How to Start a Coffee Shop or Café?

/ Commercial Coffee Equipment, Education, Restaurant Tips / December 2

Coffee shop welcome we're open sign

You might be surprised to find out that most coffee shops fail within their first year of operation. So how do you make sure you don’t end up a contributing number to these discouraging statistics? The answer is simple: plan ahead. There are quite a few things you’ll need to get together before opening day. So how do you start a coffee shop? What equipment is required in a cafe? Learn more with us!


Do Your Research

Research the industry’s leading trends along with your competitors. Find out what they’re doing and what you’re not. Ask yourself, why would a customer choose my coffee shop over the one down the street? Who are you targeting and what are your customers willing to pay for a good cup of joe?

Remember that competitive research is an ongoing process. An easy way to always be in the loop is to subscribe to coffee newsletters for updates on the most recent industry trends. Another good idea is to subscribe to your competitor’s email list to get insight into their latest marketing campaigns.

Create a Business Plan

A business plan can help initiate a shift in thinking from abstract ideas to concrete strategy. Ideally, a coffee shop business plan will detail a step-by-step guide to the internal and external operations of your business, outlining the specific approach you’ll take to each of the following obstacles:


  • Competitor analysis and strategy

  • Marketing analysis and strategy

  • Type of shop and niche

  • Layout and design

  • Menu items and pricing

  • Financial plan and budget

  • Operating plan and staffing

  • Design and layout

  • Customer demographics

  • Social media presence

For more information, check out this article on how to start a business plan from scratch. This article has a bunch of useful tips that will be especially useful to those who are planning to serve food in their cafes.

Financing: How Much Does it Cost?

Though costs rise and fall throughout the year, we have a good idea about what it costs to start a coffee shop business or cafe. Depending on the route you choose along with the type of equipment you want, the costs will vary. So how much does a coffee shop cost? Here’s a quick look at a few price ranges:


  • Cafe and Bakery: $120,000 – $350,000

  • Small Coffee Shop with Seating: $40,000 – $200,000

  • Large Coffee Shop with Seating: $75,000 – $350,000


Apply for Funding

Chances are, you don’t have 500k hidden under your couch cushions, which means you’ll probably need to apply for a loan. While it can be downright overwhelming, we can help you make sure you pick the right type of loan with the right lender for the right price.

It’s important to understand all your options, as it will affect how much money you’ll receive, how long it’ll take to pay back and at what interest rate. In the interim, we’ve compiled a short list of the types of loans small businesses can apply for:


  • Business line of credit – $1,000-$500,000 at an interest rate of 8-24%. Your credit score must be above 560

  • SBA loan – borrow up to $50,000-5 million at a 2.8%-13% interest rate and repay over a 10-25 year period

  • Term loans – borrow up to $500,000 at a 9% interest rate and repay over 10 years

  • Merchant cash advance – $5,000-$200,000 at an interest rate of 8%-30% and repay over 25 years

  • Business credit card – $500,000 at an interest rate of 8-24%. Your credit score must be above 680.

  • Equipment financing – borrow up to 5 million at an interest rate of 7.5%

  • Commercial mortgage – $250,000-5 million at an interest rate of 4.25% and repay over a 20-25 year period

  • Startup loan – $500-750,000 at an interest rate of 0-17% and repay over 25 years

  • Accounts receivable financing – 80% for receivables at an interest rate of 5% and repay over 1 year

  • Business acquisition loan – $5,000-5 million at an interest rate of 5.5% and repay over a 10-25 year period

  • Personal loan – $35,000 at an interest rate of 7% and a loan term of 6 years

Remember, that most new businesses take over a year and up to two to become profitable, so make sure your loan reflects this. It’s also a good idea to apply for a little more than you think you’ll need to cover unexpected costs you might encounter along the way. Peace of mind is well worth the little extra you’ll pay in interest.

Select a Location

It’s all about location, location, location! The same holds true when you’re choosing a building for your coffee shop. Even if you’re dead set on a property, you should still review its eligibility under the context of these points:

Visibility – You could have the best coffee shop in the world, but it won’t matter if no one knows you’re there. Corners are the best locations for shops because of their thru-fair visibility and free marketing opportunities.

Crime Rates – If you want to be really sure you’re buying into a safe community, you should check the crime statistics before making any final decisions.

Floor Plan – The layout and design will lend their voice to your brand persona, so you want to make sure the floor plan supports whatever you have in mind. Is the space equipped with a full-service kitchen? Is there adequate space for seating? Consider your work needs along with your vision.

Demographics – Knowing your customer demographics is knowing your market. It will also aid you in creating your buyer’s persona, which will help you make decisions about pricing, décor, location, menu, etc.

coffee shop menu and checkout

Choose Your Bean

Since coffee will be the single most important thing on your menu, you must select a bean with a signature flavor representative of your brand. After all, great-tasting coffee is the reason customers will keep stopping by on their way to work or even peg it as their designated meet-up spot. Before deciding on a roaster, ask yourself these questions:


  • Arabica or Robusta?

  • Light, medium or dark roast?

  • Will you buy locally or outsourced?

  • Is the coffee fair trade?

  • How high of quality?

  • How will your choice affect menu prices?


Coffee Shop Licenses & Permits

You’ll want to complete this step well in advance of your opening day. Obtaining the necessary licenses and permits is a paperwork and time-intensive ordeal that can take up to four weeks to get approved and longer if something goes wrong. What your business needs will depend on where you’re located so be sure you speak with someone in your local government to ensure you’re filing for the right things. You’ll likely need some form of the following:


  • Business License – This license will give you the authority you need to operate in the area you’re working out of. Registering for a business license will cost around $50 to register. Additional costs will depend on your location, profit and more.

  • Employer Identification Number – This number solidifies that you’re an employer with the federal government and provides you with a tax ID. It will take some time to register for this, but it is free.

  • Certificate of Occupancy – After your building has passed an inspection by your local zoning department, you receive this certificate. To do this, it’ll cost around $100.

  • Sign Permit – Depending on the size of your sign, this could cost anywhere from $20 to $50. This permit simply allows you to display permanent signage for your business.

  • Employee Health Permit – An employee health permit indicates that your employees have passed a course that educates them in proper health and safety practices. This will have to be renewed periodically and costs between $100 and $500.

Some of the other permits you may need as a coffee shop owner include a DBA (Doing Business As), retail food service permit and liability licensing. Be sure to check with your local government to obtain the correct permits.

Design the Layout & Buy Equipment

What equipment is required in a café? There’s a variety of machines and ingredients you’ll need for a successful café or coffee shop. Here’s a breakdown of the types of of things to put on your list:

Ingredients



  • Loose teas, coffee beans

  • Milk and creamers

  • Syrups, sweeteners, sugars


Machines



  • Coffee grinders, coffee brewers, frappe blenders

  • Commercial refrigeration, commercial dishwashers

  • Coffee servers


Coffee Shop Equipment Accessories



  • Espresso tampers, frothing thermometers

  • Syrup pumps, portion scales, measuring cups and spoons

  • Disposable cups, coffee sleeves, straws and stirrers


Cleaning Supplies



  • Steam wand cleaner, coffee pot cleaner

  • Beverage equipment cleaning brushes, water filters

  • Espresso machine maintenance kit

Learn more about the types of equipment required for a café or coffee shop with us as well as get more information on marketing plans and more.

Plan Out a Marketing Strategy

This isn’t a one-and-done business affair where you decide to hand out some promotional flyers or free samples on a whim. Sure, you can do that, but a true, revenue-generating marketing plan should be completed well in advance and planned out far into the future.

Get a calendar and mark the dates of every promotion. The idea of marketing is to always be at the forefront of your customers’ lives and remind them you have a product that’s worth going out of their way for. Here are some marketing ideas for your business:


  • Email – is one of the cheapest and most under-utilized marketing tools out there–and it’s 100% free! That is until you need an MLM (mailing list manager) to target specific demographics during campaigns. Chances are you won’t need this right away, but it’s something to keep in mind as you continue to grow.

  • Store Website – In today’s world, customers expect you to have a website. It doesn’t have to be anything special, but it should be professional-looking and have the expected information. Be sure to update it with your location, hours of operation, menu and whenever you change any of these items.

  • Social Media – Social media is a must-have if you want to stay relevant in the digitized world. Look into advertising on Facebook, Instagram or Google My Business.

  • Rewards and Loyalty Program – The nature of caffeine is addictive, so if you’re doing things right, you should have yourself a loyal following of wired patrons. Loyal customers deserve rewards, and they’ll use those rewards to spend more money. According to Clarus Commerce, 86% of consumers will shop more if they like your loyalty program, and 71% said they’d use the loyalty program more if they had digital access to their cards.

  • Local Partnerships – Connecting with local businesses is not only a great way to network but also helps get your name out there during the critical first couple of months.


Hire & Train Staff

Be on the lookout for experienced baristas that can help you put forward a great image. You want friendly faces up front that can make and serve a delicious drink. Be sure to focus on the people that have a great personality and will greet customers with a smiling face. You also want to train them on how to make the drinks on your menu before opening day. This way, you can avoid panic during the rush.

Offer Online Ordering 

Luckily, it’s neither expensive nor difficult to set up an online delivery system. But first, there are a few things you need to decide before selecting the best ordering system for your business.


  1. Do you want to offer pickup or delivery?

  2. If you choose delivery, will you use in-house or third-party drivers?

  3. Do you want a third-party platform or a POS-built online ordering system?

There are several affordable apps, software, and businesses on the market that will help you manage your online orders. If you chose third-party apps, it might be a good idea to subscribe to multiple platforms such as DoorDash, GrubHub, UberEats, etc. for wider visibility in the digital market.

How long Does it Take to Open a Coffee Shop?

It takes roughly between 12 and 18 months to open a coffee shop. However, this timeline will depend on a few things such as how much help you’ll have, your knowledge of the industry, the amount of time you put into the process and how familiar you are with the legalities. Things will move along a lot smoother and quicker if you have the right people helping you out and you dedicate as much time as you can to making your dream happen.

If you want to learn more about creating a marketing plan, a business plan or even what equipment is required in a café or coffee shop, we can help. Explore our blog to find more information.


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