2. What Are The Key Costs Involved In Setting Up a Coffee Shop?
The checklist below provides an overview of coffee shop start-up costs to help you plan your budget and estimate the investment you will need to open your business. Typically, the essential costs cover location, coffee shop equipment, employee salaries, licenses, permits and insurance, marketing, interior and exterior design, and various technologies such as a coffee shop POS.
The best locations for coffee shops to develop are generally highly populated and often include areas with a high density of office buildings or “business centers. Coffee shops can also be successful as drive-thrus, especially in areas where driving is more popular. The cost of finding the ideal space depends on the location and size of your coffee shop, as well as the availability of space in your community. Leasing a space in a desirable neighborhood will improve your chances of early success but will increase rental costs.
To determine the location of your new coffee shop, you must decide whether to rent, buy or build. Look for existing restaurants and stores for sale, as it is easier to convert a space used for similar purposes than to start from scratch. However, most of the space you leased needs to be renovated. Unless you purchase an existing shop, you will also need to invest in your new space and turn it into a coffee shop-like space, no matter what decor you choose. Consider hiring a real estate agent specializing in the restaurant industry or commercial properties to find a location for your new coffee shop.
Coffee shop equipment
Your coffee shop equipment will account for a significant portion of your start-up expenses. You’ll need to budget anywhere from a minimum of $20,000 to a maximum of $400,000 for kitchen equipment and restaurant furniture. There are a few pieces of equipment that any coffee shop can’t afford to be without:
Though you likely don’t intend to cook anything overly complicated in your coffee shop, you will need to be able to heat sandwiches, paninis, ice cream, and breakfast pastries if you plan to serve these types of dishes. Many coffee shops order ready-to-eat food, so you won’t need anything too fussy. Next, you’ll need a commercial refrigerator and freezer. A commercial-sized sink is also necessary. Most new coffee shops will spend at least $50,000 on repairs and renovations or new equipment and appliances.
You might also want to read: How To Make A Coffee Shop Menu
Commercial coffee grinder
Industrial coffee brewing and filtering equipment are expensive. They’re not the equipment you use for your morning cup of coffee. Below are some of the most popular machines:
- Marzocco Strada AV: best overall and costing at least and costs $28,000+
- Victoria Arduino Black Eagle 3-Group: Best for busy coffee shops and costs $25,000+
- Synesso MVP Hydra 2-Group – Best for medium-sized coffee shops and costs $18000+
- La Marzocco Linea Mini – Best for small coffee shops and costs $6000+
Having a coffee roaster is a perfect way to spread your brand beyond the four walls of your establishment. You’ll need a commercial coffee machine if you want to roast your own beans to make your drinks on-site or sell them by the pound. Depending on the quality and size of the machine, expect to spend about $10,000 to $35,000.
The espresso machine is undoubtedly the lifeblood of a coffee shop – and it comes with the most considerable equipment expense. Estimate $10,000 to $20,000 for a high-quality semi-automatic espresso machine.
Filtered water is required for coffee making, especially espresso. Set aside a budget of $650 to $800 for a system that will cover your coffee needs.
Drip coffee maker
A drip coffee maker is a system through which water automatically drips into a heating tube. Once the water is heated, it is poured over the ground coffee, passes through a filter, and comes out as a cup of hot coffee. Budget $1,500 for a complete drip coffee installation, including a quality drip coffee maker, at least two airports, and filters.
Permits, Licenses, and Insurance
Like any other business, you are expected to have permits or licenses before operating. For a coffee shop, you will need several types of permits and business insurance. Permits, licenses, and insurance can cost anywhere from $5,000 to $20,000. While costs vary depending on the location and size of the business, the required licenses, permits, and insurance policies generally include the following:
- Certificate of Occupancy (Building Permit)
- Building Health Permit
- Sign Permit
- Food Service License
- Business License
- Music License
- General Liability Insurance
Read also: What Licenses Are Needed To Open A Coffee Shop: 6 Common Café Licenses
Hiring and professional services
One of the most significant costs in setting up a coffee shop is the salary paid to your employees and the fees for the professionals who might help you.
Professional: Professional services that you can use during the process of opening your new coffee shop can include restaurant consultants, marketing or graphic design agencies, architects or interior designers, lawyers, and accountants. The cost of these services can range from $500 to $50,000.
Operational staff: You will need to hire managers and baristas, depending on your coffee shop’s expected volume of business. Baristas generally earn minimum wage. The average hourly salary for a barista in the United States is $12.92 per hour, not including tips. General managers of coffee shops typically earn an annual salary of about $40,000.
It’s advisable to employ only a few people when you first start. Before increasing the number of employees, collect data on the busiest days. If you have a lot of customers and they are waiting in line to get their coffee, you need an extra employee.
See also: Reduce Labor Costs in Retail, Coffee Shops, and Bakeries: 5 Simple Tips
Marketing and branding
The cost of marketing and branding your business depends on many factors. New locations of established restaurants may rely on existing brand recognition, and local franchises often have marketing and advertising paid for by the parent company.
New coffee shops are usually the most expensive to market. Major marketing and branding costs for new coffee shops include email marketing, paid advertising, setting up your website, creating an attractive loyalty program, etc. The success of your marketing campaign will be partially associated with your coffee shop’s point of sale.
The point of sale system is a mine of information you can leverage to better understand your customers’ preferences. Marketing costs for restaurants are estimated to be around 3-6% of your total business sales. For smaller establishments, you need to start with a lot of social media to get your name out there. Making your storefront stand out is also essential.
Must-read: How to Run a Successful Coffee Shop – 10 Tips for Cafés
Interior & exterior design
You have to consider your coffee shop’s interior design and furniture in your budget. The elements concerning the interior design you need to invest in are the lights, the decor, the signage, the music system, etc.
Coffee shops are well known for their atmosphere and ability to sit and relax. In recent years, outdoor seating areas have become very popular with restaurateurs, providing a safe and distant space for visitors.
Due to the increase in the number of people working from any location and flexible hours, the demand for coffee shops offering workspaces, retail outlets, and comfortable places for business meetings will continue to grow. Estimates suggest you budget around $1,000 to $40,000 for your outdoor coffee shop renovation.
Coffee shop POS software
An additional cost you will incur is associated with your coffee POS system. The total cost of your POS system will vary depending on the provider and equipment you choose. Modern point of sale software can cost anywhere from $50 to $200 per month, while all of the associated hardware will often cost you a one-time payment of $1500 to $5000.
Check out the innovative KORONA POS software for a POS system tailored to coffee shops. An advantage of KORONA POS is that there is no contract to sign. Subscriptions are simply monthly agreements. In addition, there are no upfront fees, installation fees, or other hidden costs. KORONA POS also allows you to use any payment processor and offers a hardware leasing option. To learn more about KORONA POS, click on the link below.
Must-read: 5 Coffee Shop POS Features To Brew Up Business