What's the secret?80% of coffee shops opened are still going strong 5 years later.
-Really? That's super surprising to me. I do know that in most restaurants the highest profit margined item is almost always Iced Tea or Coffee. But you don't take margin to the bank, you take profit dollars and unless you are turning and burning there aren't a whole lotta profit dollars in coffee.
...closely followed by desserts. If all you sell is alcohol, desserts and coffee, you will operate a stunningly profitable business. What's the secret? Well, first read this: http://www.slate.com/articles/news_and_politics/hey_wait_a_m... Then recognize that coffee shops are to the USA what pubs are to the UK. They fill the same civic hole that Baskin Robbins held for 30 years, something that simply didn't exist before it. Maybe it's because I'm older than a lot of the people here, but I remember when the cafes came. "Coffee culture" didn't slowly evolve, it just sort of... HIT about 1989. I saw a sneak preview of Sleepless in Seattle with my date, who had lived in Tacoma for most of her life before moving out with her dad to New Mexico. She pointed out a Starbuck's in the movie and said "you're going to see a lot of those soon." It seemed odd to me that suddenly everyone would start paying a lot of money for coffee (without first buying a donut) but that's exactly what happened. The coffee shop is the easiest, cheapest, lowest impact third place. And, as the bedroom communities and exurbs metastasize into communities, "coffee shops" help anchor those communities. In essence, a coffee shop charges a nominal fee to a neighborhood in order to exemplify that neighborhood. And not to put too fine a point on it, but they sell addiction - socially-acceptable, minimal-impact addiction. Coffee shops sell caffeine and sugar and they do so for the same price as a pack of cigarettes. They're habit forming. And they often have comfy chairs, free wi-fi and will top up your drip coffee as long as you're in the room. If libraries could charge $2.50 to get people to sit and chill out there'd be one on every corner, too.
I remember this, and that really was about the year it happened. The hangout for my bored teenage friends and I was the local Dennys. We would just pile into a booth and drink cup after cup of coffee, talking for hours. Sometimes we would even order food. Then an indie coffee shop popped up in our small downtown. It had art on the walls, open mics, poetry readings. It was like "wtf?" For a bored teenager this was heaven. It gave us a place to congregate and be social with each other without pissing off the management.
In college I used to study at them all the time just so I could fulfill my obligations while simultaneously be doing something at least minimally social."Coffee culture" didn't slowly evolve, it just sort of... HIT about 1989.
It's the morning rush. We have an entire population hard wired and addicted, either habitually or chemically or both. If you've ever been in a coffee shop on your way to a 9 to 5, you'll see them going gangbusters the whole morning. Then a little bump at lunch. As long as you choose your location correctly and make sure that you are along the path of morning commute traffic, I'd bet you're nicely locked in to a predictable recurring source of revenue that also represents the majority of your sales every given weekday. And the turnaround can't get better than somebody late for work :)you take profit dollars and unless you are turning and burning there aren't a whole lotta profit dollars in coffee.
500 people a day, with $2 average profit dollars each is 1000 a day less cost of goods and operating expenses just doesn't seem all that attractive to me. I would almost guess that 500 is a lot for some of the mom and pops. But yeah, a Starbucks on Main street america is busy all day long. If you can tap in to the demand with a good product in the right place, I could see it being a nice, predictable revenue stream. Like having a liquor store or a tobacco shop. -Prey on the addicted :)
Let's do the numbers. A pound of coffee is, call it $6 wholesale. From that pound of coffee you can make 256 cups of coffee - while understanding that a grande is two and a venti is three. So call them shots and figure most shops sell doubles. That's 128 servings at, call it, $3 per serving. Your expenses on the beans are in the noise. How 'bout the pastries? Let's say you sell scones for $2. Your baker is likely selling them to you for $15 for 2 dozen. You're at 50% profit on shit you didn't even make. How 'bout the labor? Say you've got 2 baristas. They're making minimum wage - and tips. Tips aren't your problem. So you're into it for $20 an hour including all the FICA and shit. Rent? Let's say you've got 500 square feet. Let's say you're in a major city but not in a hot spot. You're paying $1000 a month, round numbers. You're open 6am to 10pm, 7 days a week. You're paying basically $2 an hour for your rent. Your overhead is less than $22 an hour, beyotch. And your profit on your main product is essentially 100%. If you sell 8 lattes at $3 every hour you're profitable. Averaged out over the day, that's a latte every 7 minutes. And yeah, there's a lot of slop in the equation and you likely won't sell as many at 4pm as you do at 8am but you're damn skippy you're making your rent if you're halfway clued in.
$1000 a month? For commercial space in a major market even off the beaten path is a stretch. But the point if your numbers isn't lost on me. From where I'm sitting there are better investments. But a chain of shops, then selling franchising rights? Now I'm interested.
It's not. My wife was looking at commercial space a year ago. Some were cheaper, some were more. That's in urban LA, on major shopping streets. Back when I was mixing in clubs our flagship was 9,000 square feet in the heart of Pioneer Square. It cost $15k a month.
For many of these small, independent business owners, if they can cover their fixed costs, materials, and labor, all while making an honest wage, they struck gold. They're pursuing a dream and are their own master. My fiancee owns a boutique, and her competition isn't really the American Apparel across the street, it's the bored, semi-retired housewife with a rich husband who loves clothes and needs something to do. It's kind of weird, but she really is competing against stores that aren't too worked up if they don't make much of a profit. For the ones that are really in for themselves, they really are happy to simply make a wage equal to what they would make in their industry in a good position working for someone else. The competitors that want much more than that are the exception to the rule a lot of times.From where I'm sitting there are better investments.