Starting a Specialty Coffee Shop
Three Important Considerations
Do you love coffee? Well you’re not alone. Every day people like yourself enjoy massive amounts of hot, iced, and frozen coffee drinks. People are having lattes in the morning, Americanos in the afternoon, and some fruit flavored frapuccinos at all hours of the day. Too much caffeine? No problem use a couple of shots of decaffeinated espresso and sip to your hearts content.
So is it time for you to wake up and smell the coffee? No-wake up and smell the espresso. Specialty coffee shops and espresso bars are popping up on almost every street corner across the country. And guess what? They’re lined up out the door. People squeeze themselves into any corner they can find at their favorite espresso bar where they can enjoy a cappuccino and the newspaper. To me this suggests that the market is far unsaturated.
If you wanted to start a specialty coffee shop or espresso bar, where do you begin? In my opinion, there are three important factors. No, not “location, location, location”. Though location does make it to the top three. So let’s start there.
There are two ways of approaching note 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.
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 in 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. Such a location decision may help minimize some risk for your new startup.
A second important consideration is your budget. In many cases, your budget will limit where you locate. Most established malls and establish landlords are unlikely to want you as a tenant if you don’t have sufficient financial resources. Also if all you can afford in terms of furniture and fixtures is the bare minimum, then it would be suicidal to attempt to attract an affluent, conservative clientele. A small budget will also make it more likely that you will be providing the bulk of the labor in the initial stages of the business. Finally, a small budget makes it less likely that you will be able to afford to buy new equipment and fixtures for your business. Though this the least problematic effect of having a small budget as a secondary market for restaurant equipment makes it easier to find what you need there.
The most important item in your budget will be your starting capital. This will generally be a combination of both your own money in any money that you can borrow. Keep in mind, that while using other people’s money makes it easier to get into business, it can also impose medium term obligations that go beyond the financial arrangement itself. So that sense of freedom you would be looking forward to it having your own business will be diminished to the extent that you are obliged to other people.
Finally the most important consideration is your long-term goals. If you are looking at this venture as being the start of an espresso empire; or if you see it as a way to ease into retirement, it will affect all of your other choices. For instance, if it is to be a place where you can go to keep busy on a daily basis in your retirement, then your revenue expectations, the choice of location, and your concept will all be affected by this desire. On the other hand if you see it as the first step to something bigger, this vision may not color your choice of location or any requirements for immediate revenues; but it will definitely affect the level of involvement that you have in the day to day frontline operation of the business. In such a scenario, you will not want your personality too closely aligned with the success of the business.
So before you start to take advantage of all those caffeine addicts, sit down and think of your goals; draw up a preliminary-so realistic-budget; and then take a walk around town and try to find a place that will sit your needs.
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