One of the main drivers behind opening up nearly any business of your own is profit. Of course, being your own boss and setting your own schedule are great perks too. Money-making potential will make or break you as an entrepreneur, especially in the coffee shop industry. The coffee industry is easy to break into, but keep in mind that while you can make a good living at it, it’s not likely you’re going to become wealthy. Be realistic in your expectations.
Let’s answer this then. How much income can I make as a coffee shop owner? Most coffee shop owners will make anywhere from around $60,000 to $160,000 in personal income. That number depends on a lot of factors, but that range is where most owners of shops in the coffee industry will find their salaries.
Now, take a look at the following points in order to figure out how different factors affect how much you can make as a coffee shop owner.
- How statistics prove that there is plenty of opportunity in the coffee shop industry.
- Analyzing main revenue factors.
- Barriers to procuring revenue.
- The types of coffee shops you can open.
- The general cost for a coffee shop startup.
- An equation you can use to project income.
- The best location to start a coffee shop business.
This article will help you not only see how much you could potentially make as a coffee shop owner but will also cover all the things that go into the costs and how to increase profits for running a successful coffee shop.
Statistics say that 90% of Americans drink caffeine every day, while more than half of those folks are drinking 300 milligrams or more a day. If you’re interested in finding out how much income you can make as a coffee shop owner, then you’re in the right place. With over 200 million people consuming coffee every day, it seems to be a lucrative opportunity.
The coffee shop industry is a great example of how you can make great profit by owning your own company. Ask 10 of your friends if they drink coffee to start their days and see who says yes. My guess is 9 out of 10 of them say that they do. Many people see how much they can make and go running forward without going through and planning some very necessary parts of the process.
This Isn’t For Everyone
Now I wouldn’t want you reading this article thinking that just because you open up a coffee shop you’ll be rolling in the dough. This venture isn’t for everyone and not everyone succeeds, but there are different articles for that. Note that part of the income your shop makes will automatically need to go back into the shop itself for inventory and unexpected repairs.
It’s smart to meet with a bookkeeper to help you decide if you’d like the profits to go directly into a bank account or if you’d like to take a salary. Another thing to keep in mind is, though the money can sound great, you could be earning $120,000 a year but what will it cost you in terms of your personal life? Will you need to be at the shop every day? Do you have a family that you’d like to spend time with or is owning a coffee shop the only thing in your life right now? Weigh the pros and cons and understand there are ways of being a successful business owner and having a fulfilling personal life.
To help you discover what you specifically will earn as a coffee shop owner, there are several factors that you’ll need to consider. Your salary will depend on variables like taxes, operational costs, startup costs, labor, providing healthcare, etc. Having a detailed budget set in place will help you dramatically in the long run. Money can be a scary and intimidating subject but as a coffee shop owner, it is something you’ll need to face honestly with yourself and your investors. Be careful not to bite off more than you can chew as the saying goes.
Main Revenue Factors
Your coffee shop revenue is based on two main elements: your average receipt totals and your number of sales. Part of the job owning the shop will be to make sure both of these numbers are always increasing and at the bare minimum, that they’re steady. Your number of sales is simply the number of customer transactions you had that day. The more people walking through those doors usually means a higher number of sales. Each receipt is one transaction, no matter if more than one item is purchased at a time.
So this takes us to the other factor to your income: receipt totals. This is pretty self-explanatory, but just in case, this means the total amount spent by a customer on their receipt. This can be a pretty wide range depending on what they buy. Some folks just want an espresso which you can roughly guess is $2.50-$3, while another person could come in and want whole beans to take home, a latte for the road and a snack to hold them over which could lead to a total of $20-$30 spent. To get your average ticket price, take your total sales for the day and divide it by the number of transactions.
Increasing Receipt Totals
A way to make more money in this department is by charging more on the menu for items. This can be done simply by adding charges for extra syrups, non-dairy milk substitutes and of course, extra shots of espresso. You can also suggest up-selling to your baristas. For example, Monday morning rolls around and everyone is feeling extra tired at the beginning of the week. Have your baristas ask guests if they’d like an extra shot to “get them through the day.” You’ll be surprised at how many people say yes. I would exercise caution with this tactic as it can become irritating to guests if you’re always trying to get them to spend more money.
You’ll notice several things increase or decrease revenue but the main three are holidays, weather, and competition. Let’s go into a bit more detail about each of these.
You’ll find your number of sales might decrease quite a bit on holidays when people are out of town or spending the day with loved ones. A couple of ways to avoid losing money on those days are having sales beforehand and promotions. Having a sale might sound like you’re losing money, but if you have a sale for holiday-themed drinks during one of the weeks before the holiday, you could potentially make up for lost wages. The second suggestion is to close early on the day of the holiday. No one wants to work holidays, not even your phenomenal crew. If you remain open for the morning rush and close around lunchtime, you’ll still make money that day, your staff can enjoy the holiday, and you’ll save money by not having to pay staff, use inventory or have the lights and appliances running all day and night.
Weather is a bit more out of your control, but this doesn’t necessarily mean you still have to lose a ton of money. As strange as it seems, I’ve found really hot days are the slowest but again, this would depend on your location. What I’m suggesting to you is during those “extreme” weather days where it gets very hot or bitter cold is to promote drinks and pastries if you have them accordingly.
On hot days, promote a refreshing iced tea or a frothy nitro cold brew. On cold days a spicy chai latte or hand-made hot cocoa will warm you right up. The way marketing can save (or cost) you money is essential. It’s a simple tip to keep in mind on those days where you see fewer customers coming in your door. Also if you know you’ll have more extreme weather ahead of time, you can always use things like your website and social media to let customers know you’re having a sale or promoting specific items for those brave enough to stop in during those very hot or bitterly cold days.
Competition is not something you should be afraid of. Healthy competition is good for you and your business. One of the things that kills a lot of businesses in many different industries is complacency. As long as you continue to respond to the pressure put on your coffee shop from nearby competitors, you should do just fine.
When there is an absence of competition, business owners can get lazy. They’ll stop trying to keep things interesting because they don’t see the need. That’s dangerous for any business. Coffee shops that don’t evolve and change with the times and trends of the industry are almost certain to fail. Customers can easily get bored and start looking elsewhere for something to spark their interests again.
As an owner of a coffee shop, you need to keep up-to-date with what your competitors are offering, as well as, making sure you know what’s hot in the world of coffee lovers at all times. Don’t just offer what you think is great. Give customers what they want and don’t be afraid to try something new with your menu.
Types of Coffee Shops
Have you ever heard the phrase, “It takes money to make money?” Well, it’s true. You can’t start a coffee shop without putting in some of your own cash first. This is the not-so-fun part of opening up your own business. But if you manage money correctly, have some great investors and set a realistic break-even point then you’re well on your way to earning a sustainable income. How much money you can make as a coffee shop owner also depends on which kind of coffee shop you own. There are several different types, such as coffee kiosks, franchises, and stand-alone shops. We’ll go through each of the different types of shops, discussing how much it will take you to open them and how much income you will make owning one. Now let’s talk numbers and start with the one that will set you back the least financially.
Coffee kiosks are usually found in malls and shopping centers. They are small carts that have a select offering and usually just have one or two employees working at a time. The best thing about a coffee kiosk is you have much more foot traffic due to all the people shopping. A cool thing about coffee kiosks is that you have the option to rent it out for things like weddings or corporate events which can be an easy way to make a buck.
A coffee shop drive-thru business can be pretty inexpensive to start-up and provide you with a fairly good income. You don’t need a large interior space. You simply need enough room for the equipment it takes to prepare the things on your menu. The most important thing to consider for this type of coffee shop is the location. You want to have a location that is very convenient for people going to work in the morning, or taking kids to school, or maybe find somewhere that is close to a large university. When people can just swing through your drive-thru to grab their coffee on their way to wherever it is they go every day, you’ll find it easy to build your customer base.
You could also consider a coffee shop that is completely mobile, a food truck shop. These are great because they don’t require a ton of money to start and they can go where the business is. If something changes in the area you’re set up in and the traffic slows down, you can just move your business somewhere else. Just make sure that you are aware of any regulations governing food trucks in the area that you are working in.
Owning a franchise seems to be the safest way to own a coffee shop. If you’re in a big city, it will cost more in rent and health code fees. If you’re in a smaller town, these numbers will more likely be less. The kind of equipment you have will also play a major role and as a franchise, you may be required to carry specific equipment.
Lastly, you can independently own your own stand-alone shop. This gives you free-reign for designing the interior, what you offer on the menu and many other things. Independent shops are most popular in large cities and in trendy neighborhoods. If you’re interested in looking up specific shops, a few suggestions are Spyhouse Coffee, Stumptown Coffee, Black Eye Coffee, Intelligentsia and Blue Bottle. Those should give you a solid idea of what a successful independent coffee shop looks like.
Cost to Start-Up
The cost of starting your own coffee shop business varies greatly. There are so many things to consider when you’re trying to figure out how much money you will need to get started. Here are some things that will affect your start-up cost:
- Type of shop
- Scale of operation
- Franchise or private
So, why is it important to talk about start-up costs when we’re discussing how much income a coffee shop owner will make? This is because you need to remember that before you’re making any true income, you’ll be spending quite a bit of money. It needs to go into your budgeting and calculations for the first year or more that you have your coffee business, that most of what you’ll be making will be to recoup what you had to spend to get started.
As you look at all of the items on the list we have above, you’ll notice that all of the things that affect your start-up cost also affect your earnings potential. That makes these things important to go over in both regards. So, let’s do that.
The location of your shop will dictate how much you need for your initial investment, as well as, ongoing expenses like utilities, lease payments, supplies, and marketing costs. The location of your shop also dictates the kind of traffic you’ll have at your store, the kind of people you’ll have as customers, and what things should be on your menu and for how much.
The type of shop you open is probably the factor that affects your initial investment and your earnings potential the most. Small shop types won’t cost as much to open, but they likely won’t bring in as much either. If you can open a little coffee cart in a great location though, you stand to do very well. Think about a little coffee stand in a busy shopping center, a hospital atrium, or on a college campus.
Coffee Kiosks will set you back a measly $20,000 on average which is the lowest priced way to go about this but may also be the least lucrative.
Owning an independent coffee shop will set you back around $200,000 on average. Now you might read that and suddenly feel stressed but the best part is, owning your own coffee shop is the most lucrative way to go.
Along the same lines as the type of coffee shop business is the scale of your operation. Obviously, your operation will be smaller if you decide to go with a coffee kiosk as opposed to a full sit-down café. But, you’ll find that even the size of a free-standing coffee shop can vary quite a bit from location to location. Remember that it’s a balancing act between how much you’ll be spending on payroll, supplies, utilities, and other factors, and how much you’ll be bringing in with your sales.
Your menu will play a role in how much it costs you to start your coffee shop. The more complex your menu is, the more equipment you’ll need to facilitate the preparing of those menu items. In terms of your sales, the more complex your menu is, the more you can charge for the items on your menu. Also, you’ll likely have more sales transactions that include more than one item per receipt.
Choosing between opening a franchise or opening your own private shop will have an impact on how much you have to spend upfront. It will also have an effect on the sales that you do. A franchise will certainly cost you in terms of leases, franchise fees, and all of the equipment the governing company requires you to have. But, you get the benefit of the brand. Familiarity goes a long way in terms of bringing customers into your shop and spending their money.
According to Google, you will make 10%-50% of what a stand-alone coffee shop will make when owning a coffee shop kiosk. They estimate a take away of $500-$5,000 a day depending on the location and number of customers. This is of course, without factoring in taxes, labor, costs of the products, etc.
The average franchise owner will take home $66,000 a year. Again, like it’s mentioned before, this can increase depending on factors such as location and the specific coffee shop brand you’re franchising. The top 7% of franchise owners bring home $250,000 annually and of course, this can increase depending on the success of your shop.
Stand-alone shops can take the most money to open but reap all the benefits you’ve probably thought of during your research to own your own shop. If you’re going for a small but steady coffee shop, you’re looking at making $5,000 – $20,000 a month. If you own a larger sized shop and have a steady stream of customers than those numbers are bound to increase.
You need to remember that profits are not simply the money that you make from your sales receipts. You have to account for all of the expenses that it takes to run your business. You’ll be paying on a lease or a mortgage, you’ll be paying employees in some cases, you’ll be ordering supplies all the time, you’ll have taxes that are due, as well as, many other costs that people tend to forget about.
Breaking Down Income
Now being a business owner, making money is one of your main goals and throughout this article you’ve read what it can cost and ways to increase the income your shop makes.
One of the last things, before we’re done, is breaking that down a bit more. Grab a piece of paper and pen and write down the following:
- Average receipt total for your lowest sales week
- Average receipt total for your highest sales week
- Multiply each by 4 and you’ll have your lowest and highest amount of income possible for a month without changing your prices.
- Multiply that number by 12 and you’ve got your yearly gross income. You can see how drastic your lowest and highest numbers can be.
This can either generate tons of stress or give you relief depending on how well your shop is doing. As long as you’ve built in a realistic margin-of-profit into each item you’re selling then you should continually see profits increase. If it costs you $0.30, for example, to make a medium latte, charge $4.00 for it and that way you’ll have a profit margin of $3.70 which is fantastic. (especially if they add extra flavors and shots).
There are several ways to make more income whether you decide to increase prices, promote specific items or generate more foot traffic. Choose whichever you see fit for your shop and observe how it affects your income.
If you’re willing and able to uproot your life for this venture, may we suggest planting your coffee shop in a city like Seattle, Portland or Minneapolis? These each have a huge coffee culture community but they’re also all very welcoming of a new shop. Don’t let the competition in whichever city you choose scare you off; better yet, let them inspire you.
Get the Word Out
Make sure you get the word out about your coffee shop. If you want to make the most you can from being a coffee shop owner, then you need to put forth some good effort to make sure the community knows you are there to serve them delicious coffee and tasty pairings to go with it. Take advantage of social media for some free widespread exposure and advertising. Try to let your local media know you are opening. Put on events to draw in more people in the area. The more people who know about you and your shop, the more customers you’ll pull in.
The money you make from owning your own coffee shop can drastically change your life. There are people that are able to buy new houses, cars, and in general, have a better quality of life. You can make a salary of between $60,000 and $160,000 being a coffee shop business owner. And keep in mind, that’s just the average range. Some people will make more than that. It’s really up to you and your efforts.
After reading this article you may feel overwhelmed or you might feel inspired. Like you read before, your income as a coffee shop owner will greatly depend on many factors. Keep your costs low and margin correctly so that you bring in more money and you’ll be well on your way to making an income that works for you. If your shop is running already and you’re not making as much as you’d like, hopefully, you’ve learned some ways in which you can adjust to bring in more money to the shop and you personally.
Do you feel ready to open up your own shop? Maybe you’re reading this having already opened up shop. Are you wondering when you’ll hit your break-even point or maybe how to get the most profit by changing small things about the menu or shop itself? Whatever reason you’re here, there is plenty of knowledge to take away from this article and help you in your future or current adventure. Best of luck!
Frequently Asked Questions
According to Small Business Chron, coffee shops make an average annual revenue of about $215,000 per year by selling about 250 cups of coffee daily. That works out to be about $18,000 in revenue per month. Hence (considering the average month is 30 days long), coffee shops make about $600 per day.
You can increase that number by boosting the amount spent per receipt by promoting multi-item sales and by increasing the number of customers through your doors, at your stand, or through your drive-thru with effective marketing strategies.
The general failure rate for startups is as follows (Speight 2017):
● About 20% of startups make it past the first year of operation.
● 50% of startups are not around after 5 years.
● Only 33% of startups make it to 10 years of operation.
If you have employees, such as baristas, shift leaders, and managers for your coffee shop, you’ll need to be paying them appropriately. The area you’re located in might help give you a bit more guidance for how much you should be paying these positions. But here is some general guidance for this. A barista should make between $9 and $11 per hour. Shift leaders should be getting about $10 or $11 per hour. And shop managers should be paid between $12 and $15 per hour.
The final decision comes down to you, but remember that you at least want to be paying what the average is for these positions so that you can retain good employees. Your payroll isn’t somewhere that you should try to use to save money. Offering good service in your coffee shop can go a long way toward generating more sales.
To learn more on how to start your own coffee shop checkout my startup documents here
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.
Hi! I’m Shawn Chun
My adventure in coffee began when I first launched my first coffee shop back in the early 2000s. I had to figure out so many things on my own and to make it worse within 2 years of opening two large corporate coffee chains moved in just blocks away from me!
As I saw smaller and even some larger coffee shops in the neighborhood slowly lose customers to these giant coffee chains and slowly close up shop, I knew that I had to start getting creative…or go out of business.
I (like you may be) knew the coffee industry well. I could make the best latte art around and the foam on my caps was the fluffiest you have ever seen. I even had the best state-of-the-art 2 group digital Nuova Simonelli machine money could buy. But I knew that these things alone would not be enough to lure customers away from the name brand established coffee shops.
Eventually, through lots of trial and error as well as perseverance and creativity I did find a way to not only survive but also thrive in the coffee/espresso industry even while those corporate coffee chains stayed put. During those years I learned to adapt and always faced new challenges. It was not always easy, however, in the end, I was the sole survivor independent coffee shop within a 10-mile radius of my location. Just two corporate coffee chains and I were left after that year. All told the corporate coffee chains took down over 15 small independent coffee shops and kiosks and I was the last one standing and thriving.
Along the years I meet others with the same passion for coffee and I quickly learned that it is not only “how good a barista is” that makes a coffee shop successful, but the business side of coffee as well.
Hence why I started this website you are on now. To provide the tools and resources for up and coming coffee shop owners to gain that vital insight and knowledge on how to start a coffee shop successfully.
Stick around, browse through my helpful blog and resources and enjoy your stay! With lots of LATTE LOVE!