Looking to learn how to start a coffee shop in 2021?
Well my friend, you've come to the right place.
Opening a coffee shop can be a rewarding business, as well as having the added caffeine perks!
But the road to success can be challenging and complex.
I'm Ippei, your friendly neighborhood passive income and local lead generation specialist...
And fortunately, I've spent time burning the proverbial midnight oil so that you don't have to!
I've collected all the info you need to know before selling that first latte...
In this 12 step, complete guide to opening a coffee business, I'll show you each step...
Everything from how much startup cash you'll need, and how much the average cafe actually makes...
As well as how to write a coffee shop business plan!
So let's dive right in
(But don't forget to grab a cup of coffee first.)
How to Start a Coffee Shop in 2021
Think of Starting a Coffee Shop This Year? Here's What You Should Know:
Picturing a cute corner coffee stop? Here's where the rubber meets the road: To start a coffee shop, you need to count the cost of opening the coffee business, and calculate how long it will take for you to see a return on investment on your franchise.
When you're looking to start a coffee shop in 2021, here's what you need to add into your business plan:
Coffee Shop Start Up Cost Breakdown
Here's a list of many of the equipment, supplies, and real estate costs to consider as you plan out your business:
But it's an incomplete picture to just see the costs.
What kind of living can you make from a coffee shop business?
Here's the numbers:
Average Profit Margins of Established Coffee Shop
Alright, so now that you know what the average take home pay (aka "profit"), here's the step by step process to getting started in 2021:
Quick Start, Step-by-Step Checklist:
1. Gather Industry Knowledge and Experience
If there is one thing that can be said about the coffee industry…
It would be that it’s not going anywhere.
Coffee has established itself as a household staple across the world and throughout many cultures since at least the 15th century.
Although there is some debate surrounding the earliest discovery of coffee…
Legend has it that the coffee cherry was first discovered by Kaldi, an Ethiopian goat herder.
Legend:
Kaldi noticed his herd of goats consuming red berries that gave them surprising bursts of energy so that they would refuse to sleep at night. After reporting his findings to the abbot of a local monastery. The abbot then concocted a beverage from these berries that helped the monks remain awake and alert during the long hours of their evening prayers!
If you’ve ever heard of Dancing Goats Coffee Bar…
Then this story will probably explain where this creative name came from!
Whether you believe this legend or not, the history of the coffee bean is truly fascinating…
And if you are passionate about opening a coffee shop yourself, then you need to educate yourself on the full history of this amazing beverage.
Knowledge of the coffee industry and how it has evolved over time will empower you to create a business that will be able to grow and adapt as the coffee industry continues to shift and change.
Pro Tip:
If you interested in learning more about the history of coffee and the beginning of the first true coffee shops, read “Uncommon Grounds: The History of Coffee and How it Transformed Our World” by Mark Pendergrast. It’s a fascinating and informative read!
In recent history, the coffee industry has been categorized by three unique “waves”.
The Three "Waves" of Coffee:
First Wave Coffee
Second Wave Coffee
Third wave coffee
In addition to understanding the history of coffee and the reality of the third wave coffee industry that we know and love today…
Having first hand experience within the industry can make or break the success of starting your own shop.
If you haven’t taken the time to work at a coffee shop or coffee roaster before…
Think about getting a job at a reputable local coffee shop.
Learn what it entails to be a barista, and absorb as much knowledge as you can from working with your “boots on the ground”.
You’ll be amazed at how much this will change your perspective on running your own coffee shop!
Industry experience will change the way that you serve your customers, training your future employees, and even how you lay out your coffee bar.
2. Choosing Business Model and Casting Your Vision
You will have a variety of different business models to choose from when starting a coffee shop.
Although opening a brick and mortar cafe is usually the most profitable option…
It’s also the most expensive.
So if you are intimidated by the prospect of opening a sit down coffee shop right from the beginning…
These are some other options that you can consider:
Coffee Shop Business Models:
All of these options will help you save money.
Either through lower startup costs, a mobile footprint, or even a limited menu.
For example:
The startup costs for a mobile coffee cart or kiosk generally range between $10,000-$25,000. Which comes in at nearly 10 times cheaper than a traditional full service cafe!
The good news is that you can always expand later on!
If you start a mobile coffee cart and only cater weddings and small events when starting out…
This can be a great way to get your brand name out there, and gain experience.
Once you have been able to save up more funding, or even obtain a small business loan or investor…
You can expand into a full service sit-down cafe if you so choose.
Once you’ve decided on where your starting point will be…
It’s time to cast your vision.
Most likely, if you are truly excited about the coffee industry and passionate about opening a coffee shop…
It’s because you have a vision or unique coffee shop ideas.
And that vision is probably about way more than just the money.
Because let’s be honest here…
Starting a coffee shop is hard work, and the profit margins are slim!
So starting a coffee shop for the money will only leave you frustrated and discouraged at the end of the day.
You need a driving vision for your shop that will carry you through the financial hardships that may come your way during the process.
There’s no need for this vision to be elaborate, but it does need to be the clear “why” behind your business.
Knowing Your Why Examples:
3. Get Legal and Write a Business Plan
Before you can sell a single cup of coffee, or even invest in your dream espresso machine…
You have to get your business legal, and organized.
The planning phase of your new business startup will be the key to your long term success…
So don’t neglect the details!
If you want to open your coffee shop for it’s first day of business, then you will be required to have the following things handled first:
Coffee Shop Requirements:
In addition to taking the necessary legal steps to legitimize your business an prepare for your grand opening…
You will also need to write your business plan.
I know, I know…
You were probably hoping that I wouldn’t mention this pesky little step.
Especially after you just had to detail with all the in’s and out’s of legalizing your business.
Anything dealing with the city or health department can be enough to give you a headache as a new business owner.
But they are necessary evils, and so is writing your business plan.
So take some aspirin and a couple deep breaths…
The good news is that writing your business plan doesn't have to be a pain in the ass!
While it might not be as exciting as unboxing your brand new, shiny espresso machine…
Writing a business plan can actually be an incredible tool for growth during the initial phases of starting a coffee shop.
Skipped only by the pie-in-the-sky idealists, who pretty much plan to fail since they don't plan…
It's vital to layout the future of your business for the next couple of years, unless of course you just want to have a pricey hobby of serving hot drinks to people.
The real benefit of taking a couple hours to layout your coffee shop start up from A to Z is this:
Knowing the process you'll follow that will lead to the success of your coffee shop.
What this business plan will enable you to do is see each stage of development…
From finding a great space that's surrounded by other walk-in businesses to ensuring you have the foot-traffic you need to a profitable (think "long-lasting") business.
What deets should be in your coffee shop's plan?
Business Plan Checklist
4. Finding the Right Location
Choosing the perfect location for your coffee house will be one of the biggest and most exciting decisions that you will make during this process.
Your location will often be the defining factor for your success.
Chances are, you are concerned about finding a location that is both ideal and affordable…
Which is a tall order.
You will need to find a space that is not only practical for your needs as far as physical space goes…
But also one that has a high level of visibility and convenience.
Here are some key attributes to look out for when choosing a location for a coffee shop:
If the part about local competition confuses you…
Think about this:
Competition isn’t necessarily a bad thing!
While yes, a saturated local market could make it more difficult for you to make a name for yourself as the new coffee shop on the block…
It also shows you that your location has market viability!
If there are other successful coffee shops within your area, then there might be room for one more.
Especially since most coffee connoisseurs are usually eager to try out a new coffee house!
Eventually they’ll land on their repeat favorites, but there is a good chance that they will give you a try…
And maybe you’ll end up being that favorite hot spot with your line wrapped around the store!
So don’t let a little friendly competition scare you off…
Coffee shops are ultimately about community, and the celebration of a well loved beverage.
Rising tides raise all ships, so maintaining healthy competition and community with your local coffee houses will only be a good thing for your business in the long run…
And be careful to never bad-mouth another coffee shop!
For all you know, mentioning your distaste of another shop to a customer could be a fatal move that costs you their business if they happen to frequent that particular establishment…
5. Purchasing Equipment
When it comes time to purchase the equipment for your new coffee shop…
You might feel like a kid in a candy store!
While the equipment required for your shop can be expensive…
It’s also essential.
And quite honestly?
Shopping for your coffee shop equipment is a lot of fun!
There are endless amounts of gadgets and gizmos that you can pick out to create your ideal coffee bar (see the startup costs list for and itemized equipment list)….
But most likely, the biggest and most significant investment will be your espresso machine.
Everything in your shop will revolve around the espresso bar.
So if there is one place not to skimp on quality…
It would be this one.
While there is no need to purchase a $25,000 Slayer Espresso Machine…
You should expect to spend at least $7,000 on a decent espresso machine that will be able to keep up with drink demand and production, as well as last a long time.
Here are my top three recommendations for reasonable but reliable espresso machines:
Espresso Machine Recommendations:
In addition to purchasing your espresso machine, your second most crucial piece of equipment will be your coffee grinders!
Personally, there is one brand of coffee grinders that surpasses all others in my mind:
And that is the German brand, Mahlkonig.
Although these espresso grinders will likely cost you upwards of $2,000…
I promise you that they will be worth every penny!
As you look towards equipment, it can seem pretty disheartening due to the high cost of buying it outright.
Depending on your situation, you can either buy the equipment or work with some suppliers with either a lease or financing.
Here's some of the pros and cons of each option:
LEASING Your Equipment
Buying Your Equipment
Another great way to save on costs is to connect with other local coffee shops.
Coffee shops will often upgrade their equipment due to higher demand, even when their existing machinery is still in good working condition.
A local shop might be willing to sell you their gently used equipment at a discounted price!
Plus it will probably help them cover the costs of their new equipment purchases!
Finally, your third biggest investment will be your POS system (point of sale).
The biggest things to look for when shopping around for different POS systems is a company that has:
There are a variety of different POS systems out there for coffee shops, but these are some of the most highly rated:
The biggest thing is to determine your specific needs and ask plenty of questions before you make a final choice for your POS system.
6. Coffee Bar Layout and Efficiency
The layout of your coffee bar is not something to rush through.
Your baristas will need an efficient layout and workflow to maintain speed and quality of service…
And your customers will need a logical and instinctual order flow from placing their order to drink pick up, and condiment stations.
This means that you will need to think through every detail of your coffee bar design.
You will need to consider the placement of your sinks, refrigerators, espresso machine, and pastry case, and that’s just to name a few.
Think about it: if you barista has to turn around to reach the espresso grinder every time they make a drink…
Then they’re going to end up dizzy from doing a dance every time they have to make a line of drinks!
Or if you want your customer to order their drink and pick it to their right, by the espresso bar…
But your condiment station is positioned to their left, then the flow of ordering will be confusing, and you’ll have customers crossing over each other to get what they need.
And if your milk fridge is positioned directly below your espresso machine then the refrigerator door hits your poor barista in the shins every time she has to make a latte!
My best advice for ensuring that your coffee bar layout and workflow is efficient and well thought out is to tape out your floor plan before anything is in place.
The first McDonald’s location actually used this method to create their solution for super speedy customer service that made their burger chain infamous!
Have your team help you tape out and label each section of your bar layout, and then pretend to order, prepare, and serve drinks.
This will highlight areas of inefficiency or potential layout problems.
Rework your tape until you have found the perfect layout for your shop, and then install your equipment!
7. Sourcing Your Coffee
Obviously, if you’re starting a coffee shop, you’re probably pretty passionate about good coffee…
Am I right?
Sourcing your coffee is something you’ve probably already thought a lot about, but there are still some decisions to be made.
You have three main options when it comes to sourcing your wholesale coffee beans:
Roasting your own coffee is a whole other ballgame.
But if you are interested in opening a coffee roasting facility as well as a coffee shop, it can help you to save money on bulk coffee in the long run.
Just be prepared for another major investment, and a massive learning curve!
Roasting coffee is a whole skillset in and of itself.
Purchasing from another coffee roaster is the most common decision.
This coffee roaster might be local, or they might not.
But if you decide to purchase solely from one specific roaster, you might even get a discount for your customer loyalty.
However, the downside to only purchasing from a single coffee roaster is that you will miss out on the variety of creativity that the specialty coffee industry brings to the table.
This is why I recommend becoming a multi-roaster coffee shop!
Whatever your decision, one of the most important things when choosing where to source your coffee is vetting your sources.
Your coffee roaster (or roasters) of choice should know their craft well, and be able to effectively and transparently communicate that information to you.
This includes:
When looking for information on their coffee offerings, pay attention to:
The Specialty Coffee Association of America ranks coffee on a numbered 100 point scale.
Any coffee that ranks above an 80 on this scale is considered “specialty” grade coffee.
Specialty Coffee Rankings:
As we come to one of the most important vital areas of your coffee shop, the menu, it's helpful to notice some of the differences and similarities in menu styles along eateries, fast-food, and cafes.
Here's a few:
ABOVE: This menu gives off a much more industrial feel, but retains the white font on dark background of the previous menu.
8. Hiring and Training Employees
The process of hiring and training your employees and baristas can be extremely daunting!
But it doesn’t have to be.
Although being someone’s boss for the first time can be a lot of responsibility…
The key to being a great boss and coffee shop owner is having high integrity, clear communication, and healthy boundaries.
The key to hiring the right people is a little more complex.
If you ask a successful café owner what the most difficult challenge in running their coffee business, chances are they'll say some version of "finding the right people."
While it might seem simple to hire someone to make drinks as people order them, the job has become increasingly complex.
How?
Just as an example we can all relate to, think of how complicated Starbuck's drinks are now.
It's no longer just "an iced coffee," but has evolved into a memorized molecular monologue recited at a drive-thru.
And that's given to the employee at 5am.
I don't know about you, but to me that's definitely a unique gifting.
But when hiring, beyond innate talent, there's skillset and attitude.
In my experience hiring contractors to work in my local lead gen biz, attitude is significantly more important than skillset.
What I've found consistent throughout high quality employers is this principle:
"Skillsets can be trained, but having a 'can-do' attitude is priceless"
Several key attributes to look for in new employees would be:
Any other skills that you might want your baristas to have can be trained, but these things will either be something that someone has or they don’t.
Previous coffee or barista experience might be plus, or it might not (if they’re set in their ways of doing things vs yours.)
Whether or not you require prior experience is totally up to you!
Having a strong training program and process will be essential either way.
Come prepared with a procedure manual and handbook for your new employees, and don’t make it up as you go along!
Your systems and processes should be clear and well developed...
Because having well trained employees will ensure that your customers experience consistency and excellence every time they come in.
9. Waste Management and Product Costing
Which brings me to…
Waste management and Product Costing!
In the cafe and restaurant industry, waste management and product costing are absolutely essential.
Although food waste can occur in a variety of ways:
Proper employee training will also play a huge role in preventing waste!
Primarily in the area of measurements.
Free pouring milk or syrup flavorings can lead to massive amounts of waste over time.
Although your baristas might think that pouring a couple of ounces of leftover steamed milk down the drain isn’t a big deal…
It will be if everyone is doing it!
Train your baristas to measure EVERYTHING…
Every time.
To prevent items from spoiling or expiring before they’ve been used, you will have to hone in on your inventory and ordering systems.
This will take time, but it’s extremely important.
Ordering in bulk might save you money on paper, but if the items expire before they’ve been used…
Then ordering a smaller quantity at a higher price will make more sense.
These are the things that you will have to fine tune over time.
Another huge way to keep down your costs and maintain solid profit margins is to properly evaluate your product costing.
If you don’t know how much it actually costs you to make a double shot vanilla latte…
Then how will you know how much to charge for it?
Once you have your exact measurements down for each item on your menu, create a product costing spreadsheet that will help you determine your final product costs…
Then determine your retail price points and markup!
10. Customer Retention and Experience
The buzz and hubbub within the community surrounding your grand opening will hopefully ensure that your grand opening and first week are a huge success!
But what about a month down the road when the buzz has started to subside?
That’s when you will need to focus your attention on customer retention and customer experience.
Ensuring that people not only give your coffee shop a try…
But that they come back again and again will be the difference between a shop that closes within a year and the one that’s been around for over ten.
The best thing you can do to ensure your customer retention rate is to create an incredible customer experience in-store.
To create an amazing experience for your customer you will need to check the following boxes every time they come in:
If your regulars come in and know that their drink is going to taste different spending on who is working behind the bar…
Then they may go back to ordering from Starbucks on their way to work!
Or if they come in to work, but the tables haven’t been wiped down and the floors are dirty…
They may change their mind next time and work from home.
Every single aspect of your customer’s experience needs to be on point and consistent.
Which means that the responsibility rests on you and your team to ensure that this happens.
Another way to keep people coming back however, is to incentivize their business!
Implementing a rewards system through an app or a receipt program is a great way to motivate your customers to come back consistently and even more frequently!
You can also use this rewards program to send out promotional information and discounts either through email or text message!
For Example: Getting an email notification about discounted hot chocolate on a cold, rainy day might just motivate someone to leave their house and patronize your coffee shop!
11. Marketing Your Caffeine Cafe
Starting a coffee shop business is hard work…
But one way to make things a little easier on yourself is to set up a strong marketing campaign.
Marketing for a coffee shop can be done in a variety of different ways.
But as with most businesses…
It all starts with your website!
Creating a website will help your business to rank well in Google, which helps people to find you more easily.
And it will also help people get a feel for your coffee shop’s brand, and your menu offerings.
Thanks to user friendly, template based website builders…
You don’t even have to hire a graphic designer for this step if you don’t want to!
Some of my favorite website builders are:
In addition to having a kick ass website, you will need a strong lead generation strategy to ensure that new customers continue to come through your doors...
Because without caffeinated customers, you don't really have much of a coffee shop, do you?
So take a look at our online coaching course on local lead generation, here.
You can also start to sell branded merchandise and bags of coffee through your website down the road!
In addition to your website, you will also need to establish a strong social media presence.
My recommendation is to pick 2-3 platforms to start out with.
There’s no need to have an account on every social media platform known to man!
Online Places to Be BEFORE Your Grand Opening
You should also consider joining your local chamber of commerce!
Networking with other local businesses can be a great way to gain exposure within your community…
As well as the added benefit of learning from other small business owners!
12. Scale and Expand
Lastly, you might find yourself thriving in your coffee shop business, but your profits have reached their ceiling in your current location…
So you’re ready to scale your business and expand!
This is great news.
There are several different options that you can look into once you’re ready to scale your coffee shop business:
All of these options will help you to increase your profits and continue to grow your coffee shop brand!
Pros and Cons
of starting a coffee shop business
Pros
Yes, you read that correctly. In theory, you can start a t-shirt business for practically nothing! If you already have creative abilities, you can craft your designs in Canva for free, and start selling them via a print on demand website such as TeeSpring, and market your apparel line via social media without any intensive startup costs. While this route doesn’t exactly guarantee a lucrative result, it is possible to get started this way!
Whether you go the route of manufacturing your t-shirts yourself from start to finish, or you decide to use the print on demand method… you will be able to run this business from your home! So if you’re looking for a side hustle or business model that will enable you to ditch your commute… Starting a t-shirt business can be a great option for you! If you do decide to print your t-shirts at home, you will simply need to designate a room, or a corner of a room, as your manufacturing area!
I really cannot express how easy print on demand makes starting your own clothing line. It truly is an ingenious way to start making some extra money, without fully investing in an entire screen printing operation out of your home! Plus, once your designs are uploaded, you can start bringing in passive income as your t-shirts sell and are shipped out to your customers without you lifting another finger. Magic!
Cons
While there are some amazing benefits to selling t-shirts...There are some downsides as well. The high demand for t-shirts makes this industry appealing to many many people, which has resulted in a heavily saturated online market for t-shirt sales. This can make breaking into the apparel market difficult at first. Especially if you haven’t done sufficient market research to determine what will sell, and where there is a sweet spot between what’s trending, and your own unique designs.
For many people, the benefits of the print on demand model far outweigh the cons. After all, it does streamline the entire process of selling a physical product! But it has one major downside… Your profit margins. When selling your t-shirts via a print on demand website, you might be lucky to walk away with 30% of your total sale. Granted, you aren’t doing the tail end of the work to manufacture and ship your item, but you do need to recognize that you will have a minimized potential for profit if you go this route.
On the flip side of things, doing it yourself can increase your profits… But that comes with an added level of risk. If you are going to be manufacturing your t-shirts yourself, you will need to invest in much more equipment, which increases your initial investment, and prolongs your ROI. Plus, you will need to order your blank t-shirts in bulk before you’ve accepted your first sale! And if you haven’t properly marketed your business, this can be a risky move.
On the flip side of things, doing it yourself can increase your profits… But that comes with an added level of risk. If you are going to be manufacturing your t-shirts yourself, you will need to invest in much more equipment, which increases your initial investment, and prolongs your ROI. Plus, you will need to order your blank t-shirts in bulk before you’ve accepted your first sale! And if you haven’t properly marketed your business, this can be a risky move.
The Bottom Line in Business: Why Having Continuous In-Flow of Customers is Vital
Now that you've got your coffee shop up and running...
It's high time to get as many customers through your door as possible.
At the end of the day, you don’t have a coffee shop without customers.
And honestly?
This is basically true for every single business out there!
Your customers are the heartbeat of your business, and without them…
You don’t have much!
So what if I told you that there is a way to not only ensure that new customers find your business every day…
But that you have a steady stream of new customers that is generated practically on auto pilot?
I hope your answer is “Heck yes, tell me more!”
Because that’s exactly what I’m telling you, and I’m serious!
In fact, it’s the exact business model that catapulted me from hardly making $2,200 a month at my old job…
To making over $50,000 a month in five years!
This method is called local lead generation...
And it can work for your coffee shop too.
Online lead generation is all about leveraging the localization power of Google alongside strategic SEO to create a steady stream of new customers coming through your doors on the daily!
And the best part is that once your lead generation systems are in place…
It becomes completely passive and practically manages itself!
So if you're ready to see what the online lead generation business model can do for you...
