Multibillion-dollar market exist for coffee globally. The US coffee industry alone is a $14 billion market. In 2020, COVID caused a slight decline, but the trend toward coffee is increasing again. The coffee industry’s growth is underway, making it an excellent time to open a coffee shop. You may not be sure where to start; we will go over the steps to help you open your own coffee shop in this article.
Step #1: Choose a business option
Starting a coffee shop business can be achieved in three ways. If you’re wondering how to open a coffee shop, you can do one of the following:
- Open your own shop from scratch
- Buy coffee shop franchise rights
- Rent or buy an existing coffee shop
These various options all have pros and cons. As a franchise owner, you are bound by many aspects of that franchise, from the type of beans you can use to the shop’s decor. On the other hand, you might have fewer costs if you buy another coffee shop like construction. Consider both pros and cons before you decide which option would be the best to start.
Step #2: Establish a business plan for your coffee shop
A coffee shop business plan is primarily a document that describes the idea behind the business and how it will succeed. The questions it answers include how much it will cost to set up your cafe, how you will fund those costs, and how much money you expect to make. Considering your competition, target market, and pricing structure is an essential part of your coffee shop business plan.
When you finalize your business plan, you can present it to potential investors, financial institutions, and partners who might help you to open your cafe. This document is crucial, so you should take the time and effort to make sure it’s right.
Step #3: Look for commercial space
Finding the best commercial space for your cafe is important because a good location can increase your customer base. The space itself is also crucial and should be taken into the account. In addition to where the store is located, it is essential to consider both the location and the physical space to determine whether it is suitable for a coffee shop.
- Is the street busy with foot traffic?
- How many coffee shops are nearby?
- Are you able to fit in as many tables as you predicted in your business plan?
- Is the kitchen space sufficient?
To ensure all the required paperwork and regulations get filled out, we recommend hiring a lawyer when you find the perfect location.
Buy or rent?
If you have the funds, you can buy a store and forget about future rent increases. However, we are assuming that this will be your first coffee shop. In that case, starting with a rental would make more sense and less risky. Suppose the location is not what you have imagined, or you decide to expand in the future; you can find a new rental store without a mortgage liability.
Planning to open a coffee shop? Checkout our guide about Best Sound Systems for Cafe and Restaurants in 2021. Click here
Step #4: Apply for licenses and permits
When opening a coffee shop, there are some licenses and permits that are necessary. If you fail to obtain these licenses in a timely manner, it may delay opening your location or result in penalties from multiple agencies. Legal assistance may help you outline the steps and ensure that you do not miss anything under the local and state laws. Generally, the easiest way to get permits is to start with the required business licenses for your coffee shop in your State and then work your way down from there to the local requirements.
Step #5: Buy and install equipment
Purchasing of new equipment
The equipment like fridges, coffee makers, coffee grounders, etc., will be the highest-priced items on your list, but you can find ways to save some money. If you can purchase directly from the manufacturer, you will eliminate the middleman and extra mark-ups. If buying from a distributor, consider the market and the prices available. Spend some time browsing, search multiple distributors, and get quotes from different ones to find the best price that will fit your budget without compromising quality.
Purchasing used equipment
Used equipment will be cheaper than the brand new one for sure; however, you need to consider the lifespan of that specific machine. For example, when buying a used espresso machine, a professional one can last anywhere from 1 to 15 years, depending on how well it was previously maintained. Ensure to check all the previous maintenance or service on the machine and the original receipt to see the date of purchase.
If the equipment is about to reach its lifespan, spending more money and buying reliable equipment will be better in the long run.
Free (sponsored) equipment
When you sign long-term contracts with food & beverage suppliers, they may sponsor your fridges or coffee makers. It’s a win-win for both the supplier for marketing purposes and for you for saving money on the equipment. It may require some skills and luck, but don’t give up on this option if your budget is lower.
Step #6: Hire and train your employees
One of your biggest challenges will be hiring the right staff; baristas, general managers, cleaning staff, pastry chefs if you are offering food, and so on. Retaining your employees will also take a lot of work in this very competitive industry. You can reduce the turnover with competitive salaries, education benefits, holiday bonuses, and motivation.
It’s also important to clearly explain your expectations when hiring and training the employees. You can invest in trainers from the industry who will provide constructive criticism while praising a job well done. There is no substitute for practice when it comes to interpersonal communication.
Step #7: Create an inviting atmosphere
Customer satisfaction relates to the way you present your coffee and decorate your shop. Many people visit a coffee shop because of its “vibe,” so you should consistently convey how you want your consumers to feel. The cafe is both a relaxing place to sit quietly and study, as well as an excellent place to meet with friends over coffee. Here are some ideas:
- Set the mood by using color
- Create a condiment station for customers
- Provide books and magazines
- Make latte art
+1: What about music?
There was a reason that we saved it for last, as we believe music can play the most crucial role in creating the right atmosphere. Avoid streaming music through Spotify, Pandora, or YouTube.
Read our guide about using Spotify, Apple and others.
These services are for personal use and will not cover your business music licenses. If you ignore the Copyright Law, in other words, if you play such music in your café, you could be fined thousands or even hundreds of thousands of dollars. You need to choose a commercially licensed background music provider if you want professional background music and compliance with the law.
Such providers are not expensive at all, so you don’t have to worry about spending a significant part of your budget on music. Try Jukeboxy, where you can get tens of millions of songs and curated soundtracks for as little as $24.99 a month. Create an unforgettable atmosphere in your coffee shop and play the music that will keep your customers coming back for more.