Last Updated on November 7, 2021 by John Moretti
For first-timers, owning a business can be overwhelming and challenging. You will experience a few ups and downs, but it can also be super rewarding.
The coffee culture is extremely popular not only to younger generations but also to older age groups. This culture is the reason why a coffee shop is a great business to venture into. Aside from the increasing number of coffee consumers across the globe, the growing coffee shop market can help you earn a high profit.
But this doesn’t mean that starting your own coffee shop business is as easy as it sounds. There are various factors to consider, and understanding the industry is essential to your success.
Pros and Cons Of Owning A Coffee Shop
Starting a business is not an instant decision, and having doubts is certainly a common feeling. You probably have to weigh the advantages and disadvantages to help you decide the best way to move forward.
Coffee Shop Business Pros
1. Solid Profit Margin
This is the first thing that will come to mind when thinking about business; profitability and profit margin. All of this will depend on how you run your business. Looking at the price customers are willing to pay for a single cup of coffee and the relatively low cost of the product, you are most likely to earn a solid profit by marking up the drinks.
If you want to compete with more prominent coffee companies, you can offer low price coffee drinks without sacrificing the quality to turn first-time customers into regulars.
Having good business skills will help you increase your profit margin by at least 60 – 80%. So put in as much time building your business, track the costs your business will acquire, market it well, and keep up with your sales volume.
Being the boss doesn’t mean you can get away from working in your coffee shop and staying all day and night to tend to your customers. Of course, part of the business’ success will start with you.
Flexibility with your time means that you can be in control of how you will spend your days between work and personal life because having a balanced life is still important. Some owners prefer to spend a lot of time in the store, especially in the beginning, to learn about the customers and how the business operates. Some prefer to pop in when it’s only necessary.
Being on your own time can be handy if you have necessary errands to run or when there is an emergency. But as an owner, you shouldn’t be too complacent that your business will have to suffer. As an owner, you will still have to be responsible and pick up the slack when an employee has to call in sick or doesn’t show up.
3. Coffee Is Always In Season
Coffee is here to stay. No matter the season, coffee will always remain a popular drink for everyone. Aside from that, the coffee plant is available year-round, so you won’t really have to worry about being out of stock.
Even without other flavored coffees such as Frappuccino or other trends like nitro cold brew, you will still get customers lining up for just plain old coffee. Research from the National Coffee Association (NCA) showed that average American coffee drinks consumers 3 cups per day, and 7 in 10 drink coffee weekly, and 62% consumed this beverage daily.
So, regardless of the growing number of coffee shops popping up, there will always be a demand for it.
4. Building A Community
The community of coffee drinkers is massive, and if you don’t believe it, World Barista Championship (WBC) exists, and it is a competition that focuses on endorsing excellence in coffee. Fifty baristas are competing yearly, and they are tasked to prepare espressos, milk drinks, and their original signature drinks.
The experience of having a cup of coffee with others is great, and it is what brings people together. If you are a business owner who thinks of making a profit and building a community, a coffee shop is a good business to undertake.
A coffee shop can be a safe space for people who seek it, and it’s also a place where people can socialize, which is an important marketing factor showcasing inclusivity and solidarity, where customers will feel welcomed.
Coffee Shop Business Cons
1. Fierce Competition
As mentioned, the number of independent or franchised coffee shops is growing, so the competition is fierce. In the United States alone, every street corner has a place to buy a coffee. So between the coffee chains, diners, independent coffee shops, and convenience stores, there could be either a handful or hundreds of options for a single cup.
So if you’re planning to start your own coffee shop, you have to be prepared and focus on what you can do to set your business apart. It can be a special drink, a unique menu, or a promotion. You should ask yourself, what would be the best way to earn repeat customers?
2. It’s An Expensive Enterprise
Money will always be the main contributing factor in why many people don’t follow their dreams, such as opening up a coffee shop.
Franchising a coffee shop can cost at least $670,000, and starting this business from scratch can require money for as much as $400,000. One of the high costs is the equipment you need to run a coffee shop; an excellent commercial-grade coffee machine can already cost you $13,000. And if you need more than one, the costs can add up quickly.
A coffee shop is not a cheap undertaking, and not only do you need money to build it up from scratch, hire staff and get the right equipment, you also have to think of keeping your finances stable until the business becomes profitable.
3. Possibility Of Failure
Even with the best business plan, there is still that possibility of failure. As a responsible owner, this should be something one is willing to risk.
A failing business can affect many things, including your mental and financial well-being, so ensure that you are ready for all the consequences of running a business.
If the business fails, it doesn’t mean that you can’t bring it back up. Assessing why the company fails is necessary, so there will be no repeating of the same mistakes.
4. Issues With Employment
Are you hiring the right person? Can you provide the proper training required to be a good customer service employee? These are just a few issues that come with owning a business.
Also, part of being the owner is the disadvantage of letting employees go. It is a heavyweight to have on one’s shoulder, so ensure that you are capable of making such decisions as an owner.
Having a backup plan is essential if an employee gets sick or decides to quit. These are some of the unexpected things that can happen.
5. Time Consuming
Yes, you can have flexibility with your time, especially if you are the boss. But, when you are just starting, it can be time-consuming. From writing a business plan to making sure it all fits together, meetings at the bank or with investors, location hunting, interviews, and many other tasks will take up a lot of your time.
There are also some additional paperwork, taxes, and a whole other demanding tasks that continue even after the business is built. So keep in mind that launching a coffee shop business will take time.
Are Coffee Shops Considered A Good Business?
The profit margin for a single cup of coffee is large. But it’s still going to be a numbers game. To earn a lot of money, you have to sell a lot of cups.
Yes, major coffee chains are dominating the coffee industry today, like Starbucks Coffee, The Coffee Bean and Tea Leaf, Tim Hortons, Dunkin Donuts, or Caribou Coffee. But this shouldn’t stop one from independently owning or franchising a coffee shop to make a good profit.
A coffee shop is considered a good business. However, to increase your chances of success, you have to consider different factors such as:
- Are you located in an area where there is a demand for coffee and other specialty drinks?
- Are you able to acquire and train people to be good baristas?
- Can you afford the right equipment?
- Do you have access to unique coffee flavors?
- Are you able to get a reasonable rent for your space?
So what are some excellent tips to be successful when running a coffee shop?
Tips To Run A Successful Coffee Shop
Starting a business that relies on coffee culture is a good decision, seeing as this industry is gaining more and more popularity. Each situation is different, and it’s necessary to assess it before launching any business.
Now that we’ve discussed the pros and cons of a coffee shop, let’s look at some helpful tips to help with your planning and preparation.
Tip # 1. Develop A Good Business Plan
What is a business without a business plan?
Before diving into a more detailed and long-form plan, one thing you should create is a one-page pitch to quickly validate your business idea, your target market, and your unique selling point. What will you offer? Will you include pastries on the menu?
Once you’ve developed this successfully, the long-form plan should include more details about the new business, such as who you are as a business, competitors, milestones, revenue projections, and demographics.
Tip # 2. Visit Your Favorite Coffee Shop
This is an alternative to working at a coffee shop for at least a few months. If you don’t have the time, the least you can do is make frequent visits to your favorite coffee shop or any other local cafés in your area.
During your visits, take note of how the business operates, not just from the owner’s perspective but also as a customer. Observe the process, the staff’s activity, and how the customers engage with the business to help you get an inkling of how you want your business to work.
Tip # 3. Explore Different Coffee Variations
The product is the most important part of your business. When you visit coffee shops, try out different coffee flavors so you’ll get an insight into how customers consume their beverage.
This could give you a hint of what you can offer to customers and what unique flavor would differentiate you from the rest of the competitors.
Tip # 4. Finding The Right Location
Finding the right location will make or break your business, and it won’t be easy.
Coffee shops are a good place to socialize, and you’re most likely to see informal business meetings taking place in a coffee shop or college students catching up on their schoolwork. If they are the target market, look for a convenient location that will draw these customers, such as in the center of the city.
In addition to a suitable location are the amenities that come with it, such as accessibility and parking. Customers want convenience at all times, and if they are having difficulties finding a parking spot just to get to your establishment, there is a possibility that they will just find another option.
The Bottom Line
Investing in a coffee shop is a wise decision, with coffee consumption on the rise. Not everyone can run a café business without any knowledge of coffee. Most coffee shop owners pride themselves on their understanding of the industry, so before deciding on undertaking this venture, ensure that you have a good understanding of all things coffee.
Keep in mind that starting a business is not an easy task. Planning and making money will take time, and for the coffee shop business, competition is tough. Still, with the right motivation and determination, you’ll be able to overcome the difficulties and reap the benefits in the long run.