It feels like trendy coffee shops have taken over. Every city or even most rural town seems to have that one coffee spot that is everyones go to. Most younger people are being more interested in not just coffee, but high-quality gourmet coffee that they can only get from a coffee shop.
As a result the industry has exploded.
Even with so many new shops it feel like there is always room for more. It’s still a great time to consider opening a coffee shop or cafe.
While it varies by a lot of factors the average cost to open a coffee shop is $150k – $350k.
Starting any kind of foodservice business, from a restaurant or buffet to coffee shop or catering company, is complex. If you’re interested in starting a coffee shop but don’t know where to begin, here are some of the most important steps you need to follow to set up your business.
Before you even decide on opening a cafe, you should conduct thorough research. Research the area, existing businesses, and general footraffic of a potential spot. It also makes sense to look at rent prices to make sure you’ll be able to afford rent in that given location.
Answer yourself – Is there is a need for good coffee shops in your area? Can you compete with existing businesses? Would a take out only or sit in cafe be best?
You should pay specific attention to the existing coffee shops in the area and if are franchises or independent. An independent business may be able to compete with big chains, but not necessarily with other independent coffee shops.
Additionally, if you don’t have experience in the foodservice industry or owning a business, we suggest talking to other business owners in your area. That way, you can get their advice before you start writing a business plan and getting started. They may be able to provide crucial input on whether or not the job is right for you.
2. Select a Concept
Once you’ve decided to start a cafe, you can begin thinking about your coffee shop’s concept. Your concept is the unifying theme of your cafe, and a good concept will give your business a competitive edge over others in the area. Here are a few things to think about when choosing a concept for your cafe:
- Who is your target demographic? Are you intending to create coffee for a younger crowd, busy office employees, or more senior folks?
- What are customers in your area willing to pay? If creating a gourmet coffee shop will your patrons be able to afford a premium price? If it’s mostly working class then maybe a more casual coffee shop would fit well.
- Do you want to offer food? Are you going to buy the food pre-made from a bakery or make it in-house from scratch? Don’t underestimate the effort needed to make your own food and the timing that adds to each customer.
- Will you offer sit-down service? Do you expect most customers will get their orders to go, or do you want to make your coffee shop a welcoming environment for customers to work and relax?
Additionally, when considering which demographic to target, it makes sense to cast a wide net. Try to imagine the experience of both the young customer and the senior citizen coming in. You want to make the shop as welcoming as possible regardless of who your ideal customer is.
After you answer these questions it’s time to move to some fun details What your coffee shop’s name. What your menu will look like. What style of decor you want. Having a strong and well-conceived concept can make or break your business.
3. Find a Source for Your Coffee Beans
Serving high-quality coffee is the most important starting points to making good coffee. Take some time finding a good roaster and don’t be afraid to test a few before finding one you like.
In order to evaluate a good roaster, ask yourself:
- Do you like their coffee? If you don’t like the roaster’s coffee, then you can stop here.
- How much does quality matter to you? Very high-quality beans can be very expensive, resulting in needing to charge higher drink prices.
- Where is the roaster located? Buying from a roaster in your area is a great way to interest customers while also supporting a local business. Plus, a local roaster may have brand recognition in your area that can help you grow faster.
- Is the coffee fair trade? Fair trade promotes the ethical pay and treatment of coffee producers, and it’s a fast growing movement. If you go this route it can help in your marketing strategy.
- What types of coffee and flavors appeal to you? Does the coffee roaster have the types of coffee that you want to serve?
4. Write a Business Plan
A solid business plan is necessary for any type of operation to succeed. Your plan will help you finalize your concept, plan your ownership structure, project your finances, create your menu, and list your competitive research. This will also come in handing when you look for funding to start your cafe.
There are the standard sections to a good business plan:
- Executive Summary
- Company Overview and Description
- Market Analysis
- Business Offerings
- Management Plan and Ownership Structure
- Marketing and Advertising Strategy
- Financial Projections
5. Get Startup Loans
The next step is to get startup capital. Starting a coffee shop is costly, so you need to be sure that you have enough funding that you can afford all of the equipment and supplies.
Note, it typically takes a new operation 6-12 months to become profitable. Your initial funding should be able to cover operating costs until your business can support itself.
Consider getting a traditional commercial loan, business lines of credit, and small business loan to start. Make sure to research all of the available options thoroughly before you make a decision.
6. Find a Commercial Space
Find the right commercial space and a good location can ensure that your business sees a steady flow of foot traffic. When looking at spaces, complete a location analysis and look at:
- Proximity to Your Target Demographic
- Distance from Suppliers
- Crime Rates
- Regulations and Zoning
Also don’t forget to consider the space itself.
Is there ample room in the kitchen? Are there necessary gas, drain, and water lines already installed? Is there any foot traffic on the street? Is the front-of-house area large enough for your needs?
Once you find the perfect place, we suggest getting a lawyer to help with negotiations. This will also help make sure all the necessary paperwork and regulations get filled out.
7. File for Permits and Licenses
There are many permits and licenses your new coffee shop needs before opening. This will differ drastically by state so check with your local government to ensure you have all of the paperwork in order. Note, waiting for approval on your permits will take time, so be sure to plan ahead.
8. Design a Layout
Creating an optimal design for both your front- and back-of-house areas is essential. Look to design a space that allows for both your efficiency and your customers’ comfort.
When designing your front-of-house area, think of what kind of atmosphere you want to create.
Do you want offer privacy to appeal to people doing work or holding meetings? Would you prefer an open concept that feels airy and modern? Either way, consider the size of your space and how you can maximize the seating.
A;so consider your color choices and the style of furniture you use. This will certainly affect your customers experience. Dark colors will make the space feel more intimate, lighter colors feel more inviting, and bright colors increase customers’ appetites. Also, if you’re going for a contemporary aesthetic, your furnishings should match that style.
For the back of house make efficiency and flow crucial. Consider what stations there will be and how orders will flow. This process will start with the order being taken, then prepared, then served, and how the equipment will be cleaned. Also, if you are going to serve food map out where food equipment will fit into your layout.
9. Order Your Coffee Shop Equipment
Ok you are finally ready to get your equipment. Here is a starter list of what you will need.
- Coffee Brewers
- Espresso Machine
- Coffee Grinder
- Hot Water Dispenser
- Reach-in Refrigerator
- Ice Machine
- Bakery Display Case
- 3 Compartment Sink
- Frothing Pitchers
- Frothing Thermometers
- Tea and Coffee Mugs
- Espresso Cups
- Cup, Lid, and Straw Organizers
This is just some of what you will need but enough to get you started.
10. Hire and Train Your Staff
Excellent customer service will be important for your new cafe. Be selective when hiring staff and consider how you want your customers to be greatred. It can be cheaper to get newbies to the business but experienced baristas will surely save you some headache.
If talent is light in your area then consider bringing a professional training team out. They will handle all aspects of getting your employees up to speed before doors open.
11. Open Your Coffee Shop
Finally, the last step: Opening day.
Know that going into it, if you completed the steps above then you are prepared and ready to turn it into a success.
Before you officially open, be sure to advertise your new coffee shop on social media and in local publications to drum up interest. Try offering discounts or specials on your opening day can help encourage customers to stop in and potentially become repeats.
The most important thing to keep in mind when starting a new coffee shop is to stay organized and follow your business plan diligently. From there work on building a loyal base, and your new coffee shop will be set up for success.