Are you passionate about coffee, enjoy hosting social events and love connecting with people? If so, starting a coffee shop could be the perfect business for you.
In this guide, we’ll walk you through the process of starting a coffee shop, from developing your concept to creating a business website and marketing your business. We’ll also discuss the challenges of running a coffee shop and how to overcome them.
What is a coffee shop business?
A coffee shop is a service-based type of business that offers a variety of coffee-based beverages and often serves light meals and snacks. It’s a place where people can gather, relax, socialize and enjoy the aroma and flavors of freshly brewed coffee. Coffee shops have become integral to our modern culture, serving as meeting places, workspaces and community hubs.
Why start a coffee shop business?
Coffee shops have evolved into social and cultural hotspots, offering a unique blend of coffee, ambiance and community. In fact, The coffee shop industry in the United States is expected to grow by 3.21% CAGR from 2023 to 2028. And, the roasted coffee market in the United States is projected to reach a revenue of $66.6 billion by 2025, according to Coffee Industry Statistics. There’s abundant opportunity for new coffee shop owners, but before going all in, you’ll want to familiarize yourself with the benefits and challenges of starting your own shop.
How to start a coffee shop: 7 essential steps
All things considered, if you're passionate about coffee and ready to turn your dream of starting a business into a reality, here are seven essential steps to lay the foundation for your coffee shop.
01. Create a business plan
Executive summary: A concise overview of your coffee shop concept, mission and key differentiators (for example, will you offer specialty coffee blends or drinks? Or, will you offer live music and other special experiences?).
Market research: Identify your target market, analyze local demographics and understand consumer preferences.
Competitive analysis: Study existing coffee shops in your area, identify their strengths and weaknesses further elaborate on how you plan to stand out..
Marketing and sales: Describe your strategy for attracting customers, establishing your brand and building customer loyalty.
Financial projections: Create a comprehensive financial forecast, including startup costs, monthly operating expenses, revenue projections and profitability analysis.
Business triage: An essential part of any small business owner's management plan, business triage is a system for assessing, diagnosing and prioritizing business problems.
02. Select a legal structure
Choose a legal structure for your coffee shop, such as a sole proprietorship, partnership, limited liability company (LLC) or corporation. Each structure has different legal and tax implications, so it’s important that you carefully consider which structure is best for you in the long term. For example, corporate tax is different from other types of taxes. If you’re not sure which one’s right for you, consult an attorney or accountant. Decide how you will manage your coffee shop, including roles and responsibilities, employee management and operational procedures.
03. Secure funding
Starting a coffee shop involves significant startup costs that should be considered when planning your budget. These costs include rent, interior design, equipment, staffing and inventory. It's crucial to have a detailed budget and a solid plan for securing the necessary funding to launch your coffee shop successfully.
Personal savings: Utilize your own savings and personal funds to invest in your coffee shop.
Small business loans: Explore loans from banks, credit unions or Small Business Administration (SBA) loans tailored for small businesses.
Investors: Consider seeking investors who are interested in partnering with you and providing capital in exchange for equity.
Crowdfunding: Leverage online platforms to raise money for your business by pitching your coffee shop concept to a large number of potential investors or supporters.
04. Decide on accounting and bookkeeping systems
Efficient accounting and bookkeeping systems are essential for managing your coffee shop's finances. As a first step, you’ll want to apply for a business bank account where you can keep your business earnings separate from your personal earnings. Most banks will require you to have an employer identification number (EIN), as well as other documents in hand when opening a business account.
Once you’ve got your account set up, think about the accounting software and/or professional assistance you need to streamline tasks and ensure accurate records. Set good habits like regularly reconciling statements and generating reports for informed decision-making.
05. Choose an appropriate location
Choosing the right location for your coffee shop is critical to its success. The ideal location offers a steady flow of people, while being affordable and attracting the right crowd. When considering a location, look at factors like:
Foot traffic: Look for areas with high foot traffic, such as commercial districts, college campuses or busy shopping centers.
Accessibility: Ensure that your location is easily accessible, with ample parking and convenient public transportation options.
Competition: Evaluate the proximity of other coffee shops and assess their impact on your customer base.
Space and ambiance: Consider the size and layout of the premises, as well as the potential for creating a comfortable and inviting atmosphere.
If you're looking to start a coffee shop business in a specific state, here are some helpful resources:
06. Set up your business
To start your coffee shop, secure commercial space and hire contractors for necessary renovations. Source essential equipment like espresso machines, grinders, brewers, refrigeration units and POS systems from reputable suppliers. Budget for furniture, signage, utensils and initial inventory to create an inviting atmosphere. Careful planning and execution will contribute to a smooth operation when you open your coffee shop.
07. Obtain the necessary permits and licenses
When opening a coffee shop in the United States, it's important to comply with specific licensing and insurance requirements. While the exact steps may vary by state and local jurisdiction, here are some general guidelines to follow:
Business registration: Register your business with the appropriate state agency, such as the Secretary of State or county clerk's office. This step establishes your business as a legal entity. At this point, you’ll need to choose a unique and memorable name for your business (though you can always register for a DBA if you want to change your name later). Consider using a business name generator for inspiration.
Seller's permit: Apply for a seller's permit from the state's Department of Revenue or Taxation. This permit allows you to collect and remit sales tax on goods sold. Each state has its own application process and requirements.
Health permits: Obtain the necessary health permits from the local health department or agency to comply with food safety regulations. This ensures that your coffee shop meets the required health and safety standards.
Alcohol license (if applicable): If you plan to serve alcohol, research and apply for the appropriate alcohol license from the state's Alcohol Beverage Control agency or department. The specific requirements and application process may vary, so consult with your local authorities.
Insurance coverage: Secure appropriate insurance coverage for your coffee shop. This may include general liability insurance, property insurance and workers' compensation insurance. Consult with an insurance professional to determine the specific coverage needed for your business.
It's important to note that registration and licensing requirements can vary by state and local jurisdiction. Therefore, it's crucial to research and comply with the specific regulations and requirements of your location to operate legally and protect your business.
Tips for operating and managing your coffee shop
Operating and managing a coffee shop requires efficient systems, attention to quality and well-trained staff. Here are four essential steps to effectively manage your coffee shop.
Closely manage your inventory and supplies
Maintaining an organized inventory system is crucial to ensure a smooth operation. Here are key steps to consider:
Track inventory: Implement an effective inventory management system to monitor stock levels, track usage set reordering thresholds. Consider using Wix's built-in inventory tracking system or explore specialized inventory management solutions available through the Wix App Market. These tools streamline inventory management and ensure a smooth operation for your coffee shop.
Stock essentials: Ensure you have an ample supply of coffee beans, milk, syrups, cups, lids, napkins and other essentials to meet customer demand. Regularly assess your inventory and adjust ordering quantities based on sales trends.
Establish good supplier relationships: Build relationships with reliable suppliers who provide quality products at competitive prices. Establishing long-term partnerships can result in better pricing, timely deliveries and favorable credit terms.
Utilize technology for efficiency
Leveraging technology can streamline business operations and enhance customer experience. Consider the following:
Online menus and ordering: Offer online menus on your website or mobile app, allowing customers to view options and place orders for pickup or delivery. Partnering with third-party delivery services can expand your reach.
Payment processing systems: Implement secure and efficient payment processing systems, such as contactless payments or mobile wallet options. This improves transaction speed and convenience for customers.
POS integration: Integrate your POS system with inventory and CRM tools for seamless data synchronization, efficient reporting improved customer service. Wix's POS solution allows you to centralize operations, sync data, generate reports enhance customer service.
Ensure quality assurance
Consistently delivering high-quality coffee and food is paramount to building a strong reputation. Implement the following processes:
Standardized recipes: Develop standard recipes and procedures for each coffee beverage and food item on your menu. Train your staff to follow these recipes to ensure consistency in taste and presentation.
Taste testing and feedback: Regularly taste-test your products to maintain quality. Encourage customer feedback and address any concerns promptly to ensure continuous improvement.
Quality control checks: Conduct routine quality checks on coffee brewing, food preparation overall cleanliness. Set standards for temperature, brewing time, portion sizes food safety practices.
Train employees on proper procedures
A well-trained staff is crucial for providing excellent customer service and maintaining operational efficiency. Consider the following training strategies:
Barista training: Provide comprehensive training for baristas on coffee preparation, espresso extraction, latte art and customer service. Focus on consistency, efficiency and product knowledge.
Customer service training: Train your staff to provide friendly, attentive and personalized service. Emphasize the importance of engaging with customers, addressing their needs and resolving issues effectively.
Standard operating procedures: Develop and document standard operating procedures (SOPs) for various tasks, including opening and closing procedures, cleaning protocols and cash handling. Regularly review and update these procedures to reflect best practices.
Avoid common pitfalls
Here are some common pitfalls that coffee shop owners should steer clear of to ensure success and longevity in their business journey:
Inadequate staffing: Understaffing can result in poor customer service and increased stress on employees. Make sure that you have sufficient staff during peak hours and busy periods.
Lack of training and development: Failing to invest in ongoing training and development can lead to inconsistent product quality and low employee morale. Continuously train and empower your staff to excel in their roles.
Ignoring customer feedback: Disregarding customer feedback or failing to address concerns can harm your reputation and customer loyalty. Actively listen to customer feedback and take steps to improve your business.
Tips for marketing your coffee shop
Once you've launched your coffee shop, effective promotion is essential to attract customers and build a strong brand presence. Here are five tips to help you promote your coffee shop successfully.
Network strategically to expand your customer base
Building a strong customer base requires effective networking. To connect with potential customers and local businesses, make sure to:
Collaborate with local businesses: Forge partnerships with neighboring establishments—such as bakeries, bookstores or gyms—to create cross-promotions, events or joint marketing initiatives. This mutually beneficial collaboration allows you to tap into each other's customer base, expanding your reach and enhancing your brand visibility.
Engage in community involvement: Participate in local events, sponsor community initiatives or support charitable causes. By demonstrating your commitment to the community, you not only build relationships with potential customers but also establish your coffee shop as a trusted and integral part of the neighborhood.
Invest in effective marketing strategies
To attract a wider audience, it's essential to invest in well-planned marketing strategies that encompass both online and offline tactics, such as:
Online advertising: Utilize paid online advertising channels like Google Ads or social media platforms to target specific demographics and geographic areas. Create engaging ad campaigns that highlight your unique offerings, promotions or discounts, captivating potential customers and enticing them to visit your coffee shop.
Offline marketing: Distribute eye-catching flyers, brochures or business cards in local establishments or mail them directly to targeted neighborhoods. Additionally, advertise in local newspapers, magazines or community newsletters to reach a broader audience who might be more receptive to traditional forms of marketing.
Social media: Social platforms are invaluable for engaging with your audience, building brand loyalty creating a sense of community. Platforms like Instagram, Facebook and Twitter offer unique opportunities to showcase your coffee and food creations, share updates and promotions interact with customers and industry influencers.
How one drinks business used social media marketing to showcase their products and their brand values
Our primary focus has always been social media—we use Instagram, Twitter, and Facebook. The main thing for us, on social media, our website, and even the experience in the shop, is to be as inclusive as possible. Keeping the language of our spirits as simple as we can. Being transparent with our barrel routine and how things are aged. Using terms that are unnecessary, or trying to overcomplicate things, excludes people, and we would never want to do that. Our spirits are for everyone. Andrea Shubert, Co-founder of Strathcona Spirits
No matter where you promote your business, make sure to keep your branding consistent. Use Wix’s logo maker to create a logo that you can feature in all of your digital assets (check out these food logo ideas for inspiration).
Attend industry events to cultivate connections
Industry events provide invaluable opportunities to network with suppliers, professionals and potential customers. Here are some actions you can take to boost your presence in the coffee and food and beverage community:
Trade shows and expos: Showcase your coffee shop and its offerings at coffee trade shows, food and beverage expos or local food festivals. Engage with attendees, offer samples and distribute promotional materials to leave a lasting impression.
Encourage barista participation: Support your baristas in participating in regional or national barista competitions. Not only does this showcase their skills, but it also brings recognition to your coffee shop and reinforces its reputation for excellence.
Build an engaging website as your digital storefront
In the digital age, a well-designed business website is crucial for both running and marketing your coffee shop. Consider using a user-friendly website builder like Wix to create a compelling online presence. Here's why having a website is essential:
Showcase your coffee shop: Your website serves as a digital storefront, allowing potential customers to discover your coffee shop, browse your menu and learn about your unique brand story. Captivate visitors with enticing visuals and compelling content that embodies the essence of your coffee shop.
Offer online ordering: Implement online ordering functionality on your website to provide convenience to customers. Offer options for delivery or pickup to cater to different preferences.
Examples of successful coffee shops to inspire you
Promoting your coffee shop is an ongoing journey that involves everything from networking and effective marketing, to having a captivating website and engaging your customers online. As your business idea is brewing, take some inspiration from successful coffee shops, that have all used Wix to promote their brand online.
RailYard Coffee: This family-owned coffee shop demonstrates its love for high-quality ingredients and experiences through its online website, using rich, attention-grabbing visuals to promote its Sacramento-based shop.
Detroit Black Coffee: Detroit Black Coffee offers a variety of experiences online, using its site to promote products (like fudge and coffee mixes) that are available for purchase online, as well as event tickets, gift cards and gift ideas.
Cool Wave Coffee: Based in Waterville, Minnesota, Cool Wave Coffee provides a unique lake-side experience; beyond selling coffee, the shop offers online food ordering and bike rentals (through its sister company, Cool Wave Bike Rentals).
Yiayia’s Coffee House: Simple yet tasteful—Yiayia’s online store showcases its unique mark on the coffee world (“A couple years ago, Nassos and his family re-invented Greek barristery by bringing his coffee expertise from Europe and offering it to Texans in search of the greatest cup of coffee,” reads the “About” page) and puts its coffee beans up for sale.
Benefits of starting a coffee shop
There are many reasons why you might want to start a coffee shop. Here are a few of the most common:
Be your own boss: One of the most attractive aspects of starting a coffee shop is the freedom to be your own boss. You’ll be able to make your own decisions about the business, from the menu to the atmosphere.
Create a community space: Coffee shops are often more than just places to grab a cup of coffee. They serve as community hubs where people can connect with each other. If you’re passionate about creating a welcoming and inviting space, starting a coffee shop could be a great way to do that.
Make a profit: Coffee shops can be profitable businesses. If you’re good at running a business and you have a great location, you could be well on your way to success.
Challenges of running a coffee shop
While there are many benefits to starting a coffee shop, there are also some challenges. Here are a few of the most common:
High competition: The coffee shop industry is very competitive. In the crowded coffee shop industry, with over 65,000 coffee shops in the United States alone, you will need to find a way to differentiate your business.
High startup costs: Starting a coffee shop can be expensive. You’ll need to factor in the cost of rent, equipment, inventory and marketing to figure out what your net profit would potentially be.
Labor-intensive: Coffee shops are labor-intensive businesses. You’ll need to hire and train staff be on-site to manage the business.
Volatile market: The coffee market is volatile. The price of coffee can fluctuate, which can impact your business's bottom line.