Everyone has thought about it at one point or another: How wonderful would it be to quit your job, move to a charming small town, and open a cozy cafe?
While it might sound like an escape, operating a profitable coffee shop is actually a challenging entrepreneurial experience. With nearly 72k coffee and snack shops in the US — and profit margins in the single digits — owners need to provide exceptional service to make their business stand out.
From menu planning to building out a physical space to managing finances, coffee-shop ownership is not for the faint of heart. But if it’s truly your dream, it’s within your reach — and below are the steps you need to take to get there (plus tips from experts who have found success):
- No prior experience? No problem
- Decide on your menu
- Craft your shop's personality
- How much does it cost to open a coffee shop?
- Where to open a coffee shop
- How long it takes to open a coffee shop
- Build your team
No prior experience? No problem
If you want to know how to open a coffee shop with no experience, the best place to start is those who do have experience under their belts.
“I recommend that people avoid a ton of research on the internet and that they focus their attention on reaching out to successful coffee shop owners in their area to sit down with people who are actually doing it,” says Jamie Cunningham, who has started multiple coffee shops and a hospitality consultancy business called Coffee Shop Success.
Speak with owners who have cafes you admire and might want to emulate. You can physically walk into shops and ask to speak with the owner, look them up on LinkedIn, or email or call using the contact information on the shop’s website.
This will give you a better understanding of the steps they took to make it happen. Bring a notepad to every conversation you have — and use it! The wisdom of seasoned owners is invaluable.
Once you’ve gotten a better understanding of the industry and what it might take to open a shop, it’s time to decide if you’re ready to take the jump.
Decide on your menu
Cunningham says owners need to decide on one component before they can get started: the menu.
The menu will dictate many of your important subsequent decisions, from location requirements and equipment to pricing and staffing.
Coffee shops come in many flavors: You can have a full-service kitchen that offers food in addition to coffee, pre-made sandwiches and pastries that you cook yourself, light bites that you purchase from an outside vendor, or no food at all.
For more specialized tasks such as menu pricing, Cunningham recommends bringing in a consultant. They have tools that break down each menu item’s cost (including ingredients, labor, and overhead) to understand how the item should be priced, and if it brings in a worthwhile profit.
Shop owners can then double down on more profitable offerings, and cut loss-makers from the list.
Regardless of whether you bring on a consultant, Cunningham cautions that menu prices are not to be overlooked, and owners should not leave their pricing to guesswork.
Fun fact: There’s a psychology behind menu designs. Cunningham helps clients by strategically placing higher-profit items in the upper-right corner of the menu, which is the first spot a customer’s eye is drawn.
Craft your shop's personality
Come up with a plan for the feel of your shop.
“A lot of what makes a shop different comes down to the ownership,” says Cunningham. “The culture of your business, how your employees feel about their jobs, how they interact with guests, the things you serve.”
Staying authentic is key to standing out in a crowded field. “So much of branding is about your story and the story is better when it’s really truly who you are,” says Melissa Villanueva, CEO and founder of Brewpoint Coffee.
Once you’ve nailed down your menu offerings and the look and feel of your shop, it’s time to write up a formal business plan. Use this template to get started.
Iron out the logistics
When the big picture is set, it’s time to turn your attention to the details, like how much money you’ll need to spend to open your doors and where your shop should be located.
How much does it cost to open a coffee shop?
The cost of opening a coffee shop varies widely, depending on the lease price, the location, the equipment needed, the staffing requirements, the breadth of the menu, the cosmetic renovations, and other factors.
Cunningham estimates that $250k would be a healthy amount of capital for an entrepreneur who wants to build their shop from scratch.
Villanueva says she’s opened shops with as low as $10k as well as shops that have reached $400k to open. A cost-saving route she recommends: purchasing a turnkey operation — a store that already exists but that is being sold.
This means many of the upfront costs associated with opening a coffee shop are baked into a single sale, saving a massive amount of time but also, hopefully, money.
Finding funding for a coffee shop looks similar to fundraising for any business, and includes options such as:
Regardless of the funding source, financially planning for your new shop is necessary. Cunningham says there are many solid business plan softwares available online (he recommends Live Plan). These can help with templating your plan as well as guiding you through the information you’ll need.
“Often first-timers realize there’s a ton of required info on a business plan that they haven’t even considered yet,” he says.
Look at comparable shops in your area (but make sure you’re comparing apples and apples). Cunningham recommends building relationships with local cafe owners who might be willing to share their numbers with you.
Lastly, he recommends bringing in a consultant. Ideally, it would be a subject-matter specialist, but any accomplished business person familiar with business plans can help in a pinch.
Where to open a coffee shop
While the right location for your coffee shop will depend on your business vision and where you live, there are a few other things to keep in mind.
Cunningham, who owns one shop in an up-and-coming industrial area off the beaten path, says that foot traffic can make all the difference. Since that shop location is more removed, Cunningham said it’s become a destination location that takes social media and marketing to get customers in the door.
“If I had to do it all over again, I would pay twice as much in rent if I could have the thousands of people walking by just naturally every day,” he says.
Factors that Villanueva prioritizes when choosing locations: a space in the downtown area of a city and close proximity to a train station and a college or university.
Downtown areas offer foot traffic as do locations near public transportation where commuters frequent. Being close to a campus means a constant flow of possible employees to work at your shop.
The catch: Downtown real estate on heavily trafficked streets comes with a heftier price tag. It’s about finding balance and being realistic about whether you’d prefer to spend more on rent, or double down on your social media and marketing efforts to get customers into the shop.
As for how long it takes to open a coffee shop…
… That varies. If you buy a turnkey shop, Villanueva says you can open within the month.
If you’re leasing a space that needs to be significantly built out, or you’re missing necessary equipment that’s back-ordered or custom-made, your timeline will be longer, likely six to 12 months, according to the experts.
Cunningham says you should be mindful of how much construction is going on in your area: For example, in Nashville, it could take 12 months to get construction resources because much of the city is expanding and building.
Food operations also need various licenses and permits. Be sure to look into local requirements early on and apply as soon as possible so that you’ll be ready to go for opening day.
Build your team
When you’re a first-time owner, you’re likely working with limited funds and bandwidth. Each staff member you hire is important, and could affect the success of the shop.
Cunningham recommends filling in the holes of your own weaknesses when deciding on early hires.
If you’re a stellar marketer and salesperson but can’t do simple napkin math, you might need someone who can step in to cover finances and business needs. If you love to bake but are terrified of strangers, you’ll likely need someone willing to work front of house, welcoming guests and building rapport.
Villanueva says that keeping a lean team in the beginning has its perks: When you’re physically behind the register or in the kitchen of your own coffee shop, you learn the ins and outs of your business and can make more informed decisions as a leader.
In the end, creating a coffee shop is as unique as the beans you’re grinding behind the counter, and there is no one-size-fits-all advice. But if you start by talking to entrepreneurs who own shops you admire, come up with a clear vision and menu, and dig into a business plan, you’ll be ready for success.