Understanding how much it will cost to open your coffee shop
Understanding the initial costs is the first step in deciding if you can start up a new coffee shop.
In this case, they include equipment such as an espresso machine, which can cost up to $20,000. Many coffee shops roast their own beans. Industrial coffee roasters can cost upwards of $10,000.
Then, depending on what kind of shop you're opening, you'll need to head to a restaurant supply store for tables and chairs, a serving counter and a bakery case, and all of the miscellaneous things that go into a fully-outfitted coffee shop.
What kind of costs will you have to take into consideration?
How much your coffee shop costs is largely dependent on the kind of setup you are going to build.
For instance, if you are looking for a drive-through cafe, then it might cost somewhere from $80,000 to $200,000. Whereas, going for a walk-in coffee shop could require you to shell out anywhere from $80,000 to $275,000.
If you look at the difference between these approximates closely, you would also see that there is not a very big gap between building a drive-through, and a walk-in coffee shop. It’s because the equipment, which is the largest expense in a coffee shop, remains mostly the same in both setups.
The main difference in cost between a drive-through and walk-in cafe is your real estate, operating area, team size, as well as your furniture and fixtures. At the same time, it’s important to note that even these approximates could vary depending upon the size and location of your new coffee shop. Operating as a franchise could also affect these costs further.
Finding the best space for your coffeeshop
Real estate costs will likely be one of your larger expenses, especially at the startup of your coffee shop. If you decide to lease a space, you’ll be looking at the price of rent, money for a deposit, and other contract fees that have to be paid before you can move in and get started.
If you have decided you want to design everything – from the coffee shop name and interior to the exterior and all other parts of your coffee shop – then you should work with experts like an architect, builder, and financial consultant to figure out how much your dream building is going to cost you.
Finally, you can buy a pre-existing space. If this is the route you take, consider your mortgage payment and make note of any renovation costs that you might incur to get the space ready to house your coffee shop business.
Keep in mind that your monthly expense in this category should not be any higher than 15% of your profits averaged each month. Since you’ve likely already chosen your location, you can figure out a rough estimate of what your profits will be by taking the amount of traffic passing by your shop, counting on about 3-5% of people stopping, and then multiplying the amount of customers by an expected sales per customer amount that you think is reasonable.
Costs of re-configuring your space
It will take work to turn a blank-slate rental into a space that resembles a coffee shop, no matter what your decor you choose. You may have to pay for new light fixtures, cabinets, and decorations, as well as practical installations like coolers, freezers, and refrigerated display shelves.
Costs of POS software and hardware installation
Another expense you will find is linked to your transaction technology. Modern POS software for coffee shop will cost between $50 and $200 a month, while the accompanying hardware kit would also cost you $1,200 to $3,000 for a one-time payment.
That’s why we recommend using Poster’s software, which allows you to use any tablet at your disposal to boot-strap your business and to start selling for a minimal cost.
Cooking and coffee-making equipment costs
Equipment needs for any small business are subject to variations, but there’s one thing that’s certain: this isn’t the equipment you use for your morning cup of joe, and industrial coffee brewing and filtration equipment can get pricey. Here are a few pieces of equipment that no coffee shop can go without:
Water filtration system
Commercial coffee grinder and drip coffee maker
The hardest part of buying equipment for a coffee shop or other food and beverage businesses is deciding what you need and how much of it to buy.
When you add up the high-quality equipment it takes just to make your customers’ favorite drinks, it can total up to $10,000 or more. This highlights how expensive starting a coffee shop can be.
As a general rule, start slow and increase when your budget allows. Growing your business gradually instead of planning for unrealistic numbers enables you to manage the scale of your business even under the tightest of margins.
Finding suppliers and inventory for your coffee shop
In the food service industry, food and labor costs are referred to as prime costs. Prime costs, when taken as a percentage of total revenue, shouldn’t exceed 60 to 65 percent. Compared to restaurants and other food and beverage businesses, most coffee shops have it easier, especially if you don’t plan on serving a broad menu of food with your coffee drinks.
In most restaurants:
60 to 65 percent of prime costs go to labor
Food and beverage costs average 28 to 35 percent of total sales
Regular coffee drinks have an average margin of 15 to 20 percent, and specialty coffee drinks have an average margin of 12 to 18 percent
Given that you cannot just run your equipment without any ingredients, it is important to stock up on inventory while starting your own coffee shop. Thankfully, this particular expense is not hard to calculate, and you can easily adjust your stock according to the sales that you get in the first couple of months. This also includes costs for branded items such as coffee cups, sleeves, and napkins.
One of the most important expenses in inventory is obviously coffee beans. Some coffee shops choose to roast their own beans, for which they use industrial-grade coffee roasters. Whereas, others get their coffee beans pre-roasted. This has a direct effect on your monthly inventory as well as one-time equipment costs. Other important expenses on inventory include but are not limited to milk, sugar, cream, flavorings, syrups, and spices. Usually, the opening inventory for your coffee shop could cost somewhere from $5,000 to $10,000.
Legal and administrative costs
To legally run a coffee shop, A Certificate of Occupancy, and Food Service License are also needed. If you plan to serve alcohol as part of a coffee shop/bar concept which is becoming increasingly popular, you’ll need a liquor license as well. All of these permits carry application costs that vary between states, so make sure to include that in your cost breakdown.
Marketing and promotional costs
Starting your new coffee shop would go in vain if people don’t know that it even exists. That is why you would need to factor in marketing costs in order to reach out to your target market. This is also a big factor while assessing how much does it cost to start a coffee shop.
Whether you go with traditional marketing options or if you choose digital marketing as your go-to advertisement medium, you would still need to allocate a large chunk of your overall spend to marketing. This is crucial, since proper marketing is one of the great ways to reach out to potential customers during the first few weeks of your launch. Typically, a good marketing budget for a startup coffee shop should start from $5,000.
The total cost of opening your coffee shop
Initial costs can differ considerably depending on the venue, scale, and equipment specifications of the coffee shop. Here are some preliminary estimates:
A coffee shop that is sit-down usually costs $200,000 to $375,000 to set up.
A big drive-through shop will cost anywhere between $80,000 and $200,000.
A small kiosk could cost anywhere between $25,000 and $75,000.
A franchised sit-down coffee shop could cost as much as $673,700.