The costs to open a coffee shop
Hi, I'm approximately 20 years old, with not much in terms of money to my name. I'm looking forward to opening up my own shop, eventually. (I'm a barista working for a local shop, at the moment), and I'm trying to approximate the initial costs (minus labor and rent). Some questions I have are.
What is the minimum quality and cost of a espresso machine being used for commercial purposes. (I don't need a 50k machine to start out with)
Where are some good coffee suppliers (good coffee, fresh, etc), and what kind of prices would I be looking at.
Syrup suppliers, ghiradelli,etc, and the expenses inquired on those.
Fridges, bake displays, etc.
Also, do chalk walls sounds like a good idea (just wondering)
There's probably other things im forgetting, but these are at the forefront of my mind.
I was thinking of Athen's Ohio, (close to school), but I have other places in consideration.
Any advice would be appreciated. Thanks
-Phil
What is the minimum quality and cost of a espresso machine being used for commercial purposes. (I don't need a 50k machine to start out with)
Where are some good coffee suppliers (good coffee, fresh, etc), and what kind of prices would I be looking at.
Syrup suppliers, ghiradelli,etc, and the expenses inquired on those.
Fridges, bake displays, etc.
Also, do chalk walls sounds like a good idea (just wondering)
There's probably other things im forgetting, but these are at the forefront of my mind.
I was thinking of Athen's Ohio, (close to school), but I have other places in consideration.
Any advice would be appreciated. Thanks
-Phil
Replies to This Discussion
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Permalink Reply by Marek on
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Where to begin, based on your questions and thought process... the answer is right at the 'very beginning'.
Without getting too complex. You will need to lease and renovate your space, which at the minimum will run you $100,000 if done properly, on a really tight budget maybe $50,000 if many things are already in place.
You can find a decent espresso machine for $5,000 but you will need another $50,000 in equipment and furniture.
So... before getting into too much detail the first thing you need to consider is do you have access to at least $100,000 to start your shop?
If the answer to that question is yes, then I am sure there are dozens on this board that can provide advise and guidance that you will find most helpful.
Just being honest... so ponder and I will watch for your reply.
Regards
Marek
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Permalink Reply by Ron Ingber on
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Opening up a new coffee shop in Athens, Ohio will be a real challenge.
I am sure you are familiar with Donkey Coffee
http://www.donkeycoffee.com/
maybe you even work there. Based on their quality, presentation and location next to the university, I think there must be other potential cities that will be less competitive.
I don't have any relationship with them, other than as a customer when I visited my daughter (she earned a masters degree).
Good luck in your endeavor, but I would plan on budgeting $25,000 or more the first six months for advertising, just to get people into your shop.
Ron, the Country Guy
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Permalink Reply by Phillip Prass on
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As I said, I don't have a whole lot of access to money, right now. These are all just plans so I can either take a loan, or attempt to atleast save some of it up. So while I don't have the money, I plan on acquiring, but I need to atleast be able to outline a price for people. So would you say 100k is a bare minimum?
Also, in terms of demographs, do high school students make for a good demograph, because there is a vacant business lot right across our local high school, with no other coffee shop in that part of town. I was wondering if before/after school hours would be a good money making time. My mind is all over the place, right now, I know, but I want to make this work.
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If you're looking at a vacant lot... Then you are talking about having a building erected... Either by the land owner or you... Or buying the land, either way... A massive increase in your cost base...
Here is my best suggestion. Educate yourself online in all aspects of coffee.
Search google, coffee shops, coffee shops for sale, opening a coffee shop. Cost to start a coffee shop. Coffee shop layout.
Then go to eBay and search for all of the equipment you need. Search espresso grinder, espresso machine. Search fetco brewer, bun, bun brewer, bun grinder...
Go to espresso parts.com and search for other espresso websites...
This should help you out a lot.
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Permalink Reply by Jared Rutledge on
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the very fact that you're asking these questions most likely means you're nowhere near ready to open a shop, even if money wasn't an issue.
you're passionate about coffee but you've never hunted around on craigslist just to see what your dream machine might cost used? you've not discovered a good local roaster in your area? you think machines cost in the 50k range?
there are two salient points to be gleaned here - one, google can answer just about any question you just asked. two, you need a lot more coffee experience and knowledge before you proceed, or you're going to fail.
and i opened my shop for around 60k, including rent for the first 7-8 months.
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Permalink Reply by Brady on
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A couple of things to add here.
First, why do you want to open your own shop?
Marek's upfit number seems pretty good. Now, add at least 6 months worth of working capital to that number. To make it, you'll need to be able to pay rent, utilities, labor, product, and finance costs out of pocket for that amount of time, at least.
Seriously consider purchasing an existing shop... buying one that has a stable customer base and is breaking even for $100k-$150k is worth considering. It might well be cheaper than starting from scratch.
No, high school students are not a good customer base. They can be a great addition to your mix of customers, but in larger numbers they are too noisy, too messy, buy too little, run off other customers, and go off on vacation too often. You want a mix of people of varying demographics - businessmen, stay-home moms, knitters, readers, students, commuters, contractors, etc.
Do you have a business plan drawn up yet? You'll need one before you even think about talking to someone about financing. I'd advise you to, in addition to learning about coffee and cafes, spend lots of time learning about how to run a small business. Look for SBA or SCORE classes on running small businesses. Look into the online business planning tools at the SBA website.
Search back through past discussions on this board regarding COGS assumptions... that'll give you the info you need to estimate your margins.
You have a good start - you are asking questions. You need to be asking the bigger questions though. You are at least 6 months away from even caring about your walls and syrups. Heck, I think you are a couple of months worth of hard work away from being able to say "yes, I should open a coffee shop next year". Until then, execution details are a distraction. Keep asking questions, though.
Hope this helps... it is meant to.
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Thanks for all the info, I'm seriousy interested in opening up my own shop, and as I said, I'm just collecting all the details I can.
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Permalink Reply by John P on
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I would say a few things. $100K is a fair ballpark figure, even with SBA type loan you will need 30-40% of your own capital and the remainder of the loan will need to be fully collateralized. Best way to get money is from hard work or people who love you. Remember banks expect YOU to be risking a lot in the equation too. If you're not willing to put everything on the line, why should someone else?
Take the time to seriously learn about coffee and espresso, AND business basics first. You have to hit the ground running, no baby steps or it will kill you. Don't romanticize owning a shop. You need to know you are better than the best available shop in your area BEFORE you open. And if you are more aggressive, travel, take the time to visit the best coffee shops in the US, Canada, or overseas and pay careful attention to everything that's going on. (This is what we did, and it paid huge dividends)
The more you prepare ahead of time in terms of bean/roaster selection, proper equipment, proper brewing techniques, mastering grind, dosing, temperature, tamp, brew pressure, etc. as well as understanding proper design for efficiency, minimizing waste, customer education and customer service, pricing... the better off you will be. To be honest, if you don't have a clear, and I mean precise understanding of everything above PLUS, in this market, you will not fare well. Customers consistently mark "Quality" as being the number one reason they return to a coffee shop -- especially NOW when that is what will separate you from everyone else. But if that's not what you're about, I would wait, or do another business... customers spot the truth of your core, you can't fake it, so either you put the coffee/espresso first and foremost, or you will suffer the consequences of the many Starbucks style copycats that have come and gone by the hundreds in recent years.
** Don't expect everything all at once. Lots of employees, big paycheck for yourself, overseeing everything. Many new owners want too much too fast and end up in ruins. Plan long term strategy, for a 20 to 30 year run. This should be a long term project. Look at the ENTIRE picture and see how to manage debt, growth, etc throughout the life cycle of the business. Invest in your business as much as you can in the beginning so you can take time working ON your business as more and more time goes by. We decided to do without employees to pay off our loans AND save money for a second business.
After six years, we are looking for another project. Take your time and do it right.
Prepare well. Love what you do.
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Permalink Reply by Brewed Expressions Coffee House on
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I echo Bradys post. You might want to see if your current employer will send you to the nearest Coffee Fest. Allot can be gleaned from talking to shop owners one on one. As for equipment, sometimes your roaster will have there own service dept & they usually have a line on used equipment.
As of roasters that is sorta hard. We have several in our area, but chose to go out of town for ours. This assures us that you aren't getting the same cup of coffee here as you do down the road. Meet with them & set up a cupping with them.Walk thru their facilities, see if they have private labeling, and most importantly is customer service.
As of cost for set up..Depends on the area. Allot of pro & cons about rent vs owning.One post said $25,000 in advertising..I haven't spent that in 17yrs of business,but do make sure you have at least 6-12 months of overhead in the bank (rent/payroll/operational expenses,ect)
Keep asking the questions...
Keep asking & don't get discouraged by coffee snobs. Some won't even allow whip in there store.. Know what your customers want,try to steer them to the more purer form,but in the end the true coffee lover will not worry about what you do for the other guy only what you do for them.
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i wouldn't count on getting an SBA loan. i tried that through a credit union, guaranteed by the SBA, and it was a nightmare. and apparently they're backed up for years at this point. plus they want your house as collateral, and if you don't have one, oh well.
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We ended up doing a very favorable equity line for and they granted us a hefty chunk on an additional line which is there for emergencies. SBA is difficult, but most people use it as a starting point. SBA was 7% loan, equity line was 5 1/4% (in 2004), that's primarily why we said no to SBA.
Having a house makes it easier... but in the end, you need something of value or, like some out there, a substantial savings from years of hard work elsewhere.
Jared Rutledge said:i wouldn't count on getting an SBA loan. i tried that through a credit union, guaranteed by the SBA, and it was a nightmare. and apparently they're backed up for years at this point. plus they want your house as collateral, and if you don't have one, oh well.
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Phillip Prass said:Thanks for all the info, I'm seriousy interested in opening up my own shop, and as I said, I'm just collecting all the details I can.
Understood. Gather your data, make your business plan, figure out what you have to spend, figure out what you may be able to bring in for income, THEN take a step back and decide if it will work for you or not.
Too many prospective owners miss these steps - the "will the business work" and "will this lifestyle be a fit for me" steps. Too many fall in love with the idea, a grossly over-romanticized idea at that.
Its not nearly as much fun as you'd think. Or as profitable. Most owners that I know are flat broke and working WAAY more hours than they wanted to. Being a barista is far easier and more fun than being an owner. In many cases it pays better too. That's why so many shops are for sale.
That said, there are owners out there that wouldn't trade it for the world... including a few that have chimed in so far. Just get a very good understanding of what it means before diving in.
Not trying to insult you here, but this is something that too many people underestimate. Its an expensive learning experience.
That's why I asked why you want to open a shop. So, why do you?
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