How to Start a Coffee Shop
How to Start Up a Coffee Shop
Who doesn’t love the aroma of freshly ground java in the morning? Or get a mental kick as the warm scent of freshly toasted croissants wafts through the station? Perhaps you’ve got a few half-punched loyalty cards stashed away in your wallet or get greeted by name whenever you step foot in your local cafe?
There’s good and not-so-great news. Coffee shop sales are set to grow at least another 29% to reach a mind-numbing £4.3 billion in the coming five years, Mintel says. It’s an uber-competitive industry, yet just under half of Britons choose to go to what Mintel calls ‘non-specialists’ – places like M&S and the local BP Express. On the other side of the fence, market experts Citigroup are hinting that after this, there won’t be any more room for growth in a totally saturated market. Even though we, as a nation, downed about 95 million cups each day during 2018.
Starting your own coffee shop can be both a great way to swap one daily grind for another and an altruistic saviour, rescuing Brits from petrol station coffee. You’ll need to think about a few things to make it a success, though. Online there are millions of ‘how-to’ articles, which is why this time, at FindMeAStartup, we’re going to focus more on the softer side of things – things to help you stand out.
Should I start from scratch?
There are bazillions of franchise opportunities available. If you’d like to be part of Costa, Nero, or Starbucks’ ever-growing international ubiquity, you can often go the turnkey route. (But not always – Costa, for example, aren’t taking on individual franchises at the moment due to massive growth.) You could be part of every aspiring MBA’s next business strategy assignment, too…!
Another option is to purchase an existing coffee shop. If you’re looking for something more akin to passive income, you could always buy a cafe that’s already staffed and stocked. You’ll still have a fair bit to do if you’re planning to take an existing business up a notch but may not need to re-invent the wheel. For example, suppliers will already be sourced and systems set up, so revamping things will be discretionary.
Fun fact: Research says at least a quarter of Brits drink coffee for energy before a workout.
Maybe, though, just maybe, you live in a town that’s going blue in the face for something different. A place that’s just gasping for something organic, in sustainable packaging, or where YOU can be the pioneering artisan amongst non-specialists. But what will you need to conquer?
- Premises – Will your target market be pedestrians? Shoppers in a centre? Motorists and lorry drivers? Weigh up foot traffic, visibility, and competitors in the area against financial must-haves like affordable rent and rates. A back garden could be idyllic in the countryside while giving families a chance to get some air;
- Business plan – There’s no escaping it with such a resource-intensive business idea. Your plan should cover things like financial projections, target market demographics, Unique Selling Point (USP), staff, operations, and capital layout. A solid business plan is also essential if you ever need/want a business loan;
- A great idea – ‘Coffee’ alone is not a strong enough selling point. Neither, while we’re at it, is ‘Coffee and Lotus Biscuits’. Your great idea doesn’t have to be something earth-shattering, it could just be consistently decent, high-grade coffee and unparalleled service.
I have no good ideas.
Sure you do! You may not be able to claim that J.K. Rowling wrote the Harry Potter novels at your cafe, but there are millions of ways to be different.
Millennials in particular value sustainability and ‘the bigger picture’ highly, so there’s always room for you to offer something that’s good for the planet and others. Green packaging, bicycle racks for customers, fair trade coffee, organic beans and tea, or some combination thereof. We’d visit your store!!
If commuters are your game, why don’t you stand out with ‘grab-and-go’ breakfast deals? How about a loyalty programme that involves more than just punch cards? In a small town where everyone knows each other, adding a personal touch could be your jam!
Another great idea is to tack your coffee shop onto your existing business if you’ve got one. Starting up a soft play centre like we mentioned, or know someone who is? Parents LOVE coffee! Opening shop in a tourist town? Why not serve cream teas? (MASSIVE SUCKER for cream teas, I am.)
Your coffee shop should make people want to stay and hang out. The morning rush may be your key money-maker, but people are rarely drawn to dingy, dark places in the first instance, right? Things like plants, pictures, posters, signage, comfy seating, WiFi, and power points for laptops can all work together to make your cafe super special.
Friendly staff who go above and beyond will always be a huge differentiating factor. I worked at a cafe where one of our regulars always ordered an egg and bacon sandwich and a large English Breakfast. When the cafe changed hands, the new owner would no longer allow this because these items weren’t ‘officially on the menu’ (people had to order two small teas because she thought this would boost sales). We may have lost only one customer, but it also cost the owner a lot in terms of pleasant vibes and respect from staff.
Why the anecdote? Basically:
Customer loyalty = Customer retention = Lower marketing costs
Not that you need to bend your rules for everyone, but something simple like a small discount for bringing your own reusable cup can go a long way.
Don’t forget the back-end
Staff-wise, you will want people you can rely on. People like:
- Serving staff;
- Cleaners, who you may choose to outsource or not.
Ideally, your ‘skeleton crew’ or ‘key staff’ will be able to share their experiences on what equipment is needed, pricing, and so forth if you are open to suggestions. This could be anything from a simple ‘mom and pop’ cash register and oven to digital systems and staff with tablets.
Pricing, quality, consistency
The markup on a cup of coffee is pretty high, but you’ll need to shift loads of it to make a decent profit. Your costs should not be so high as to scare away regulars, but after an initial period, you should be able to cover staff costs, utilities, rent, tax, and insurance.
Being dependable is crucial. Source reliable suppliers, a talented barista, and aim to be an outlet that people can consistently rely on. This way, you’ll be able to guarantee quality. Two key motivators:
- Nothing’s scarier than a caffeine-starved mob that’s been waiting ages for a fix; and
- Regulars are more likely to come back on autopilot if they know you serve impressive coffee that hits the spot every time;
- Good quality means good reviews means more walk-ins.
Wherever food and hot beverages are served to the public, liability insurance is needed. For a small annual insurance fee, you’ll be ticking the regulatory boxes (for this at least) and could be covered for up to £5 million in potential damages.
VAT also applies if you are serving items for consumption on dedicated premises – i.e. anywhere in your shop or outdoor area. If you’ve ever been charged a higher price to have a warm sausage roll from a bakery, you may have wondered why that spin in the microwave cost you 50p extra. It’s because warmed up takeaway food is also subject to VAT. To get to grips with all the different things that count and do not, you’ll need to be prepared for some research.
One last thing…
Cater to your target market…and it doesn’t hurt to be flexible. If you find that you’re doing a rip-roaring trade, learn what you’re doing well. If your income driver is mostly people’s nans coming in for tea and sandwiches, there’s (probably) no point trying to expand into caffeine-spiked flaming Lamborghinis and espressos at £7 a cup. If its tourists, check out your Trip Advisor and see what they really love about your cafe. Play to your strengths and you won’t waste resources or run yourself into the ground. You can always use your profits to try again elsewhere!