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How to Start a Coffee Shop: 3 Mistakes to Avoid

How to Start a Coffee Shop

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How to Start a Coffee Shop

If you’re looking to start a Coffee Shop, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key Coffee Shop industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a Coffee Shop business, but succeeding in it!

How big is the Coffee Shop industry?

The Coffee Shop industry has grown at a rate of 4.3% over the past five years. The industry's 74,267 establishments are expected to collectively bring in $39.4 billion this year.

What are the key segments of the Coffee Shop industry?

Sales in the Coffee Shop industry are dominated by coffee beverages. At 51% of industry revenue, this is the largest product segment. Other beverages and food items make up another 45% of revenue, and other items such as mugs and packaged coffee round out the remainder of industry revenue.

What external factors affect the Coffee Shop market?

A number of factors affect the performance of the Coffee Shop industry. These drivers include:

Consumer spending - Like any business in the food service industry, coffee shops depend on consumers' willingness to spend discretionary cash. As such, times of economic growth tend to benefit the industry.

Healthy eating index - Consumers are becoming more aware of the health issues associated with a poor diet. Therefore, coffee shops that offer healthier alternatives alongside other menu items will benefit.

Per capita coffee consumption - Coffee shops depend on coffee drinkers. Per capita coffee consumption in the US has remained fairly steady over the past five years, and is expected to rise slightly in the next five years.

Coffee Consumption in the US

Who are the key competitors in the Coffee Shop industry?

Starbucks leads the Coffee Shop industry, with a 39.8% market share. In second place, Dunkin’ Brands has captured a 21.9% market share.

What are the key customer segments in the Coffee Shop industry?

The key customer segments in the Coffee Shop industry are as follows (with the percentage of revenue they generate in parentheses):

  • Household with the highest income quintile (37.8%)
  • Households in the three middle income quintiles (>50%)

What are the key financial metrics and costs in the Coffee Shop industry?

The key financial metrics in the Coffee Shop industry are as follows:

Purchases - The greatest expense for Coffee Shops is the purchase of food and beverages, and account for approximately 38.5% of revenue.

Wages - Wages are the second-largest expense for the industry. This is due in large part to the labor-intensive nature of the business.

Other expenses include equipment depreciation, rent, advertising, and sometimes franchise royalties.

What are the keys to launching a new Coffee Shop?

  1. Have a business plan. A great business plan will go a long way in helping you get the funding you need to open a Coffee Shop.
  2. Choose a coffee roaster. Be sure to find one that not only roasts great coffee, but one that also delivers on time.
  3. Choose a location. It is crucial for a Coffee Shop to be located in a busy, accessible area. One veteran coffee shop owner recommends parking near the location you've chosen (pre-lease agreement) to count cars and people.
  4. Become an expert barista. Be the most knowledgeable person on your team, both in technique and in product knowledge.
  5. Hire the right people. Be sure every person on your team loves coffee, and then help them develop that passion and gain expertise via cupping sessions.
  6. 6. Develop the menu. Many coffee shops offer a variety of coffee drinks, but also offer other drinks and a limited food menu.

Coffee Shop Menu Example

Coffee Recipes

What are the typical startup costs for a new Coffee Shop?

One-time costs:

  • Lease deposit
  • Building upgrade
  • Equipment purchase - including espresso machine, brewing equipment, refrigerator, POS system, etc.
  • Permits and licenses
  • Starting inventory

Ongoing costs:

  • Wages
  • Rent
  • Equipment maintenance
  • Inventory replacement
  • Utilities - including wireless internet

How much do Coffee Shop operators make?

According to the Bureau of Labor Statistics, Top Executives in the Special Food Services sector have an annual mean wage of $91,000.

Keys to Coffee Shop Success



Coffee Counter Example



10 Steps to Promote Your Coffee Shop

Helpful Videos

The Art of Pour Over Coffee by Joe Bean Coffee Roasters

What's it really like to own a coffee shop?

How to run ...a coffee shop

Secrets of a coffee shop - Workshop Coffee London

Additional resources in the Coffee Shop industry

For additional information on the Coffee Shop market, consider these industry resources:

www.restaurant.org
National Restaurant Association

www.ncausa.org
National Coffee Association USA

www.bls.gov
US Bureau of Labor Statistics

www.scaa.org
Specialty Coffee Association of America



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Growthink helped birth my company. They got to know both me and my vision. They helped ‘smack me upside the head’ to help make sure I was realistic, about meeting expectations. As a result, they helped craft, draft and construct the right written presentation. As a result, I got my funding.

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