Brewing Up: How Much Does it Cost to Open a Coffee Shop?
If you find yourself in a daily habit of waiting for your morning fix at the coffee shop, it turns out that millions of other people are doing this as well. But have you asked yourself how much it costs asked to open a coffee shop?
If you’re considering starting up a food and beverage business, opening a cafe is not such an absurd idea. After all, diners have been one of the fastest-growing concepts in restaurants, with over US$237 billion worth by 2025.
I learned that just having a good idea is not enough for success. There are many aspects to starting your own business, which translates into start-up costs coming at you from every direction.
So, what is the budget for establishing a coffee shop? Opening a coffee shop is not cheap. Crimson Cup, the successful chain of shops with locations all over North America and abroad, has said that you can expect to spend between $80k-300k depending on your size and services.
I have covered some of the necessary steps and expenses you should expect before getting started.
- Writing a business plan
- Finding and developing space
- Purchasing equipment
- Finding staff and vendors
- Setting up marketing
- Becoming compliant
Make the most memorable menu for your guests
A menu is a critical component of your coffee shop’s branding and can be used to excite guests, but it also needs to bring in profits.
1. Writing a business plan
If you want to start a small business, the first step is developing an all-encompassing plan. A plan isn’t just about getting funding; it’s also about listing out your actions for opening up a shop and whether or not owning a coffee shop is right for you.
Coffee shop owners are unique in not answering this question with a broad number. A coffee owner will be lucky if they can break even after expenses, so they need to take their time and develop relationships with customers before opening up any shops.
It can vary depending on the location and hours open for business. To get an idea about ROI, there must be careful oversight over budgeting.
Starting a small business is not glamorous, and the first two years are always tricky. We will help you anticipate all of your costs with opening up a coffee shop so that this doesn’t catch you off guard.
2. Finding and developing space
You may need to pay a higher cost for your coffee shop if you want it in an expensive part of town or one that is high traffic. It also depends on the size and availability of space near where you live.
- When you’re first starting, balancing the cost of commercial space and the corresponding lease is hard. Renting is easier on your budget, but leasing will give you more options for locating in an area with potential.
- When you are starting a new store, the costs of utilities will add to your initial expenses. To have gas, electricity, and water turned on for your temporary location can be expensive.
- Renovating a space to be used as a coffee shop is not cheap. You will need new light fixtures, cabinets, and decorations for the inside of your store, but you also have exterior needs like refrigerators outside.
3. Purchasing equipment
Part of answering the question ‘how much does it cost to open a coffee shop’ is knowing the purchasing equipment.
No matter what the size of your business, there are some things that you can’t do without. One of these is industrial coffee brewing and filtration equipment; it gets expensive.
- Water filtration system
- The cheapest coffee maker is the one that will make your morning cup of joe.
- Espresso machine
When buying equipment for a coffee shop or other food and beverage business, the hardest part is figuring out what to buy. You need enough of everything to do their jobs efficiently but not too much because then it will just go wrong.
When you include the cost of all your equipment, it can be over $10,000 to make drinks. This means that opening a coffee shop is expensive.
For many business owners, it’s essential to grow your company gradually and not just for unrealistic numbers. Succeeding at the right pace is better because you can adjust if needed.
Initial inventory and other supplies
- Coffee beans Teas $1,000 Coffee $1000
- Teas $1,000
- Coffee $1000
- Cups Paper cups $1,000 Containers Clear plastic cups Napkins $1,000 Stirrers Straws lids
- Paper cups $1,000
- Clear plastic cups
- Napkins $1,000
- Tea, bottled water, juices, baked goods, salads, ready-made sandwiches, ice cream, and other foods and beverages are available to meet a variety of needs.
- Provide variety by providing various drinks, baked goods, salads, and ready-made sandwiches.
- I purchase basic supplies like cream, packets of natural sugar, and low-calorie substitutes. I also buy syrups such as maple syrup or coffee flavoring
- Milk, cocoa powder
POS systems and financial software
Another cost to think about is the one associated with your transaction technology. Modern POS software can range between $50 and $200 per month, while the hardware bundle will often run you a one-time payment of anywhere from $1,200-$4,000, depending on what type of store it’s geared towards.
The best thing about POS software is that it pays for itself by making inventory and transactions easier to track.
The costs for your rental, renovations, and installations will add up. At some point, you’ll have to budget more money in the form of a security system or insurance.
4. Finding staff and vendors
When it comes to calculating the break-even point, you need various numbers. These include food and labor cost percentages essential for ensuring your business is performing well.
You can keep track of the cost to see if you are making a profit and ensure that none of these costs become unsustainable.
Another thing to consider on how much it costs to open a coffee shop is the food service. The food service industry is well aware of the importance of keeping their premium costs low, and in most cases, this means not serving any other food than coffee. This makes it easier for coffee shops to keep these costs down because they can focus on selling one thing.
In most restaurants:
- The majority of the cost in running a business goes to labor.
- This is the average cost of food and beverage on total sales.
- Coffee shops typically make 15% to 20% of their revenue from regular coffee and,12% to 18 % of their sales come from specialty drinks.
Increasing your food percentage is not the only way to keep labor costs down. You can also reduce employee wages, thereby making up for any potential loss in revenue.
To develop a budget, you need to forecast your expected revenue. You can then use that number and calculate the target per-serving costs on each of your menu items to have goals for what should be profitable while also accounting for staff salary expenses.
Marketing is also an essential consideration for any coffee shop, especially how much it costs to open a coffee shop. You can hire a consultant to help with marketing or subscribe to software like Lightspeed that will allow you to reach out and connect with your customers through email marketing tools, such as MailChimp. With this software, you’ll capture customer data from when they purchase things in the store.
6. Becoming compliant
You will need permits for various things, such as serving food and playing music.
First, you must register your business with the local government. You will need a Business License and Employee ID Number (EID) to employ employees legally.
To legally run a restaurant, you will need several permits. A Certificate of Occupancy and Food Service License is necessary for all restaurants in most states or provinces. Suppose alcohol is served as part of your concept (which is becoming increasingly popular). In that case, you’ll also need a liquor license which varies between state and province, with application costs that vary accordingly.
Can you afford to own a coffee shop?
The first time you think about opening a coffee shop, it might seem like an expensive and intimidating venture. What is the budget for establishing a coffee shop? It’s okay if you don’t want to take out $80,000 or more loans for this type of business because the potential payoff is high.
If you’re not sure about the idea of starting a coffee shop, there are other ways to get your feet wet. Crimson Cup estimates that it would cost only $60,000 for mobile carts and with food trucks or pop-up locations in stores on certain days of the week.
Lightspeed is here to help you get your coffee shop up and running. We have an expert team that can answer any questions or concerns you may have about the process of starting a business.
That’s it on how much it costs to open a coffee shop and all you need to know. It’s your time to think and decide. Good luck!