Last Updated on November 7, 2021 by John Moretti
You really, really love coffee! So much so that you are seriously taking your passion for the bean and turning it into a business! You’ve been in coffee shops, and you now believe that you can open your coffee shop and make a success of it.
Opening a successful coffee shop requires some planning and strategy, and here are the ten elements you need to excel at to make it a success.
- Business plan
- Floor plan
- The Coffee
- Quality Equipment
- Exterior Design
- Customer Experience
Taking an in-depth look at each of these elements will give you an excellent overview of why these are all essential for the success of your Java joint!
The Business Of Coffee
Before we get into the actual nuts and bolts of your business, let’s look at the coffee business in the US and see the potential for success and profits for your shop.
The coffee shop business in the US has an annual revenue of more than $30 BILLION, and the global industry is projected to grow by a staggering 67% in 2022 in the ready-to-drink market.
Now, who in their right mind doesn’t want a piece of that action, especially if you are passionate about your coffee.
And if that wasn’t good news enough, the gross profit margins on coffee shops can be as high as 85%, and while the success of the business in the US seems optimistic, there are some aspects of this business that can be challenging if not done correctly from the outset.
But, let’s focus on the good news! There is great demand for coffee, which is growing annually, so more than enough business to go around. So, how do you make sure your venture will succeed?
Coffee Shop – The Business Options
Before we get into the ten best tips for a successful coffee shop, you need to consider what type of business you will create. With the proliferation of franchised stores and existing businesses, you have some options to consider.
Buying A Franchise
This could be an option where you need business support and a successfully established brand backing to give you traction straight off the bat. Taking on a franchise also has most of the significant business decisions done for you and is provided with a location and a turnkey solution.
While there are franchise fees involved, this could be a great option if you are new to business or the coffee shop business, as many of the central business aspects are taken care of for you.
Staff recruitment and training, Point Of Sale systems, the coffee blend itself, food items, menu, branding, and marketing are all included with the franchise agreements, and having this in place takes a large chunk of time out of the equation.
With franchising, you will often network with business owners that manage and run successful coffee shops already. Even if your ultimate goal is to have your unique one, the experience gained in a franchise may well be worth the wait.
Buy An Existing Coffee Shop Business
Another option is to buy out or buy into an existing business. This would require some due diligence and financial analysis of the current company and the projections for revenue in the coming years.
The tricky part of this option is finding a viable and suitable business with solid prospects for success, a good location, a good customer experience level, good staff, and growth opportunities.
But, a business that may be closing down may also offer a superb opportunity to grab much of the capital equipment, staff, and location for yourself and then simply rebrand and re-mold it to your design and standard.
Starting Your Coffee Shop From Scratch
While the two options above may appeal to some, you may feel that you want to create something entirely new with your unique spin and flavor on it. While this option may not have the stability of a franchise or existing business, it does have some exciting benefits not found in franchises or existing shops.
Opening your new store from the ground up gives you flexibility in the creative aspects of your business, and logos, colors, and branding can be done precisely as you have envisioned it.
Not only that, but you won’t be butting heads with previous owners or franchise managers on day-to-day decisions.
So, if this is the way to go, then let’s brew up the ten top tips you need to make your coffee shop a raging success.
1. Create A Business Plan
This is one of the fundamental steps of starting any business and is also a vital component when looking at funding, which we will discuss later.
The business plans define all the business parameters and outline steps, processes, and details to create and launch your coffee shop.
The business plan will identify your unique selling points, the type of coffee and the options available, projected turnover, and profit margins required to start-up capital, as well as your customer target market.
It will also plan out the steps and time frames involved from concept to launch, the branding ideas, colors and logo concepts, décor, and even the music. The business plan can also include additional amenities such as wifi and USB charging ports and some of your creative ideas on marketing, promotions, and the launch event.
On the financial side, the business plan would include all the cost elements from your cups and mugs to food menus, other drinks like milkshakes, and whether you would offer alcoholic beverages or not.
There is a well-known quote that goes,” If you fail to plan, plan to fail.”
The business plan will address the three critical points of finance, marketing, and operations. It should give a potential lender or investor a clear and structured view of the business strategy.
Remember that business plans are flexible and can be changed or amended as new ideas arise, so this is not set in stone but is instead a road map that can have a few detours on the way.
Hire An Accountant
Having someone solely focused on the business numbers is a critical aspect of running the financial side of your business. If you are not skilled in this field, or you find yourself simply not having the time to do it as you are focused on operations, you need to have an accountant in place.
They will give you proper feedback on the business’s financial health, and an experienced accountant can often advise and structure the financial aspects of the business plan to make it more appealing when looking for funding.
2. Choose A Great Location
The adage ‘Location, Location, Location is a fundamental pillar of business for real estate and coffee shops! Without a great location, your unique coffee shop may be doomed to fail.
The location you choose will be determined by the type of target market you are aiming at. For example, if your target market is everyday workers, you need a location with a lot of those customers moving through or past it every day.
If your market is students, having a location close to libraries or colleges is ideal.
Another aspect to consider is accessibility, as you don’t want a location that is difficult to access or not centralized. If you can find a developing place where you could anchor yourself as the only coffee shop – then that is the jackpot.
Suppose your location has a tourist business that increases over the festive season and holiday periods. In that case, that is a bonus for you as you can then rely on the higher turnover during those seasons, and that extra cash can be used to reduce capital debt or invest back in the business.
A final word on location, don’t pick a location where you have many competitors. This will make your ability to capture new customers more difficult than if there were only one or two or no other coffee shops in the area.
Before choosing your location, it’s advisable to spend some time around the area and feel for the potential site. If you are going to be open into the evening, then spend some time in the area at night.
Finding the right location may take some time, but it is worth every second in the long run as a fantastic location is 50% of the battle won!
Location Rental Balanced With Traffic
While the location may be excellent, you may find that prime real estate comes at a price, and you need to be clear about what you can and cannot afford based on the business plan cash flow projections.
Choosing a location where the rental is too high will put severe pressure on your shop to generate consistent turnover, and if there are quiet months, you need to be sure you have enough cash reserves to pay the rent.
If your rent is going to take a big bite out of your cash flow, it may not be the right location for you as you need to balance the cost of the site with the revenue it could offer from the traffic around it.
3. Build Your Floor Plan
The floor plan of your coffee shop is an essential aspect as it will determine how people and products flow through your store. You need to be sure that where people will be queueing that there is enough space for them.
The floor plan will lay out the storage and access to materials for your staff and the seating plan for tables and lounge area and the spaces in between to allow walking space and serving access.
The floor plan also lays out the kitchen design and serving counters and the details of the fridges, the actual coffee machine(s), the serving counter placements, and the cake fridges or cabinets.
In essence, the floor plan is the store blueprint, and like finding the location, it will take some time to develop a proper floor plan. It’s not all bad news, as numerous online sites offer free floor plans for coffee shops, and that could be a great place to start without costing anything.
4. Find Your Start-Up Funding
One of the biggest challenges with starting up a new coffee shop is sourcing funding for the venture. Remember that most new businesses won’t start to see any profit for at least the first six months after launch.
When starting, you may want to look at your financial status, determine how much you could invest in the business, and then look to other sources for the balance.
Talk to Family And Friends
This is where your solid business plan comes into play. If it is viable and the numbers have been concisely put together, you may well be able to find family or friends willing to get involved.
If you manage to get funding from family or friends, always ensure the agreements are done in writing with the terms of repayment and interest clearly defined and agreed to by all parties.
You don’t want a sudden shock later down the line when your investor decides they want the majority share or there is a dispute on who owns what. It can get messy quickly, so it’s essential to have any personal loan agreements with family or friends in writing.
Other Sources For Start-Up Capital
Depending on your city, you may find there are funding options available for new ventures. Local loans or business-assisted programs sponsored by the city can often be a godsend for start-up businesses.
While some lenders may require your business to be operational already to consider your funding request, doing some research into available business loan options would be time well spent.
Bear in mind that starting a coffee shop could cost between $80 000 and $300 000 depending on the type of shop you want. A small drive-through type kiosk would cost a lot less than an entire sit-down store with food and snacks.
5. Find Great Coffee
The very core of your business is coffee. So you need to find an incredible bean that tastes great and that you love. You can’t be passionate about your business if you don’t like the coffee!
One of the significant aspects of this business is that there are a rising number of coffee roasters. This bodes well for finding a local supplier that provides a great bean or variety of beans and is reliable and trustworthy.
Being able to offer a variety of high-quality coffee beans for your customers gives you variety and versatility to suit the different taste profiles of your client base.
Supporting local coffee roasters will enamor your customers when they see you are promoting other local businesses, and they would be more inclined to support you in return.
Here are the best coffee roasters in some of the major cities in the USA:
6. Branding Your Store
Next to your operational and marketing, branding is one of the most critical aspects of your coffee shop business. Outside of the logo, branding also addresses the color and design of your décor and the branding of takeaway cups and staff uniforms.
Your shop logo is the real face of your business and spending time and money getting one done reflects both yourself, the shop’s core values, and coffee cannot be understated. You also need to consider business growth’s medium and long-term impact when it comes to your logo.
Having an easily identifiable logo associates your brand with the shop and the customer experience you want to provide.
7. Invest In High-Quality Products
Nothing says commitment in a business like a coffee shop than seeing high-quality equipment inside. Look for the best coffee machines as not only do they convey that sense of premium experience, but they also ensure that the coffee itself is prepared and brewed correctly.
Having world-class brands in your store conveys the sense of an up-market coffee experience, which should be reflected in every aspect of your store, from the couches and tables to the chairs, cutlery, cups, and décor.
While this may not be the lowest cost option, go large and don’t hold back on investing in sound quality systems and machines if you are going to go.
Offer A Good Quality Variety Of Products & Trends
One of the critical elements to your success is to have a good variety of snacks, drinks, and coffees for your clients.
Over the years, the rise of specialty coffees and blends has given coffee shop owners an excellent opportunity to attract new clients by offering such products.
This even allows you to create your unique blends and drinks by networking with local suppliers and researching the emerging trends in the industry.
8. Create A Marketing Plan
Marketing your shop will be the single most crucial element in your business from now on outside of the customer experience. This needs to be done BEFORE you open because if you only have your marketing plan when you’re open, you’re going to behind the game before you even get going!
The marketing plan should be developed well in advance so that you can start promoting and creating awareness around your business at least six months before you open.
There are some innovative ways you can leverage local businesses to help you market your product. One of those is to exchange coffee with companies around you in exchange for on-site advertising.
Social media is another way to get great exposure, and if you aren’t great at social media, ask your kids to help you! Using Instagram to post some pleasing pics of your store or people enjoying your coffee is a low-cost option, and TikTok can be utilized to do walk-through videos and other content.
Giveaways and competitions on social media can build a local following quickly and cheaply as well.
Another great way to create awareness is to get involved in local events for business or community and bring coffee! Everyone loves free coffee, and bringing your special brew and interacting with people in your area creates both goodwill and a sense of reciprocity.
Simply put, participating with local people and businesses and giving them something creates a sense that they need to reciprocate by supporting you in your industry.
This is also a scientifically proven concept in marketing and forms part of Dr. Robert Cialdini’s Principles Of Persuasion, which is almost required reading for most marketing executives.
You can also do small-scale email or direct mail campaigns to residents and businesses and use discount coupons to create interest and attention. Finally, call everyone in the local media and tell them about your shop and invite them around.
9. Invest In Exterior Design
There may be a trend to spend a lot of time and money on the interior of your shop, which is essential, but the outside is equally important, and a well-designed and conceived shopfront can work wonders with passers-by and intrigue them enough to step inside.
Signage, lighting, paint color, landscaping, windows, doors, and exterior décor all have a visual impact on your customers. If your goal is to create a specific style of a coffee shop, then your exterior has to convey that, and the interior has to solidify it.
Many people will decide based on the shop’s look whether to come in or not and having a uniquely styled appearance also creates interest and a’ buzz’ in the community, which can bring people into your store.
10. Craft The Customer Experience
This is probably the essential element as all of the factors above culminate in the actual store experience, so let’s look at some of the critical aspects you need to have.
Properly trained, knowledgeable, and enthusiastic staff
Your staff can make or break a business, and this is why you need to hire with care and slowly. This is a process that should begin anywhere from 6 months before you open so you can be sure that your staff is excited and energized, and ready to deal with your customers.
A smile is a people-orientated business that goes a long way, and creating a positive environment for your staff will reap incredible rewards as they connect with customers and learn what they like and how they like to be served.
People’s connection with staff in coffee shops and any business is the lifeblood because people don’t buy from brands; they believe from people. If you are going to offer table service, then make sure your staff is adequately trained.
Counter and collect services optimize time and reduce labor costs, but the service must be efficient and effective to provide a high-quality customer experience.
While you will need people to help man the till, counter, and tables, don’t rush out and hire – start slowly and rope in friends or family to begin with and then gradually acquire staff that will become assets.
Set Your Bar High
Don’t be afraid to set and enforce high standards in your business, from the quality of the coffee and food to the performance of your staff. The quality of your customer experience will determine whether you achieve marketing gold, the word-of-mouth referral.
Of course, with social media that can be done a lot easier, poor customer experience can result in disaster.
Offer Loyalty Programs
Many people these days almost expect loyalty programs from businesses, and yours should be no different. Providing incentives for ongoing support is a proven positive for customer retention and a positive customer experience.
Be Engaged In The Business
As the owner, you are the real energy and driving force behind your shop, and as such, you need to be in the front line. Whether greeting customers and introducing yourself as the owner or being behind the bar serving coffee and snacks, you need to be involved.
Sitting in your office while everyone else runs your business for you may be good if you are an accountant. Still, in a people business like coffee- you need to be visible as this creates the relationship between you and your customers and your staff!
The Bottom Line
Well, there you have it, ten great tips to open a successful coffee shop! Now it’s time to take your passion and turn it into the shop you have been dreaming about. Coffee is all about love, and if you genuinely have a passion for the bean, then nothing can stop you!