Once upon a time, you may have thought that opening a coffee shop was a no-brainer. After all, mostly everyone — including you — loves coffee. Plus, the hustle and bustle of everyday life means there’s less time to kick back at home with a warm cup of fresh brewed coffee. Folks need the convenience and kick of a cup of joe on-the-go. And with over 100 million Americans drinking coffee EVERY day, there is a big and captive market for your brew. Easy sell.
Coffee is also relatively easy to prepare and serve. There’s no traipsing to the shop at dawn to bake scratch-made biscuits or juggling the multiple implements (and fire) of a fondue service, for instance. On most days, you can be open and serving as soon as you restock the cups and dial in your espresso.
But after a while, every operator realizes that running an independent coffee shop is tough business. It’s not easy to find and keep talented baristas and servers, and there’s always competition, whether from the big chain down the street or a new “coffee concept” funded by your local culinary celebrity.
Plus, although retail coffee is a high-margin business, it is also a numbers business. Say you sell 50 cups of drip coffee a day and make a respectable $1.30/cup on each sale; you’re only bringing in $65/day. Let’s say your business is in a high-traffic location, and you sell 150 cups a day; your profit will be less than $150/day.
As a comparison, the profit margins on espresso and espresso-based drinks can be twice or three times that of drip coffee. Although it takes a bit more time and training to pull a perfect espresso shot (vs operating the drip brewer), the overall benefit to your business can be tremendous.
So, what steps can your shop take to stay competitive? It’s a question many independent coffee shops think about a lot. It’s certainly front and center in the thinking of Stockton Graham & Co. customers. But it’s not enough to be merely competitive – independent retailers must position themselves to succeed.
For more than 20 years, Stockton Graham & Co. has focused on the success of independent coffee shops and specialty coffee businesses by blending the art of coffee and business of coffee. Through these years we’ve helped hundreds of independent coffee shops succeed. And in doing so, we’ve discovered that there is a formula, of sorts, for success.
Here are our 10 Habits of Highly Successful Coffee Shops:
- Lead with your passion, and pass it on to all of your employees. There’s no substitute for genuine excitement about your product and your store, so don’t be afraid to flaunt it. Create a warm, distinctive, inviting store around your passion that engages customers in a visceral way. Make your store a place that people seek out and enjoy spending time at.
- Pay attention to profit margin. It’s calculated by dividing your business’s net income by its net sales. If the ratio is greater than zero, your business is making money and that’s a very good thing.
- Focus on espresso and espresso-based drinks, as the profit margins for these beverages are at least twice—and often three times—the profit margin of drip coffee.
- Build enduring relationships with your customers by paying particular attention to what they do and how they behave in your store. You should absolutely ask their opinion too. Yet your customers’ actions will tell you so much more about their true preferences than their words will.
- Make sure your store is in a location where foot traffic, or drive-through traffic, is high. The numbers just won’t work out unless the volume is there.
- Don’t skimp on training. Make sure your baristas are experts and your staff is knowledgeable. Teach the menu, and give your staff pointers on how to talk about the items you serve. Invest in your staff; hire, train, and support them well. Turnover is a killer, so create a positive work environment and competitive compensation package. Maximize effectiveness and efficiency and minimize frustration and work-related injuries by paying attention to bar layout and workflow (call in the professionals if you need to).
- Don’t commoditize your business. Focus on providing high-quality coffee and unique offerings that excite your customers. Deliver your offering with personality and panache. Define your concept and stay true to it – adding products that complement and dropping those that fall short of the mark.
- Keep your inventories lean to ensure your coffee is always fresh and keep your presentations clean to let your products breathe. When it comes to merchandising, whether it’s retail bagged coffee, mugs, muffins or snack bars, less is more. Research shows that more sparsely stocked shelves suggest that items are in high demand, which subconsciously makes them even more desirable.
- Do not let yourself get out on the slippery slope of price promotions. Strive for full retails and full margins that elevate and celebrate your offerings. Use loyalty tactics, like anniversary specials or a free cup of coffee on each customer’s birthday, instead of discounts to develop customer loyalty without eroding profits.
- Focus on consistency. Establish what you want your customer to experience and work to achieve that with every single cup of coffee, vanilla latte, muffin and customer interaction. Demonstrate the importance of consistency to your staff through Coffee College training, encouraging best-practice sharing and discouraging “special variations” on drinks. If “Sam’s chai latte is the best!”, find out why and have him share the secret (adjusting the price as needed).
Brady Butler, our newest Business Development Associate and former barista, manager, trainer and equipment technician, recommends experiencing your store from a customer’s perspective. Pay attention to the details: how does the space look, feel, sound and smell? “As an owner or manager, you may spend so much time in their spaces that it’s easy to not notice the progressively messier kitchen area, a chalk menu that’s unreadable from a distance or a cloud of acrid smoke from a panini grill,” Brady advises. “These are all things that turn customers off and can reduce sales.”
To help your store succeed, Stockton Graham & Co. runs several training courses for operators and staff, including our new Barista Certification course. Our monthly Coffee & Espresso Basics at our Raleigh, NC headquarters, also called Coffee College 101, is a good place for any coffee shop operator and staff to begin training.
- Business planning
- Menu planning
- Product pricing
- Store layout and design guidance
- Marketing guidance
- Promotional support
- Custom packaging and labeling
If you’d like more information on how Stockton Graham & Co. can support your business, visit The Business of Coffee. To schedule a business consultation, call our Customer Care Associates at 800 835 5943.