Small Business Brief

Food Business

The Truth About Cafes: Is Starting a Coffee Shop Hard?

We’re a nation of coffee addicts. We top the global charts with 400 million cups of coffee consumed every day in the United States.

That makes starting a coffee shop a potentially lucrative business if you can get it right. 

Luckily, we’re here to talk you through the essential cost and considerations of setting up your own coffee shop. From the hidden costs to our top tips, you’re going to learn everything you need to get started today.

Starting a Coffee Shop 101

You’ve decided to take the plunge, you’re in the most exciting phase when you start to see how it could all come together- but how? The first thing you need to do is get an accurate idea of any costs involved:

How Much Does It Cost?

There’s no definitive answer on how much it costs to start a coffee shop.  Your costs will depend upon the type of coffee shop you want to open, the real estate costs in your community and many other variables.

Here are some general ranges for the costs of opening various coffee businesses:

  • 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 $300,000
  • Drive-thru only coffee shop: $80,000 to $200,000.
  • Coffee shop with seating and drive-thru: $80,000 to $300,000

What Does Each Stage Cost?

Once you have a ballpark, we need to get a little more specific. Let’s walk through the stages of opening your coffee business and price it up.

1. Write Business Plan

The first step of opening any business is writing a clear and comprehensive business plan. This is where you will outline the costs involved and detail the steps needed to get your business up and running. 

You can find plenty of examples online if you’re not familiar with the basics of creating a business plan.

2. Find a Space

The cost of your coffee shop space will vary greatly on a number of variables. Here are just a few costs to consider at this stage:

  • Renting or buying a commercial space. Leasing space in a popular area will help drive revenue but also increase costs
  • The cost of utilities. You’ll need to have the gas, electric, and water turned on during set up. This will add to your opening expenses.
  • Renovation costs. You need to transform a blank-slate rental into a space that resembles a coffee shop. You might have to pay for new light fixtures, cabinets, and decor. You also need to consider practical installations like coolers, freezers, and refrigerated display units.

Get quotes or estimates for each of these things to add to your business plan.

3. Buy Equipment

There are a few different types of equipment you’ll need to price up. Let’s take a look at these now:

Brewing Equipment

Here are a few pieces of equipment that no coffee shop can go without:

  • Water filtration system
  • Commercial coffee grinder and drip coffee maker
  • Espresso machine

If you go for all the high-end equipment it can add up to $100,000 so the key is to start basic and add to your collection once you are profitable. 

Inventory and Supplies

It’s not just about finding the best bulk coffee, there are other continuous costs to think about:

  • Drink options
    • Teas 
    • Coffee 
  • Cups
    • Paper cups
    • Containers
    • Clear plastic cups
    • Napkins
    • Stirrers
    • Straws
    • Lids
  • Food and drinks
  • Supplies such as cream and packets of real sugar, low-calorie substitutes, syrups, spices such as cinnamon, nutmeg
  • Milk, cocoa powder
Financial Equipment

Transaction technology will be your best investment. POS software can cost between $50 and $200 per month, while the hardware bundle will cost you a one-time payment of $1,200 to $4,000. 

It will pay for itself quickly enough and make your operations run more smoothly. 

4. Find Staff and Vendors

We include these in the same section as you need to estimate these to get your break-even point. 

You have no way of calculating these costs yet because you haven’t yet opened but here is a guideline. In the food industry, food and labor costs are called prime costs. Prime costs shouldn’t exceed 60 to 65 percent of total revenue.

Regular coffee drinks usually have a margin of 15 to 20 percent, and specialty coffee drinks around 12 to 18 percent. Your business plan should include a section in which you forecast your expected revenue. 

5. Marketing 

Marketing is key to the success of your business and you can get freelance or agency help with this or choose to do it alone. You need to build the online brand of your business and you should start early.

Start months before opening to build up and audience prior to opening. This ensures that you open to anticipated customers who already know your coffee shop. 

By understanding your niche and the audience you appeal to you can build a loyal following online. Don’t be afraid to show your personality.

6. Compliance

There are certain permits you will need for your business to be compliant.

The first permits every business must have is a Business License and Employee ID Number (EID). This allows you to operate a legitimate business with legal employees.

To legally run a restaurant or cafe you will also need a Certificate of Occupancy, and Food Service License. If you plan to serve alcohol as part of your concept then you’ll need a liquor license as well.

Each of these permits carries application costs that vary between states, so make sure to include that in your cost breakdown.

Espresso Yourself!

When starting a coffee shop you need to calculate all of these costs in your business plan. Preparation is key and you need to know what you’re getting yourself into. It all comes down to one thing in the end – can you afford to open your coffee shop?

By understanding all of the associated costs and planning your margins you can calculate how long it will take you to break even. If everything looks good to go financially then all you need is the motivation and the vision to make it happen. 

Did that help you figure out where to start? Keep browsing our blog for more tips and tricks for your business.