Nowadays coffee shops exist in spades! And since the market is full, opening a new coffee shop can be challenging. But no worries, today we are about to tell you all the details on how to open a coffee shop the right way.
Make a Business Plan for Opening a Coffee Shop
So, you have decided to open a coffee shop. To begin with, you need a business plan, otherwise, even the greatest idea can fail. Creating a detailed plan is the first step you will have to complete. Here are the things you should include in the plan:
A detailed description of your business
The structure of your organization
The definition of your target audience and its analysis
The definition of your competitors and their analysis
A marketing plan
A financial plan.
A good business plan is an absolute must for any project, as it gives a deep understanding of the market, plans for growth, and the business itself. Apart from this, a detailed plan can help you attract investors. No one will finance just an idea itself, but a nice business plan for a coffee shop can inspire potential sponsors to invest funds in your project.
How Much Does it Cost to Open a Coffee Shop
To create a financial plan, it is essential to calculate how much money you need for starting your own coffee shop. Obviously, we can’t tell you the exact cost, since we have no idea what your plans are. Instead, we will give you the basic knowledge of how to calculate the expenses on your own. Here the things you should include in your calculation:
Paperwork. You will have to get licenses: an employer identification number, a certificate of occupancy, food service license, sign permit, and some other documents.
Purchase of foodstuffs. These expenses highly depend on your menu. For instance, you will spend much more apart from coffee if you also plan to serve alcoholic beverages.
Staff salaries. That’s an obvious thing — there are not too many people who will agree to volunteer. In the U.S., baristas are paid on average about $18-20,000 a year while managers work for no less than $30-40,000 a year.
Rental of premises. This cost depends on the size of the premise and its location. Don’t be surprised if a premise at the very center of the city will cost a pretty penny.
Procurement of equipment. Fortunately, you can avoid this component if you rent a premise which is already equipped. Otherwise, you will have to purchase all the essential equipment and, probably, also pay for its installation. Espresso machines can cost from $5,000 to $20,000, coffee brewers from $500 to $2,500, and espresso grinders can also cost from $500 to $2,000. The expenses also depend on your menu. For example, if you offer not only coffee and cakes, but also meals cooked on fire, you will need extra refrigerators, ovens, and powerful ventilation systems.
Advertising. You will have to spend a part of your budget on promoting your coffee shop. If you don’t do this, you won’t attract as many visitors as you want.
We would say that the minimum budget you need to start a coffee shop with seating is around $80,000, while the maximum limit depends only on your ambitions and purposes. A coffee kiosk may cost less — you will have to spend around $60,000 at a minimum.
Read also: how to start a food truck business.
Create Your Own Coffee Shop Concept
A really cool spot should offer not only great drinks and food — its overall concept should be absolutely amazing! Starting a coffee shop, strive to give your visitors a comfortable and unique atmosphere, and they will quickly fall in love with your place. We’re not talking only about the design here. It matters, but it is also important to pay attention to the overall image of your business, and the way your personnel communicates with visitors.
Every detail should follow the general concept to create a feeling of completeness, and if you manage to achieve this goal, your visitors will definitely come back and recommend your coffee shop to their friends.
Choose a Location and Space
Choosing an area goes in your checklist for opening a coffee shop next after defining the concept of your coffee shop and its target audience. However, to make a final choice, you will have to collect some information about the vibrancy of the street. Just estimate how many people and cars pass by during the day (consider your potential working hours). You can deal with this challenge on your own or simply hire someone. This won’t cost a lot or take a lot of time.
Then, it is essential to decide if you want to rent a premise or buy it. Since your business is a coffee shop start up, we suspect you will go for renting. That’s a wise choice as it has several significant advantages. First of all, it is cheaper. Secondly, if you chose a wrong location you can simply rent another place and that’s it. However, you should be very careful when signing the rental agreement. Read it carefully or ask an experienced lawyer to do this for you. An owner may want to increase the rent if your business succeeds, so do your best to avoid such issues.
So, you chose a street (and even the side of a street!), and decided that you are going to rent a premise. How to choose the right space? Well, the concept can help here as well. Besides, look for those spaces which have already been occupied by similar businesses — they may have all the essential equipment. But if you choose this way, remember to discover why the previous owner closed their place. This information can really help.
Choose the Equipment for the Coffee Shop
As we already said, the easiest way to get the equipment is to rent a premise which already has it. But if not, you will have to choose one of the following ways:
Buying New Equipment. It can cost a lot, but you can try to save some money. Don’t buy the equipment from the first producer — explore the market and the prices first. Then, if you buy a lot, you can try to get at least a tiny discount.
Buying used equipment. Obviously, it will cost less than the brand new one. However, you will have to check the equipment wear. If the equipment is already at the last stage of its life cycle, it is better to spend more money but buy reliable equipment. Or you can choose the next option.
Getting equipment for free. Yes, it is possible but you will have to apply your diplomacy skills and be pretty lucky. This trick can work with foodstuffs suppliers — if you sign a long-term contract with them, they can provide you with, for instance, their branded refrigerators.
Register Your Coffee Shop Business
As we already mentioned, running a coffee shop you will have to deal with some paperwork. Need for certain documents depend on the state you are in, but some of them are a must regardless of your geographical location.
Business license. It turns a new company into a legal entity. Check your state government’s website to discover how to apply, and pay attention to the details — in some cases, you may need to renew your license every year.
Employer identification number. It's another must on your list of documents. It is issued by the Internal Revenue Service, and getting it may take some time — only one number is issued per day. At least, it is free.
Certificate of occupancy. It proves that your premise is properly maintained. You will get it after your location passes the final inspection. All the details can be found on the site of your local government.
Food service license. It is issued by the local health department, and you can get it either in person or online. Again, in some cases this license may need to be renewed.
License for playing recorded music. Playing any type of music in your coffee shop also requires a separate license. This rule applies even to CDs! In case you neglect getting this document, you will get a fine, and sometimes it can reach $30,000.
One more thing — before putting out a signboard, you will have to get a sign permit from the government of the city. If you rent a premise, it would also be great to get approval from the owner.
We don’t know your exact location, so we suggest you just check the rules of your state and then get all the essential licenses.
Finding credible foodstuffs suppliers is the next step. Don’t focus only on prices — the quality of the products is a much more important factor! Explore the market, find suitable suppliers, check reviews about them if possible. After you narrow the options down, check their prices and terms of business.
At this stage you can finally make a choice, but read the contract extremely carefully. Apart from this, always reserve to right to work with several suppliers, just in case.
Another good idea is looking for small local suppliers. Do you know a person who makes amazing homemade cakes and cookies? Yes? Then why not work with them? Besides, offering homemade food can become your special feature and attract more visitors.
Find Professional Service Staff
To find reliable personnel, start developing portraits of your future workers. What should they look like? What qualities do they need? Then, create a catchy job description and publish it on job portals and social networks. Don’t forget to prepare for interviewing your potential employees — think about questions you want to ask them.
After you hire your staff, develop a nice motivation system for them. It can include some bonuses, extra days-off, lunches on the house, and so on. Besides, you will have to combine friendliness with more or less strict control. Otherwise, your employees may relax too much and spoil your business.
Read also: how to hire a good chef.
Environment in the Coffee Shop
A good, stylish, and memorable interior is among the most important things you have to pay attention to — it can lead you to success even if it offers pretty standard coffee. First of all, it is vital to choose the right colors and lighting, as they can revive even the most “boring” place. Then, think about furniture — it should follow your concept, be comfortable, and reliable.
Pay attention to the size of your tables, chairs, and armchairs. The pieces of furniture should be convenient, but there should still be some space between them. Otherwise, your coffee shop will turn into a typical canteen. Also, choose practical furniture. It should be easy to clean and quick to fix.
Think of a Marketing Campaign
Thinking about how to start a coffee shop you can start working on a marketing campaign that you will run before the opening. Create accounts on diverse social networks and inform your potential visitors about the progress of your business. Show them your work on the interior and menu, tell them about unusual beverages and meals, if you have them, announce your opening date and invite them to join. You can even promise them a free drink if they come!
There are a lot of ways to get in touch with your target audience, you only have to create portraits of your clients and define the channels for getting in touch with them. For instance, if your place is located next to a university and you focus on students, consider Instagram and Facebook as the main ways of communication. And, obviously, don’t forget about your accounts after your place is open. In this way, you will attract new visitors and encourage the existing ones to stay loyal.
Apart from this, you can also go for something like print advertising, but the Internet is the most efficient way get in touch with your clients. At least you won’t have to pay for printing the materials.
Read also: how to attract more customers to your restaurant.
Create the Logo and Signboard for Your Coffee shop
Logo and signboard are the “face” of your business, so it is extremely important to make a wise choice. Obviously, your logo and signboard should complement each other. To get a really cool signboard and logo all at once, hire a professional designer or go to a design studio. If you don’t have a lot of ideas about how everything should look, ask them to provide you with several options so you will be able to choose exactly the logo and signboard which will hit the spot.
Implement the Loyalty Program
Here is one more tip on how to run a coffee shop efficiently — make up a special loyalty program for your visitors. It will motivate them to come back again and again, and this is exactly what you need, right? There are two popular variants of loyalty programs for coffee shops.
The first one is offering a constant discount to visitors who have already spent a certain amount of money in your place. The second option is developing a special system which will allow clients to collect bonuses and then exchange them for something cool. Both options are very popular, but at least you can create a really catchy design for discount cards.
Install Coffee Shop POS System
Installing a POS (Point of Sale) system is one of the most useful recommendations on how to open a coffee shop. This is a computerized system which allows you to track sales, cash flow, food inventory, etc. It optimizes the working processes and makes everything much easier, so we highly recommend that you install it. And it is better to do this at the very beginning — such a strategy will allow you to avoid a lot of problems and expedite the work of your personnel.
Usually, the POS system consists of a screen, a cash drawer, and a credit card reader. Receipt printer and barcode scanner are optional. But the structure of the system is not the only thing you should know about it — there are enough POS systems on the market, so you will have to make a choice. Remember, a really good and reliable system must have the following features:
Providing a detailed sales report which includes the information regarding what exactly you sold, the percentage of sales, and so on
Client acquisition and management which will help to communicate with your customers and increase their loyalty
Employee management for tracking their working hours
Inventory management for ordering new products without any problems and predicting your future costs
Impeccable security for keeping all the data safe from hackers
Seamless integration with any software
Many vendors offer business owners to try a management software for free to give them an opportunity to test it before purchase. You can also go for a Poster 15 day trial — it’s free!
Opening a coffee shop is a great idea, and now you know how to deal with it the right way. Just follow our guide and be creative!