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Is Opening Up A Coffee Shop a Wise Decision?
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msarabia
Senior Member


Joined: 23 Jul 2013
Posts: 3
Location: TN
Expertise: Just starting

Posted Tue Jul 23, 2013, 1:25pm
Subject: Is Opening Up A Coffee Shop a Wise Decision?
 

Here is the scenario:

Location is a boutique, artsy, booth vendors selling their wares.
2 Stories 22 vendors in all
Bistro/Lunch on site on 1st floor
2nd floor opening in September where the coffee shop will be located with the new artisans.
Space is 8x10 in what use to be a wine bar/serving station
Location open only on Thursday, Friday, and Saturday
Hours 11am - 8pm
Location opened in May and has grown in foot traffic.
Bistro Owner has seen her sales increase by $50 each month.

Am I crazy to do this or not?  Would appreciate any questions you may have or input you may freely give :-)
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GVDub
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Joined: 25 Jan 2008
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Posted Wed Jul 24, 2013, 7:58am
Subject: Re: Is Opening Up A Coffee Shop a Wise Decision?
 

What's your business plan? Coffee and coffee drinks only or other beverages as well? Espresso? Drip? Pourover? Anything beyond drinks? 8x10 is about enough room for a cart, or cart-sized counter and a few stools, so what's your projected volume? Many people don't drink a lot of coffee after mid-afternoon, so are you planning on non-caf/de-caf beverages? Plumbing available there? 220v service? (as that will determine what machines you can consider) Health regulations (hand wash sink at station, etc)? Equipment cost? Service contracts for said equipment? Manning it solo, or have employees? Costs of employees? What's the nut and how many beverages do you have to move per hour to make it? Insurance costs? If construction/alteration is needed on the space, is that you or the landlord paying for it? What type of pre-opening inspection do local health department folks need? Those are just a few of the questions to consider. The SBA (Small Business Administration) if you're in the U.S. can offer some help and point you towards business mentoring programs. Also local community colleges might have vocational ed. classes for food service/catering, etc. that can cover a lot of the stuff you have never even thought of.

Lots of stuff to consider when opening a food service business. Is it a wise decision? Hard to tell on limited data. But if you don't have a business plan and haven't considered the factors listed above, at least in passing, and formulated some sort of answer to most of them, it's probably not.

Also, with only 27 hours a week open, I'm assuming that you have some other income stream. Most new businesses go under because they're under-capitalized. Figure you need enough money to operate and live on for a year to 18-months to give the business time enough to grow and establish itself.
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calblacksmith
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calblacksmith
Joined: 25 Nov 2007
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Roaster: gave it a try, decided no
Posted Wed Jul 24, 2013, 10:34am
Subject: Re: Is Opening Up A Coffee Shop a Wise Decision?
 

Yes, what he said.
It is hard for me to see how you can make the monthly rent on such small number of hours.
Being very low, say the rent is $400 a month, or about $100 per week. An electric bill of $50 a month, FREE water, a worker at $6 an hour (not a skilled barista in any way, shape or form) for 30 hours a week is $180 PLUS state disability ins, SS etc of $50 a week, FREE brewing equipment, FREE coffee, FREE cups and condiments you have an outlay of $1370.

You need to take in $317 a week just to make it a wash.

You said that a BISTRO owner has seen a $50 increase per month (pretty sad rate of increase) so one has to think that there isn't much foot traffic at all.

Do the numbers work out for you?

 
In real life, my name is
Wayne P.
Anything I post is personal opinion and is only worth as much as anyone else's personal opinion. YMMV!

Feed the newbs, starve the trolls and above all enjoy what you drink!
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msarabia
Senior Member


Joined: 23 Jul 2013
Posts: 3
Location: TN
Expertise: Just starting

Posted Wed Jul 24, 2013, 11:35am
Subject: Re: Is Opening Up A Coffee Shop a Wise Decision?
 

Here are more of the details.

I am planning on serving 50-55 people per day/3 days a week.  The location is downtown on the square where the county court house is in the centerpoint of the square.  Which means lots of attorneys, paralegals, etc.  Which in turn means I need to use my creative juices and provide maybe a delivery service to the offices and shops in the area.  I am looking at hiring a ex-Starbucks manager that will run the whole thing for me.  She is a gold mine.  With her customer service and detail to coffee, I feel it would be a win-win.  I am increasing her pay from where she is at to $11 per hour. Plus I feel incentives are necessary for the job and feel in my management/marketing experience it is a win for both parties involved.  Her incentives would be $.25 a cup on the front and 2% net profit on the back.  Equipment I would purchase and would only use a 1 group station for now.  

Rent will only be $275.  I have to pay for the water line to be installed but the landlord pays for the water and electric usage.  I am still waiting on pricing for my insurance and in the state of TN you're not required to have WC if you have less than 3 employees.

I encourage more of your input.  Anything I read is what I soak up and review before I sign the dotted line.
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DanoM
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Posted Wed Jul 24, 2013, 2:06pm
Subject: Re: Is Opening Up A Coffee Shop a Wise Decision?
 

It can easily be said that opening up any restaurant, cafe, or coffee shop is never a wise decision.  So many variables, and so hard to predict the outcome.  Most new food ventures seem to go out of business in the first year.
That doesn't mean you can't make money at it!  You could well turn into the next Starbucks in 10 years, with this being your first and famous location...  

Being on the 2nd floor sounds like you are out of the way from most of the foot traffic.  If the local 2nd floor vendors don't draw in customers then you won't have any foot traffic to sell to, although the vendors might be a good source of clients.  Only being open 3 days a week also makes it hard to win over dedicated, repeating customers, since most of them want their coffee daily and at the 'regular' place.

For years I would always buy my morning coffee from the same espresso vendor on a cart semi-exposed to the elements (Los Angeles), and they had an amazing line that made Starbucks at rush time look like a leisurely cafe!  They were near a well traveled intersection, nobody had to walk indoors or upstairs to get their coffee and it made a real difference to their business.

msarabia Said:

I am still waiting on pricing for my insurance and in the state of TN you're not required to have WC if you have less than 3 employees.

Posted July 24, 2013 link

Be careful here.  You are working with steam, extremely hot surfaces, people putting pressure on pucks with a tamper, and various other dangers.  When, not if, an employee gets injured you might wish you had workmans comp insurance.  Be sure to discuss the issues with your insurance agent and business lawyer!

Just because you can make espresso safely at home doesn't mean your employee who's tamping 50+ pucks a day won't get a repetitive motion injury or aggravate a prior injury.  On top of that there is the possibility of burns while steaming milk, dropping the milk, hand in steam, grabbing a portafilter by the brass and burning your hand with near boiling temps, etc.
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GVDub
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Joined: 25 Jan 2008
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Posted Wed Jul 24, 2013, 2:47pm
Subject: Re: Is Opening Up A Coffee Shop a Wise Decision?
 

Another question, of course, is what are you doing to distinguish yourself from the competition? What other coffee shops are within easy reach? Can you best them? Can you get the word out? What are your promotional plans. You're committing to a grand or more a month just in wages and commission, so what kind of margin are you having to make per drink? What's your projected wastage? Whose coffee will you be using, and will that roaster be part of the draw? Who's your customer and what is it that they want? Many casual consumers aren't looking for a "god shot", only a caffeine delivery system. Will they pay premium price? What's the overall market? Is there a courtyard or space nearby that hosts events (music performances, etc.) and can you use that to tie into your business?
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msarabia
Senior Member


Joined: 23 Jul 2013
Posts: 3
Location: TN
Expertise: Just starting

Posted Wed Jul 24, 2013, 3:04pm
Subject: Re: Is Opening Up A Coffee Shop a Wise Decision?
 

You guys have been great with so much feedback and information.  Keep them coming.

Because it is a downtown location every 3rd Thursday is a Concert on the Square event and every 4th Friday is a Sip and Mingle in the store itself.  I have an opportunity to serve wine those nights (another source of income).  I also will be serving the days we are open pastries and desserts, which is truly my first love.  The bistro gal is a friend of mine and is fine with me offering them. I have not begun looking at which coffee roaster we will bring in as our coffee. Try to get numbers in place first.  You are right that our customer will be one for more of the "Pick me up" afternoon consumer or the "I'm shopping and want a cup of coffee to hold in my hand" consumer.  I think even looking at throwing in a blender to make smoothies will help with extra income.  Also, I will bring in a local Nashville chocolate bar company that are some quick grab and go items.

I have room for 2 stools in the bar area and then I have space outside in the "lobby" area for 2-3 bistro tables/4-6 seats.

Pricing I have as $2 for a 12 ounce to a 12 ounce flavored mocha at $3.75

Keep them coming everyone, you are doing fabulous!
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Heissmeister
Senior Member
Heissmeister
Joined: 6 Aug 2013
Posts: 12
Location: Martinsville, VA
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Posted Tue Aug 13, 2013, 3:04pm
Subject: Re: Is Opening Up A Coffee Shop a Wise Decision?
 

I haven broken down the details...but at first glance it looks like a bad deal. You might be able to break even. Will you run labor other than yourself? And a sales increase of 50 bucks a month is horrible growth. A coffee shop needs to be open 6-7 days a week to be considered a location to gain repeat customers, which is where you get your main stream of revenue. I would be very careful at pursuing this venture.
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