How to Start a Coffee Shop: 9 Steps to Success

Start a coffee shop by following these 10 steps:

1. Plan your Coffee Shop
2. Form your Coffee Shop into a Legal Entity
3. Register your Coffee Shop for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Coffee Shop
6. Get the Necessary Permits & Licenses for your Coffee Shop
7. Get Coffee Shop Insurance
8. Define your Coffee Shop Brand
9. Create your Coffee Shop Website
10. Set up your Business Phone System

We have put together this simple guide to starting your coffee shop. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out othersmall business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit ourHow to Name a Businessguide or get help brainstorming a name with ourCoffee Shop Name Generator

If you operate asole proprietorship, you might want to operate under a business name other than your own name. Visit ourDBAguide to learn more.

Whenregistering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening a coffee shop?

Thestartup costs for a coffee shop businesscan vary widely, depending on the size and type of coffee shop you want to open. Your expenses will depend largely on thetype of coffee businessyou want to start, the specificequipmentyou need, yourlocation, if you want to include space for abakery, etc. For instance, a small kiosk in the corner of an existing building can be opened for as little as $5,000, although many cost between $25,000 and $75,000. Free-standing drive-thrus can cost between $80,000 and $200,000 to start up, and shops with their own seating can be more than $200,000. The main expenses that contribute to these costs includerent,staffing costs,taxes, andequipment, such as Point-of-Sale (POS) systems, espresso machines, and so on. Espresso equipment alone can run up to $20,000.

There are several ways to minimize startup costs. Running a small kiosk yourself will keep rent low and eliminate any staffing costs. Focusing solely on high-quality brewed coffee, rather than espresso, will eliminate the need for expensive espresso equipment and reduce how much milk you use.

What are the ongoing expenses for a coffee shop?

The ongoing expenses of a coffee shop are labor, which shouldn’t exceed 35 percent of sales, rent, which should be kept below 15 percent of sales, utilities, and the costs of good sold. Costs of goods sold includes the costs for coffee (~$7.50 per pound), milk (~$3.00 per gallon), syrups ($4.50 per 25.4 ounces), and cups, lids and sleeves ($0.20 per beverage served).

Who is the target market?

An ideal customer is someone who has discretionary income and enjoys food and beverages. Customers with little discretionary income are less likely to purchase higher-priced beverages and food items.

How does a coffee shop make money?

Coffee shops charge their customers based on what beverages and food items a customer orders. Some coffee shops have problems with people “camping out.” These customers may purchase one beverage, but then remain at the shop (typically on a computer) for several hours without spending any additional money. To combat this, a few coffee shops in higher-traffic areas ask customers to make a purchase every hour or two. Other coffee shops don’t offer Wi-Fi, but this can also deter customers from coming at all.

How much can you charge customers?

The average cost of a cup of plain, brewed coffee at a coffee shop is $2.70. Brewed coffee accounts for 51.5 percent of the beverages sold in coffee shops. Espresso-based beverages, such as americanos, cappuccinos and lattes have an average price ranging from $2.62 to $3.94. The food products sold at coffee shops often are in a similar price range.

How many customers can you expect your business to serve in a week?

How many customers a coffee shop will serve in a week or day varies widely. Busy shops centrally located in cities may serve more than a thousand in just one day, while shops in rural areas may see only a few hundred a week.

How much profit can a coffee shop make?

A coffee shop's net profits are directly tied to how many cups of coffee and pastries a shop sells. A shop that is in a higher-traffic area and sells more coffee will usually have higher profits than one with little traffic. When run well, a coffee shop's profits are typically between 10 and 18 percent of its gross revenue. To see how much volume increases profits, consider coffee shops that are open every day of the year and have average tickets of $3.00. A shop that sells 100 beverages a day would grow $109,500 annually, and hopefully bring in a profit of $10,950 to $19,710. One that sold 300 cups a day would gross $328,500, and hopefully have an annual profit between $32,850 and $59,130.

How can you make your business more profitable?

销售customers is the easiest way to increase the profitability of a coffee shop. Customers can be offered larger sizes, additional shots of espresso, flavored syrups or baked goods

STEP 2: Form a legal entity

The most commonbusiness structuretypes are thesole proprietorship,partnership,118bet金博宝 , andcorporation.

Establishing a legal business entity such as anLLCorcorporationprote来cts you from being held personally liable if your coffee shop is sued.

You can金宝搏188是什么公司yourself and pay only the minimal stateLLC costsor hire one of the118金宝app for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more aboutstate sales taxand franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to aspiercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting abusiness credit cardhelps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with ourLLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a coffee shop business. Learn more about licensing requirements in your state by visitingSBA’s reference to state licenses and permits.

In particular, most states require a coffee shop businesses to obtain a seller’s permit. A seller’s permit allows states to record and collect taxes from the sale of goods and services.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully.Business Insuranceprote来cts your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face,begin withGeneral Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need isWorkers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

People who love coffee, food and other people are well-suited for working in or owning a coffee shop. The business involves plenty of hands-on work making beverages, and business owners regularly interact with both employees and customers. Most people drink coffee in the morning, so most coffee shops are open during morning hours. Shops can also be open the afternoon or evening, but owners should at least expect to be working almost all mornings. Some owners close their shop one day a week so they can have a day off, and many either close their shops or have limited hours on holidays.

What happens during a typical day at a coffee shop?

In a coffee shop, day-to-day activities center around making and serving customers coffee. When not brewing coffee and ringing up customers, downtime is filled by restocking supplies and ordering more inventory (e.g. milk, coffee and cups), scheduling employees (if a shop has multiple employees), washing dishes, cleaning, and prepping more coffee and food for sale.

What are some skills and experiences that will help you build a successful coffee shop?

First and foremost, coffee shop owners should be familiar with coffee. They need to know much more than the average drinker. In addition to knowing about coffees and coffee beverages, owners also need to be proficient in inventory management and managing employees.

Many coffee shop owners get the initial skills and knowledge they need by working in a coffee shop for several months before opening their own shop.

Alternatively, coffee expertise can be learned in just a few days by hiring an experienced barista or coffee roaster to serve as a consultant. Managing inventory and employees can be learned on the job, although not having these skills will make the startup phase much more hectic.

What is the growth potential for a coffee shop?

A coffee shop business can be as small as a single drive-thru or as large as a national, or even international, chain. Starbucks, for example, has more than 24,000 stores around the world. Many successful coffee shops are local or regional, having a few locations in a relatively small area.

Should you consider joining a franchise?

Joining a coffee shop franchise can be a good option for entrepreneurs who prefer to use a proven model rather than start from scratch. While joining one can mean slightly higher initial costs and less control, a quality franchise offers great benefits such as initial and ongoing support, marketing assistance, and brand recognition.

Opening a coffee shop franchise typically requires $200,000-$700,000. Larger coffee shop franchises like Biggby Coffee and Dunkin' Donuts typically cost more, while more niche favorites like Sertino's and Classic Rock Coffee often have lower startup costs.

Interested in joining a coffee shop franchise?Check out our favorites.