How Much Does it Cost to Open a Coffee Franchise?
If you have a daily routine of waiting at a coffee bar for your morning fix, you are in the same position as millions of other people throughout the world on any given day. When contemplating the prospect of launching a food and beverage business, operating a coffee shop is not a terrible alternative. The global market for coffee shops is projected to reach $237.6 billion by 2025, making them one of the restaurant industry’s fastest-growing categories.
As you are well aware, however, there is more to launching a successful business than simply having an idea: there is planning, development, and strategy involved, which translates to start-up expenditures coming at you from all sides.
How much, then, does it cost to operate a coffee shop?
We have addressed some of the necessary actions and costs you should anticipate prior to beginning:
Create the most extraordinary cuisine for your visitors
1. Writing a business plan
There is no general answer to the question of how much a coffee shop proprietor makes. The amount you’ll be able to take home after balancing the rest of the budget is highly dependent on your rate of customer acquisition, your break-even point for overhead, equipment, and payroll, among other factors. In general, social media marketing and networking have a significant impact on the launch of a firm.
Similarly, you may wonder what your return on investment, or ROI, will be if you invest in building a coffee shop; however, the answer is more convoluted than you might want. Due to the industry’s rapid expansion, a coffee shop’s return on investment has a high potential, but not every initiative will be successful. Maximizing your return on investment requires hard effort, vigilant management, and a shrewd budget.
Starting a small firm is not glamorous, and your profit margins will be tight for at least two years. With our assistance, however, you won’t be surprised by any of the fees associated with operating a coffee shop, which is a huge benefit.
2. Finding and developing space
Location and size of your coffee shop, as well as the availability of space in your town, will determine the cost of finding the ideal spot. In the initial phases of launching a new firm, the following expenses will need to be covered:
Cost of leasing or purchasing a commercial space. The lease for a storefront in a highly desirable location will raise your chances of early success, but it will also increase your monthly fee.
The expense of paying utility bills. While you are setting up shop in your new location, you will need to have the gas, electricity, and water turned on, which will increase your starting costs.
Construction costs. Regardless of the style chosen, it will require effort to transform a bare-bones rental into a room resembling a coffee shop. You may be required to purchase new light fixtures, cabinets, and decorations, as well as practical installations such as coolers, freezers, and refrigerated display racks.
3. Purchasing equipment
Equipment for brewing
Industrial coffee brewing and filtration equipment can be quite expensive. Here are several pieces of equipment that any coffee establishment must have:
System for purifying water
Choosing what you need and how much to buy is the most difficult aspect of purchasing equipment for a coffee shop or other food and beverage business.
When you add up the cost of the high-quality equipment required to prepare your clients’ favorite beverages, it can exceed $10,000. This shows how costly it may be to open a coffee shop.
As a general guideline, you should start slowly and increase as your money allows. Growing your organization gradually as opposed to preparing for implausible quantities enables you to manage the scale of your firm even under the most stringent margins.
Initial inventory and other supplies
- Coffee beans
- Teas $1,000
- Coffee $1000
- Paper cups $1,000
- Clear plastic cups
- Napkins $1,000
- Food and drinks
- Meet varying demands by including tea, bottled water, juices, baked goods, salads, ready-made sandwiches, ice cream, etc.
- Supplies such as cream and packets of real sugar, low-calorie substitutes, syrups, how much does it cost to open a coffee franchisespices such as cinnamon, nutmeg
- Milk, cocoa powder
Associated with your transaction technology is an additional expense you will incur. Modern POS software can cost between $50 and $200 per month, while the corresponding hardware bundle can cost between $1,200 and $4,000 on a one-time basis. Innovative POS software designed specifically for coffee cafes is available from Lightspeed.
While point-of-sale (POS) software may first appear pricey, it typically pays for itself over time by making inventories and transactions easier to track.
Remember the monthly rent, renovations, and installation expenses you incurred? To safeguard your investment, you will incur additional fixed expenses for a security system and insurance at some point.
4. Finding staff and vendors
Why are your employees and product suppliers included in the same section? Because everything relates to your break-even point. Since you have not yet established your coffee shop, you will be unable to calculate food and labor cost percentages, which are vital for ensuring the success of your business.
However, you can monitor these costs in order to forecast a realistic quantity of revenue and to ensure that none of the costs stated are becoming unsustainable.
Primary costs in the food service sector include food and labor expenses. As a percentage of overall income, prime costs should not exceed 60 to 65 percent. Compared to restaurants and other food and beverage enterprises, coffee shops typically have it easier, especially if you do not want to offer a diverse menu of food alongside your coffee beverages.
In most restaurants:
60%–65% of primary expenses are allocated to labor Food and beverage expenses typically 28–35% of total sales.
Regular coffee beverages have a margin of 15%–20%, while specialized coffee beverages have a margin of 12%–18%.
With a greater percentage for whatever meal you provide, you should still be able to keep food prices around 25%, allowing for more room for labor while maintaining profitability.
Include a part in your company strategy that forecasts your anticipated revenue. Calculate your goal per-serving costs for each item on your menu using this estimate. This gives you a list of objectives to pursue and an estimate of the remaining budget you’ll utilize to acquire staff.
A coffee business that hopes to create a splash in its industry must also pay close attention to its marketing efforts. You can hire a consultant to assist with marketing and outreach, or you can subscribe to software like Lightspeed, which makes it easier to communicate with your customers. Lightspeed POS interacts with email marketing providers like as MailChimp, allowing you to collect customer information, view customer purchase history, and build marketing audiences.
6. Becoming compliant
In order to operate your business, sell food, perform music, hire employees, etc., you will require permissions.
Every business must first obtain a business license and employee identification number (EID). These permit you to run a legal business with legal staff.
A Certificate of Occupancy and Food Service License are also needed to operate a restaurant legally. If you intend to serve alcohol as part of the increasingly popular coffee shop/bar idea, you will also require a liquor license. Be sure to include the application fees for each of these permissions, which vary by state and province, in your cost breakdown.
Can you afford to operate your own coffee shop?
There are ways to get your feet wet without committing to a full-service coffee business if you are still hesitant. For instance, Crimson Cup’s pricing estimate for a mobile coffee cart begins at only $60,000. You might also eliminate the costs associated with a permanent location by launching a food truck or partnering with local businesses to host a pop-up coffee shop in their locations on specific days of the week. Importantly, if you sense an entrepreneurial spirit, you should follow it wherever it leads.
It is time to take the next step and acquire a coffee shop POS system that will assist you in getting started. Discuss with one of our specialists how Lightspeed can serve as your coffee partner.