How to Start A Coffee Shop?

Have you been following along with our How To Start A Business series? Our blog is a hub for commercial real estate investors and entrepreneurs. Prefabricated metal buildings are the ideal option for starting a business of any size. We have a great article about why prefab steel is the number one choice for building materials amongst commercial real estate investors here. But today, we’re taking a deep dive into your next possible business venture: opening a successful coffee shop. 

Why should you open a coffee shop or cafe?

There are an estimated 100 million coffee drinkers in the U.S. alone. If you’re an avid coffee drinker, you know where every potential caffeine pit stop is on your way to work, running errands, and everywhere in between. If there is a lack of coffee in your neck of the woods, there may be an obvious need to be filled. If there are already local coffee joints in your area, that doesn’t mean the market is saturated. Each cafe holds the ability to provide a unique experience to coffee drinkers, or even potential customers who don’t regularly drink coffee.

If there are already many coffee shops in your area, it’s time to turn your daily cup of coffee into a more comprehensive experience. For example, in college towns, many coffee shops are connected to bookstores, featuring a library-like atmosphere where students can feel comfortable staying for longer periods. This is also an excellent option for areas where many residents are known to take part in remote work. A coffee shop with a comfy workspace can quickly evolve into a second office for those who work from home. 

More than half of regular coffee drinkers pour their first cup within the first hour of waking up. Many coffee shop owners combine baristas with bartenders, serving coffee in an AM and beer in the PM. (Check out our article here about starting a brewery – a combined beer and coffee experience, maybe your next business venture!)

 How do you create a business plan for a coffee shop?

If you’re looking to receive a bank loan to get your business started, you’ll need a long-form business plan as well as a short, one-page pitch to validate your strategy. The contents of that business plan will change based on the type of coffee shop you plan to open. There are plenty of options, but the size of the operation will be the most drastic difference. 

• Coffee Kiosks: drive-throughs and coffee carts for people on the go
• Standard Coffee House: serves only coffee
• Internet Cafes: coffee houses with sitting space and free internet access for students, remote employees, small business owners, etc.
• Cafe: usually includes baked goods, light breakfast or lunch, or an attached restaurant
• Coffee Roaster: roasting your beans on-site and selling beans and grounds
• Coffee & Beer: a combo barista and bar scenario 

A good business plan will give the bank a sense of who your market is, how you’re going to reach them, and what makes your business idea different from other coffee shops. Even if you’re providing your capital, a long-form business plan will help you make sure that all your bases are covered without making assumptions about the future of your business.  

How much does it cost to open a coffee shop?

There are so many factors that can drastically change the initial investment of starting a coffee shop. Finding the ideal location with your desired amount of traffic will undoubtedly take up a significant percentage of those costs. 

Looking at the big picture, Shopkeep estimated that opening a successful coffee shop will cost between $80,000 and $250,000. One of the costs that are easiest to estimate is equipment. Coffee drinkers generally take their brews very seriously. It is always worthwhile to invest in high-quality equipment for your customers. At a minimum, you can expect to spend $10,000 on water filtration systems, commercial coffee grinders, espresso machines, etc. 

After the higher costs are covered, the smaller costs of maintaining inventory can start to add up. To open your doors, you’ll need to be stocked with around $2000 in coffee beans and teas. Cups, containers, napkins, stirrers, and straws can run you up to another $2000. Then, you’ll need to account for the ongoing expense of operating a point of sale system and software. 

Designing a successful coffee shop

Many people assume that a prefabricated metal building is a simple, box-like structure, delivered to you without any customizations. In reality, the best prefab steel buildings won’t look any different than any other brick-and-mortar stores. You’ve more than likely walked into your fair share of prefab metal buildings without even realizing it. The possibilities are practically endless when it comes to customizing the interior and exterior of your structure. So, you should carefully consider the flow of your coffee shop when designing the layout. 

It’s fun to consider the more exciting design aspects of the coffee shop, like plush seating areas or an outdoor cafe. But the most crucial step you can take is zooming into the work station. Coffee shop equipment, like an espresso machine, drip coffee makers, milk steamers, bean grinders, bean storage, a sink, and cup storage, can take up a great deal of counter space. Nevertheless, it’s all necessary. Picture yourself working in the space and find the ideal placement for brewing and checkout that will provide a smooth workflow.

What licenses and codes should a coffee shop be worried about?

Before you open your doors, you’ll need to thoroughly understand the permits necessary to serve food, play music, and hire employees. Your first step is acquiring a Business License and Employee ID Number. Without them, you won’t be able to open up a shop. Even if your coffee shop doesn’t serve food, you’ll still need a Certificate of Occupancy and Food Service License. If you’re building a structure from the ground up, these licenses will be secondary to those you’ll need to start construction. Hiring a trusted, licensed contractor will take a great deal of responsibility off of your plate. 

While you’re at it, you may want to consider hiring an accountant for your small business. Not only will an accountant help you stay on top of business and employee taxes, but they can also act as a small business consultant, helping you stay on top of your goals. 

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