Starting your own coffee shop is an exciting endeavor to take on. But, it can also be tough to know how to calculate coffee shop startup costs. The reason for this is because there are so many different routes you could take to create the coffee shop that you’ve been dreaming about.
So, what’s the answer to the question of how to calculate coffee shop startup costs? You can find an estimated coffee shop startup cost by adding together the following types of costs:
- Rent, mortgage, or build expense
- Equipment purchases
- Consumable supplies (drink and food ingredients, paper products)
- Hiring, training, and payroll
- Marketing expenses
- Miscellaneous (insurance, taxes, fees for expert help)
There’s no fixed price for how much it costs to start a coffee shop, but you can figure out a rough estimate to start with. Below is more information to help you account for the costs mentioned above.
The Starting Line
Before you start crunching numbers for the costs we mentioned, you’ll need to have a plan in mind. This is where a good business plan will come in handy.
You don’t need to know all the details about what you’re going to do, but knowing what kind of coffee shop you want to open—drive-thru, kiosk, coffee bar, café, etc. —is highly important. There is a huge difference in the cost of opening a coffee cart and opening a full café. Before you start calculating your coffee shop startup costs, figure out what kind of shop you want to open.
The location of your shop is the other major factor you need to know before your calculations can really start coming together. Your coffee shop business’s location plays a huge part in knowing how much money you’re going to need to get your shop up and running.
Once you know the type and location of your coffee shop, you can start truly planning the business around your vision.
Real Estate Costs
Real estate costs will likely be one of your larger expenses, especially at the startup of your coffee shop. If you decide to lease a space, you’ll be looking at the price of rent, money for a deposit, and other contract fees that have to be paid before you can move in and get started.
If you have decided you want to design everything – from the interior to the exterior and all other parts of your coffee shop – then you should work with experts like an architect, builder, and financial consultant to figure out how much your dream building is going to cost you.
Finally, you can buy a pre-existing space. If this is the route you take, consider your mortgage payment and make note of any renovation costs that you might incur to get the space ready to house your coffee shop business.
Keep in mind that your monthly expense in this category should not be any higher than 15% of your profits averaged each month. Since you’ve likely already chosen your location, you can figure out a rough estimate of what your profits will be by taking the amount of traffic passing by your shop, counting on about 3-5% of people stopping, and then multiplying the amount of customers by an expected sales per customer amount that you think is reasonable.
Equipment Costs
The equipment you need to open your coffee shop is highly important. This is the foundation for the operation of your business. Lack of or non-working equipment means no business and no sales.
This is not an area to skimp out on. You want to look for high quality, reliable equipment that will last for a very long time. That being said, don’t be afraid to “comparison shop” and try to find the best deal possible. Also, make sure you check out reviews of pieces of equipment before deciding on yours.
Your equipment costs can range from quite high to really very reasonable. A large café with full dining menus and a sit-down dining room will need a lot more equipment than a coffee cart that serves brewed coffee only. Here are some of the potential equipment needs to consider for your coffee shop:
- Espresso machine
- Coffee and espresso grinders
- Automatic coffee brewers
- Blenders
- Servers
- Ovens
- Toasters
- Refrigerators
- Ice machine
- Storage bins, bottles, shelves
- Display cases
- Merchandisers
- Sinks
- Dishwasher
- Accessories and utensils
- Pumps
- Dishes
Consumable Supplies (Repeat Items)
You don’t want to open your coffee shop without the supplies you need to be successful. This category of costs includes all of the consumable supplies, the items that will get used up and that you’ll have to replace. These are your ingredients to make tasty coffee creations, the ingredients needed for food items, and all of your paper products.
You want to purchase quality ingredients so that your end products are of the highest quality. There are some ingredients that won’t matter as much when it comes to the taste of your coffee. The foundation of your business is coffee, so it stands to reason that using the finest quality of coffee that you can is a good idea. The mixers and add-ins are important too but those are not the pieces that will make or break your business, the coffee is.
Remember to consider the costs of paper and plastic products also. These are things like to-go cups and lids, napkins, straws, bags, stirrers, plastic ware, and more.
The costs in this category are going to be higher in the beginning. There are some things that won’t run out as fast as others. To be safe, plan to spend about two thirds more than what your actual month’s operating costs will be to get your shop fully stocked for opening. You’re starting from scratch, so it’s best to be safe in your calculations for starting your coffee shop.
Your Employees
This section only applies if you’re opening a coffee shop that requires others to work for you. A coffee kiosk or cart doesn’t need anyone else. You have to account for the compensation of your employees—paychecks, bonuses, and benefits.
Also, you need to think about the cost of hiring someone. This includes expenses for training, any permits needed for them, and uniforms if applicable.
Remember to think of yourself as an employee of the business, too. You’ll need to include your salary in your payroll expenses.
Marketing Your Coffee Shop
This is an area where you can save some money if you’re smart about it. Sure you need to plan to spend some money on your coffee shop logo and branding possibly, but you can do a lot of marketing your business for free these days. It will mostly just cost you in the way of time.
Make sure that you create an online presence for your coffee shop so you can take advantage of social media. It’s a great way to get virtually free advertisement for your budding business. You can also get the word out to local media that there’s going to be a new face in town. That might score some free coverage and local exposure for your coffee shop.
Some costs of marketing include logos, signage, business cards, website design, and paid advertising.
There’s Always a Miscellaneous Category
We’re calling these expenses miscellaneous. According to Forbes.com, these often get overlooked. Make sure you take into account the following:
- Insurance
- Permits and licenses
- Utilities
- Cleaning supplies
- Expert fees (consultants and those who provide services)
- Taxes
- Shipping costs
There’s bound to be other expenses that come up along your path to opening your coffee shop. But, if you use this guide for calculating your coffee shop startup costs, you’ll find that most of the expenses you encounter have already been accounted for in your calculations.
Frequently Asked Questions
This is a tough question to answer straight-up. As we mentioned, different kinds of coffee shops will cost you more or less to open. It’s really about what kind of shop will do best in the location that you’ve chosen.
If you look at the overhead and operating costs of opening a coffee shop that has seating areas, many employees to pay, serves food, and is located in a metro area, a lot of what you make in sales might get knocked off because it costs so much to run the business. But you’ll likely be making more and larger sales to account for that.
A coffee cart doesn’t cost a lot to run. So most of the sales you make will likely be considered profit. However, you won’t have the same capability to serve a large menu of items. If you’re in a high-volume location though, you stand to do quite well. Read more here about how much money you can expect to make as a coffee shop owner.
A coffee shop averages about 100-150 transactions a day to start. If each of those transactions is around $5, or at least averages to that, then you’re looking at sales of about $500-$750 a day.
Keep in mind, though, that like everything else in the coffee shop business, it all depends on what your business plan looks like.
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!
Shawn
