How to Start a Coffee Shop (2024 Guide)

No wonder there is a Starbucks on seemingly every corner, along with numerous local specialty coffee shops.

That’s a significant number of people ordering coffee!

You can tap into coffee’s popularity and earn a profit by opening your own coffee shop.

While it’s not easy and does require investment, it can be a profitable venture.

How to Open a Coffee Shop

Here’s a guide on how to open a coffee shop.

1. Franchise or Independent Coffee Shop

Your first step should be to decide what type of coffee shop you want to start.

You have a few different options:

• Open your own shop. This means starting completely from scratch and creating your own store.
• Open a coffee shop franchise.
• Purchase an existing coffee shop that’s for sale.

Each option comes with its own set of pros and cons.

For example, opening your own shop gives you the freedom to create exactly the type of shop you want, but you won’t have a big brand name behind you to help you out at the start.

On the other hand, if you start a franchise, you’ll benefit from brand recognition, but you’ll also be bound by the franchise’s rules, including the use of specific logos, colors, and even coffee beans.

Consider the pros and cons of each option and compare them to your priorities for your coffee shop.

For example, if having control over your branding and coffee beans is very important to you, then a franchise may not be the best fit, and you’d be better off with one of the other two options.

If your main goal is to have everything set up and ready to go as quickly as possible, then starting from scratch may not be ideal because it requires you to build everything from the ground up.

2. Do Your Research

If you want to know how to start a coffee business, it’s important to do your research. You need to learn all about what makes a successful coffee shop.

The internet has a wealth of information, and there are also other educational tools such as books and classes. You could also ask other coffee shop owners about their experiences.

You’ll want to learn everything there is to know about starting a coffee shop, from how to roast your own coffee beans, to the best machines to use, and the health codes for a coffee shop.

Basically, you need to seek out information on the entire process, from making the coffee to growing your business.

Doing your research will provide you with important tools and information that can help you to build your business.

The more knowledge you have, the better it is for your coffee business, as you’ll have more insight into how to run it effectively.

3. Create a Business Plan

Having a business plan is crucial for any type of business, including a coffee shop.

Your business plan will involve a few different components.

Firstly, you need to decide how you want your company to operate. There are many options such as:

• Sole proprietorship
• LLC
• C-Corp

The option you choose will have tax and legal implications for your business, so it’s important to choose carefully.

It can be a good idea to consult a business attorney about these types of decisions. This will help you choose the best option for your business.

If you are starting a franchise, you may already have a business entity that you have to use.

Aside from deciding on the structure for your business, you will also need to:

• Decide on a business name.
• Determine the location where you want to open your coffee shop.
• Think about the type of goods you want to offer.
• Consider the type of coffee shop you want to have, like a sit-down or drive-through.
• Identify your target demographic.

There’s a lot to consider when creating your business plan. However, having a business plan is very useful as it helps you organize everything in one place.

Not only is a business plan useful for organizing information, but if you need outside capital to start your shop, you’ll need to provide a business plan for funding consideration.

Fortunately, there are many business loans available for a café. Whether you need funding to start your coffee shop or want to leave room for expansion later on, having a solid business plan from the outset can make the process easier.

There are many other factors to consider early on, such as:

• What customers in your area are willing to pay. For example, if you’re planning to open a store in a working-class neighborhood, then opening a gourmet café where you charge $6 for coffee may not be the best idea.
• Whether you want to offer food. You may decide to offer food alongside coffee. If you do, you will need to decide whether you’re going to purchase the food pre-made from a bakery or make it in-house from scratch.

There’s a lot to consider when you’re first starting your business, but the more you can plan, the better. Having a strong concept will help set your coffee shop up for success.

4. Consider Costs and Funding

It’s crucial to consider costs and funding when starting a coffee shop.

Not everyone will require outside funding. Some people may already have the capital to start a coffee shop without seeking it from investors.

You’ll need to calculate your startup costs. Once you have determined your startup expenses, you can decide what startup funds are required and whether you’ll need to request capital from investors or contact banks and credit unions to request a small business loan. Another option is crowdfunding, which allows other people to support and contribute to the success of your coffee business.

Whichever funding option you choose, you need to have a clear idea of your budget before seeking the capital you need.

Starting a coffee shop is expensive, so you need to ensure you have enough funding to afford all of the equipment and supplies your business will need.

Also, it can take new businesses 6 to 12 months to become profitable. So, you’ll need to make sure your initial funding can cover operating costs until your business can support itself.

There are many methods you can use to get funding for your coffee shop, such as traditional commercial loans, business lines of credit, and small business loans.

It’s a good idea to research all of the available options thoroughly before deciding on what type of financing would be best for you and your business.

How Much Does It Cost to Open a Coffee Shop?

So, you might be wondering exactly how much it costs to open a coffee shop.

Well, it really depends on a few factors, such as:

• The location of your coffee shop.
• The size of your coffee shop.
• The type of coffee shop you’re opening.

It can cost anywhere from $80,000 to more than $600,000 to open a coffee shop.

The cost really depends on the size and location of your business.

It’s important to consider the following costs as they can add up:

• Renovations
• Buildouts
• Construction
• Machines
• Water systems
• Coffee grinders

Additionally, unforeseen costs often come up, so it’s important to be as accurate as you can with your budget to avoid underestimating. Consider every possible cost when creating your budget.

5. Choose the Right Location

Once you have a business plan and have organized your startup funds, you need to start setting up your business. The first step is finding a location.

This is probably one of the most important steps in the entire process of starting a coffee business.

The location of your coffee shop will be a huge factor in its success.

Here are some factors you should consider when looking for a location for your coffee shop:

• The size: Ensure that enough customers can fit comfortably in the space. You don’t want them to feel cramped.
• Accessibility: Make sure your coffee shop is accessible to everyone.
• Parking: Consider how the majority of your customers will reach your coffee shop. If you don’t depend on foot traffic, ensure there’s parking available, either a lot or street parking nearby. If biking is popular in your area, consider adding a bike rack.
• Seating: Think about the amount of seating available. Is there enough for the number of customers you want? Do you have outdoor seating that you can set up when the weather is good? Ensure you have plenty of space for your customers.
• Rent or mortgage: Consider the cost of rent or mortgage. Rent will be a significant part of your budget and should be included in your business plan. If you have a mortgage on the space, consider how much it will cost.
• Competition: If there’s already a well-established coffee shop nearby, that location may not be ideal. If there’s no other coffee shop nearby, you could potentially fill a gap in the market. Consider the competition in the area.
• Crime rates: A property might be cheaper in a rougher neighborhood, but consider if it’s worth the stress. Look at crime rates when choosing a location and consider what’s best for you and your business.
• Demographics: Consider the location’s proximity to your target demographic. If you are targeting a specific customer base, ensure that your business is located near them or is at least accessible to them.
• The space itself: In addition to the location, consider the space itself. Factors to consider include:
  • Is there plenty of room in the kitchen?
  • Are the necessary gas, drain, and water lines already installed?
  • Is the front-of-house area large enough?

When choosing a location for your coffee shop, consider not only the location’s convenience but also whether the physical space is suitable for a coffee shop. This includes evaluating the layout and overall environment to ensure it enhances the customer experience.

It’s advisable to consult with a lawyer to assist with negotiations and ensure that all necessary paperwork is completed and regulations are met. Additionally, hiring an architect or contractor for the build-out can be beneficial. They can provide estimates for plumbing, electrical work, heating, and air conditioning systems.

6. Register Your Business and Obtain Necessary Permits and Licenses

The specifics of registering your business and obtaining permits will depend on your city or county. This includes understanding which taxes you’ll be responsible for and acquiring any required licenses and permits.

Although the registration process can vary by state, you will need to apply for an Employer Identification Number (EIN) and establish your business structure before beginning the registration process.

Before you can start serving coffee to customers, you must secure several permits and licenses. Since you will be serving coffee and possibly food, ensure you have the appropriate business licenses and health permits. Additionally, you may need building, zoning, and land-use permits.

The types of licenses and permits required and the process for obtaining them can differ depending on your city and state. Be sure to check with your local government to determine the specific paperwork needed and ensure you have everything in order.

Keep in mind that obtaining permits can take time, so plan ahead and allow sufficient time for approvals.

7. Decide on a Menu for Your Coffee Shop

When opening a coffee shop, one of the most crucial aspects to consider is your menu. What exactly will you offer to your customers?

A well-designed menu will help draw in and retain customers. It’s an essential part of your business, so don’t take your menu design lightly.

Here are some tips to keep in mind when designing the menu for your coffee shop:

• Stick to your brand: Any good business requires strong branding. Ensure that your menu reflects your brand and aligns with your overall branding strategy.
• Know what the competition is offering: Check out what other similar businesses nearby are providing. Make sure your coffee shop offers everything your customers need and doesn’t miss any key items.
• Get feedback: Before finalizing your menu design, seek feedback from others. Ask for their opinions on the design and the menu offerings.
• Look at as many menus as possible: Visit various coffee shops and review their menus for inspiration.

Researching menu design and gathering information will help you create an exceptional menu.

8. Design a Layout for Your Coffee Shop

Designing your coffee shop is another crucial factor. You need to create an optimal layout for both the front-of-house and back-of-house areas. This is key not only to the efficiency of your business but also to the customer’s experience.

Designing the Front-of-House Layout

Consider the type of atmosphere you want to create. Do you prefer a cozy and private setting where people can chat, work, or hold meetings? Or would you like a more open-concept space that is airy and modern?

Whatever type of space you want, consider the size of your shop and how you can maximize seating. Arrange the seating based on the atmosphere you want to create for your business.

Seating is just one aspect of your shop’s design. You should also consider the color and style of the furniture and other décor elements.

Branding is important. If your logo and menus feature the color orange, but your coffee shop does not, it may not feel as cohesive as it should. The colors and style of furniture you choose should align with your desired look. For an open-concept, modern-style coffee shop, opt for contemporary furniture. For a cozier, traditional-style shop, choose classic furniture.

The front-of-house style should be cohesive and reflect your company’s branding.

Designing the Back-of-House Layout

The area behind the counter is often busy and crowded, so efficiency and flow are crucial. When designing the back-of-house setup, consider the necessary stations and the order flow.

Think about where you’ll take and prepare orders, and plan for equipment cleaning. If you’re serving food, also consider where food equipment will fit into the layout.

When designing your shop, consider how many people you want to accommodate and the type of atmosphere you want to create. You want a space where people can enjoy their coffee in a clean and orderly environment. Both the location and the interior design of your coffee shop are incredibly important.

9. Order Your Coffee Shop Equipment

If you’re planning to start a coffee business, you’ll need coffee shop equipment. For more information on acquiring equipment, you can check out this resource.

The types of equipment needed may vary from shop to shop, but there are a few pieces of equipment that pretty much every café will need, such as:

• Coffee machine
• Espresso machine
• Coffee grinder
• Water filtration system
• Refrigerator
• Freezer
• Ice machine
• Tea and coffee mugs
• Take-out coffee containers
• Point-of-sale system (POS)
• Hot food equipment
• Bakery display
• Cup, lid, and straw organizers
• Aprons
• Sink

The equipment you need really depends on what types of items you are selling.

For example, if you plan to sell cold and frozen coffee drinks, you will need a blender. If you plan to sell food, you may need items like ovens and toasters.

Consider the types of items you plan to include on your menu, and then make a list of all the equipment you’ll need to prepare and serve those items.

10. Find Suppliers

Aside from equipment, you will also need supplies. Finding reliable suppliers is an important step.

Drink ingredients, such as fresh-roasted coffee beans, milk, and syrups, will constitute a significant portion of your operating expenses.

Ingredients are crucial, as serving high-quality coffee and other beverages is essential for attracting and retaining customers.

You can keep inventory costs low by partnering with a supplier that offers frequent deliveries.

When starting your coffee business, spend time finding the right coffee supplier. If you’re starting a franchise, the brand will handle this for you. If you’re opening your own store, you’ll need to find a good supplier that fits your product needs, budget, and desired taste.

Serving high-quality coffee is vital, making this step particularly important. Many coffee shops purchase their beans wholesale from a coffee roaster.

Be specific when selecting a roaster. Consider whether you like the taste of their coffee beans; if you don’t, your customers probably won’t either. Evaluate the price to ensure it’s affordable for your target demographic and check if the roaster offers the types of coffee and flavors you want to serve.

11. Hire and Train Your Staff

Another crucial step is hiring and training your staff. Being selective during the hiring process is important because excellent customer service is key to the success of your coffee shop.

When hiring and training staff, decide whether you want to train new employees yourself or hire experienced baristas.

One of the most important characteristics to look for in a barista is a great personality and the ability to greet customers with a smile.

When training your employees, it’s crucial not only to teach them how to make beverages correctly but also to educate them about the coffee itself and its flavor profiles. This is because some customers may be interested in learning more about your coffee selection. Your staff should be able to answer any questions and make recommendations.

Your hires are the face of your coffee shop, so they play a significant role in a customer’s experience at your café. You want to ensure that your customers have a positive experience.

Proper training is essential for making a great cup of coffee, but you also want to hire individuals with excellent communication skills who understand the importance of building relationships with customers.

Here are a few important qualities to look for when hiring and training a barista:

• Great customer service
• Strong communication skills
• Great attention to detail
• A willingness to learn
• Cleanliness
• A positive attitude
• The ability to multi-task
• The ability to work under pressure
• Responsibility
• Reliability

Overall, a great barista will have a passion for coffee and care about the success and reputation of your business.

12. Get a Good Inventory System

When running a coffee business, it’s crucial to manage your inventory effectively. At the beginning, it can be challenging to estimate how much of each item, such as coffee beans or baked goods, you’ll need. You might not even know how many cups you’ll need each day initially.

Track these items carefully to get a clear idea of your usage. Ensure you stock your shop with essentials like coffee beans, syrups, varieties of milk, condiments, stirrers, and more.

Inventory management software is also a great tool for tracking and identifying items, making it easier to know what’s in stock and what needs to be reordered.

There are many inventory management apps available for small business owners. Some point-of-sale (POS) systems also offer inventory management, so that’s something to consider when choosing one. There are even specific POS systems designed for coffee shops.

No matter what option you choose, ensure you have a method for managing your inventory to avoid running out of items or over-ordering unnecessary supplies.

13. Promote Your Coffee Shop

Once everything is set up, start marketing your coffee shop to attract customers for opening day.

Having a marketing plan should be a primary focus. There are various ways to promote your coffee shop brand:

• Create a website for your coffee shop.
• Utilize social media platforms (Facebook, YouTube, LinkedIn, Instagram).
• Implement search engine optimization (SEO).
• Engage in influencer marketing.
• Consider paid advertising.
• Network with local businesses and community leaders.
• Host community gatherings and pop-up shops.
• Utilize storefront advertising.

Tailor ads and promotional materials to your target demographic, as these are the customers you’re trying to attract. Utilize multiple marketing avenues for best results.

14. Open Your Coffee Shop

After finalizing your business plan, securing a location, and completing the necessary steps, you’re ready to open your coffee shop!

Generate interest by promoting your opening day through social media. Consider planning a ribbon-cutting event or a soft opening to give people an exclusive first look at your shop.

Posting about your opening day on social media helps inform your target demographic that your shop is open for business. Offering discounts or specials on opening day can also attract more customers.

On opening day, mingle with your customers to connect personally. Many people appreciate knowing the face behind the brand. Building relationships with your community is crucial for long-term success.

15. Build Customer Loyalty

After opening, focus on building a loyal customer base to keep your coffee business thriving.

Implement strategies to encourage repeat visits and boost sales, such as a loyalty or reward program and coffee and meal combos. Offering coffee gift cards is another way to attract customers and generate extra revenue, especially as gifts for friends, family, or coworkers.

Master the Art of Coffee Entrepreneurship!

Starting a coffee business isn’t the easiest way to make money, but with a solid business plan, organization, and a loyal customer base, you can achieve great success.

I hope this step-by-step guide on how to open a coffee shop is a helpful starting point. Good luck!