Start-Up Costs of a Coffee Shop
Starting a coffee shop is the ultimate fantasy of many coffee enthusiasts. If you have already come to a point where you now feel prepared to start your dream venture and open up a coffee shop, then you likely want to know the next step for actually making your dream come true.
This is where the dream becomes less enthusiastic and more practical. Now comes the opportunity to haul out a calculator and start calculating the real financial cost of launching coffee shop entrepreneur dreams into reality.
So, how much does it cost to open a coffee shop? The answer: it depends. That’s probably not the answer you are looking for, but if you scour Google for an answer, you will see the most common results indicate $20,000 – $250,000.
#How could you know what to estimate your investment expense to be to get your coffee shop up and running based on such wide startup cost potential?
Well, the reasons for the range are multi-faceted. It is, of course, to some degree dependent upon your location. States and towns have their own fees, and the real estate market varies wildly from state to state.
A coffee shop can be as small as a kiosk or as large as a big franchise. The size of the coffee shop you plan to open will drive the startup costs largely.
To get a better idea of what it will cost to get started, let’s break down the essential requirements for your startup:.
The most profound step of all would be defining your business plan, specifically what your coffee shop will require.
#What are the purchases in the start-up costs of a coffee shop?
To know what you will need to buy before opening your coffee shop, look at the breakdown of what it means to own a coffee shop. The range of food options open to restaurant start-ups today is simply staggering.
Thanks to Food Network and celebrity chefs, owning a restaurant of any kind has now become more of an idealistic job. Street food carts and trucks are becoming wildly popular. Along this same line, a coffee kiosk or café truck could be an ideal choice.
This is a smaller scale than a coffee shop-cafe, and its potential for portability allows the owner of a coffee shop to find customer traffic. Now that the world of food trucks is in such an upswing, a cafe on wheels may be just what is in order for some people and with slightly lower startup costs than owning a brick-and-mortar establishment.
For others, however, the traditional and stable coffee shop is the dream choice. The variety of establishment options means that the costs for opening a coffee shop are, to some degree, within your power to control.
#So what does it cost to start up a coffee shop?
*To answer this question, consider your start-up requirements:
#Define your coffee shop location?
This may increase your start-up cost projections. Should your coffee startup be mobile, you will then need a delivery method like a kiosk or truck. This could be as modest and low-budget as $10,000 for a kiosk, or as expensive as $35,000 for a fully-equipped catering truck.
If your business will be located in a fixed site, your lease or purchase price will vary by location. Some buy commercial buildings, while others rent commercial space. The location is important. While the cost to lease in more popular areas like malls is much higher, these locations stand a greater chance of seeing potential customers walk in off the street than a more rural setting for a coffee shop.
Commercial-grade equipment will allow you to hold the volume of brewing coffee for crowds. Some of the examples of equipment you’ll need are coffee pots, grinders, and specialty coffee machines. The commercial coffee grinder will be about $500-$800, and you will likely require at least two, one for caffeinated and the other for decaf.
Each commercial coffee brewer costs $500, and you will need more than one for the same reasons. For flavored coffee beans or different roast options, you will need a coffee pot for each, plus possibly carafes to ensure the right temperature control.
Espresso machine: specialty coffee orders. Specialty coffee machine ranges in the price of $5,000 to $7,000. This is considerably more expensive than either of the other two items, but the espresso machine will be essential for competing with the specialty coffee offers of the larger coffee franchises.
#Product costs
This is what you intend to sell. To sell coffee, one must have coffee to sell. You will need coffee, cups, stirrers, sugar, cream, milk, etcetera, and etcetera. This cost is fully dependent on the volume and variety your coffee shop intends to sell.
#Licensing fees and charges
Each town and state will have its requirement. Some of the most frequent charges include: Business license, resale license or seller’s permit, health permits for food handling and workers.
Depending on your state and business plan, you should expect your licenses and fees to cost anywhere between $150-$8,000.
Insurance. All businesses require insurance. Commercial insurance is a necessary fee, and you will need adequate coverage before you start selling anything.
#Staff costs
You will need to hire people to make your business profitable. Regardless of whether it is servers, or bookkeepers, or managers, factor wages and also the costs of benefits into your calculations for your staff. This includes workers compensation insurance. The cost of your staff will vary based on size of company and business plan.
As you can see, the opening costs of a coffee shop range all over the place and consist of so many factors which tie directly into the related costs. That is not necessarily bad news, however. Given such a wide range, making a coffee shop plan to fit your budget simply requires flexibility and planning.
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#But just how do you figure out exactly how much you really need to get your coffee shop started?
#Calculate your coffee startup budget
Every business idea starts as a paper and takes shape into action as it eventually becomes a business plan. A coffee shop is business which earns revenue. That means that start-up cost for your company will be recovered through the sales.
When you decide what it will take to open a coffee shop, remember that fine-tuning the details are creating a formula so that you can be assured that you will recoup your startup costs with a successful business. A successful business can only spend less money for both its startup costs and daily operating expenses than it generates in sales and revenue.
*Your plan will have to show how you are going to spend less money than you bring in.
A coffee shop is most probably bound to be lucrative for the simple reason that nearly three-quarters of American adults drink coffee. Many Americans drink coffee daily. This makes a coffee shop owner less likely to encounter customer-related problems, but rivalry might be another problem.
The top five coffee shop operators catered for seventy percent of the country’s coffee purchases. Meaning franchise like Dunkin’ Donuts or Starbucks would receive the most visits from customers, and seven out of ten customers of coffee visit a franchise. This does not mean that small coffee chains can not compete with the coffee giants but knowing your competition helps predict possible sales volume.
For every dollar $100 made in sales in their coffee, the gross margin is 85% and, therefore, after the product’s being sold, the owner takes home $85. However, if you are going to be a competitor with companies that get 70% of the customer business in your industry, then you must ensure that your company offers something special.
For some, this means specializing in the niche. For others, overcoming the problem of competition is done with the best service and quality.
At this level of competition, it definitely pays to make sure that any kind of investment in a startup coffee shop is necessary and set to gain a return. The ability of one to control how much one could invest in the startup coffee shop is also followed by the aspect of holding control of the cost incurred with proper planning.
#Extra Information
Define a business plan and guide you to deciding what type of start-up costs are required. Projected sales of a coffee shop according to your business plan help you to know how much coffee you had to sell before you start recovering your investment needed to open up a coffee shop.
A small business entails smaller investment and smaller equipment, but the possibility of sales is also smaller. This therefore means that your costs will take a little longer to recover. A bigger investment may have a better chance of sales as well as revenues, but the fact that the coffee giants hold the market share of coffee sales means that a startup company needs to rely on word of mouth, marketing, and superior service and quality.
One needs to decide how much money he or she wants to commit to this business. The amounts invested in a coffee shop are small but will reap only small returns due to limited earning capacity. However, the risk is also minimum. A large shop may touch more customers, and thus it will earn more. Still, if the company does not outperform the competition, then failure is at a greater risk.
If and when costs are kept low, including startup costs, then it can be classified as successful. Do not over-leverage; if one is going to throw all one’s retirement savings into their coffee start-up dream, know how well the costs have been planned and has plans for recovering their investment.
The net sales profit percentage of a coffee shop is 2.5%. If your company yields 100,000 in sales, your profit is $250,000. That also means, however, that if your company yields 10,000 in sales, your profit is $25,000.
Using $250,000 in your initial investment with the needed return, your store would need $100,000 in coffee sales to pay for that investment. For ease in making many calculations you may set a unit price for your cup of coffee of $2.50.
You would have to sell 40,000 cups of coffee to recover the $250,000 cost of your startup investment. That would be 109 cups of coffee per day.
Assuming you’re in a small town, you are unlikely to sell 109 cups of coffee per day. Then probably you would have a greater chance of succeeding with a lesser investment. However, if you are in a city, and your $250,000 investment puts your coffee shop in an area of high customer traffic, then a large investment would have a greater chance of successful recovery of the start-up investment costs.
Such diversity exists in it that it would be pretty hard to come up with a simple, simplistic answer to how much it costs to set up a coffee shop. However, by using a well-defined business plan and the amount of investment, profitable ventures can be provided through coffee shops.
#Frequently Asked Questions
1.Is the business profitable for a shop owner running a coffee shop?
Coffee shops can be profitable. Compare the price of an espresso to the price of a cup of coffee. Many companies charge $4.00 or more for a specialty espresso drink but only charge $2.50 for a standard cup of coffee.
2.What else can I do to increase the chances that my coffee shop will succeed?
Marketing and location are crucial. So, opening a coffee shop down in the middle of a residential neighborhood, not many people are going to find their way to the shop or stop by the shop. On the other hand, very well publicized and visible, more chance for success.
3.As a very high percentage, 70% go to the major franchises, how do I make my coffee shop even more visible, and ultimately successful?
Location, once again is important. But if you offer all the same conveniences of a large chain, including drive-thru’s, and also offer superior service and a superior product, your product may sell itself. If not, market your company and yourself through advertising and visibility.
A line from the poem “All that is gold does not glitter”