How to Start a Successful Coffee Shop.
Coffee can be very profitable – when done right.
Updated December 05, 2019
(Article republished from “The Balance Small Business” is part of the Dotdash publishing family.) Opening a coffee shop can be extremely profitable if you do it right. Pass by any busy specialty coffee shop and it will likely be full of customers enjoying coffee, espresso, lattes, teas, and a variety of pastries and other goodies. Serving quality coffees and snacks in a trendy, relaxing atmosphere is a hugely successful business model pioneered by Starbucks, which has grown to more than 31,000 coffeehouse locations around the world. If you love coffee and are looking for a business opportunity, this is your guide to starting a coffee shop and making it a success.
There are three basic options for starting a coffee shop:
- Purchasing a franchise, in which case most of the major business decisions will be made for you. For a franchise fee, you will be provided with a turnkey business in a location selected by the provider of the franchise.
- Buying an existing business. This is another way to acquire a turnkey operation. However, finding a profitable business for sale is not an easy task.
- Starting from scratch. This option requires the most effort but has the most flexibility and the best potential to maximize profits.
Whichever option you choose, the same fundamentals for success apply. Your business plan for starting a coffee shop should incorporate the following key factors.
Find a Good Location With Reasonable Rent
Before opening a coffee shop, understand why they’re so popular. First of all, coffee shops are great places to socialize. Statistics show that coffee shops are the most popular place to meet friends. They are also a preferred spot for individuals looking to pass the time reading a book or magazine or surfing the web while enjoying a beverage and snack.
Coffee shops are also a popular place for informal business meetings or for students to catch up on schoolwork. Walk into any popular coffee shop and, chances are, you will see a realtor reviewing listings with a client or a group of students collaborating on a school project.
Given the above, finding a great location is crucial for attracting customers when you’re opening a coffee shop. If you are franchising or buying an existing business, the location is preselected, but you should still do your research and decide whether the existing or selected location is a good one.
Location vs. Rent
Note that the most central locations are not necessarily the best for your bottom line. Malls and other high-traffic locations typically have the highest rents and the most competition. Storefronts are excellent locations for coffee shops—they have the highest visibility, the rents are usually lower than in malls, and you can set your own business hours instead of having them dictated for you.
Vehicle Traffic and Parking
Unless you do locate in a mall or other high-pedestrian traffic site, you’ll need to think carefully about accessibility and parking. If a customer has to make a difficult turn off a busy street to get to your establishment or they have trouble finding available parking, they are likely to take their business elsewhere. Ideally, you want a convenient, highly visible location on a busy street with plenty of parking so customers can easily drop in on their way to or from work or school.
With the popularity of cycling growing by leaps and bounds, having a secure lock-up rack for bikes is essential.
A coffee shop can become an overnight success with the right location. Find a spot near a busy crossroads with a lot of vehicle, pedestrian, and bicycle traffic and plenty of available parking, and you’ll be off to a good start.
Consistently Serve a High-Quality Product
When opening a coffee shop, consider that gourmet coffee and tea drinkers want more than a mug of ordinary joe or a teabag in a foam cup. According to a study by the National Coffee Association of America, in 2018, more than 60% of the coffee beverages sold were of the specialty variety, and that percentage has been on the rise since 2010.1
Given the demands of discriminating customers, there is little chance a coffee shop business will attract a regular clientele and thrive unless you can consistently serve the best regular and specialty coffees, teas, and snacks. Succeed in doing this and customers will choose you over the competition, even if you are not in a central location. This means you will need to:
- Source the finest fresh-roasted beans.
- Buy a high-quality espresso machine and related equipment such as grinders, water filtration systems, etc.
- Serve fresh pastries and snacks.
- Ensure you have a well-trained staff—a knowledgable, skilled barista is essential to the craft of coffee.
- Offer a mix of customer favorites (frappés, chai lattes, etc.) and your own unique creations.
Provide Great Customer Service
Excellent customer service is the hallmark of any successful business, especially in the food service industry. Combine a great location, top quality products, and great customer service and, chances are, you will have a very successful coffee shop.
Surveys show that four out of five customers rank customer service as very important. One of the secrets of Starbucks’ success is its professional and efficient service. It’s a model any coffee shop owner would do well to emulate.
Counter Service vs. Table Service
Most successful coffee shops utilize counter service. Having customers order and pay up front and calling them when their drinks and snacks are ready minimizes your labor costs and enables you to better handle busy periods such as breakfast and lunch.
Table service is generally slower, more labor-intensive, and better suited to restaurants where patrons order full meals and spend more time in the establishment. On the plus side, having table service does give more opportunity to upsell the customer with desserts or snacks.
Create a Trendy, Relaxing Atmosphere
Surveys have shown that most people believe atmosphere is one of the biggest attractions for a café. On top of its service model, Starbucks’ relaxing, cozy, and comfortable atmosphere is one of the major contributors to its success.
When opening a coffee shop, having the right atmosphere is key to attracting customers that like to hang out with friends or business associates and (hopefully) consume additional products. Go into any popular coffee shop on a weekday afternoon and, chances are, you will see groups of students doing their assignments (rather than in the school library or cafeteria).
The ideal atmosphere is clean and bright with plenty of natural light and comfortable seating space. Use a mix of seating and table types (such as bench tables) so you can accommodate single customers as well as groups of various sizes. Be sure to have plenty of lighting for evenings and dull days. Having an outdoor patio space is a huge attraction in season and greatly increases the visibility of your business.
Unless you are a design pro, consider using an experienced interior decorator to design the interior of your premises. You want that distinctive, personalized ambiance that will draw in customers and that involves all the design elements: layout, furniture, decorations, lighting, flooring, etc.
Offer a Variety of Snacks
Another key to success when planning how to start a coffee shop is to realize that, even though coffee and tea have a high markup (up to 80% on specialty coffees), a coffee shop cannot survive on coffee sales alone. Multiple sales are a must. Having an assortment of quality snacks on display at the counter will tempt the customer to make an additional purchase.
Popular items that go well with coffee and tea include:
- Cinnamon Buns
- Granola bars
- Yogurt cups and parfaits
- Cold drinks
Make sure your employees recommend a food choice to customers at checkout time if they are only ordering coffee or tea.
For efficiency, the food items should either be pre-made or purchased from vendors. Preparing made-to-order food (such as sandwiches, etc.) is time-consuming and reduces overall sales volume, particularly in busy periods. Baked goods can be sourced wholesale from local bakeries.
Offer Loyalty Cards
Assuming you are serving a great product in a good location, having a loyalty card program can be the icing on the cake for customers and really help you build up a clientele. Getting a free espresso or latte on a loyalty card after 10 prior purchases will put a smile on anyone’s face.
Loyalty cards improve your bottom line by:
- Encouraging regular customers to come in more often
- Improving the odds of an infrequent customer choosing your business over competitors
- Encouraging customers to spend more
Make sure to use good quality cards that have your business name and logo prominently displayed and won’t easily disintegrate from being in wallets or purses. Alternatively, nowadays many POS systems integrate loyalty programs automatically, giving customers one less thing to carry in their wallets.
Serve on the Front Line
As with any customer service-intensive business, when running a coffee shop, the owner should be present and fully engaged with the business as much as possible. For many customers, the sign of a good business is seeing the owner front and center taking orders, serving, and conversing with the public.
Having a hands-on presence also helps to motivate staff to perform at their best. This is especially important when you first start your coffee shop. If you are unable to be present, finding a good manager is essential.
To Wi-Fi or Not to Wi-Fi?
Most cafés offer free Wi-Fi as a convenience to customers who like to use their mobile devices in order to do business, schoolwork, or just web surf while having a coffee or snack. You’re not likely to find a large coffee chain that doesn’t provide free Wi-Fi for its customers.
However, a growing number of independent coffee shops are pulling the plug on free Wi-Fi or even banning laptops and tablets in an attempt to create a more communal atmosphere where people converse rather than immersing themselves in the internet.
For some people, walking into a coffee shop and seeing everyone typing on a laptop or tablet is a turnoff, and they tend to take their business elsewhere.
In some cases not having Wi-Fi has actually resulted in increased profits, since people using mobile devices may tend to spend more time but less money in the establishment. Some coffee shops have compromised by not allowing laptops and mobile devices during busy periods such as lunch hours.
Ultimately, whether you decide to have free Wi-Fi or not should be a business decision based on your customers’ wants and needs. After all, people will patronize your establishment if they feel they can enjoy themselves.
Choosing a business is totally a personal decision. You may find a lot of other possibilities, but coming up with some small business ideas that yield higher profits is little tricky. So, choose your passion from the above list and turn your dream into reality.