Coffee House Business Plan
A Coffee house is a specialty beverage retailer and offer high-quality option to the fast-food, gas station, or institutional coffee.
The coffee house business is really a great way to make money. It is not easy, but if you are professional and work hard you really can make a lot of money with a great lifestyle to go along with it.
If it’s all about the money then coffee is the key thing to focus on. It’s easy to forget that the margin in coffee is so great. We often tend to look at total spend and the revenues from larger spend items such as lunch, whilst forgetting that the gross profit from two cups of premium coffee can easily be the same as a full meal.
And it will have less of a labor cost attributed to it.
We have no doubt that that’s where we are, and that’s where you can be too! Specialty coffee is hot! The specialty coffee industry is undergoing its most rapid growth in history. Our love affair with specialty coffee has exploded into a $5 billion industry whose growth shows no sign of slowing down. The growth is being driven by an emerging coffee culture. The National Coffee Association reports that last year there was an increase of people drinking specialty coffee of 19 million in just one year.
Once coffee drinkers have tried specialty coffee, there is no going back. The simple fact is; specialty coffee tastes better! We are experiencing a coffee-drinking public that recognizes, appreciates, and demands specialty coffee. This all adds up to an increased popularity of the specialty coffee house and the products they offer. With high quality specialty and espresso-based coffee drinks, a commitment to uncompromising quality, and a team of professionals committed to operational excellence.
Some coffee houses gross $2000-$3000 a day, 70% of this revenue coming from espresso based drinks, and the owners of these establishments put in their pocket (or purse) about $25,000 a month in profits!
The locations with the best probability of success are, in order:
- Next to colleges and universities, on a commercial walking street
- Downtown business district, in a large office building
- Neighborhood commercial walking streets
- Heavy foot traffic tourist areas, with great visibility
- Airports and large medical facilities (for carts and kiosks)
- Strip malls
- Inside shopping malls
First discovered in 850, coffee is the world’s most popular drink with more than 400 billion cups being drunk a year. The first coffee shop was opened in Constantinople in the 15th century, with coffee entering Europe through Venice 100 years later. London’s first coffee house opened in 1652.
Landmarks in coffee’s increasing popularity include the production of the first commercial espresso machine, in the early 1900s and the development of the Gaggia machine – the first mechanical process for making espresso and cappuccino in the post war years.
Coffee Houses offer comfort food based upon time-honored recipes from around the world.
Opening a Coffee House is quite promising. Since you would be running a predominantly cash business, the initial cost is significantly less than many start-ups these days. The process is labor intensive. The financial investment in your employees will be one of the greatest investments in making your Coffee House a success.
Your mission should be to provide accessible and affordable high quality food, coffee-based products, and entertainment to the thousands of residents within a five-mile radius of your Coffee House.
You will be successful operating a Coffee House by providing quality food, and coffee-based beverages.
Think of coffee houses as a neighborhood gathering place. A coffee house is an extension of your living room for people to congregate, relax, converse and to meet others in a casual, friendly atmosphere. Coffee houses have always been a meeting place for poets, intellectuals, students, writers, musicians and artists.
Coffee houses generally don't have full kitchens built with ranges, ovens, hoods and flues. The coffee house space has comfortable seating with dark roasted coffee and espresso brew offered with inexpensive desserts, lights meals and beverages. Service is casual as in walking up to a counter, ordering and paying for your drink and food. Depending on the order, it may be brought to your table or you may carry it yourself. Some patrons use a criteria of ambiance first and coffee second when evaluating coffee houses.
Original artwork from local artist cover the walls and perhaps live music and poetry readings are performed. A local bulletin board might hang on the wall for people to scan deals on apartment sublets, cheap airline tickets or guitar lessons. A rack carrying neighborhood, underground newspapers and magazines will be available free for customers to read. All these add to the attraction of a coffee house.
In addition, music and ambiance is definitely an important factor when designing your ideal coffee house. A variety of features, including interior, tall ceilings, woodwork, iron work and natural lighting add to the richness of the space. Choose jazz, classical to underground rock music to play over the stereo system to enhance the atmosphere. You don't want to make your coffee house too slick and "franchise" looking as if belonging in a shopping mall. Make it a bohemian feel, make it one of a kind, make it comfortable and relaxing. Whether a patron enjoys reading a good book or wants to meet friends over a latte, the coffee house is becoming a popular and important fabric for communities and neighborhoods across the country.
Getting your customers to visit more often can be achieved in a variety of different ways. Converting that three visit a week customer to four visits a week can be attained simply by making the quality of your coffee so good that he can ’ t pass by your coffee house without nipping in. Alternatively, you can try and persuade your morning customers to try you for lunch or your afternoon customers to try you in the morning. Maybe you can persuade your weekday customers to visit at the weekend or all of your customers to take food home or use you for catering functions.
The key to making profit in your coffee business is to know your numbers and ensure you have clear and simple procedures to track them. Daily, weekly and monthly - not once a year six months after your financial year end when your accountant finally bothers to get round to looking at your books!
A new customer will be intimidated 90% of the time. We are all slightly awkward in a new environment, so view your business from a new customer’s eyes as much as from an existing customer’s. It’s a fine balance. You need to grasp that the new customer will be confused about how you operate so you need to make your systems as clear as possible without being clumsy.
- Is it table service or counter service?
- Where do I get a tray?
- Where do I pay?
If there is the slightest doubt about these things then make it very clear to them.
Know Your Market
- Determine the total size of your coffee houses target market.
- Demographic information such as population age, gender, income levels, race, occupations, disposable income and buying practices are essential to know when marketing the coffee house.
- Geographic area is important to consider in choosing a location for your coffee house, knowing where your potential customers are located, and other types of coffee houses in that geographic area.
- Once you have defined who your target customer is, you must determine how many potential customers exist if your coffee house is to be commercially viable. It is important to note that the market may already be well served by other acceptable coffee houses to your own.
If your coffee house is an improvement on a existing coffee houses, your market size could be determined by the total number of similar outlets currently being sold in the geographic market you have defined. If you have a new product which is an "add-on" to another product currently on the market, knowing the number or product sold annually in your geographic market would help determine the market size for your new product. It is also important to know whether the market is growing or shrinking. Economic, political, environmental and demographic trends will have some effect on the success of your coffee house.
Know Your Customers
- Who or what do you plan to sell your coffee to?
- How do customers perceive themselves?
- How do you plan to acquire customers?
- What distribution methods will you need?
- What form of advertising and promotion will be effective to produce sales and sell coffee?
- What will promotion and advertising cost?
- Where is your target customer most likely to buy your coffee?
- How important is price to a customer?
- How important are product or service quality and convenience to your customer?
- Focus on customers' needs.
- Listen to your customer.
Knowing who your customers are is important but servicing the customers to ensure that they are happy and satisfied with your coffee house is paramount. It has been acknowledged by many marketing gurus that customer service will be the key to survival of your coffee house over the next several years. Excellent customer service ensures an ongoing relationship between you and your customers.
So in order to establish this, the coffee house owner could promote your coffee house through advertising in magazines. You should also attend trade fairs where valuable contacts can be made as well, they can receive input about the coffee house and whether your prices are suitable for your customers. You start with the idea that there might be a need for a coffee house, but to fully understand your new business opportunity, you need to add the customers' perspective. Knowing your customers' needs, values and wants will build a strong competitive advantage into your new coffee house.
Know Your Competition
- Know who your competitors are and their company history.
- Know what your competitor's products are - its features, costs and prices.
- Know your competitor's strengths and weaknesses.
- What are the advantages and disadvantages of your product?
- How valuable is your new product to the marketplace?
- Will your product make its entry difficult and costly?
- Will you face new competition in the marketplace from other innovations that may be expected to threaten the market share?
Studying and researching the competition is a very critical market research step. It may uncover a similar product already on the market; help you evaluate the potential share of the market you can expect to obtain; and provide you with a list of companies to license or distribute your new product. If your product is similar to products already on the market, familiarity may be an advantage. If your product is completely new on the market scene, it may be a disadvantage.
It is important to note that with new product introductions, customers may be slow to catch on. Failure to recognize your competition at an early stage of your marketing research, could lead to difficult problems later on.
Know Your Market Price
- What price will customers pay?
- Does your product have a price advantage over the competitors?
- What does it cost you to get your product to market?
- Are there trends in price increases or decreases and how much in your target market area?
- Is your initial price low enough to find a market and yet high enough to make a profit?
- Price and value to your customer are the most important variables in this area.
You must be able to introduce a new product at a lower cost or you will not be in business long enough to recoup your investment. If you can produce a same product like your competitors for less and sell it for less, then you can take business away from your competitors. Never assume that your product is so great and wonderful that customers will pay anything for it! Researching what your target customers will pay for your product and what your customer's needs are will have an effect on the market price.
Writing A Coffee House Business Plan
Writing A Coffee House Business Plan
Financing The Idea
Unfortunately, not many financial institutions will lend money to an unproven entrepreneur with great ideas. An underfinanced entrepreneur may have to borrow money from their savings account, borrow against personal assets, or recruit investors amongst family and friends. When an entrepreneur approaches an investor, they must inform the investor why they need the money and how much the investor is going to obtain for their contribution.
Another way to find an investor is to choose a working partner. This partner may not only provide money but may also have experience in operating and managing a business. Entrepreneurs may also consider advertising for potential working partners in a newspaper under Business Opportunities. Once the entrepreneur becomes established, they may want to investigate financial assistance programs that are available through financial institutions and the federal and provincial governments.
Researching a coffee houses potential can take a lot of time and in some cases, even money. The level of research and cost will vary from business to business and from person to person. The purpose of doing market research is to provide you with enough knowledge to determine whether the project is worth pursuing and whether they are prepared to take risks of financial failures or financial gains. The less research an entrepreneur undertakes, the greater the risk they may face in developing their coffee house. However, on the other hand, overanalyzing and over researching may take too long and if no action is taken soon enough, competitors may bring a similar idea to the marketplace faster.
Some factors which can contribute to coffee house success are:
- A well-thought out Coffee House Business Plan is "worth its weight in gold"
- Build commitment
- Review your mission statement and strategic objectives
- Perform market research
- Evaluate data
- Formulate marketing objectives
- Assess the cost
- Create one-year tactical plans
- Establish a formal review process
- Set up a market infrastructure
- Identify a niche
- Be flexible in modifying your niche as the marketplace changes
- Attend trade shows
- Stay in touch and in tune with your customers
- Listen to the voice of the market
Some factors contributing to coffee house failures are:
- Failure to direct the correct message to the correct audience
- Failure to match the goals and the budget
- Failure to use the correct techniques
- Failure to be consistent
- Failure to grab attention
- Failure to understand the customer
- Failure to be on the cutting edge
- Failure to use research
- Failure to recognize results
- Failure to sell something people want to buy
- Failure to select the right partner when doing business
- Failure to charge what you are worth
- Failure to turn down bad clients
- Failure to recognize what you want to do with your life the day after - the day after you realize that your business is either a success or a failure!
What are some of the more subjective traits that define your customers? This might include things such as current buying motivations, perceived shortcomings of other solutions in the market, and trends / purchasing shifts likely to occur within your target market.
Naturally, the more you understand your customers, the better your chances of success. Many times the best approach to answer the target market question: “Who is our customer?” is to invest time and resources in primary market research. Conduct simple surveys or focus groups. And if feasible, work with a reputable market research firm to guide you through the process.
At the very least, use the Internet and industry groups to locate market research studies and statistics for your Coffee House Business Plan. These resources can range from free information available on websites to expensive professional market research studies prepared by experts in the field.
Performing primary research enables you to gather and document the quantitative and qualitative information needed to prepare a solid target market section for your Coffee House Business Plan.
- Don't assume that everyone is a buyer.
- Don't be unclear about the characteristics that define who your target customers are.
- Don't assume you must have a "huge" target market - a large and well-defined target market that your coffee house can serve is far better.
- Don't jump to conclusions about why your target market needs you - instead explain how your coffee house will meet their needs.
- Don't underestimate the value of focus - sell a specific product / service to a specific group.
- Don't try to attack too many markets at once - particularly if you are a start-up coffee house.
Coffee House Business Plan
Coffee House Business Plan
Consider getting staff to ask customers whether they have been at your coffee house before. If they have not then get the staff member to
politely explain how you operate - where to order, where and when to pay and which products the server particularly likes themselves. Create a training session where staff role play at being a new
customer, and make them understand that the script is important.
Coffee is a global industry that employs more than 20 million people and ranks second only to petroleum in terms of dollars traded worldwide. With more than 400 billion cups consumed every year, coffee is the world's most popular beverage.
Today's coffee cafes cater to a marketplace as varied as the coffee flavors themselves--some targeting the breakfast and lunch on-the-go market, others operating as evening destinations, with food items and perhaps entertainment, and a wide range of styles in between.
Most successful coffeehouses have heavy foot traffic and high-volume sales. The majority will serve as many as 500 customers per day and manage up to five customer turns during the lunch hour, despite having limited floor space and modest seating capacity. Profit margins for coffee and espresso drinks are extremely high-after all, you're dealing with a product that is more than 95 percent water. At the same time, your average ticket amount is less than $2, so you need volume to reach and maintain profitability.
Besides specialty roasted coffee by the cup, most coffeehouses also have espresso-based drinks (cappuccinos, lattes, etc.), assorted teas, bottled water and fruit juices, along with an inviting assortment of baked goods such as biscotti (Italian dipping cookies), bagels, croissants, muffins and a selection of desserts. Most also sell their beans by the pound so customers can enjoy their favorite brews at home.
Great Coffee Houses do not happen by accident.
They are planned that way.
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