Are you confused with the plethora of information on how to open a coffee shop? And they tell you not to trust anyone that has never opened, owned or operated one before. Should you?
opening a coffee shop business
Phil La Rosa, who work with Espresso Works in Perth, Australia emailed me an infographic on how to open a coffee shop. He thought it would be fun to look at the steps required to open your very own café and have it published on my site.
But Espresso Works do not own or operate a coffee shop. They specialize in the maintenance and sales of the finest coffee machines and associated products in Australia. They have been doing this since 2008. So I guess they must know the industry pretty well.
If that's okay with you, let's look at their infographic on how to open a coffee shop.
How to Open a Coffee Shop
Espresso Works list out ten essential steps on how to open a coffee shop. But it doesn't cover all aspects of opening a cafe. So I expanded on the list with more items. Check them out:
#1. Find the Right Location
The location of your cafe plays a major part in the success of your coffee shop. Choose a location with lots of foot traffic. But good location can be expensive. Is it within your budget?
Do a comparison. Is it better to spend money on a better location that already has the foot traffic? Or cheaper to spend extra money on marketing to attract that traffic.
To learn more on this, read my article on finding the right location.
Remember that location is not everything!
You still got to put in your best practice restaurant marketing to work. You have to take control of whatever you can to bring in more customers.
Understand your customer's need. Build a culture to care for your customers AND your staff.
#2. Do Your Business Plan and Choose Your Space
I assumed your Business Plan is in place. This is the road map from which your new coffee shop develops. That you’ve done your homework and serious about opening a coffee shop.
To write a strong business plan that is relevant, read my article on How to Write a Business Plan that Stays Relevant.
Espresso Works suggest that you decide on your space. Do you plan to run your business on a mobile kiosk or truck or a full brick and mortar location? Remember that each has its own constraints. A smaller space means less variety of drinks and foods to sell.
#3. Secure the Right Equipment
The type of coffee you want to sell will determine the equipment that you require. Do you need a cappuccino machine, French presses or drip coffee machines?
These depend on your space and budget (and what you had written in your business plan! Don’t divert from it as it will affect another aspect of your cost and margin).
You may also be tempted to buy the new and trendy brewing machine or other latest gears. Even if you have a deep pocket, you should not. Go for the trusted model that has gone through the test of time. This will ensure full support for parts and services even if it has less breakdown.
Besides coffee machines, you also have to look at the water filtration system. A good filtered water is a key to good coffee. Read my article on How to Make Coffee Taste Good to understand why water quality is crucial to good coffee.
Ice Making Machine is another important component to your cafe's equipment list. Read my review on Manitowoc Neo Ice Machine, the best compact ice machine if you are on a budget.
#4. Adhere to All Local Regulations
Different areas and local councils may have different requirements when it comes to opening a coffee shop. For example, in the US, all equipment must be NSF certified before they issue a business permit.
So check with your local government on their requirements. Put that in your business plan checklist.
#5. Do Your Groundworks - Research the Competition
Check prices of coffee selling in your area. Analyze all the local restaurants and food trucks that might compete with you.
Then look at what they offered, the design and ambiance for each of the establishments.
Can you offer something different? Give quality coffee, food, and services. Be involved in the day to day operation. Be the head barrister. Be the best.
Hone your skills, set standards and drive your team to get better and better.
And remember to keep your coffee shop clean all the time. Read my Restaurant Cleaning Checklist Infographic to guide you through the cleaning process. Keeping your cafe clean all the time is important. 79% of people will not return to a messy restaurant or with dirty toilets. Even if you serve the best coffee and food.
The following statistics are real. It shows how important are your first two years of your operations.
Source: U.S. Bureau of Labor Statistics and Small Business Administration
#6. Hire Staff
For new cafes or small coffee shops, some of the duties of your staff will cross over from one section to another. For example, your waiter can double as host or bartenders. Hence, when you hire people, explain this to them. Employ only those that agreed to this flexibility in their duties.
Payroll costs account for about 25 to 35% of your total gross sales. If it gets higher than this, you either have to reduce your operating cost or increase sales.
Items deemed to be "controllable expenses" are:
- Salaries & Wages 25%
- Employee Benefits 4.5%
- Direct Operating Expenses 4.5%
- Music & Entertainment 1.0%
- Marketing 2.5%
- Utilities 2.5%
- General & Administrative Expenses 4.0%
- Repairs & Maintenance 0.5%
These add up to about 44.5% of your total expenses. If these are well managed, then you can control your profit. "Controllable Profit" is a good indicator of how well you are managing your restaurant. There's a direct correlation between management's operating abilities and "Controllable Profit" (Controllable Profit = Gross Profit - Total Controllable Expenses).
This is one of the Key Indicator for restaurant owners to know where to focus their attention.
Irrespective of these numbers and tools to track performances, it is no secret that good people are hard to find. So, as I had mentioned earlier, build a culture of caring for people. Not only for your customers but also for your staffs.
#7. Source Specialty Items
One way to be different from other coffee shops is to create your own signature blend.
Find a reputable roaster that can help you get that signature or your very own specialty blend.
But avoid the mistake of wanting to serve everything or do everything. You will likely fail. It is better to be good at something than second-rate at everything.
#8. Think About Food Items
Your coffee sales will not give you enough margin to pay for the controllable expenses.
Sure, coffee may be the reason why customers come to your shop. But to make enough margin, they must buy other stuff as well.
So think about food items to serve. Hot food and/or cold food such as sandwiches, muffins, cookies etc. Then place them close to your point of sale.
Research shows that 75% of customers look for food as well as coffee.
Don't forget cold drinks and mineral waters. This will ensure better chances of multiple sales.
Will you prepare these yourself? This mean more staff to hire and extra equipment to buy. Or will you source them from a good local bakery?
#9. Furnish Your Coffee Shop
Starting a new cafe can be expensive. Decorating and furnishing items can add up to your cost. But you can reduce them by buying things online, do bulk purchase or buy used furniture.
As the decor and furnishing will set the tone and ambiance of your cafe, choose well. You also want to create a comfortable environment for people to come back.
For inspiration, check this book that features 33 eclectic coffee shop designs with good design aesthetics.
#10. Market Your New Business
It is tempting for new coffee shop businesses to overspend in their marketing efforts. Instead use low-cost marketing methods such as:
- Leveraging on the Social Medias such as Facebook, Twitter, Instagram etc. Start a conversation or place ads on these medias.
- Have your own website - start a conversation on your website's blog Click here to learn more on this.
- Hand out flyers and network with the community.
- List your coffee shop in your local F&B review website.
- Use email and SMS to further expand your network.
- Create a culture to care for your customers. Find time to meet them from table to table. This will create customer loyalty.
Begin to market your cafe as early as possible. By the time you open, you have excited customers ready to be part of your business.
The cost of marketing and Public Relation depends on your business plan and other factors that only you, the restaurant owner, know for sure. Do what's best but stick to your budget.
Other Marketing Ideas
Espresso Works proposed these other marketing ideas to help with your business launch:
- Offer unique products such as specialized roasts, local ingredients etc.
- Fee Wi-Fi (some establishments have now imposed a time limit to free Wi-Fi. This will free up the chair and table spaces for other new customers).
- Have a customer loyalty programs. The best program is to give discounts or other incentives to regular customers.
- Sell coffee related items
- Host or sponsor local entertainment, readings or book club events - only if it is within your budget
- Train your baristas using online services
Starting a new coffee shop can be exhaustive. Despite good planning, you can still made mistakes and cost can go beyond budget.
Follow the above guidelines on how to open a coffee shop. It will at least reduce these issues.
Did I miss anything else? If you are a restaurant owner, love to hear your comments and tips for future coffee shop startup owners. Share it below!