There is no quick and easy way to start a coffee shop. Coffee is a tough business, and it takes a lot of time, money, and hard work. But the feeling of walking into your own shop every day, knowing you started it yourself is worth the effort.
To start a coffee shop from scratch, you will need a thorough business plan, a good location with affordable rent, a good marketing strategy, and excellent coffee. There are other factors to consider, but those are the most important places to start.
It is not as simple as going out and signing a lease on a perfect location tomorrow. Planning and preparation are key when opening your first coffee business, and we want to help you do that.
Develop a thorough, well-thought-out business plan and budget for your coffee shop
If you’re like me, you’re excited to start showing people that you have the best coffee in town. But it’s important not to jump in too fast. The coffee business is highly competitive, and it’s vital that you plan well before you open.
Before you do anything else, you need to know how much you can afford to spend to open your coffee business. There are different styles of coffee shops, and you don’t need hundreds of thousands of dollars to open one.
Do you want to have a large, brick-and-mortar space where people can hang out, work, and relax? Or do you want to serve cold-brew from a cart at the local farmer’s market?
These are both viable business models, but they require two different budgets and two different plans. According to Crimson Cup Coffee, these are the following price ranges for opening a coffee business (as of January 2018):
- Coffee kiosk/Coffee stand: $60,000 to $100,000
- Mobile coffee food truck: $50,000 to $150,000
- Coffee shop with seating: $80,000 to $275,000
- Drive-thru only coffee shop: $80,000 to $200,000.
- Coffee shop with seating and drive-thru: $80,000 to $300,000
Starting from scratch, you won’t be able to save money by purchasing an existing business. That means you can expect to be on the high end of those costs for your respective style.
Research the market in your area and know your competition
Find out what kind of coffee shops are in your area. Are there a lot of sit-down cafes, but no mobile coffee trucks? Is no one selling coffee at the farmer’s market? Those are both holes in the market that you can and should take advantage of.
Decide early on who your target customer is. If you live in a college town, focus on providing a space where students can gather and do homework together. If you are opening in a more metropolitan area with a lot of young working professionals, set up your shop as “workspace” not a hang out space.
Knowing the type of customers that you want to attract before you find a location will help you choose the perfect space.
Find a good location with affordable rent
Location, location, location.
Location is everything in the coffee business. Most people buy their coffee on their daily commute to work or school. Even if you have better coffee than the other shop in town, that doesn’t mean you will have their business. If your competitor is closer to a customer’s home or work, they will most likely go to them.
Here are a few practical things to consider when choosing a location:
- Look at a map of your city and find the biggest employers in the area. Look for the most densely populated residential areas, too.
- If you are trying to open in a bigger city, look for an area with a lot of foot traffic and minimal competition. The more people come by your door each day, the more chances you have to convince them your coffee is better than your competition’s.
- Do your math. Don’t overpay for somewhere because it’s in the perfect place. You have to be able to pay your rent each month.
Design a memorable, creative, and unique brand for your coffee shop
If location is everything, then branding is everything else. If people don’t like your logo or the interior of your shop, they won’t come. You have to be able to catch someone’s eye when they see your brand on social media or drive by your café.
Try thinking through some of these suggestions when determining your coffee brand:
- Good brands tell good stories. Name it after something personal that is important to you.
- Shorter names are often better because they are more memorable.
- Make sure people know you are a coffee business when they see your name. You don’t have to have the word “coffee” in it, but it can help to use “roasters,” “coffee company,” or something similar. It helps bring clarity to what your business is about.
Start marketing before you open
In the age of social media, you can start a marketing campaign months before you actually open. There are a lot of ways you can do this, and they can all help you generate much-needed buzz before opening day.
Post pictures of your interior as you decorate. Share updates when you get your new roaster or grinder shipped in. Shoot a video showing your customers how your equipment works. Schedule a coffee tasting at a local farmer’s market or other public space, and let people try it for themselves.
Buy the equipment you need, but don’t overspend
Your equipment can make or break your shop, especially if you’re wanting to go into specialty coffee. If you want to serve better espresso than the shop down the street, fork out the extra cash for the best grinder money can buy. It will make more of a difference than any other piece of equipment you have, even the espresso machine.
Some things aren’t as important, though. You may not need a $4,000 Seraphim automated pour-over system when a $50 gooseneck kettle will get the job done. When choosing equipment, make sure you’re buying the best pieces for your space.
A large café needs larger, higher-volume equipment than a small coffee truck. Whatever you do, don’t skimp on your water filtration. Coffee is 98.6% water. If you have bad water, you’ll have bad coffee.
Decide if you’re going to roast your coffee or buy it wholesale
To roast or not to roast is a big decision when opening a new café. Roasting your own coffee provides you with the most control over what you’re serving and can cut down on long-term costs. But, it’s a large up-front investment. It also eats up labor costs (someone has to actually roast the beans) and can be extremely frustrating when starting out.
Buying wholesale removes some of your individual control and is much more expensive than buying green, unroasted coffee. The biggest benefit of wholesale purchasing, though, is consistency. If you get a bad batch, you can send it back to the supplier for a refund. If you roast a bad batch, you either have to throw it out or serve bad coffee.
There isn’t a “right” answer to this question, but it is a decision you have to make. If you’re going to roast yourself, prepare to spend between $10,000 – $30,000 if buying a roaster new. You may be able to find one cheaper on the used market, but be sure it’s large enough for the volume you plan to sell. This is where your business plan will come in handy.
If you’re buying wholesale, find a company you can work well with. You can go big with Counter Culture, Intelligentsia or another large roaster, or you can go local. Either way, be sure you can maintain a good relationship with them. You’ll be working with them for a long time.
Create a menu that’s memorable and familiar
Do you ever read a menu at a shop and have no idea what the drinks they offer even are? No matter how hard you look, all you can find is their new “Superfood Vegan Gibraltar” when you just want an iced caramel latte or a pour-over.
Having unique, creative, memorable drinks is important. It isn’t a bad thing for people to know your shop as “the [insert your creative drink name here] place.” It creates buzz, and people will talk about those specialty drinks.
But if a new customer who has never heard of your shop before walks in, they need to have something familiar they can order. They need something they’ve ordered at all the other coffee shops they’ve been too. In those cases, it isn’t about memorability. Yours just needs to taste better.
When making your menu, be sure to consider how you’re going to price your drinks. Author Colin Harmon has an excellent chapter about this in his book, What I Know About Running Coffee Shops. He explains that coffee is a high-margin product, but not always high-profit.
According to Harmon, your gross margin should sit around 70-80%. He even offers a VAT and Margin calculator on his website to help you get started in determining your best starting price points.
Make your coffee better than everyone else’s
We’ve been speaking practically about the items, preparations, and ideas you need to consider when opening a café so far, but we haven’t even talked about the most important part – the coffee.
Coffee is both an art and a science. You need to make sure you’re doing your best work to help the coffee, be the best it can be. There isn’t room here to talk about all the nuts and bolts of creating both excellent drip and espresso coffee, but there are a few books that will get you on the right track.
- The Blue Bottle Craft of Coffee – James and Caitlin Freeman
- The Professional Barista’s Handbook and Everything but Espresso – Scott Rao
- The World Atlas of Coffee – James Hoffman
- Brew: Better Coffee At Home – Brian Jones
And if you can’t bear the idea of reading 5 different books on coffee brewing, there are lots of online resources, too. Barista Hustle is Matt Perger’s blog on everything coffee, including hundreds of online video lessons. Chris Baca’s YouTube channel has tons of videos on coffee brewing too. His “Extract Everything” series is great for aspiring café owners and home baristas alike.
Baca also talks a lot about his own shop Cat & Cloud and shares his experiences with owning a café, which can prove invaluable to a café startup. Past the reading, be sure to constantly be experimenting and improving what you offer.
Innovation is always happening in the coffee industry, and you need to be on the cutting edge of it if you’re going to be successful. But you can’t do that all by yourself.
Hire people who know coffee, but more importantly who know hospitality
The coffee business is no different than any other business. No matter how good your coffee is, if people don’t feel welcomed and taken care of when they come into your café, they won’t come back. Maybe you’re already a people person, and that’s why you wanted to get into coffee. Great! If not, you need to hire people who are.
You can teach anyone how to make good coffee. You can show them barista training videos, teach them how to pull a perfect espresso, and even how to do latte art, but you can’t teach someone how to treat customers. Learn more about hiring baristas for your coffee shop here.
Start serving great coffee
Once you’ve planned well, found your location, marketed your business, roasted (or bought) your coffee, and hired good people, it’s time to start serving. Opening day can make or break your shop. It may be a good idea to get the word out with some kind of promotion to help generate buzz.
You could run a contest on social media for a free bag of coffee. Offer a free cup of drip coffee to the first 100 people who bring a friend with them.
While this is certainly not the only resource you’ll need to open your own coffee shop, it should give you a big head start over most budding café owners. Even if your opening day goes great, you should keep a close eye on your revenue each month. It may take 6 months or longer before you start seeing a significant profit.
Should I take over someone else’s existing coffee business instead of starting from scratch?
If there is an opportunity to buy and re-brand an existing business, it can save you a lot of money in start-up costs. But if you want to have the same level of control as starting from scratch, you could end up spending the same amount in renovation costs as you would anyways.
Should I join the SCA?
The Specialty Coffee Association of America has a lot of helpful resources for coffee shops starting up. While not necessary, it is a hugely beneficial resource that we would recommend. Membership costs
Should I open a mobile coffee truck?
If you don’t have the capital for a brick-and-mortar café, a coffee truck or cart can be a great place to start. All of the principles we talk about here are important for mobile coffee businesses too, so you’re already a step ahead of everyone else.
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.
Ready to open your own coffee shop? Click here for our startup documents.
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!