It’s no secret that starting a business from scratch isn’t easy. If your goal is to open and run a coffee shop business, that’s awesome and it makes sense. After all, coffee shops are the fastest growing businesses in the restaurant industry, reaching numbers of up to 7% growth per year.

But as you can imagine, there’s a lot of planning, development, strategy, and hard work that is involved in opening a coffee shop and these factors equate to start-up costs.

How Much Capital Do You Need to Open a Coffee Shop?

So how much does it cost?

Before we get to the actual numbers, just as a side note if you get discouraged by these figures, keep in mind that startup capital is available to small business owners who have a good business plan.

That being said…

Opening a coffee shop can cost anywhere from $80,000 to $250,000. 

This is according to both Investopedia and The Crimson Cup.

Keep in mind that this estimate includes fixed, variable, and one-time startup costs that are explained below.

How Much Capital Do You Need to Open a Coffee Shop?

Fixed Costs

Rent

When it comes to fixed costs, your most expensive cost will almost certainly be your rent—how much you must pay per month to open and run a coffee shop at a certain location. If you want to learn about the different types of locations you can rent and the pros and cons of each, feel free to check out our other post “Coffee Shop Business Tips for Newbies”.

The reason rent is so expensive is because you are usually charged a certain amount per square foot of property you’re renting. For instance, many malls in America usually charge a range of $18 to $30 dollars per square foot, and this price only goes up around popular department stores. According to Peerspace, some estimates have rent as high as $15,000 to $30,000 per month at popular malls. At areas that don’t have as much customer traffic you can expect the cost to be a good amount lower, but this could hinder your sales as your business won’t receive as much exposure.

It’s important to note that it may take 2-4 months to get the business rolling so you want to have enough money in your startup fund to cover that amount.

Workers

The number of workers you have and how you organize their shifts will play a large part in how expensive this cost is for you. In that sense it can be considered a variable cost as it varies from business to business, but for your specific business you should consider this a fixed cost that you must be able to pay month per month.

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How to Start a Coffee Shop Tip 1

If you’re unsure how much you should pay your employees a good guiding light would be to consider that Starbucks pays their employees an average of $12 per hour.

According to the Crimson Cup a general rule of thumb is that your payroll cost, which includes wages, benefits, workers compensation, and cost of payroll processing should be less than or equal to 35 percent of sales.

Maintenance of Equipment

You can’t serve great coffee if your equipment is dirty or in dire need of repair. Most of the equipment you’ll need such as an espresso machine will have a lifespan of around 5-10 years (as long as you take good care of them). Its important to clean your equipment every day to ensure high quality coffee and prevent bacteria from growing.

This cost of this is somewhat negligible as you can simply get your employees to do this for you and it will just factor into their pay as an extra hour or so of work.

However,

It is extremely important that you replace some of the small parts to certain machines every few months to prevent having to deal with corrective maintenance that could result in your entire shop being closed for a period of time due to repairs. It’s estimated that this should come out to a couple hundred dollars every few months. And while it is small, it is still important to note.

Variable Costs

Cost of the ingredients and other materials

Our first variable cost is the cost of your ingredients. These costs vary based on the types of products served and the amount that goes into each drink, so they tend to be hard to predict on an overall basis. One of the most significant costs when it comes to the ingredients tends to be milk which is used in high quantities when it comes to espresso-based drinks.

Cups, lids, sleeves, and utensils add additional costs to this section and are also difficult to predict on a fixed basis.

How Much Capital Do You Need to Open a Coffee Shop?

One-time Startup Costs

Production Equipment

This is where things get pricey. Thankfully, they’re one-time costs that can be looked at as investments into the business that will be made back. There is quite a lot of equipment needed so we’ll hit the key ones that every coffee shop owner must have.

High Quality Drip Coffee Maker

**Don’t be frugal on this purchase** A coffee maker can make or break your coffee’s taste and quality, regardless of the quality of your beans. Depending on your expected sales you’ll most likely want to buy multiple coffee makers. That said, including the additional costs of pots or carafes to keep the coffee fresh, a coffee maker can be anywhere from $500 to $2500 a piece.

Coffee Grinder

To keep the freshness and flavor, coffee is usually stored as beans. Once those beans are grinded, however, the life of that freshness will start to tick away. The quality of a coffee grinder plays a large role on the taste and savor of your coffee. Therefore, investing in a high-quality grinder for $1000 to $3000 will make sure that your shop is running on freshly grinded beans during all hours of the day.

Refrigerator

This one is pretty self-explanatory. At the minimum you need a refrigerator to store dairy products, and if you want to serve other goods or more intricate beverages you need both a refrigerator and freezer to store ingredients. Depending on the size of the, you can get both of these for $500 to $3000.

Espresso Machine

As Start My Coffee Shop put it best, espresso machines “are the most feared element of starting a coffee shop, as the price can run pretty high”. They come in a variety of styles (manual, semi-automatic, automatic, and super-automatic) and have a price range of $2,000 to $25,000, respectively.

The higher quality machines allow you to free up more hands by having the ability to steam milk simultaneously and increase service speed. This allows you to sell more, faster. Thus, you should truly look at buying a high-end espresso machine as a necessary investment for your business.

Other Food Prep Tools

Equipment such as ovens, microwaves, toasters, and more will be needed if you plan to sell other goods such as bagels, muffins, croissants, etc. at your shop. This can cost you as little as $1,000 to $2,000 or far more depending on how much you want to push your customers to buy food rather than just coffee.

Other Equipment

In addition to needing all of the above, you also absolutely need furniture such as tables, chairs, and restaurant display cases to fill your restaurant. The space you rent will be unique to you, so it is important that utilize it the fullest. Some furniture you should consider for your shop (in addition to what we have above) include:

      • Décor or wall hangings
      • Floor lamps and ceiling lights
      • A bar area and end tables
      • Other types of seating (couches, lounge chairs, or stools)

Utilizing your space is not an easy task, so it might be in your best interest to invest in an interior designer who can help you with this. In total, furnishing your coffee shop with the help of an interior designer could cost you around $3,000 to $10,000.

Need some more information on equipment for your coffee shop? This quick read is sure to help you out.

How Much Capital Do You Need to Open a Coffee Shop?

Related Questions

How do I rent a coffee shop at a mall?

Renting a coffee shop, or any shop for that matter, in the mall can be quite challenging. The best way, though time-consuming, would be to scour the internet for opportunities to lease a shop at a mall that’s near you. While you can do this completely on your own, there are websites that offer these services for you and bring the malls to you. Such websites include Peerspace or Storefront.

As mentioned before, renting a shop in the mall can be expensive but it comes with great opportunities. The most important thing to consider is to make sure that you are able to meet your bottom line while renting a space at a mall.

Should I hire an accountant to help me?

Like any business there will always be legal and administrative fees that you will incur when starting up. An accountant and an attorney can help with registering a business with the state and also filing for the correct licenses, but this can cost around $1,000 to $5,000. You can also file and register on your own, but this could take longer than doing so with an attorney.

 

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Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.

Sources

“Coffee Shop Cost Breakdown.” Start My Coffee Shop, 12 Oct. 2019, startmycoffeeshop.com/coffee-       shop-cost-breakdown/.

“How Much Does It Cost to Open a Coffee Shop?: How To Start A Coffee Shop: Crimson Cup                                Coffee.” Crimson Cup Coffee How Much Does It Cost to Open a Coffee Shop Comments,           www.crimsoncup.com/coffee/how-much-does-it-cost-to-open-a-coffee-shop.

Peerspace on June 17, 2019. “How Much Does It Cost to Rent a Store in the Mall?” Peerspace, 10 Feb.    2020, www.peerspace.com/resources/rent-store-mall/.