Increasing profits without Increasing Overhead.
Hey all, I was just going over the numbers for the year with the Owner of the shop that I manage, and we were discussing ways to increase profitability while keeping our overhead & prices generally the same as they have been. It seems that on average our biggest costs every month are RENT & LABOR. That being said, has anyone that works in a relatively small market/shop been able to find a way to do that for a lengthy period of time? Please understand that we pay most Employees $8/hr as that is the minimum wage here in California, and we already carry retail items such as Art and souvenirs, because we get a ton of tourist traffic on the weekends. Some of the things that we had discussed are T-shirts & Hats with our products and logos, travel mugs and other low cost items. Any and all of your suggestions are needed and appreciated.
Replies to This Discussion
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Permalink Reply by Andrew R. Tucker on
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My bosses stock inexpensive travel mugs with our logo, sweatshirts and both long and short sleeved tee shirts for purchase. They seem to sell well, and are very affordable. The sweatshirts are a little pricey: 30+ after tax, but shirts and mugs go over well. We also use prepaid 12oz drip coffee cards for those who just want to get served quickly, they have 10 spots to mark off, and sell for 11.70 after tax. Our roaster provides us with 1lb bags of whole beans in vacuum packs which we sell for 10.00, in at least four varieties. Since our location is near a university, we seem to sell a lot of teeshirts and mugs on moms & dads weekends, as visiting parents like to take something with them to remind them of their students favorite study spot. We have free all ages music frequently, and buy CDs from artists who come through, and have them displayed along the service bar. We buy CDs for 10, and sell them at 15, typically. All these items augment our daily sales enough to keep them in stock year round.
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Permalink Reply by Joe Marrocco on
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I disagree with the notion that more stuff in the shop will decreae overhead and increase profits. What is the focus of your shop? Keep the main thing the main thing. Keep it simply and clean. As a coffee shop I would focus on coffee. The highest profit margins are going to be straight shots of espresso and whole bean sales. A pound of coffee sold outright has very low overhead on it and you can educate your whole bean customers on how to prepare it at home to a high standard. This means that the items in your store should corospond with your focus. So, sell home brewing equipment; french press, pour over, chemex, simple burr grinders, etc... If you focus on quality and education, these costumers will look at you as their personal coffee professional and you will have a long term relationship with them.
Espresso entails quality. Also, if you sell double shots at $1.75 each you will sell it at about $50.00 per pound instead of your regular # sales. This means that you have to focus on quality though. People will only switch to small drinks like espresso and caps if the quality takes them there. Syrups and milk all add to your overhead.
Just some thoughts. Quality, focus, stream lined staff, not too much extra crap and you will be more profitable in my opinion.
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Permalink Reply by Jesse -D-> on
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Thanks Joe, I really didn't feel like typing all that ;-) Keep it simple, do it better than anyone else. I think a t-shirt, and a travel mug or two are a good idea(free advertising, environmental reasons), but gadgets and crap just get in they way of your goal. Which, I would assume, is to make the best coffee on the planet.
Joe Marrocco said:I disagree with the notion that more stuff in the shop will decreae overhead and increase profits. What is the focus of your shop? Keep the main thing the main thing. Keep it simply and clean. As a coffee shop I would focus on coffee. The highest profit margins are going to be straight shots of espresso and whole bean sales. A pound of coffee sold outright has very low overhead on it and you can educate your whole bean customers on how to prepare it at home to a high standard. This means that the items in your store should corospond with your focus. So, sell home brewing equipment; french press, pour over, chemex, simple burr grinders, etc... If you focus on quality and education, these costumers will look at you as their personal coffee professional and you will have a long term relationship with them.
Espresso entails quality. Also, if you sell double shots at $1.75 each you will sell it at about $50.00 per pound instead of your regular # sales. This means that you have to focus on quality though. People will only switch to small drinks like espresso and caps if the quality takes them there. Syrups and milk all add to your overhead.
Just some thoughts. Quality, focus, stream lined staff, not too much extra crap and you will be more profitable in my opinion.
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Permalink Reply by Mike Spence on
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Hi Chris - a couple of suggestions on this. I posted a thread (http://www.baristaexchange.com/forum/topics/starbucks-asks-for-rent)
about starbucks asking for reduced rent - a few people have responded that they have had luck doing this as well. I'd say check those responses and try that.
Also, are you implementing a gift card program? Sell $25 gift cards for $23 or $20 - this gets cash in hand and the customers moving on buying them. If you are doing an electronic gift card program, look around at different companies - I know some that will handle the gift cards through a credit card machine for free (Bart Collins at Mercury has a page here on bx).
Hope any of this helps!
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