Owning your own coffee shop is an exciting experience, but before you make your first move, you need to get educated on how the business operates in order to have a full understanding of all the costs needed for running a successful coffee shop.
We will discuss the following elements that go into determining the cost of a coffee shop:
- The components of overall cost
- The qualities of a good coffee shop
- What to consider before opening
The cost of buying or opening a new coffee shop depends on a number of factors. According to successful business owners, the price of coffee shops ranges from $80,000 to $250,000 or more.
The Cost Varies
The cost of buying a coffee shop may vary from one region to another. Even opening a shop on block A can cost quite a bit more than block B. Check around each neighborhood and if you feel comfortable enough with it, consider talking with neighboring business owners about their costs. It can also depend on the country and demographics of the place where you want to buy it. For instance, there are some cities where the cost of living is very high while in other places the cost of living or housing is low. This will tell you more about how much you have to pay for a shop. The location will also affect what taxes and certification you will need prior to opening the doors to customers. Another factor that determines the cost of a coffee shop is represented by the type, amount and quality of the equipment you will need in order to open and run the shop.
Qualities of a Good Coffee Shop
We all have that particular thing that we love and every customer has their own unique criteria about what makes a good coffee shop. What is the thing that makes your favorite coffee shop just that? Is it the friendly atmosphere, cool music, or the quality coffee? To qualify as the best coffee shop, you should offer the whole package. Whether you want to start a new coffee shop or buy an already existing one, here are some tips that will make your shop the best in town.
High-quality equipment. Get the equipment that is reliable so you don’t have to spend more in the long run. This will also depend on the brewing methods you plan on having at your shop. You can have a simple, black cup of coffee and have it brewed in several different ways, each having different equipment needed.
A good location that has a lot of foot traffic and is appealing to the eye. This will help drive free marketing if people like the interior of your shop.
Great coffee. Make your shop well known for preparing quality coffee. People will pay more for better coffee, especially when your baristas are latte art trained.
Outstanding menu options. This doesn’t have to mean a lot of options but more so carrying the essentials and being exceptional at serving those. This is also a place to consider if you’d like any food or pastry options at your establishment.
Unique/signature coffee drinks that are exclusive to your location.
Aesthetically pleasing. If your shop is in a trendy city, what your shop looks like can make or break your sales. Like we mentioned before, it can garner free marketing but overall just make it a place people want to be at for hours.
Wi-Fi is an absolute must. If you walk into a coffee shop and look around, you will see almost every patron on their laptop or phone. It is crucial to have fast Wi-Fi to ensure customers having a place where they can come to work or study.
What to Consider Before Buying a Coffee Shop
Before buying anything, you need to check and confirm if everything is how you would like it to be upon purchasing. Buying a coffee shop is no different than any other business when it comes to that factor. There are a number of other factors that you should look out for to see if the shop is really worth what you’re about to spend. Check to see if anything needs updating or if there are areas you’d like to construct or tear down.
Do you understand the coffee shop lease?
Understanding the lease is very important, and you need to make sure you go through it thoroughly and keenly. Sit down with your lawyer and the landlord and make sure you understand it well and get any unanswered questions answered. This is a place where you don’t want to hold back on any underlying questions because it can be very costly in the future.
Confirm if the shop is being run efficiently.
Before buying a coffee shop, be sure to establish the best way of running it effectively and the most effective way of doing this is through collecting profit and loss statements from the vendor’s accountant. These statements will give you the shop’s background and all its history. Also, be as hands-on as possible. You are the owner, which means everything is your responsibility and it is up to you and how you run your shop to be the most successful.
Calculate the selling price of the coffee shop.
Most of those who own businesses have various ways of calculating the selling price of their assets but the most common way of doing it is calculating the annual net profit then multiplying it by three or four. For such reason, you don’t have to make offers based on the asking price. The best way to negotiate is to calculate the net annual profit and multiply it by three. This also ensures you have savings in the case that unexpected costs come up.
Work within the business before buying it.
Most businesses would not want to share or declare their full profits. Though it’s an illegal act, it helps them evade tax. There is no other better way to confirm this than to analyze the profit and loss statement. Some people will tell you that they are actually making more than what is presented in their financial reports. Too much trust should be avoided, especially when making investments. You can’t just trust people or their word. The best way to go about this issue is to work in the business prior to purchasing it.
When you do so, you will be able to know if there is any money that’s not being recorded. Working in the business can help you estimate the wages and calculate the staffing levels and also the daily expenses of other items like the materials used. Furthermore, you’ll also be able to know about any faulty items before purchasing them. This will help you to avoid losses from buying faulty machines that may need replacement or repairing.
There are a few questions you need to ask yourself before buying a coffee shop. Are you going to continue with the existing staff, or are you going to hire new staff? Do you need new skills and expertise, or are you going to continue with the existing ones?
When you want to buy a coffee shop, you need to consider various factors to avoid running losses when you start operating. Make sure you carefully consider the overall cost or purchase and operation as well as the location and what makes your shop unique. If you have all of these things in line, you are on your way to owning a successful shop!
What is the average rent for a coffee shop?
According to the Coffee Makers USA website, rent should be no more than 15% of projected sales. Hence, if you project $100,000 in sales per month, your monthly rent payment should be $15,000 or under.
What is the general checklist to follow for opening a coffee shop?
Follow this general checklist to open a coffee shop.
- Create a business plan.
- Get funding for your coffee shop.
- Generate a brand.
- Create your menu.
- Generate marketing and advertising campaigns.
- Have a soft opening.
- Refine your products and business practices.
- Have a grand opening!
To get a free eBook on how to start your own coffee shop, just click 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.