So you want to start a coffee shop? Great! Maybe you’ve already started to formulate a business plan and budget, but you’re still feeling a bit lost. You’re still not sure how to factor in different cost aspects or how to provide quality in every area to ensure you start a great coffee shop. You’re probably starting to feel a bit overwhelmed. Well, lucky for you, I’ve written this guide!
Rough estimates put the cost of starting a coffee shop at somewhere between $50,000 and $250,000, depending on scale and size (e.g. coffee stand versus a large café). These estimates take into account everything from rent, product, labor, equipment, marketing, and more. Of course, if you want to start a great coffee shop, you’ll need it to be cost effective in every aspect. Below, I’ve detailed aspects that affect each area’s cost influencers and provided recommendations for how to use each to start a great coffee shop!
One aspect that is often overlooked is service. Sure, everyone acknowledges that service needs to be top notch in order to be successful. However, what people don’t often realize is simply the type of service offered can greatly impact a coffee shop’s success. The service industry often draws to mind waiting on your customer, hand-delivering deliciously homemade food and drink with a smile, and making customers feel special. However, as detailed below, this may not be the most cost effective, or even the most customer pleasing way to serve.
Cost
As promised, this post will detail various costs that affect how successful your coffee shop will be, from obvious topics such as location (different locations have higher or lower rent) to less obvious aspects such as service. I will also go into detail about lesser known aspects of each topic and costs involved.
Location and rent
You probably already know that location will ultimately determine how much rent you pay. If you’re in a high demand area, your rent will be higher. Likewise, if you’re somewhere desperate for tenants, you won’t pay as much.
However, more than just the neighborhood can affect how much location will cost you. Even if you’re in a less trendy neighborhood, just being in the city will hike up rent. If you’re not tied to the city, maybe consider a surrounding suburb. This can have added benefits to your business success, but more on that later.
Once you’ve picked your city, town, suburb, or neighborhood, you’ll need to look into space type. This is often an overlooked aspect of cost, as you may think that coffee shop rental space is roughly the same in your area of choice.
However, this can vary greatly depending on the type of building you choose to rent in. Shopping centers and malls often have the highest rents, even if you’re outside a city! Sure, you’ll be paying for heavy foot traffic, but make sure you estimate if that’s worth the additional rent and competition (you are in a mall, there’s bound to be multiple options for coffee).
Stand alone storefronts or buildings typically have lower rents, not to mention you’ll have less competition and won’t be tied to mall hours. Just make sure the location attracts enough traffic!
Labor
The most difficult cost to estimate, there are ways to ensure your staffing costs are low without sacrificing quality. Likewise, there may be more influencers in this aspect than you realize.
Most will think of labor in terms of numbers; how many staff to hire, what wage to pay, etc. However, the quality of staff hired will often determine how much labor costs you…not to mention the success of your business.
By hiring quality staff, you’ll likely not need to hire as many. Efficient baristas, cooks, and wait staff will get the job done, saving you the need to hire more. Of course, to keep wonderful staff, you’ll need to provide bonuses or a pay increase eventually, but if they keep your great coffee shop successful, it’s worth it.
Motivated staff will want the business to be successful; they’ll do more than their job description. They’ll also have their own ideas to grow the business and improve quality and efficiency. Paying a few quality staff slightly above minimum wage will end up saving you time and money than if you kept a revolving door of sub-par lowly paid staff.
Service (counter vs table)
Ah yes, as mentioned above, service is often thought of as being key to a great coffee shop, but not many factor it in to their costs. Service often gets grouped in with labor or another area. However, many do not realize that the type of service you offer can greatly affect cost!
Sure, you want to provide the best service possible, but what exactly does that mean? And how can you provide an amazing caliber while also being cost-efficient?
First, you may want to rethink the type of service you’re offering. In the coffee shop industry, this comes down to two main choices: counter and table service.
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- Table service is the more “traditional” of the two: customers sit and order from a waiter/waitress, who then delivers the product and handles the bill. This can be a very enjoyable experience for customers and employees alike; however, it might not be the best choice for efficiency and cost. Table service will require an additional type of staff (wait staff), which means more out of the budget for labor, table sets, and possibly space.
- Counter service is much more efficient for a coffee shop. You’ll be able to serve more patrons by having food and drink collected by customers at the counter. Your staff will focus solely on taking orders and payments and making great coffee! And you won’t be spending more on labor for wait staff. You’ll also save money by not having tables set and many customers utilizing counter service won’t stick around. Thus, you may not need as a big a space or as many tables as you would with table service.
Recommendations to start a great coffee shop
I’ve already given a few recommendations above to keep costs down; however, I also promised recommendations to ensure your coffee shop starts off great! See below for more tips.
Location and rent
This is a bit of a reiteration and elaboration of tips above for how to keep costs down. However, cost is not the only reason to choose a particular location over another. In order to have a great coffee shop, you need the location to be great. This is probably the most important decision you’ll make for your business.
Once you’ve decided if you can live with a particular areas rent; either the city, outskirts or suburbs you’ll need to decide what “sub-area” within that city or suburb you want to rent in. What’s a “sub-area?” Well, it can be a few different things. It could mean a particular neighborhood or part of a city or suburb. Or perhaps a certain building or shopping district.
Before you choose though, think, what “sub-area” will really make my coffee shop great? You’ve already done a bit of thinking to choose your main city or suburb. You’ve factored in the rent for that choice and the type of business you want (i.e.; small city coffee shop or suburban cafe hangout). Now you need to take it to the next level with the “sub-area”; what neighborhoods are in need of coffee shops? If an area is oversaturated is your business idea unique enough to attract customers? Is there enough traffic and offices or non-coffee businesses nearby to keep your coffee shop busy all day?
Once you’ve thought it through and chosen a “sub-area” I want you to think more about the specific type of space. I mentioned it above in the cost section, how malls and other high traffic areas can have higher rents than stand-alone storefronts.
However, this isn’t the only factor when looking at various spaces for rent. You’ll want to check that the space receives enough traffic to pull in constant customers. Visit at various times during the day to gauge the consistency. Additionally, is the space accessible by many forms of transport? Does public transportation stop nearby? Can pedestrians safely access the shop? Is there ample parking or space to create a parking lot if you choose? These are all extremely important to examine before signing a lease.
Atmosphere (service, vibe, seating type)
Once you’ve chosen your space you’ll need to create an inviting place to drink coffee! This is where the atmosphere comes in, which is comprised of many things. I already discussed service type in the cost section and come to the conclusion that counter service is likely the most cost-effective.
However, that does NOT mean you have to choose counter service. If the type of atmosphere you want is more “sit down cafe” than “quick grab coffee”, then, by all means, opt for table service. However, no matter which you opt for, make sure the service delivery matches the atmosphere you want to create.
What does this mean? Well, if you opt for table service how do you want your wait staff to wait? Is it all about efficiency with a smile? Or do you want them to take their time, introduce themselves to every customer and check on each table periodically? If you choose counter service again, is it purely about efficiency? Do you want baristas to call out orders and give a brief “have a nice day” before moving on to the next latte? Or do you want them to wait and engage a bit more with the customer before handing the coffee off and moving on to the next order? Whichever you choose, make sure to train staff accordingly.
Other aspects that go into a great coffee shop atmosphere are seating and interior design. Again, do you want to create a nice space with relaxing couches and chairs for customers to enjoy catch-ups over coffee? Or do you want a thriving internet cafe business with as many Wi-Fi using customers as possible crammed around tables filled with maximum seating.
Make sure the design and decor of the space reflect your choice of “atmosphere,” this is where you can really get creative. Do you want a simple, minimalist design of white walls and neutral furniture for gamers to focus on the Wi-Fi. Or perhaps you want calm yellow walls and comfy chairs for moms to meet over a cup of coffee. Whatever it is, this is your chance for truly personal touches.
Efficiency (food and drink prep, labor)
This topic is tied into cost, as the more efficient your coffee shop is the less it’ll cost you. The main ways of increasing efficiency have already been mentioned, but now I’ll elaborate a bit.
Labor is where you’ll save the most with efficiency, starting off of course with efficient staff. If you hire well to start, you’ll be happier in the long run. And if you have an efficient staff plan, with one person taking orders, one or two making coffees, and one for clean up, you’ll really help your business.
Another way you can increase efficiency is by prepping as much as possible. Have staff come in an hour before opening and prep food and other products for the day. The less you have to do during a rush, the better and the more customers you’ll be able to serve!
You may also want to think about the layout of your coffee shop and how the flow of customers and staff affects the efficiency. If there’s an easy path from the door to the ordering counter, it’ll help the congestion of customers. Likewise, if the tables are set up to prevent run-ins and spills, your staff will thank you.
Remember to Factor in Growth Costs
You will save yourself so much headache and have a much better start to a great coffee shop if you plan as much as possible. This means having a business plan, budgeting and planning every aspect like staff schedule, equipment repair schedule, ordering, etc. However, one thing that is essential to remember is that your coffee shop won’t be the same forever. Eventually, the business will grow, in customer influx, space and demand. This can be hard to foresee but you’ll thank yourself later if you have a rough plan. Make sure you have savings if you need to increase product, staff or seating. Always have potential other spaces in mind to move to if you need more space. Anything you can think of will help!
Frequently Asked Questions
This is another question with the frustrating answer of “it depends.” Most restaurants and cafes offer the option these days, so most customers will likely expect it. However, some independent coffee shops are saying “no” to the mainstream and not offering Wi-Fi. This may be because you don’t want students buying one coffee and setting up shop to study all day while not buying anything else. Or perhaps you want your coffee shop to be a place for socialization more than web browsing. It’s up to you; just make sure it matches the space you want to create.
YES. This is an absolute must. It incentivizes coffee drinkers to be repeat customers as they’ll eventually earn a free drink! And once they’ve bought five or ten or fifteen drinks you’ll likely not be losing any revenue on the free one. Also like Wi-Fi these have become coffee shop staples and most customers will expect the option.
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
