Many have longed for the hustle and bustle of their own coffee shop. The smell of roasted beans, the whirl of the milk steamer, the extra squirt of whipped cream on a just mixed mocha.
What can be better than owning the destination in your uptown? The focus of business meetings, college students, and a high school couple on their fourth date playing checkers. A coffee shop provides a community gathering place and a great deal of enjoyment for its owners.
If you love coffee, and you enjoy being around people, if you thrive on multi-tasking and if there’s a hint of an event planner in you, than opening a coffee shop can be a fulfilling experience.
It can also be a profitable endeavor; according to the Specialty Coffee Association of America’s (SCAA) website, retail sales estimates suggest the total U.S. coffee market was $11.05 billion in 2005.
How can I start my own coffee shop?
Starting your own coffee shop isn't as easy as you might think. There is a great deal of planning and investment required to make your local java joint a success. Learn how to start your own coffee shop.
Our sister site, ExploreStartups.com, has created a Guide to Starting Your Own Coffee Shop which covers everything from startup to operating a coffee shop. We highly recommend it!
Steps
Location, location, location! Coffee shops are all about location. You first need to review where you would place your coffee shop - a mall, a local uptown, near a college campus. Ideally, you will want a drive thru and a lot of foot traffic. You can find a location by browsing through areas of high traffic, near college campuses, or just call a couple local realtors for ideas.
Estimate breakeven. The first thing I do when reviewing a potential coffee shop location is estimate the breakeven point. Once you know the lease and an estimate of utilities and insurance, estimate your other expenses. These expenses include: employee salaries, marketing/advertising, Internet service, miscellaneous supplies. Leave out cost of goods sold such as cups, coffee, milk, etc. Also, leave out capital expenditures such as equipment and furniture.
For example, let's say you have a lease of $2,000 and utilities/insurance estimate of $800. You want to be open from 6:00 am to 12:00 midnight, with two workers for all shifts - at $8 per hour, this is $288 per day. Let's assume monthly expenses of $500 for advertising, $150 for Internet service, and $500 for miscellaneous. That's $1,150, or $39 per day. So, now we know we have lease ($67 per day) + utilities/insurance ($27/day) salaries ($288/day) other expenses ($39/day). Right now, our rough estimate is $421 per day. If you think you can average $2 per transaction profit, on average, you need to sell 211 transactions per day to break even. Of course, this is without buildout and capital expenditures. If you think you're in a high traffic location, this estimate may be very achievable.
Build a plan. Now that we have roughly estimated breakeven and we believe we can achieve that, let's work on creating a plan for the coffee shop. Explorestartups.com, a sister site of MyTutorials.com has a free business Sample Coffee Shop Business Plan for you to model yours after. It's extremely important for you to get a plan together before moving forward - you need to know how much money you are investing and how you will make money (and specifically, if you can make money!)
Gather funding. Well, this is no fun, we're already on step 4 and we haven't even served one cup of coffee yet! The next step is to gather the funding you will use to start the coffeeshop. One of the things I recommend is to find about 25% more funding than you estimate you will need. There will always be things pop up unexpectedly and you don't want to be surprised and have it throw your entire plan off track because you are thousand or two short in funding.
Start a corporation or LLC. Once you have a plan and the funding in place, you will want to incorporate or start an LLC (see How to Form an LLC). Before you negotiate the lease, make sure you have a company structure in place to protect your family.
Negotiate the lease. Now, it's time to negotiate a lease. Remember: it's a negotiation - you don't have to always take their first offer. Make sure you understand the details of what's included and what's not included: does it include insurance? Utilities? Parking? Can you build a drive thru? What kind of modifications are required to install equipment? Can the electrical system handle it? Is there easy access to water? Can you build a patio in front of the coffee shop?
Have a lawyer review the lease agreement before signing it.
Research and buy equipment. If you don't have an experienced barista on your staff already, find one to help you research and buy equipment. You don't want equipment which is too difficult to use, but you also want something that a skilled barista can use to create custom drinks.
Build out the coffee shop. Install carpet, paint, bars, tables, chairs, counter, refrigeration units, espresso machines -- everything you will need to open.
Hire your staff. We recommend having an experienced barista manage the shop if you can afford it. He/she can hire and train staff and ensure consistency.
Advertise your shop! Advertise in local newspapers, at the local college campus, and at local events. If your shop is big enough, invite some local groups to hold meetings at your coffee shop.
Tips and Tactics
Poor taste of the coffee will always turn away repeat customers. Ensure you are properly mixing and serving coffee drinks.
Diversify during the summer months into frozen drinks.
Focus on the coffee - don't get too distracted into sandwiches or other foods.
Use a customer rewards program to get repeat customers.
Train your baristas well and watch shrinkage - make sure they aren't giving away free coffee to their friends!
