When trying to figure out how to open a coffee shop, things can get complicated. There are countless moving parts to keep track of, new recipes to nail down, employees to hire, and so much more. With that said, we’re here to break it all down and clarify things a bit. So — let’s talk about how to start a coffee business.
Why Open a Coffee Shop?
Coffee shops bring life to early morning commutes, help build community, and deliver a touch of comfort to cities that might otherwise be cold and foreboding. Beyond that, though, they’re a gathering space for people of all walks of life; writers, students, artists, business professionals, they all gather within coffee shops to chat, work, and learn.
Because of this, a well-run coffee shop can quickly become a necessity for dozens of people in your neighborhood, ultimately allowing a safe third space for your community. But what makes for a popular coffee shop?
The Growing Popularity of Coffee Shops
Coffee shops have exploded in popularity in the past thirty or so years. What began as a small fad that explored Italian espresso quickly grew to a wildly popular concept that would proliferate throughout the world — the cafe. Cafes are great for several reasons. First and foremost, they offer coffee that’s usually of a much higher quality than you can find elsewhere.
Beyond quality coffee, though, cafes have become something of a gathering place for communities. With the addition of free wi-fi to cafes, they’ve quickly become an excellent space to quietly work, study, or simply exist. This all goes to say that the most important aspects of any cafe are comfort combined with quality coffee.
Benefits of Starting a Coffee Business
The most obvious benefit of starting a coffee business is simple — unlimited delicious coffee! Beyond that, though, the simple truth is that coffee is quite profitable. You see, seven out of every ten Americans drink coffee every day — just over two thirds of the country’s population. With that in mind, it’s easy to see why coffee blew up so quickly!
Research and Planning
Understanding Your Target Market
As with all businesses, it’s crucial to understand your market before trying to enter it. This is because not every area will be the same; some neighborhoods will prefer drive-through coffee stands for their ease of access and speed. Others will prefer a classic sit-down cafe, and others still will simply forgo the cafe scene altogether for classic drip coffee.
In other words, you need to know your audience.
If you’re located in a mostly residential area, for example, it’s reasonable to expect that a drive-through would be more effective. Parents need coffee before dropping their kids off at school, and we all certainly need coffee on the way to work. On the other hand, a heavily urbanized downtown area will find that a sit-down coffee shop may be more effective; after all, people are already walking past all day. Providing a place to sit and chill is far more likely to work downtown than it is around everyone’s homes.
Choosing the Right Location for Your Coffee Shop
On that note, it’s time to talk about location. Where you set your business will have a major impact on its success, so it’s important to think about it well before investing in a physical location. As we saw above, location can affect both the actual logistics of how your business is set up, as well as what you may want to sell.
For example, if you plan on selling food alongside coffee, it’s likely best to avoid setting up shop nearby bakeries, breakfast joints, and other common early morning haunts. Similarly, it’s important to understand how much traffic passes by the location you have in mind. As mentioned above, foot traffic is a major part of brick-and-mortar businesses, but that’s not all; local vehicle traffic can also bring new guests to your business. As such, setting up shop near common thoroughfares is advised.
Conducting Market Research
Market research doesn’t end with understanding the neighborhood’s logistics. You need to understand the demographics of your local neighborhood in order to fully lock in a target audience.
Let’s say that you’re trying to set up a high-end cafe with extremely high-quality ingredients and drinks. This means that you’ll need to charge higher prices for your products and, more likely than not, invest in a nicer location (meaning higher rent). While this type of cafe would likely work quite well in a bustling city’s downtown area where businesspeople can use the company card, it’s less likely to work in a working-class neighborhood. Similarly, a down-to-earth, small cafe with little room to sit might not work in a metro area, but it’s likely to find success in that same blue-collar neighborhood where people seek value and speed.
Creating a Coffee Shop Business Plan
With planning and market analysis out of the way, it’s time to talk about a business plan. This is where things really start to come together, so pay attention.
Setting Clear Goals for Your Coffee Business
You should have clear goals established for your business well before opening its doors. You should understand your company’s mission and values, be aware of major milestones, and make efforts to establish new goals as you accomplish them. This allows you to easily gauge your success and, importantly, helps establish a timeline for success.
Estimating Startup Costs and Expenses
While establishing goals, you’ll quickly begin to understand how expensive it is to open a restaurant. During the goal-setting process, you should take notes on costs associated with real estate, equipment, training, and salaries. By the time you’ve gotten a full plan established, you’ll have a better idea of the specific costs that you’re facing, allowing you to adjust your goals accordingly.
Licenses, Permits, and Legal Requirements
Licensing is a complicated process no matter where you live. While the necessary permits and licenses will vary depending on your specific jurisdiction, there are a few common threads in most areas. You’ll need a health inspection and all licenses that accompany that, along with an inspection of your building by the fire marshall and (potentially) city inspectors. Additionally, you’ll likely need to get licensing to actually sell coffee. From there, though, you’ll need to check in on local requirements.
Designing Your Coffee Shop
Coffee shops are just as much about their vibe as they are about the coffee. While the name clearly shows that coffee is the number one concern, the simple truth is that decor is crucial to creating a truly welcoming cafe.
Choosing Decor to Reflect Your Brand
While most cafes will try to create a cozy, welcoming vibe, the way that you go about it is entirely up to you. Your decor should clearly reflect what your business represents and, importantly, show a bit of personality. Nobody likes studying in a sterile-white cafe — so breathe some life into your space.
Building a Menu That Stands Out
Just like restaurant menus, building a cafe menu is a long process. It needs to properly reflect your style and values while being delicious and properly priced. No matter what drinks you run, though, coffee always starts with the beans.
Selecting Coffee Beans
It’s crucial that you take the time to find the right beans for your shop. If you’re not already, familiarize yourself with coffee terroirs (farming regions), varieties, and roasting styles. Each of these factors directly impacts the final product, meaning that you can get entirely different final products from beans grown in the same place by the same people that are then roasted by two different people.
Another important factor to consider here are the ethical and environmental concerns associated with coffee. In recent years, consumers have expressed an increasing concern over the sustainability of grow operations and the ethical treatment and compensation of farmers. As such, it’s important to know not only where your coffee comes from, but how it’s made and by whom.
Once we’ve located a farm that we like, it’s time to think about roasting. Some coffee shops roast their own beans, while others hire local roasters to do it for them, while others buy from farms that roast their own beans. How you handle it is up to you, but it’s good to know that these options exist.
Incorporating Food Options to Boost Revenue
Food is almost always a great addition to coffee shops, as long as it’s executed properly. Try to stick to food items that are easy to serve and require little interaction — usually, this takes the form of baked goods, sandwiches, and fruit or smoothies.
Hiring and Training Your Team
Key Roles to Fill in Your Coffee Shop
All cafes will need a few specific roles to ensure that things run smoothly:
- General Manager (GM): This person handles the long-term success of the business. They manage orders, people, and inventory.
- Assistant Manager (AM): This manager manages the day-to-day of the cafe; generally, they’ll handle rushes and ensure that things run smoothly in the short term.
- Baristas: Depending on the size of your business and its hours, you could need anywhere from one to ten baristas. They are the lifeblood of your cafe and will likely require a good bit of training.
Depending on the size of your crew and how many shifts you have, it may be worth hiring one or two shift managers as an in-between for the AM and baristas.
Providing Training for Consistent Quality
Once you’ve hired your crew, it’s time to get training. Your GM and AM should be able to perfectly execute every task in the shop before beginning to train your baristas. From there, they can train the remainder of your staff as needed. And don’t forget — training shouldn’t stop after hire. Continue to train and coach your staff, and you’ll find continued success and growth.
Marketing Your Coffee Shop
Marketing is a major part of launching any business, and coffee shops are no different. Let’s take a look.
Using Social Media to Build Buzz
Once you’ve gotten a location, menu, and staff nailed down, it’s time to build anticipation. Whether you hire a marketing professional or agency, or you do it all yourself, what matters is that you should be on social media constantly. Reach out to local influencers, reporters, bloggers, anyone with a platform in your area, and get them paying attention to you. From there, you can host a grand opening.
Hosting a Memorable Grand Opening
Grand openings are a stressful experience, but when they go right, there’s nothing like it. If you did your job on social media well, chances are that you’ll be packed — that’s good. Just remember, this is why we trained ahead of time. Ensure that service goes smoothly, shake a few hands with local influencers, and be sure to give out a few tasty samples.
Encouraging Word-of-Mouth Referrals
Word-of-mouth is a great way to get new customers, but it’s difficult to encourage naturally. The simple truth is that good service and a great product are what earns repeat customers, and repeat customers tell their friends about you. It really is that easy!
Tips for Long-Term Success
While the coffee industry certainly isn’t an easy one, it can be rewarding when done right. Take a look below for a few tips to ensure that things continue to go smoothly.
Keeping Up with Coffee Trends
Coffee is an ever-advancing beast, and as such, it’s one that needs to be constantly studied. Trends come and go, but the ability to capitalize on them in the moment differentiates cafes that last from those that don’t. While this isn’t to say that you should chase every trend, it’s important to be aware of them.
Prioritizing Customer Feedback and Improvement
Cafes are, ultimately, a very social space. Baristas and their regulars tend to have a specific and often quite friendly relationship. Because of this, when customers provide feedback (both good and bad), it’s important to take it into account. Sometimes it’s a comment on great service, tasty coffee, or an adorable shop — and it’s important to take those wins. But when it’s an issue with the quality of the coffee, food, or service, it’s vital that you take note.
Sometimes it signifies a failure in training or product, and sometimes it signifies a grumpy customer whose coffee still hasn’t kicked in; either way, better to be safe than sorry.
Expanding Your Coffee Business Over Time
If you want to eventually expand to multiple locations, it’s important to set goals to help you get there. Establish milestones for sales to tell you that it’s time to start planning for a second location, a third, and so-on. If you only want the one location, though, that doesn’t mean that you can’t continue to grow.
Maybe growth to you is investing in better equipment, a larger space, or better beans. Or, maybe it means building your own roasting program — growth comes in a lot of forms. No matter what, though, it’s important to keep goals for growth in the back of your mind.
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