Are coffee shops actually viable?
Discussion
Afternoon all!
I was chatting to a friend last night about my own career change plans when she mentioned that she was considering opening a small coffee shop in the town (a small town, middle England, fairly posh area)
I was a bit skeptical about her figures so wanted to see if anyone here had any experience in this sector, is it at all profitable?
The details/numbers:
- It's a small place, just off the highstreet, rent is just £300 pm, could maybe seat 6x 4-person tables.
- As its so small business rates will be zero.
- Running costs unknown at this point, she doesn't want to pay for extra staff if possible, maybe one person for 3-4 hours a day, opening probably 5 days a week.
- There is one local cafe as competition, but its more of a greasy spoon than a coffee house.
Based on purely selling coffee, She estimates selling circa 40 cups a day (Breakfast and lunch service) at an aproximate profit of £2 per cup, maybe 20x cakes at lets say £1.50 profit each. Now by my maths that's an estimate of £110 gross a day before staffing and costs.
Are coffee shops in any way viable???? sounds like a massive investment for little return...
She looked a bit worried after we'd gone through the numbers.
I was chatting to a friend last night about my own career change plans when she mentioned that she was considering opening a small coffee shop in the town (a small town, middle England, fairly posh area)
I was a bit skeptical about her figures so wanted to see if anyone here had any experience in this sector, is it at all profitable?
The details/numbers:
- It's a small place, just off the highstreet, rent is just £300 pm, could maybe seat 6x 4-person tables.
- As its so small business rates will be zero.
- Running costs unknown at this point, she doesn't want to pay for extra staff if possible, maybe one person for 3-4 hours a day, opening probably 5 days a week.
- There is one local cafe as competition, but its more of a greasy spoon than a coffee house.
Based on purely selling coffee, She estimates selling circa 40 cups a day (Breakfast and lunch service) at an aproximate profit of £2 per cup, maybe 20x cakes at lets say £1.50 profit each. Now by my maths that's an estimate of £110 gross a day before staffing and costs.
Are coffee shops in any way viable???? sounds like a massive investment for little return...
She looked a bit worried after we'd gone through the numbers.
Well Starbucks and Costa seem fairly successful!
But seriously, you're 100% right to do the basic figures and show them to her. I'm glad she was a bit shocked too. Better now than after she's lost a ton of money. Given her plans it's got to be worth her getting a job in a similar shop or a Costa/Starbucks so that she gets an insight into one before committing.
In addition to the basic finances what will happen if she's on hols/ill/etc. Will she just close up?
But seriously, you're 100% right to do the basic figures and show them to her. I'm glad she was a bit shocked too. Better now than after she's lost a ton of money. Given her plans it's got to be worth her getting a job in a similar shop or a Costa/Starbucks so that she gets an insight into one before committing.
In addition to the basic finances what will happen if she's on hols/ill/etc. Will she just close up?
Mandarin VX said:
- Running costs unknown at this point, she doesn't want to pay for extra staff if possible, maybe one person for 3-4 hours a day, opening probably 5 days a week.
The fact she doesn't know the running costs is a concern from the off.It's also not just staff. What about equipment, water, electric, lighting, breakages, damage, etc, etc?
Mandarin VX said:
Based on purely selling coffee, She estimates selling circa 40 cups a day (Breakfast and lunch service) at an aproximate profit of £2 per cup, maybe 20x cakes at lets say £1.50 profit each. Now by my maths that's an estimate of £110 gross a day before staffing and costs.
I'm no retailer but I do know that 40 cups a day is massively low for a coffee shop that's open all day. Say it's open from 0800 (to catch people before work) and 1800 (to catch people on their way home)
That's 4 cups an hour. Paltry.
And what's with opening 5 days a week? It needs to be open 7 days a week.
TBH, it sounds like your friend is looking at this as a hobby rather than a business.
Coffee is high margin but low yield so the tangible profit comes from volume - you need to be knocking out as many cups as you can.
I can see it working, in a a shop selling 400 cups of coffee a day.
Maybe the 40 number is the main problem. No point worrying about 300 quid vs 600 quid rent. Far better paying more to rent a shop with the necessary traffic potential. Probably next to another coffee shop. At least then you know the location is proven.
Building up custom in an unproven area without that proven competition is harder?
Maybe the 40 number is the main problem. No point worrying about 300 quid vs 600 quid rent. Far better paying more to rent a shop with the necessary traffic potential. Probably next to another coffee shop. At least then you know the location is proven.
Building up custom in an unproven area without that proven competition is harder?
Bare in mind guys she's only in the very early stages of said "considering", like she saw the premises was available last week and hasn't viewed it yet.
I don't know where the 40-a-day figure came from, again probably a wild guess.
This isn't central London, not even central city, this is a small town (Melbourne Derbyshire to be specific) so you can't expect a queue out of the door every morning and evening.
I've said that what she really needs to do is find a similar shop (well several), go in, sit in the corner drinking coffee and watch, count, take down prices. Then really think through the numbers: How long will that £2000 coffee machine take to pay for itself? how much will maintenance cost? How much will fit-out cost.... etc etc etc
As I said... very early stages - We've all been there, get all excited then figure out it's not viable.
I don't know where the 40-a-day figure came from, again probably a wild guess.
This isn't central London, not even central city, this is a small town (Melbourne Derbyshire to be specific) so you can't expect a queue out of the door every morning and evening.
I've said that what she really needs to do is find a similar shop (well several), go in, sit in the corner drinking coffee and watch, count, take down prices. Then really think through the numbers: How long will that £2000 coffee machine take to pay for itself? how much will maintenance cost? How much will fit-out cost.... etc etc etc
As I said... very early stages - We've all been there, get all excited then figure out it's not viable.
Mandarin VX said:
surveyor said:
Sell more than coffee?
Something for the weekend sir? Or Art. Online as well as in the shop.
Put in a pole, open later at night on Fridays and Saturdays, get some of the local impressionable late teens to take their clothes off for money?
Munter said:
Or Art. Online as well as in the shop
I know a small successful cafe that does that. How much local art they sell I don't know, but more importantly they do a good range of light meals, sandwiches, breakfasts etc and I reckon that attracts most of the trade (they're usually pretty full) and makes most of the money.Frimley111R said:
Well Starbucks and Costa seem fairly successful!
I camped out in one (Costa) for a day a few years back doing interviews. In between which and during the usual no-shows, I watched the operation. This was a busy city centre (Canterbury) with two tills operating. Rough average I counted was that each till rang 4 times every minute with an average order value of a fiver. That's takings of £20 every 60 seconds - £14k a day (on the basis they open for 12 hours a day) - £100k a week - £5.2m a year. I suspect it's a lot more than that with margins very high. Plus they are as much a real estate business as they are a coffee shop.I think a lot of people look at what goes on in a Costa or Starbucks and it seems quite simple and they think "i can do that" but the reality is a little different.
Monkeylegend said:
Selling 40 cups of coffee a day is not a business, its a hobby.
Averaging 40 cups of coffee per day, every day, from a small outlet with low expected footfall is doing VERY well.I'll have around 200 clients that I supply (mostly rent) coffee machinery to and less than 25% of them achieve that figure.
My business is based in the north east and our biggest door to entry is our 'Three Month Trial Package' whereby we'll supply a machine (usually a commercial bean to cup, but also a traditional machine if required) along with sufficient ingredients to produce a mixed variety of 400 drinks for a fixed fee of £150 per month. No contract, just sufficient time for the 'new' entrant to establish viability or otherwise.
If it works for them, then great, we'll look after them and, historically, will probably keep that customer for life.
When and if the time comes that their sales warrant buying their own machine, we're well-placed to know and understand their business and to recommend the best machinery for their needs.
I wish her luck but I see many fail through overestimating their top line (sales).
tumble dryer said:
Monkeylegend said:
Selling 40 cups of coffee a day is not a business, its a hobby.
Averaging 40 cups of coffee per day, every day, from a small outlet with low expected footfall is doing VERY well.I'll have around 200 clients that I supply (mostly rent) coffee machinery to and less than 25% of them achieve that figure.
My business is based in the north east and our biggest door to entry is our 'Three Month Trial Package' whereby we'll supply a machine (usually a commercial bean to cup, but also a traditional machine if required) along with sufficient ingredients to produce a mixed variety of 400 drinks for a fixed fee of £150 per month. No contract, just sufficient time for the 'new' entrant to establish viability or otherwise.
If it works for them, then great, we'll look after them and, historically, will probably keep that customer for life.
When and if the time comes that their sales warrant buying their own machine, we're well-placed to know and understand their business and to recommend the best machinery for their needs.
I wish her luck but I see many fail through overestimating their top line (sales).
Munter said:
Or Art. Online as well as in the shop.
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