Most owners will tell you that there are four main factors you must pay the utmost attention to when starting a coffee shop: location, costs, management, and employees. You need the right location to help establish your business, understanding costs helps you run the business effectively, and the right employees keep customers coming back.
But there is much more.
Starting a successful coffee shop requires physical, mental, financial, and even emotional strength, wisdom, and endurance. It is not easy, but it is worth it.
Here's everything you need to know about how to get your coffee shop off the ground, from costs and permits to creating a solid business plan.
1. First, Get Some Real-World Experience
Before investing a dime, spend at least half a year working in a successful coffee shop or bakery. As much as you can, shadow the manager or owner. Observe, learn, and make notes.
Here’s why getting real-world experience is important before you start your own coffee shop:
- It helps you determine if you have the aptitude to work in the coffee business and run a coffee shop. Many people dream of opening a coffee shop, but not everybody can handle the daily, mundane demands of working in or owning one.
- You will gain insights and understand the flow of a busy shop, the challenges of daily operations, and some tips to make work faster and efficient. Even something as simple as where to keep the pins near the register can make a big difference in a coffee shop.
- You will also understand food safety protocols and get a sense of the daily hustle.
- Most importantly, once you have a good understanding of the industry, you can reverse engineer your plan. You'll have insights into what suppliers to use, average waste costs, burn rates, and how to handle the most unexpected moments that come with running a coffee shop.
2. Do Sufficient and Targeted Market Research
Market research is all about finding a gap in the market and filling it. Starting a coffee shop is an entrepreneurial venture, which means it only succeeds if you can find a problem or gap in the market and fill it.
Take a good look at your local area. Who are your competitors? What are their strengths and weaknesses? What can you offer that they don’t?
Dedicate a lot of time to studying and carefully critiquing your competitors. Visit 10-20 coffee shops in the neighborhood, if possible, and place orders.
Note down what you like about their product and what you think is missing or can be improved.
Collect information on:
- Customer volume: How many customers does the business attract daily?
- Menu pricing: How do they price their products?
- Store layout and vibe: What is it about their design that appeals to customers?
- Wait times and customer service: How efficient is their service?
- What items sell the most?
3. Define Your Target Customer Group
Here is a tip for identifying your customer group when starting a coffee shop: rather than creating what you think is good and expecting the audience to like it, identify what the audience likes and create it. You respond to the market, not the other way around.
Is your coffee shop for students looking for a study spot, busy professionals needing a quick pick-me-up, or families looking for a place to hang out? Know your audience inside and out.
4. Choose a Business Model
Create your coffee business model. Will you focus solely on coffee or offer a menu with pastries, sandwiches, and snacks? Decide what makes sense for your space and market.
There are 4 common types of coffee shop models:
- The Instagrammable / TikTok coffee shop that attracts a “Gen-Z audience”
- The social coffee shop where you can study or chat with friends.
- The takeout coffee shop: small but functional.
- The Coffee Shop Franchise
Your coffee shop business model will help you build an identity and make your shop more attractive to your target audience.
5. Create a Good Coffee Shop Menu
Choose a coffee shop menu based on your location/market rather than what you want to serve.
It is always wiser and more important to give the customers what they want rather than find customers who want what you offer. There is a temptation to dress up the menu and add fancy items, but the best coffee shop menu is the one that has the items the customers want the most.
Despite all the fancy menu items, the most popular coffee for most Americans is iced Americano and bagels with cream cheese.
Do not overdo the menu.
6. Create a Coffee Shop Business Plan
Every coffee shop needs a solid business plan. A coffee shop business plan is your roadmap for everything—from securing funding to understanding your market and competition. If you plan to seek investors or loans, this business plan will be your golden ticket.
Here are the main parts every coffee shop business plan must have:
- An Executive Summary: A brief introduction to your coffee shop, your vision, and what makes it unique.
- Market Analysis: Research your target market, local competition, and how you plan to stand out.
- Business Structure: Will you be a sole proprietor, LLC, or something else? This affects liability and taxes.
- Menu and Pricing: Detail your offerings—coffee, teas, food, and anything special. Make sure your pricing aligns with your target market.
- Marketing Strategy: How will you attract customers? Think about social media, promotions, loyalty programs, etc.
- Operations Plan: This is the day-to-day—how will you run the shop, what are your hours, and who’s in charge of what?
- Financial Projections: This section includes startup costs, expected revenue, and how long it will take to break even.
7. Understand Your Startup Costs: How Much Does It Really Cost to Open a Coffee Shop?
Opening a coffee shop isn’t cheap, and you’ll need to budget carefully. Costs can vary significantly based on location, size, and concept, but I will try to be as detailed as possible and explore as many costs as possible.
To start a coffee shop, the main costs you have to consider are the cost of rent, renovation and design, cost of equipment, inventory, fees for permits and licenses, and cost of inventory. Usually, this comes up to about $50,000 and $250,000, depending on the size and location of your shop.
Here is a rough breakdown of what you’ll need to spend to start a coffee shop:
Here’s that information turned into a table format for easier reference:
| Expense | Estimated Cost |
| Location & Rent | $2,000 - $10,000+ per month |
| Renovation & Design | $5,000 - $50,000 |
| Equipment | |
| Espresso Machine | $2,000 - $15,000 |
| Coffee Grinders | $500 - $2,000 |
| Brewing Equipment | $500 - $5,000 |
| Other Equipment | $1,000 - $5,000 |
| Inventory | $1,000 - $5,000 |
| Permits and Licenses | |
| Business License | $50 - $500 |
| Health Department Permit | Varies by location, but mandatory |
| Food Handling Permit | Varies |
| Alcohol License | Varies by location |
| Sign Permit | Varies by location |
| Marketing & Branding | $2,000 - $5,000 |
| Staff Wages | $10 - $20 per hour |
More Equipment You Might Need
For a coffee shop, it is clear that you will need brewing equipment, coffee grinders, an espresso machine, etc. What is not so obvious (and many people fail to consider this) is the amount of other commercial equipment you might need at the beginning.
Here is some equipment you will need for daily operations
i. A Commercial Blender
- You need a commercial blender for smoothies, frappes, and other blended drinks. You can start with a smaller unit like this 2 HP Commercial Blender.
- It comes with a toggle switch, a powerful 2-hp motor, and offers both high and low settings, and costs about $50.
ii. A Convection Oven
- You need a microwave or (preferably) a commercial convection oven for heating pastries or sandwiches. A convection oven works better because it preserves the texture of the food.
- There are smaller convection ovens like this 1/2 Pan Countertop commercial Convection oven. It offers 1.6 cu ft capacity and 1600W of heating power, with 4 wire racks to accommodate 4 half-size sheet pans, providing ample space and flexibility.
iii. Refrigeration units.
- You need under-counter fridges, reach-in refrigerators, and display coolers for milk, syrups, food items, etc., and for frozen items, ice, or make-ahead baked goods.
iv. An Ice machine
- A commercial ice machine will come in handy. Especially if you are doing a lot of cold brews, iced lattes, and blended drinks.
- This 750W ice machine can produce 126 cubes in each batch at a rate of 265 pounds (120 kg) per day per day
v. Prep tables and cutting boards for food and drink prep.
- For prep tables, cutting knives, and boards, you can check out this Japanese knife brand.
How to Reduce Cost On Equipment Costs for Your Coffee Shop
To minimize the cost of equipment, get all of these commercial kitchen supplies from a trusted supplier.
Specialised suppliers like Wilprep’s kitchen provide all this equipment in different sizes and at affordable prices.
8. Correctly Estimate Your Daily Operating Costs
Once you're up and running, you’ll have ongoing costs to manage daily. The daily costs of running a coffee shop are typically between $300 - $1,000, depending on size and sales volume.
Here’s what you should budget for:
- Staff Wages: This will be a major chunk of your daily costs. If you’ve got a team working the shop, you’ll pay them daily or weekly. Expect to spend a significant portion of your daily revenue here.
- Supplies: Coffee beans, milk, pastries, napkins, cups, etc. These will run you around $10 - $50 per day, depending on your volume.
- Utilities: Electricity, water, and gas to run your coffee machines and equipment can cost between $500 - $2,000 per month.
- Marketing: You’ll need to keep your marketing fresh, especially on social media. Monthly costs might range from $200 - $500, depending on your strategy.
- Miscellaneous Costs: Insurance, repairs, cleaning, and any other operational needs.
An Entrepreneur Shared their Monthly costs
To get an estimate of how much it might take to run a coffee shop in a month, here are the figures shared by an entrepreneur on Reddit:
| Category | Details | Amount ($) |
| Sales | Total revenue generated for the month | $6,000 |
| Fixed Costs | Recurring expenses (rent, electricity, gas, etc.) | $3,000 |
| Variable Costs | Expenses that fluctuate with sales (beans, boba, cups, etc.) | $1,000 |
| Human Costs | Wages for 3 part-time employees (15-20 hours per week combined) | $1,500 |
| Take Home | Profit after all costs have been deducted | $500 |
9. Acquire Necessary Permits, Licenses, and Regulations
Navigating the licensing process can feel like a maze, but it’s necessary to get all the appropriate coffee shop licenses before you open. Here are the essentials:
- Business License: This is a must-have for any type of business.
- Health Permit: Ensures you're following health and safety standards.
- Food Handling Permit: If you're serving food, you'll need to pass a food safety inspection.
- Alcohol License: If you want to serve beer or wine, you'll need to apply for this.
- Sign Permit: If you're putting up a new sign, make sure to check with the local authorities.
10. Create a Fun Customer Experience
A great coffee shop isn’t just about the drinks—it’s about the experience. Think about your space.
Do you want it to be a cozy hangout with comfy chairs and soft lighting or a fast-paced to-go spot with a minimal design?
Your vibe is going to shape how customers feel and interact with your brand.
Also, consider the music, the décor, the menu design, and even the customer service. It’s those small details that make a place stand out.
11. Is It Worth It?
The short answer is yes, if you do it right. Opening a coffee shop requires upfront investment, time, and a lot of energy, but with the right preparation and strategy, it can become a beloved community staple.
If you’re passionate about coffee, have a clear vision, and are ready to hustle, starting a coffee shop could be the perfect next step.
You Might Also Be Interested:
Here's a list of 5 affordable commercial refrigerators, and some of the best commercial convection ovens this year.
What Entrepreneurs Have Said
Location is Everything
Many coffee shop owners point to location as a huge determinant of success. Location is 60% of the success formula
For instance, a bustling area with good foot traffic, like near a busy plaza or a popular supermarket, will make all the difference, even if your shop is smaller or your products are simpler.
Plus, the right location helps to ease many of the challenges of running a coffee shop because it draws customers in naturally.
And remember, the work involved isn’t just about brewing the perfect cup of coffee; it’s about managing everything behind the scenes. So, when you're ready to start, ask yourself if you're willing to commit the time, energy, and focus to make this dream a reality.
If the answer’s yes, then you’ve got what it takes.
The Quality of Employees Matters
Making coffee is not like cooking, where it takes skill, and the right measures of spices can change the food drastically. It does not take that much skill to make coffee.
What is most important in a coffee shop is a worker who smiles and is friendly.
Having employees with a good attitude is crucial for retaining customers. If your employees are not warm and affable and do not smile, you will not be able to build a customer base, even if your coffee is magnificent.
If your coffee is average, but you have friendly employees, you will still get repeat customers.
