page and any personal social media accounts. You may find that someone in your social network needs a job or can refer someone they know. If you want to reach high school or college students, check if local schools have a job board you can post to. Advertise your openings to people who visit your shop by hanging up "Now Hiring" signs. You can even post these notices in your windows before you open your shop.
Related: How to Hire a Barista
3. Read through application materials
Look through your applications to see who stands out. Candidates who fill out every section of the application tend to be more detail-oriented and professional. You may want to choose candidates who have prior experience in the service industry. However, if you see potential in someone with little experience, you can start them in an entry-level role and give them the opportunity to grow with your business.
4. Interview your top candidates
Before meeting for an in-person interview, save time by screening candidates with a brief phone interview. During this phone call, ask questions that help you get a feel for their personality and interest in the position. After conducting phone screens, schedule in-person interviews with candidates you’re interested in. During these interviews, ask candidates questions about their customer service experience and coffee knowledge.
Here are a few questions you can ask during an interview:
- What kind of coffee drinks do you know how to make?
- Explain what good customer service looks like to you.
- What skills make you qualified for this position?
- How would you deal with a challenging customer?
- How do you stay calm during a sudden rush of customers?
- Tell me about a time you had to use teamwork to solve a problem.
- What experience do you have keeping a clean and organized workspace?
- What is your greatest strength and weakness?
- Tell me about a time you had to use conflict-resolution skills to diffuse a tense situation.
Read more: 5 Barista Interview Questions and Answers
5. Create a thorough onboarding process
One of the most important steps in building successful teams is training employees well. Create a training handbook for your managers to use when onboarding new staff members. Make an effort to create a welcoming first impression for new employees and be understanding of their initial learning curve. Facilitating team-building activities is a great way to help your staff become more comfortable working together.
Frequently asked questions about starting a coffee business
Here are common questions aspiring coffee shop owners ask:
Is a coffee shop profitable?
A coffee shop can be profitable with the right business model. Start by choosing a location that has a high demand for this type of business. Major metropolitan areas and college campuses tend to be good choices, although they can be oversaturated. You could also make a considerable profit, for example, if you open somewhere that has no other coffee options.
Find your niche in the market to help your business stand out, whether it’s offering unique espresso drinks or having a commitment to sustainability. By sticking to your brand’s values, you can attract a loyal set of customers.
How much does the average coffee shop owner make?
The national average salary for a business owner is $80,284 per year. Your salary can vary greatly based on your industry, location and customer base. Coffee shop owners benefit from a flexible schedule and can choose their own benefits. Many of them have health insurance and paid time off through their business.
How much does it take to open a coffee shop?
According to Investopedia, a coffee shop can cost as little as $25,000 to almost $675,000 to open. These costs can fluctuate based on whether you’re opening a franchise, buying a business or starting from scratch. Your location and business structure also have a lot to do with this initial cost. For instance, a large coffee shop with a drive-thru will probably cost much more than a small kiosk shop. Consider lowering your costs by purchasing used equipment and furniture for your shop.
Here is a breakdown of common expenses when opening a coffee shop:
- Rent or building mortgage
- Loan payments
- Supplies (coffee beans, ingredients, napkins, cups, coffee pots, cleaning supplies, etc.)
- Equipment (espresso machines, coffee grinders, blenders, etc.)
- Labor and employee benefits
- Income taxes
- Sales taxes
- Licenses and permits
Read more: How to Hire Your First Employee
What do I need to open a coffee shop?
Consider these factors before opening a coffee shop:
- Location: When choosing your location, have an inspector determine if it’s safe to operate a business in. You want to pick a location with reasonable rent and hookups for kitchen appliances. Find a balance between a prime location and the costs associated with it.
- Menu: Create a menu that attracts your target audience. Decide if you want to serve both drinks and food or just drinks.
- Registration: The requirements for registering your business may vary by state. Most states have an online portal where you can fill in your information and pay any applicable fees.
- Business name: Create a name that represents what your shop has to offer.
- Regulations: Following local regulations is an important part of operating a legal business. For instance, you need to consider your jurisdiction’s food and safety rules.
- Employees: Start the hiring process well before you open your business so you have time to fully train your staff. Creating an employee handbook is a great way to ensure your staff is following the same guidelines.
- Interior design: Another major part of opening your coffee shop is setting up your space. Choose a design that creates an inviting atmosphere.
- Supplies: Figuring out who your suppliers are is crucial to your business. You need to decide who you buy your ingredients and other supplies from. Find a balance between quality and cost.
- Equipment: The type of equipment you need to prepare food and drinks depends on your menu. If you serve more complicated drinks or hot foods, you may need more specialized equipment.
- Business bank account: Creating a separate business account for your coffee shop allows you to keep track of all of your finances in one place.