So You Want To Start A Coffee Shop...

So You Want To Start A Coffee Shop

Most Americans drink coffee, and by most we mean an astounding 83 percent. That already-impressive number continues to grow[1]. If you're one of the coffee-chugging millions and you think you have what it takes to make a buck in this thriving market, we've got some tips to help you start your own coffee shop.

Table of Contents

Deciding if You Want to Open a Franchise

Starting an Independent Coffee Shop

Curating the Perfect Coffeehouse Menu

Licensing and Permit Requirements

Buying the Right Equipment

Part of the beauty of coffee is that it's simple to create. It doesn't have to take a whole lot of overhead to get a coffee business up and running. You can start a coffee-selling business with a simple kiosk or a cart that you can set up on a street corner or take to events. That type of venture requires the least startup capital, and it's something that you could treat as a side job on weekends and summer nights.

If you're dreaming of going all out and establish a brick-and-mortar coffee shop replete with comfy couches, witty baristas, and weekly poetry slams, that's a big investment- both financially and time-wise. But, it's one that can certainly pay off if executed with care and dedication.

Deciding if You Want to Open a Franchise

Before you go any further, you need to make your first big decision. Do you want to cultivate your own independent coffee concept from the ground up or buy into a franchise? The latter route definitely has its benefits, the biggest being the automatic name recognition and brand loyalty you gain from people who are already fans of the company. You'll also have all the best practices and operating procedures handed to you, with your job being primarily to implement them at your store.

The biggest barrier to many prospective franchisees is the initial cost required to get into the game. The franchise fee, which is essentially your ticket in the door, will cost tens of thousands of dollars. On top of that you have to foot the bill for most of your equipment, supplies, and operating costs. Those usually ring in at a couple hundred thousand dollars, but occasionally cross the seven-figure mark.

Additionally, franchisors commonly require franchisees to have a certain amount of liquid cash available. See the following chart for the costs associated with becoming a franchisee of some of the hottest coffee brands.

FranchiseInitial FeeRoyalty FeeAverage InvestmentSource
Seattle's Best$25,0004%$265,000 - 446,108Franchisedirect.com[2]
Dunkin' Donuts$40,000 - 90,0005.9%$216,100 - 1,530,050Entrepreneur.com[3]
PJ's Coffee of New Orleans$10,000 - 25,0005%$166,000 - 440,000Entrepreneur.com[4]
Carbou Coffee$25,0005%Not AvailableCariboucoffee.com[5]

Starting an Independent Coffee Shop

If you decide to blaze a trail with your own unique concept, you've got your work cut out for you. So many cafes that open to a great deal of fanfare end up failing within a short time of their grand openings. Don't be a statistic. A well-planned coffee shop can be more than a place to grab a morning latte. It can truly be that third place that forms a cornerstone of the community.

Developing Your Café Brand

To become a successful business, your shop needs a clearly-defined brand. Ask yourself what's going to make it unique in terms of what your menu will look like, as well as the environment you want to create. This also means you need to define your target clientele. If you try to please all of the people all the time, you'll dilute your brand and have trouble building a solid following. You want your customers to feel like it's their coffee shop, even if that means you create a concept that certain demographics won't have much interest in.

You should begin with understanding the demographics of your city. A large working-class population may have less interest in unique espresso drinks and just need a place to make a quick stop for their morning cup of joe. If your neighbors have a good deal of disposable income to spend at your shop, they may be looking for coffee drinks like lattes and cappuccinos made from choice ingredients. A younger clientele, the kind that would be abundant in a college town, may be attracted to unique offerings that satisfy their thirst for adventure - consider unconventional flavors and an edgy atmosphere.

The United States Census Bureau provides a number of tools, including the American Fact Finder[6]

Choosing the Right Location for Your Café

Your business' location can make it or break it. Even a spot-on brand with the best coffee in town will struggle to survive if it's in a poor location. Start scouting yours by paying attention to daily traffic patterns. State and local officials may be able to help here, since they often collect traffic counts.

If you want to target morning commuters, find a location that's easy to get in and out of for people going to work. If you're looking to target a lunch crowd, find a spot that's convenient to local businesses that employ your clientele. Convenience, visibility, and safety should be your deciding factors.

Creating an Inviting Atmosphere

Another part of luring and keeping your clientele comes down to choosing your décor and furniture. Young people might prefer to frequent a shop with unique artwork and cozy furniture where they can gather with friends. Working professionals may want a place to sit and plug in their laptops where they can feel like they'll be able to get some work done without too much interruption. Upper crust customers might prefer an air of sophistication informed by old-world motifs.

Whichever is closer to your ideal, remember that consistency is key. Try to avoid blending those concepts together or you might confuse your customers and make it so none of them feel at home in your shop.

Curating the Perfect Coffeehouse Menu

Begin with The Bean: Sourcing Coffee

It might sound obvious, but the first step in putting together a coffeehouse menu should be to find the right coffee to serve. You have several options when it comes to sourcing your beans. You could ask around at area businesses to see if there are local roasters you could buy from. The internet is also a good source for finding coffee importers to do business with. A Google search for "wholesale coffee" yields dozens of potential partners for you to consider.

It's often not enough just to serve up a good fresh cup of coffee. Many serious coffee drinkers expect an origin story. Concerns over unfair trade practices and unsustainable growing techniques have lead many roasters to make it clear that their beans are grown and sold by ethical practices. Some customers will want to know that the coffee you serve meets those standards.

Furthermore, like wine grapes, coffee beans take on a distinct flavor depending on the climate and soil their grown in. To help your brand stand apart and to prove that you're serious about your coffee, consider buying single-origin beans that are kept together with beans of the same batch through the whole supply chain. That practice lets the coffee maintain its geographically distinct flavor that many customers take a great deal of interest in.

Food and Snack Offerings

Assembling a killer menu goes beyond the bean. The real profit potential for the entire day lies in offering sweet and savory snacks, and even full course meals. As a matter of fact, your long-term survival might depend on what you serve on a plate rather than in a cup.

Coffee being the breakfast of champs that it is, it makes sense to pair it with other early-morning items. Pastries, bagels, and biscuits can be baked in house or sourced from local vendors, and they can be as simple or as complex as you deem necessary to satisfy your clientele.

If you think your business will support a strong lunch crowd, a simple panini press doesn't take up too much counter space or require a great deal of skill to operate. Still, they can grill up sandwiches that are a step above traditional cold-cut deli fare. Complement those sandwiches with simple-to-serve chips or french fries and you've created your own lunch spot.

Don't neglect thirsty patrons who prefer cold fizzy drinks to hot ones. Soft drinks also carry a high profit margin, especially when they're dispensed at a bag-in-box fountain. Chocolate and candy can also be paired with a coffee concept, and make reliable impulse buys that keep without refrigeration.

Licensing and Permit Requirements

When you feel confident that you've got a rock-solid business plan, it's time to turn your dream into a legal entity. This entails a whole lot of paperwork. Every type of business needs to apply for certain things, including a general business license and an Employer Identification Number from the IRS [7].

Foodservice businesses are required to apply for a number of other permission, too. Those include food handling permits, approvals from the health department, and certificates of occupancy saying that their buildings are sound and safe for visitors. Finally, you'll need a permit or two to legitimize your physical presence. A brick-and-mortar location will need to conform to zoning requirements, and a cart or kiosk will be restricted in where it can be set up.

The U.S. Small Business Administration[8]is a good place to start educating yourself about the licenses required to open a business. Contacting your local chamber of commerce is another good step. Local governments are on your side as a small business owner. Your success means more tax dollars and economic growth for the city, so seek out your allies and know that you don't have to navigate the maze of red tape alone.

Buying the Right Equipment

Choosing the Best Coffee Brewer for your Coffee Shop

Now it's come time to choose the equipment you need to start serving your patrons. Commercial coffee equipment is a little bit different than what you have in your home, so do your research to make sure you get what you need.

Every coffee shop needs a reliable brewer, sometimes called a pourover machine or a drip brewer. These make what most people would simply describe as 'regular' or 'drip' coffee. They brew coffee into containers, often a glass decanter, but we recommend investing in coffee airpots, which can keep coffee fresh and piping hot for several hours while preserving its taste. You should never rely on an electric element to keep coffee hot for more than 30 minutes, because it will quickly degrade the quality of the coffee and cause it to develop a bitter taste.

Size your brewer based on your expected volume. Different clientele will have different demands for one type of coffee versus another. Smaller brewers can brew about five gallons of coffee an hour, while the largest ones can make triple that amount.

Unless you're sticking to old-fashioned drip coffee, you'll need to invest in an espresso machine, too. These things can seem pretty complicated for a first-time buyer, but luckily there's a buying to guide to help you choose an espresso brewer. The main difference between them, other than their output, is what level of automation of the brewing process they provide.

Semi-automatic versions require a good degree of skill on the part of the barista in order to produce a consistent shot, while a superautomatic machine does nearly everything for you. Again, it's important to size your machine based on your expected output. Making espresso drinks can be an involved process, and lines can back up quickly without an efficient setup behind the counter. A good way to prepare for a rush is to have an espresso machine with two or more brew groups and at least two baristas on staff to operate it simultaneously.

Additional Equipment You Might Need

These are some of the essential pieces you might consider equipping your shop with so you can provide those all-important non-coffee offerings.

  • Whether you're sourcing them from a vendor or baking them in house, you can show off your bakery items and keep them fresh with a bakery case.
  • Without a doubt you'll need a way to keep your perishables cold, even if it's with a simple undercounter refrigerator to store your milk and cream.
  • Larger operations that need to keep larger amounts of chilled foods will require a reach-in refrigerator. If you plan on offering an extensive menu, a walk-in cooler might be in order.
  • Refrigerated snacks like pie are at home in a well-lit, wide-windowed deli case.
  • An undercounter ice maker will keep you stocked with cubes or nuggets for your iced coffees and soft drinks without taking up too much space.
  • If you want to offer sandwiches or wraps you also need a way to keep all those perishable topping refrigerated and fresh. The prep table is a piece of equipment designed specifically for that.
  • The high-speed oven is a favorite piece of equipment for heating smaller batches of food quickly and with great results. They can bake fresh items, toast sandwiches, and reheat frozen foods for entrees and appetizers.
  • The panini press, that can toast their namesake sandwiches, as well as burritos and wraps.
  • A deep fryer, whether you choose a countertop version or a full-sized floor model, is a versatile piece to have on hand for preparing fries, chips, appetizers, and countless other fried items for snacks and entrees.

[1]Fernau, Karen. "Coffee grinds fuel for the nation." USA Today Accessed 17 April 2015.

[2] "Seattle's Best Coffee Franchise Costs & Fees." Franchise Direct Accessed 17 April 2015.

[3] "Dunkin' Donuts." Entrepreneur.com. Accessed 17 April 2015.

[4] "PJ's Coffee of New Orleans." Entrepreneur.com Accessed 17 April 2015.

[5]"FAQ - Franchising: How Much are Your Franchising Fees?"Cariboucoffee.com Accessed 17 April 2015.

[6] "U.S. Census Bureau: American Fact Finder."factfinder.census.govAccessed 17 April 2015.

[7] "Apply for an Employer Identification Number (EIN) Online".irs.gov Accessed 17 April 2015.

[8] "U.S Small Business Administration"sba.gov Accessed 17 April 2015.