Location: Change is Good
A New Approach to Playing the Location Game when Starting Your New Specialty Coffee Business
If you wanted to start a specialty coffee shop or espresso bar, where do you begin? In my opinion,it all starts with location. Your location will dictate your concept. It will dictate who you hire and how many you need to hire. And in some cases it will be the determining factor as to whether or not you can even afford to go into business at all.
There are two ways of approaching the location question. The first, and more traditional, approach is to find a high traffic area. This is based on the theory of numbers. The more people that pass your door, the more that are likely to go into your door. In this case, you’re looking for a high traffic area.
Using this approach you’d be looking for a spot where you would be able to catch the morning commute. You’d want a place where people looking for that first jolt of caffeine can easily go on their way to work. Now anybody working in this business will tell you that the morning rush is their bread and butter. But if you just had to live off your morning rush, don’t count on any early retirement. So you’ll also want the place to be located somewhere that experiences walk by traffic throughout the day. Perhaps some place in a shopping district, or near tourist attraction, or in a business district.
The problem with this approach also has to do with numbers. The higher the traffic, the higher the rent. If you’re just starting out, you’re looking to make savings anywhere you can. Now proponents of the high traffic theory will tell you that the traffic numbers will justify the rent numbers. In many cases this is true.
However, if you decide to play it safe and locate in a high-traffic area; then all of a sudden a Starbucks moves in just down the block, you are sure to see your revenue numbers negatively affected. Because companies like Starbucks always play it safe. They love the high traffic street corners and the popular malls. These types of companies need big numbers. They need big numbers in order to produce big numbers. They need big numbers to impress their stockholders. They need big numbers to pay for their overhead. And big numbers are only found in high traffic areas.
The other approach to location, especially if you have a small budget, is to play the niche game. Playing the niche game involves a lot more upfront research, but in the long run will let you sleep better at night. The key to this approach is a neighborhood demographics. Find a neighborhood that is showing signs of some sort of transition. And when I say transition I mean either getting richer or getting younger.
Neighborhoods such as these are ideal for several reasons.
Firstly, if they are just starting to transition, then you will basically have a captured audience. It is likely that you’ll be the only place in the area that is geared to servicing this new clientele. As a result, the new locals will rush to you. Your presence will serve as a validation to their choice of living in that neighborhood. So they will be loyal to you as long as you can give them a quality and level of service that they demand.
Secondly, if the neighborhood is getting younger, then this represents many opportunities. First of all, it means that the people living in that area are less likely to be involved in traditional jobs. So they may be involved in jobs that involve shift work. Or they may be involved in high-paying jobs that involve fewer hours, such as the entertainment business. Or, and this is becoming more and more likely, they may be involved in jobs that are based on telecommuting. All of these scenarios means that your customers are likely to come in at all times of the day and not just during the morning rush. Though, because of the nature of caffeine, you will likely see most of these people first thing in the morning.
A neighborhood that is getting younger, increases the likelihood that you will have young families in the area. In many cases this means that there will be stay-at-home moms looking after their infant children. In my experience, there is no such thing as a stay-at-home mom. These young women will be looking for opportunities to network with other moms in the area. When they find a place that caters to their tastes, they will make it “there place”. Depending on the number of young families in the area, you may in fact a several rotations of “mom networks” in your establishment throughout the day.
Another great reason for locating in these types of neighborhoods is that you don’t have to have the best spot on the street. These spots are usually reserved for establishments that cater to the old locals. And in my experience the new locals, though they love the area, don’t necessarily love the old locals. This gives you the opportunity to locate in storefronts that have lower rents. Doing this allows you to build up your business faster. So in that perfect spot on the street does become available, you can make your move with confidence knowing that new location will be a look to produce the revenue and you already have a certain level of business to work with.
Finally, setting up your business to appeal to this demographic will protect you when a larger players realize the value of the neighborhood. By the time this happens, you all already have built up a loyal clientele. Also it is your coffee that they will associate with good coffee. You will be “the local discovery”. As a result, there will be a certain “snob appeal” associated with your establishment. The big boys call it “branding”. And you do it right, in your neighborhood you will be the brand to beat.
I believe that this second approach to choosing a location for your espresso bar is becoming more and more viable. In business there are no guarantees. Choosing a location based on this approach helps you to limit your risks. It will limit your financial risk. It will limit your exposure to competitive risks. And because of the lower overhead, you’ll be allowed more mistakes; and therefore your risk of failure will be limited as well.
|
|