There’s no better time than now to take the leap and fulfill your dream of running a coffee shop. Not only are Americans drinking more coffee than ever before—with 64% drinking a cup daily—, but these numbers are only set to soar.
As alluring as this dream may be, opening a coffee shop can feel like a daunting task. From thinking about your coffee shop startup costs and operations to marketing strategies and sourcing your beans—there’s a lot to juggle.
With so much to think about, how do you decide what’s truly important? You follow an “opening a coffee shop” checklist, of course! This post provides that checklist which includes the 10 essential elements of opening any coffee shop:
- Writing a lean business plan
- Finding the right equipment
- Understanding coffee startup costs
- Choosing the right location
- Hiring the perfect team
- Keeping your menu simple
- Perfecting the design
- Providing quality coffee
- Marketing before the launch
- Investing in systems to manage your operation
Elements of Opening a Coffee Shop
1. Writing a Lean Business Plan to Validate Your Idea
You don’t need a lengthy, detailed business plan that takes forever to complete. These plans are usually only required when you need funding from a bank. Instead, create a short or lean plan of a few pages to help validate your idea without getting caught up in the details.
Sure, details are essential, but what’s more important is a plan that will help you move along intelligently from the start. View your lean plan as an ever-evolving document you can revisit, and revise, as new information surfaces. Creating this plan will ensure you remain nimble and can quickly take advantage of new opportunities.
But how do you create this plan?
Imagine you’re having a conversation with a friend about your business idea. Now, tell him or her about these key areas:
- Your unique selling proposition which details the value you’re providing customers
- Market need: Examples may include customer desires for unique flavor profiles and personalized coffee experiences
- How you’re filling the market need: You could offer alternative coffee brewing methods like pour overs or batch brews
- The competition: Think about direct (other coffee shops) and indirect (bistros) competition
- Target audience: The demographics and psychographics of your audience
- Planned marketing strategies: Will you have a loyalty program? Will you use social wifi marketing? Are you planning on having an official launch
- Important milestones before and after the launch
- Your team: Who do you need to make this work? List all employees and partners
- Coffee startup costs: How much money do you need?
- Funding: Do you need funding? Options include family and friends, the bank or outside investors
Once you’ve validated your idea, you can dive into the nitty-gritty:
2. Finding the Right Equipment
The list of equipment you’ll need depends on the type of coffee shop you want. Will it be a coffee kiosk, mobile coffee shop or a coffee shop with or without seating? Get your head wrapped around the concept to help you pinpoint your equipment needs, which may include:
- Automatic drip coffee maker to serve black coffee
- Espresso machine: You’ll definitely need this as many types of coffee will include espresso
- Industrial coffee grinder if you’re keeping unground beans in inventory
- Refrigeration system to keep milk cold
- Containers and pumps to store syrups and other items
- Kitchen equipment (like ovens) if you’re serving food
- Shelving if you’re selling merchandise like hats or t-shirts
- Freezers you can, among other things, use to store employee food
- Industrial blenders for making smoothies and shakes
- POS system which includes both the hardware and software to process orders, manage staff, and run your business
3. Understanding Your Coffee Shop Startup Costs
Beyond the equipment, there are other costs to consider:
- The rent or build costs of your location. As a general rule, rent shouldn’t be more than 15% of your projected sales
- The cost of coffee beans
- Any fees for professional services, e.g., architect or accountant
- Payroll costs
- Income taxes which is roughly 35% of your operating profit
- Other expenses like insurance, office supplies, and business permits.
Given the above cost considerations, you’re likely wondering: How much does it cost to open a coffee shop? Unfortunately, there’s no exact answer— it depends on several factors including the cost of retail space, the equipment you decide to use, your marketing budget, and even the type of coffee shop.
That being said, there is a cost range you can use for guidance. Expect to pay anywhere from $60,000 to $275,000 to open your coffee shop, depending on the type:
- Coffee kiosk: $60,000 to $100,000
- Mobile coffee shop (food included): $50,000 to $100,000
- Coffee shop including seating: $80,000 to $250,000
- Coffee shop excluding seating: $80,000 to $275,000
4. Choosing the Right Location
You can build your restaurant from scratch, use an existing building or take over the lease off a current coffee shop that’s not doing well. Regardless of what you decide, take the time to choose a location that has:
- A central location with high pedestrian traffic (see the exception below)
- Other nearby shops or restaurants to attract customers
- Reasonable monthly rent
- Municipal support in the form of plumbing and electrical utilities
- Parking (if needed)
Take note: You don’t always need a central location with high traffic. If you have a great full-service concept that serves fantastic food and delicious coffee, you can attract people—despite a remote location.
5. Hiring the Perfect Team
According to Review Trackers who analyzed more than 331,920 online reviews from more than 1300 restaurant locations “ ‘service’ was the most frequently mentioned keyword.”
Customer service is vital regardless of what business you’re in. Treat your customers well, and they’ll flock to you. Don’t, and you risk losing customers, and profits.
But how do you ensure employees deliver excellent customer service?
Start hiring slowly by asking for referrals from people you trust. These could include family and friends, business partners, or other business connections in the hospitality industry.
Hiring slowly ensures you’re getting the right people from the start and prevents headaches later on. The type of employees you’ll need will include servers, baristas, and an accountant to manage the finances.
Empower employees through training
Without the necessary training staff won’t deliver the service you expect. So, provide this training from the start and remember: Repeat the training a few times, so employees don’t forget what they learned. Bad habits can—and do—creep in.
Treat employees well
No one understands the importance of treating employees well better than Richard Branson, who prioritizes employees over customers and shareholders. Branson knows that if you treat your employees well, they’ll be happier, more loyal, and deliver exceptional customer service.
So how do you plan to look after your employees? Beyond the obvious perks like a wage increase or a gift, treat them with empathy and respect. Stand up for them when paying customer are rude—the customer is not always right. Be there for them when they lose a loved one. Give them the support they need.
These little things matter, something the Ritz Carlton Hotel gets: General managers regularly stand up for their employees when guests are being inappropriate.
Is it any surprise they have one of the highest JD Power rankings for customer service in the world?
6. Keeping Your Menu Simple
“Less is more. Rather focus on doing a few things well, than a 100 half-heartedly.” - Alrishka Macaskill, Terbodore Coffee Roasters
Menu engineer Gregg Rapp, echoes this statement, mentioning that it’s better to have a simple menu with no more than 7 menu items per category. The reason? Giving your customers more choice can overwhelm them, making it harder for them to choose a dish. And, when customers feel overwhelmed they’ll likely revert to the familiar which can have a negative impact on your profits if that familiar dish a lower margin one.
A simple menu will help you whether you’re following the full-service model or not. For more menu design tips, read 9 Restaurant Menu Design Tips That Will Help You Boost Profits.
7. Perfecting the Design
Visualize the space you want to create
Before opening any restaurant, you need to think about the design. Coffee shops are no different. When designing your space consider your concept and ambiance. In the case of a coffee shop, you’ll want to capture a relaxed, social and vibrant atmosphere.
Put yourself in your customers’ shoes and visualize the space. Imagine what they’d want in a seating area. Perhaps it’s long tables? Maybe it’s smaller separate tables? Or both? You could even just ask them.
Besides ambiance, you need to think practically: You require enough space for customers to form a line, and materials need to always be readily available for baristas—If they have to disappear to find stuff, customer service will be slow.
8. Providing Quality Coffee
“We roast our beans in small batches in Portland, which is extremely important to us. Our freshness and quality are always at the highest level—small batches allow more control over temperature and flavor profile.” Clay Geyser, Black Rock Coffee Bar
It goes without saying: You need quality coffee.
Some coffee shops, like Black Rock Coffee Bar, will have their own roastery. Others will get already-roasted beans. In either case, you need to find a supplier that has quality beans or understands the roasting process.
You also need to understand that the roasting process and how suppliers treat their beans impact the flavor profile of your coffee. Why? This understanding will help you find the right beans for the flavor profiles you want. Consider these examples:
- Light acidic roasts give you fruity flavors
- Medium to dark roasts provide nutty and caramelized flavors.
- Lighter roasts are better for pour over coffee
- Darker roasts are more versatile and better for espresso-style coffee
9. Marketing Before Launch
You can have the most beautiful concept and amazing coffee, but if no one knows about you, they simply won’t come. While you don’t need to have an official launch (if you want to, go for it), some marketing before the launch always helps. Here are a few ideas to get the creative juices flowing.
- Tell everyone—family, friends, or acquaintances— about the upcoming launch. You’ll be surprised at how the word spread—especially if you have a great concept
- Introduce a loyalty program from day one
- Write a press release for your local newsletter
- Send personal cards to business owners in the area—if they know about it, they may refer some of their customers to you
- Ensure you have adequate signage in your storefront
- Contact influencers or food bloggers. If they love your concept, they’ll write about it, and you’ll get free marketing
10. Invest in the Right Tools to Manage Your Operation
Finally, you’ll need good systems that provide structure, so your entire operation runs smoothly. These include systems for opening and closing, employee communication, employee schedules, and order processing.
The now successful Black Rock Coffee Bar learned the importance of these systems the hard way. When they started:
- Managers spent hours flipping between multiple documents—time-off requests, availability calendars, and schedule pages, to create schedules
- They had no automated process to compare actual labor vs. scheduled labor. Instead, they relied on manual procedures
- Team communication was slow—the team relied on direct text messages—making it time-consuming to organize shift changes
- Managing labor costs was even harder as they depended on spreadsheets which made finding the right numbers hard
However, after using the employee scheduling tool, 7shifts, Black Rock Coffee bar improved these processes and saved time and money:
- The scheduling tool helped managers create detailed schedules for an entire week in less than 30 min
- Comparing actual vs. schedule labor became a breeze thanks to the ability to run variance reports using the 7punches time-clocking app
- Team communications became smooth as the team could communicate “in-app,” receive real-time notifications, and adjust shifts on the fly. Plus, staff became more accountable as they weren’t referencing time sheets from three weeks ago
- Most importantly, managers got a firm handle on their labor costs with the labor budget tool. Managers could now enter their projected sales and view labor percentage while creating schedules
As the owner, Cley Geyser notes: “When payroll went through, we would have a look and find the number we needed, but by that time, you may have wasted 2 weeks or even a month knowing you’ve had high labor costs. With 7shifts, we can look at it day by day and week by week. It’s current.”
Fulfilling your dream of opening a coffee shop does not have to be a daunting task. The key is to ensure you concentrate on the most important elements.
As we’ve seen, there are 10—starting with validating your idea with a business plan, finding the right equipment, and understanding your startup costs, to choosing the right location, ensuring you have quality coffee, and having robust systems in place.
Focus on these, and your dream of starting a coffee shop will slowly fall into place. The only remaining question is:
Are you ready to take the leap and open your coffee shop?