Do you love coffee? Have you thought about starting a coffee shop business?
Updated: Aug 24, 2020
I love going to coffee shops.
I go by myself, with my nieces, with my friends, with my sister, my husband, etc. I love the ambiance and I love to drink coffee.
But I am not the only one. .
Did you know that 70% of Americans drinks at least two cups of coffee a day?
Coffee is big business!
So if you want to open a retail coffee shop where you sell specialty coffee, tea, and other hot beverages with some baked good, sandwiches, snacks, and or salads then you’re in the right place.
And the first place to begin is with a business plan.
Since I write business plans I thought I’d give you a brief introduction to a coffee shop business plan.
Business DescriptionYou want to start with your business description.
You may think that with a coffee shop it’s pretty straightforward. For the most part, it is but your business description is going to show how you stand out from the other coffee shops. How you can be different!
There are so many coffee shops, as of 2017 there are over 24,000 coffee shops across the U.S. So you want to stand out. And the best way is by finding a niche. This can be a demographics, a specialty coffee, etc. In Washington State, I went to a coffee shop that served beer. There are entrepreneurs who have created hybrid coffee shops, blending their love of one thing with their love of coffee.
So think about how you can stand out, what you can do.
Find your niche and turn that into your business description, describing your business and what makes it special or different from others.
Market Analysis Here you’ll want to describe the industry related to coffee shops and its market.
An industry is similar businesses that are grouped into industries based on their products or services sold.
The market is whose within the scope of your business product or service. So this would include your target market, segment, the size of the market, competition, economic environment, buying patterns, barriers to entry, and regulations.
The coffee shop industry would include things like:
30,000 stores have a combined annual sales of over $25 billion, forecasted to reach $28.7 billion by 2021
A coffee shop sells an average of 250 cups per day, for an annual sales of $215,000
Major companies in the U.S. include The Coffee Bean & Tea Leaf, Peet’s Coffee & Tea, and Starbucks
Americans drink 2.7 cups of coffee per day
The United States imports in excess of $4 Billion worth of coffee per year
Independent coffee shops sell 31% of espresso-based drinks, while the rest is brewed coffee
Competitor Analysis The competitor analysis is where you identify and evaluate your competitors. The competitor analysis helps you see what your competitors are or aren't doing and you can use that to your advantage.
The best way would be to find competitors within your local geographic area, the area around where you want to put your business.
The national competitive landscape is driven by consumer demand, consumer spending, disposable income, consumer confidence, and tastes. Smaller independent coffee shop’s profitability depends on location, traffic, and quality of the product.
Individual company’s profitability depends on their ability to secure prime locations, drive store traffic, and deliver high-quality products. Large companies have advantages in purchasing, finance, and marketing. Small companies can compete effectively by offering specialized products, serving a local market, or providing superior customer service.
Marketing StrategyThe marketing strategy is the means by which you will reach your clients.
You first have to find out who your clients are and where they are. So if you’re targeting Millennials you’ll want to be on social media if you want to target let’s say baby boomers your strategy is going to be very different because they’re not online as much.
Location is so important.
When it comes to the location you need to find a prime physical location and you need to have a strong online presence.
For your physical location, you want a place with a lot of foot traffic, near other successful retail stores and at a budget.
With respect to your online presence, you need to understand that things are changing. When people hear about a new business their reaction is to go online and check it out. And the businesses website needs to be on point! And on top of that, you need to interact on social media.
This may feel a bit overwhelming but it is something you need to focus on and even budget for
So, what will your projections look like? Here’s a quick cost analysis:
The typical sit-down coffee shop costs between $200,000 to $375,700.
Drive-thru, $80,000 to $200,000
A small kiosk-$25,000 to $75,000
A franchise anywhere around $673,700
Shouldn’t go over 15% of sales
Equipment up to $20,000
Average Purchase per Customer Visit = $5
Average Cost of Goods Sold per Customer Visit = $2
Keep in mind that these are average sales. That means they take from the lower end and the higher end of the spectrum. So you might be averaging more on a weekly basis.
Management TeamSo you’ll need about 4-7 employees depending on the size of your location and how many customers you get.
Typical Salary: $35,000 per year
Hiring and scheduling employees
Keeping track of inventory
Adhering to health and safety standards
Ensuring customer satisfaction
Typical Salary: $9.55 per hour (not including tips)
Making coffee drinks
Operating cash registers
Here you want to state how much funding you’ll need, how much you’ll invest, and who else is or has invested.
Here is some average coffee shop start-up costs, keep this in mind when looking at the funding you’ll need:
Coffee Cart: Average costs between $20,000 to $25,000
Kiosk: Depending upon the size and menu average costs can be $25,000-$75,000
Drive Thru: Can open small units for less than $35,000 with a large drive-thru costing anywhere between $80,000 to $200,000
Costs of Coffee Bar: The average cost of a 1,200 square foot coffee bar is $200,000 to $375,000
Some extra tips for you.
You can open a big coffee shop or a small one. From a cart, truck, kiosk, drive-thru, coffee shop, coffee catering, etc. The possibilities are endless. And depending on the type you can invest anywhere from $10,000 to $700,000.
Whatever you choose, find a niche, get a business plan, and get started.