Are coffee shops actually viable?

Are coffee shops actually viable?

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Mandarin VX

Original Poster:

2,344 posts

169 months

Friday 13th December 2019
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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.

Frimley111R

15,538 posts

233 months

Friday 13th December 2019
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Well Starbucks and Costa seem fairly successful! hehe

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?

Muzzer79

9,806 posts

186 months

Friday 13th December 2019
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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.

designforlife

3,734 posts

162 months

Friday 13th December 2019
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She might be better off buying a jiffy truck and selling coffee out of that.

wombleh

1,778 posts

121 months

Friday 13th December 2019
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300pm and no business rates sounds optimistic, if genuine then that could work.

Our friends ran a small one that was about 8x that for rent and seem to remember business rates were half as much again.

anonymous-user

53 months

Friday 13th December 2019
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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?

Mandarin VX

Original Poster:

2,344 posts

169 months

Friday 13th December 2019
quotequote all
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.




Kev_Mk3

2,742 posts

94 months

Friday 13th December 2019
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Interesting as I have always thought about selling coffee out of a van once retired - long as it breaks even & keeps me busy I don't mind its just to keep active.

Doofus

25,732 posts

172 months

Friday 13th December 2019
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I do wonder when the general public will wake up and realise that they can actually get to work/do their shopping/drive a car without a bucket of Americoffee in their hand.

Thus far, however, they don't seem to have done... smile

surveyor

17,768 posts

183 months

Friday 13th December 2019
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Sell more than coffee?

Mandarin VX

Original Poster:

2,344 posts

169 months

Friday 13th December 2019
quotequote all
surveyor said:
Sell more than coffee?
Something for the weekend sir?

Simpo Two

85,151 posts

264 months

Friday 13th December 2019
quotequote all
Try thinking from the other end. Imagine a Costa outlet, with several staff and business rates and it makes a good profit. Where does that profit come from? What do they do that your friend can't or hasn't thought of? (apart from the brand name of course which is a pull)

Munter

31,319 posts

240 months

Friday 13th December 2019
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Mandarin VX said:
surveyor said:
Sell more than coffee?
Something for the weekend sir?
Sure. "That's just a bag of sugar officer".

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?

Simpo Two

85,151 posts

264 months

Friday 13th December 2019
quotequote all
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.

Monkeylegend

26,227 posts

230 months

Friday 13th December 2019
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Selling 40 cups of coffee a day is not a business, its a hobby.

cheshire_cat

260 posts

184 months

Friday 13th December 2019
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In a small town I would not be surprised if most trade was at the weekend rather than during the week.

StevieBee

12,795 posts

254 months

Friday 13th December 2019
quotequote all
Frimley111R said:
Well Starbucks and Costa seem fairly successful! hehe
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.

tumble dryer

1,999 posts

126 months

Friday 13th December 2019
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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).

Monkeylegend

26,227 posts

230 months

Friday 13th December 2019
quotequote all
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).
That's no more than £100 revenue per day. It is delusional to think a coffee shop will survive on that or that you can make a living out of it.

Frimley111R

15,538 posts

233 months

Friday 13th December 2019
quotequote all
Munter said:
Or Art. Online as well as in the shop.
First 30 seconds of this https://www.youtube.com/watch?v=31gKvsEU1eM&ab...

hehe