Starting a Coffee Shop

August 29, 2023

With coffee drinkers an ever-growing market, opening a coffee shop can be a quick and relatively inexpensive business to start.

Although it’s a food service business, coffee shops have a higher profit margin without the high attrition of the restaurant business. Coffee is sexy. People get attached to their coffee shop as an appendage of their social life, their hang out, or their retreat to get some serious computer screen time.

Don’t be intimidated by the big chain shops.

Their store designer in corporate headquarters is busily designing the same store for Alaska as he or she is for Florida. You have an advantage in that you are keenly attuned to your community. You know the habits and customs of the people, you know the demographic you’re aiming for. The uniqueness and character of your coffee shop will draw a loyal and appreciative clientele…if you do it right.

You’ll need to consider some of the major expenses of your initial investment based on the type of coffee business you want to have. Every case and scenario is different. You’ll probably be signing a lease. You’ll need cabinetry (build-out). Equipment will be another large expense to consider, which will be dependent on your menu.

. Coffee is usually an impulse buy. People will seldom go out of their way to get it, especially if there’s a quick drive up kiosk on their normal driving route. Location is the most important factor to consider. It will define your success or decide the failure of your business. Take your time. Shoot for an A+ location, and don’t settle for anything less than a B+.

If you’ve never worked in the coffee shop business before, plan on setting aside some funds for taking classes. Rosettas, hearts, steam, and foamy milk don’t just happen, and mastering them isn’t necessarily intuitive. This is particularly important if you’re planning to open a coffee shop in an upscale area. Once your customers taste a great coffee drink that’s been properly prepared, it’s going to be very difficult for them to ever go back a large chain for an auto-steamed cappuccino.

There are few good reasons for opening a coffee franchise unless you’re accustomed to someone telling you what to do and how to dress. Franchises make all the decisions for you and you pay a significant price for that privilege. So, unless you don’t have a creative bone in your body and no entrepreneurial spirit running through your veins, you’ll have spent a lot of money to be held back and frustrated.

Of course, since the focus of your business is coffee, you’ll want to make sure you work with a reputable company. The best way to find one is through an independent consultant. Your choices may be vast or restricted depending on your geographical location. If you’re in North Dakota, you may only have the choice of two or three companies that will be reliable to work with.

It’s equally important to make sure that the manufacturer of your equipment has quick reliable service. You can’t afford to have your espresso machine down for an extended period of time. You’ll need that repair done in a matter of hours, not days.

There are 330 million cups of coffee consumed every day. That makes the specialty coffee business particularly attractive as a start up. With careful planning, opening a coffee shop may be the best move you ever made.

Location, Location, Location

The number one reason coffee shops fail is because they are in a poor location. Unfortunately, most people are in a hurry and excited to get started and they don’t understand the importance of location strategy.

Is the location visible? Is the property aesthetically pleasing? Is it accessible? Is there enough traffic to create customer flow? Is the location a match with your target demographic? Is there parking? Does your location match your concept? Is there competition?

Location is your biggest limiting factor. It can take six months to a year to find the right location. It’s not about finding a location that will just due; it is finding a location that has all of the components that will ensure your success.

The truth is, you will always be competing against the heavy hitters like Tim Horton’s and Starbucks, but with the right location strategy you can thrive beside them. If you cannot find what you need don’t settle. Don’t get wrapped up in your own enthusiasm and rush your decision. Plan ahead and create a location strategy and stick to it.

Start With Coffee Shop Customer Profiles

The right place for the wrong people. Or the wrong people in the right place?’

If you create a concept that is not marketable to your local customer base you will fail. The problem is that most owners become absorbed in the business that they want to create and do not pay attention to the relationship between concept and demographic.

In order to stay competitive you need to spend the time understanding what your local customer base wants.

  • What is your identity going to be? Are you aiming to achieve the ‘neighborhood coffee shop’ feel, or do you want to be more edgy?
  • Perhaps you are looking to capture a more sophisticated customer with a high end approach.

The problem is that people are not clear on their concept and don’t understand the importance of it being ‘right’.

How unique do you need to be to be competitive? What concept will your target demographic be responsive to? What is your attraction strategy? What is going to make you different or marketable? Who is your potential customer and what do they like?

Your attraction strategy is your concept and you need to target the needs and wants of your customer. You may have a unique idea that has the potential to create a niche in the coffee shop marketplace, but if it is not compatible with your customers it won’t work. With the popularity of specialty coffee, there are many groups of people to target and lots of room for creativity.

Don’t forget you are a coffee shop and your concept needs to reflect that. You need to know what has growth potential and if people are going to be interested. Do people want to buy espresso at a premium? If so, who is it and where do they live. If they don’t want to, what do they want to buy?

Coffee Shop Staff Management

One of the biggest mistakes new business owners make is they treat their staff as a commodity. Labor costs are important but what about turnover and training costs? What costs more? What is your recruitment strategy? Why will someone want to work for you? Are you a good manager? People forget that hiring, training, retaining and managing staff is a difficult job.

Many coffee shop owners do not provide adequate product knowledge and training. The result is ineffective staff, reduced profits and irritated customers. Handing over a manual is one of the most common forms of staff training.

Why should a staff member read a manual about coffee?

How are they going to extract the right information from the manual and apply it? What if they are visual learners?

If your staff is uneducated about the business concepts and products how are they going to answer customer questions? Where do you think the knowledge is going to come from?

Owners often forget to give reward when it is due. Owners expect instant dedication and interest in the bottom line. They forget that they make the profits and therefore they are the ones that really need to care. Owners need to give staff a reason to care.

Coffee in itself is complicated and so is the brewing process, especially for specialty drinks.

Staff needs to be trained on product knowledge and brewing methods to ensure that they are successful. If you give your staff the resources they have the potential to be great.

You can’t just tell someone to learn, you need to tell them why they need to learn and how it affects their job and the business as a whole. The truth is that people work harder when they are invested. Recognition and respect are the two most motivating factors for staff.

It is not enough for them just to show up everyday, people want to have responsibility and purpose. Two way communications is critical to staff relations. As a manager you need to communicate your expectations clearly. Hiring and training the wrong individual is a poor investment because turnover is costly. The level of service increases with long-term employees. It is worth the time and money to invest.

Create a Welcoming and Friendly Atmosphere

The coffee shop atmosphere is something you really need to focus on if you want customers to feel welcome. Even though many people are in a hurry to grab their coffee and go in the morning, you will have plenty of people that want a place to relax and visit while they drink it. The more inviting you make your coffee shop atmosphere the more customers you will attract.

Being able to relax in any establishment is important to consumers. No one wants to drink coffee in chairs that are hard on their back or try to visit with someone in a crowded space. You need to offer your customers enough room to sit back and visit with people without having to talk over everyone else. Try to place plenty of space between tables so conversations don’t run into each other.

The decor you select will affect the coffee shop atmosphere. Try to find neutral colors that work well for the tables and the carpets. Pictures that you place on the wall should be colorful but also relaxing to look at. From the moment a person enters, the coffee shop atmosphere should be very appealing to them.

The lighting is an area you need to address in relation to your coffee shop atmosphere. Remember that there will be plenty of people coming in for coffee while they read a book, look at important paperwork, or even access information on their laptop. Make sure they have sufficient lighting to be able to successfully accomplish such tasks.

The genuine smiles and assistance from your staff will definitely assist with your coffee shop atmosphere. No one wants to get their coffee from unfriendly people that act like it is an inconvenience. It is also a big turn off when the sentiments are fake. Make sure you hire qualified individuals that are also able to effectively communicate and interact with all of your customers.

Your coffee shop atmosphere also has to work well for the employees of your business. Make sure they are able to get around easily to clean up tables and chairs. You always want your coffee shop to be very clean. The equipment also needs to be set up in an efficient way so they can quickly make the drinks customers are ordering.

Your coffee shop atmosphere needs to leave people wanting to come back to it again. They should be getting more than just a cup of coffee. Sell them the overall experience of what a quality coffee shop it. As a result you will earn a very loyal customer base that return for more on a regular basis.

Paying close attention to your coffee shop atmosphere is important so make sure it gets the attention it deserves. You don’t want to lose customers because they don’t feel comfortable in your coffee shop. It may take time to decide on the best layout so don’t leave this to the last minute. Strive for a relaxing coffee shop atmosphere that works well for both your customers and your employees.

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