If you’re looking for the definitive guide to opening a coffee shop in 2023, this is it.
In this ultimate guide, we will cover 10 steps on how to start a coffee shop. This includes your coffee shop design, brainstorming for coffee shop ideas, your unique coffee shop business plan, and cost. Stay tuned for this complete and ultimate guide to walk. you through every step of the way.
1. Your Airtight Coffee Shop Business Plan
One of the most common questions we get is: “Do I need a business plan?”
The answer is usually: it depends.
Usually, when someone asks this question, they’re talking about a fully fleshed out financially-deep, written coffee shop business plan – the type that you’d take to a bank during the startup phase while securing investors or a loan. While that’s useful if you’re trying to secure a large loan from an investor (and wise to consider finances in the long-term), the type of coffee shop business plan we believe to be most beneficial in the early stages of opening a coffee shop? It’s more of a general gameplan and guideline that helps you understand how you position yourself in a competitive market, what makes you stand out, the brand identity you need your employees to embody, and your coffee shop design.
==> Check Out Tips on How To Market Your Cafe To Increase Sales and FootFall
Take time with your coffee shop business plan. All businesses start with an idea. Maybe your idea is entirely unique; you’ve never seen anything like it anywhere. Maybe your idea isn’t entirely unique, but it IS unique to your area. Whether you want to open a large cafe or a coffee cart, you need a game plan, such as preparing your coffee shop equipment and prepare a coffee shop cost breakdown. These are all important.
Your coffee shop business plans can run the gamut, but without a plan, it will likely always be just that. An idea. A perfected business plan brings life to your ideas, and forces you to consider everything you need to consider in order to both show others how seriously you’re taking your dreams, but also to provide a roadmap to follow throughout the life of your business. A business plan shows that you’re serious about what you want to do, you’ve done your homework, and gives structure to an otherwise intangible idea. It’s the road map that gets you from A to Z.
So how to start a coffee shop and come up with unique coffee shop ideas? Where do you get started? Some people may have gone to business school to prepare for this moment, but a great majority of our customers haven’t.
If you’re looking to be one of the first coffee shops in your area and without much competition, you might be able to get away without a structured plan. But if you’re looking to open a coffee shop in a competitive market – you will need to have a truly original idea and to understand your audience as best as humanly possible. This includes having unique coffee shop ideas such as coffee shop designs that are different from others. THAT is how you’ll get customers coming through your doors, day in and day out. A good business plan helps guide you towards success by forcing you to think about important details that may not be obvious at first.
One tip – you may find your concept changing as you work through your business plan – that’s normal! Maybe you find your unique coffee shop ideas no longer unique – someone has used the concept before! You may even find out your idea just doesn’t make sense on paper. You can theoretically spend lots of time and effort on something only to find that your idea isn’t working out halfway through – it can be demoralizing, but working through a business plan makes sure you’re not investing thousands of dollars in an idea that’s doomed from the start. At the end of the day, it’s better to lose a little bit of time and effort than potentially delve into a big, expensive business endeavor that never had much of a chance, to begin with. Working through these things sets you up for success when you finally do have that winning idea and location.
If your coffee shop does not currently possess a streamlined, developed business plan, we encourage you to check ours out.
2. Find the Perfect Location
Finding the right location is possibly the most important thing a potential coffee shop owner can do. This could help you gain an idea of your coffee shop cost breakdown and the kind of coffee shop equipment you need. Without the right location, everything else you do is potentially wasted effort.
What to look for:
Traffic. Traffic and accessibility are your essential needs. Depending on the community that you serve, it can be vehicle traffic (namely if you’re opening a drive-thru or have ample parking, but foot traffic is ideal). Through marketing and promotions (this comes from your unique coffee shop business plan), you may occasionally attract customers outside their immediate living and working areas, but you will almost never get regulars. That’s why you need to be near as many people as possible.
Large office buildings, hospitals, and tourist areas are the most ideal centers to concentrate on. Apartment buildings are not bad either but generally won’t lead to quite as much business.
The last thing that can make or break a location is renovations. You’d also don’t want to choose a place with a high rent price that won’t cover your coffee shop cost.
It’s tempting to look for a place that was already a restaurant or coffee shop, but that’s not always the best idea because a business already failed there once.
At the very least, it’s important to figure out why that business failed and what you can do differently. When looking at locations that aren’t properly vented and plumbed, make sure to factor in that cost (or talk to the landlord about doing it) because it can quickly turn into a massive investment.
Cafe Locations vs Coffee Cart Location:
Both cafes and coffee carts want similar things out of a location. Foot traffic is essential, as well as visibility. This could mean you’ll need a unique coffee shop design to attract people. However, because coffee carts are smaller and have less overhead, they are more flexible with where they can be placed.
3. Develop Essential Skills
Barista Skills
Plenty of people with varied backgrounds or entrepreneurial spirits want to open a coffee shop even if they’ve never worked in one, and that’s fine!
Not being able to jump behind the bar or train employees yourself can be a huge disadvantage when opening a new coffee business. This will reflect badly on your coffee shop business plan. You also won’t be as informed when it comes to the products you offer because you won’t have the firsthand knowledge of creating them and seeing how customers react.
By investing in your barista education and training, you naturally improve your ability to train your future employees.
Business Skills
Maybe you’re in the opposite position: you’ve been a barista and want to know how to start a coffee shop. Barista skills are vital, but a coffee shop needs a lot more than that to run well. Here are some of the business skills you’ll need to be confident in:
Negotiation
It might be your business’s value to someone else (like a landlord), or it might be a machine’s value to your business. In business, everyone is looking to get as much as they can, but everyone understands this. That’s why this value language is universal. Communicating benefits when talking about your own value and communicating challenges when buying are should help to get negotiations started off correctly.
Networking
Network early and network often. This will reflect positively on your coffee shop business plan.
Word of mouth is one of the most powerful means of getting new customers. By grabbing the attention of one person, you might also grab the attention of their friends and family. This goes a long way towards building up your shop as a real member of a community. Once you’ve attained that status, you know your networking is succeeding.
And never underestimate the power of reviews. They say that a negative review reaches five times the amount of people than a positive one. By being present in your business, you can drastically improve the amount of control you have in ensuring your customers have a positive experience.
Hiring
Nearly every coffee shop business plan is going to need an employee at some point, so this is a skill you’ll need. The most important advice we can give when it comes to hiring is to focus on personality and attitude instead of skills. Ask interview questions like:
- How would your supervisor and co-workers describe you?
- Give me an example of a time at work when you went above and beyond what was asked of you.
- Tell me about a difficult situation at work, how you got through it, and what you learned.
==> How To Hire The Right Cafe Manager
Bar skills can always be taught, but finding someone willing to go the extra mile with customers and for your business is nearly impossible to teach. Like we say above, good coffee is subjective to most customers, but good service is something they’ll remember. With every customer, you’re looking to make your coffee shop their coffee shop, and not everyone can do that. Of course, finding the right employees is only the first step.
4. Managing
Unless your pockets are very deep, you likely will not be able to afford hiring a qualified manager in the beginning phases of your cafe. It is imperative that you possess management skills, or can learn. Good management is not as simple as “being the boss”. As a manager, respecting and valuing your employees is first and foremost. Just making demands is the fastest road to unhappy and underperforming employees.
Remember, YOUR performance might be what needs improving. Always try your best to stay objective and understand the needs of the business, see what other people see, listen to the feedback you receive even when it might be uncomfortable.
Treat meetings as a constructive experience, and not a place to allow for complaints. Create a process where everyone can feel like their complaints will be heard and addressed in a constructive way – but meetings are NOT that place. Lots of things can affect people’s performance, and you never know what someone will be going through on a given day.
Budgeting & Inventory
Having an accountant in your corner can be a big help, but they can’t do everything for you. You also might not be able to fit an accountant into your own budget. What then?
Budgeting skills are vital in coffee where transactional profit is often low and inventory can make or break a business. Smart budgeting involves balancing past data with future assumptions to only spend as much money as you need. Budgets are seldom perfect, but being able to create one and develop it through observation is essential.
Marketing
We’ll cover marketing more in-depth below, but it is an essential and unavoidable part of a successful business. Effective marketing starts with outreach, but also includes many more layers to actually bring paying customers in. A new drink, sales, etc. are all ineffective if not marketed well. Some great idea to also make your cafe stand out is to give it a secret overhaul overnight – read here on how to make your cafe profitable at night.
==> Starting Out? Check Out Low-Budget Marketing Ideas
5. Stay Organized
Find Good Partners
You’ll certainly need a good general contractor experienced in cafe/restaurant spaces (more on that later) but what about other partners?
Step one is recognizing your weaknesses. As a business owner, you will have to be good at a lot of things, but no one can be good at everything. There are certain gaps that just can’t be ignored, and it might be wise to hire someone to help you in those areas. Here are four of the most common professionals you might want to look for:
Accountant or Bookkeeper
Money is at the core of any business, so making sure everything is accounted for and accurate is essential. A good accountant/bookkeeper can alleviate a lot of the stress that comes with money and provide some recommendations based on experience. Coffee shop budgets can become complicated quickly, so hiring an accountant to help, even for a short time, is essential. They can help you calculate your coffee shop cost breakdown through estimating what kind of coffee shop equipment you need in your cafe. This will help your coffee shop business plan tremendously.
Business Attorney
You likely won’t need to put a lawyer on retainer, but developing and good working relationship with a business attorney is a worthwhile investment. There are certain things that you will just need a lawyer to look over.
Human Resources Professional
Hiring an HR Professional is not as common as talking to a lawyer, but it should be. HR brings another perspective to your efforts that are not just about what’s legal (though they can help with that too). By talking to an HR professional, you’re making sure all your employee policies are correct and lawful, and you can feel confident hiring and working correctly with your staff.
Marketer
Getting a good marketing plan early can be a game-changer for new businesses. Asking someone with expertise to help you form a long term plan, make contacts, and execute strategies will pay off hugely in the long run. You may want to hire a marketer for a short time to get you started off and again down the line to scale your business up.
Employee Handbook
Most coffee shops will need at least one employee even before they open, so we can not emphasize enough how significant it is to get this done early and correctly. Getting a thorough, clear employee handbook early on helps set expectations and procedures for anyone you work with. A good employee handbook must have the following:
- Defining employees and their relationships with employers
- Standards of conduct for staff
- Team member communications
- Employment Policies
- Salary and Benefits Policies
Operations Manual
Most prospective business owners know they need an employee handbook, but fewer know about the importance of an operations manual.
Simply put: The employee handbook defines relationships and expectations, but the operations manual tells your employees how to actually do their jobs.
An operations manual is a supplement to on the job training and acts as a reference for employees. It limits your liability by making sure employees know how to consistently make drinks, maintain machinery, and interact with customers. It also provides you and your managers tools to make sure every employee is trained up the same way and to the same standards. No one can blame a barista for not following proper procedure if it was never taught, especially when it comes to
6. Begin Building
What is the coffee shop cost breakdown?
To get an idea for what opening a coffee shop costs, here are some general figures:
| Type of Coffee Business | Startup Cost Range |
|---|---|
| Full Cafe/Coffee Bar | $150-$300k+ |
| Coffee Drive-through | $75-250k+ |
| Coffee Cart/Mobile Operation | $20-$75k+ |
One of the biggest expenses in a coffee shop is your initial equipment. Here are some estimates for the big things that you’ll see in most shops.
| Equipment | Typical Cost |
|---|---|
| Espresso Machine | $9000 |
| Grinder | $2800 |
| Coffee Brewer | $2200 |
| Pastry Case | $4800 |
| Undercounter Refrigerator | $1800 |
| Upright Refrigerator | $2500 |
| 3-Compartment Sink | $1100 |
| Dishwasher | $3600 |
It’s not cheap, but being budget-conscious can keep things from getting out of control. Buying used equipment is always an option, but try to find out how well the equipment was maintained. Poorly maintained equipment can end up costing more than brand new, and in the long run, it can mean terrible value. This is essential in how to start a coffee shop smartly.
Find Funding
Whenever opening any business, doing it with as little debt as possible is ideal. That means your first funding strategy should always be saving your own money. Being frugal can be hard, but it’s a good test to make sure you really want to open a coffee shop. Even after saving money though, chances are you’ll need funding of some kind. Here are some of the safest ways to get startup capital:
SBA Loan
A lot of businesses start off with a Small Business Association Loan. sba.gov makes connecting with lenders about as easy as it can be. These loans are still very much loans, with all the trappings and potential challenges, but they are usually more tailored to fit businesses like small coffee shops and might have more generous repayment terms. Still, we recommend taking the smallest loan you possibly can.
Angel Investors
Angel Investors are becoming a more popular means of finding funding. They are investors who have specifically stated their interest in small businesses who might have a hard time finding other loans, hence the term angel. However, there are far fewer angel investors looking to invest in hospitality businesses, so this method can still be challenging for coffee shops. Usually, you’ll need some kind of unique hook beyond just good coffee, like extreme environmental sustainability or a focus on charity work.
City Grants
Cities are often looking for certain kinds of businesses to open. Driving tourism and spending is always a value proposition, and sustainability is becoming increasingly important. Investigate your local government’s website for grants to see what you’d have to do for them. Applying for grants is often a somewhat time consuming process, but it can pay off greatly and put you on the map for your city.
7. Coffee Shop Design
Coffee shop design is a topic unto itself, but we’ll give you the two most important design considerations right here: flow and upselling.
Flow
All products have certain psychology to them, and coffee is no different. It’s very important to your customer experience to make your shop easy to navigate, your menu understandable, and your offerings clear. You need to have cafe signage to guide your customers through every step.
8. Plan to Open
Waiting until every minute detail is perfect will probably mean you’ll never get open. Things will be a little rough around the edges, but the sooner you can start getting customers through the door, the better. We recommend opening in 2-3 stages, starting with a soft open and ending with a grand opening.
Opening Party
Your opening party might be your soft open, or you may want to separate them out. At your opening party, you should invite friends and anyone who helped with your business at any stage as well as potential business partners and promoters.
Soft Opening
A soft opening usually coincides with your opening party or comes shortly after when the wrinkles have been ironed out. This is the time to do a little marketing and a little promotion, to let business slowly start to build.
Grand Opening
About two weeks after your soft opening, you will want to hold a grand opening. This is your big party with as much marketing and promotion as you can muster. Make sure everyone is ready to go and provide the best possible service.
9. Develop Your Employees
When first training employees, it can be beneficial to run through exercises that emphasize efficiency. For example, give a new barista 4-5 drink orders and task them with making the drinks as quickly as possible without rushing. Allow new baristas extra time to think it over, and talk through the process with them.
Come up with a few of these exercises (even better if you come up with them based on real-life scenarios specific to your shop) and work through them. Be encouraging when the barista gets things right and gently correct by explaining the reasoning behind doing things a certain way. The more your baristas understand the “why” of things, the more you can trust them to make good decisions independently.
10. Grow Your Business
Menu
The most straightforward way to grow is having a menu with popular staples and rotating specials. When creating specials, consider seasonal flavors and unique combinations. In the age of social media, the visual appeal of a drink also can’t be understated. A drink that looks fun and iconic and tastes good is a better marketing tool than a drink that tastes amazing and looks normal.
Your menu should also take into consideration what your customers want and where you’re located. If you have a lot of parents with kids, consider offering some kid-friendly options. If you have a lot of busy business people, consider offering subscription services or refills in your branded mug to make their daily coffee trip as easy as possible for them.
Marketing for Coffee Shops
Marketing is a crucial part of owning a coffee shop that many business owners (understandably) don’t always devote enough time to. There are hundreds of ways to market your shop, but some are more useful than others.
Websites
Don’t try to get by without a website. A few businesses manage to do it, but they are the exception. You want a site that is above all easy to navigate. 90% of your visitors are there to see your menu, you address, your hours, or your contact information, so make those things easy to find. If you want to add more info about your story, staff, or anything else, do it! Having several pages on your site is generally a good idea, but you just need to make sure your most important info is easily accessible.
Social Media
Everyone wants a good social media presence, but how important is it to your specific business?
Do you have a lot of customers in their teens to mid-20s? An aesthetically pleasing Instagram feed and a Snapchat geotag are probably worthwhile investments.
Are your customers just a little older? Don’t neglect Instagram, but it doesn’t need to be as big of a focus. Instead, encourage customers to leave Google reviews and consider investing in some targeted paid advertising.
Are your customers middle-aged and older? Maintaining your Facebook page becomes a little more important, and good service is a huge focus.
==> Check Out 4 Hacks To Boost Your Cafe’s Social Media Following and 2023’s best Social Media Strategies
Traditional Advertising
Are newspapers, radio, or TV ads worth it?
Maybe, it depends on your market. Newspaper ads are great for smaller, hyper-local communities. Radio ads can be surprisingly effective among older demographics in a slightly wider range. The only avenue we seldom recommend is TV ads because of their expense. The other challenge with traditional advertising is that it can be difficult to track exactly how useful they are while digital ads can tell you exactly what your budget is returning.
Conclusion
The coffee industry is a fascinating and rewarding place. Coffee professionals get to meet all kinds of people, and building your own space is a totally unique feeling.
We hope this article is a great starting point for taking your first steps into this amazing industry. If you like complete guides like these, you need to look at more tips on opening your own cafe in 2023 in our more recent blogs.