How to Open a Coffee Shop? (From Concept to Cup – The Guide)

Delina Chantel Yasmeh
Published by Delina Chantel Yasmeh | Author
Last updated: April 9, 2024
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As a prospective coffee shop owner, starting a coffee shop is a significant business choice that demands extensive research, decision-making, and broad industry expertise.

To support you in this venture, we collaborated with our team of established entrepreneurs with decades of industry experience and produced this in-depth how-to-start coffee shop guide.

This comprehensive guide covers the basics you'll need to know, from crafting a business plan to start-up costs to common business licenses required in the coffee industry.

Quick Summary

  • To open a coffee shop, one must draft a business plan, understand startup costs, and secure appropriate licenses and permits.
  • A successful coffee shop requires comprehensive market research and a clear concept to attract and retain customers.
  • The projected annual growth rate of 3.5% in the coffee shop market from now until 2029 presents a promising opportunity for prospective coffee shop owners to tap into an increasingly lucrative market.
  • From my perspective, the key to a thriving coffee shop lies in balancing exceptional service with a cozy, inviting environment that feels like a second home to customers.


12 Steps to Open a Coffee Shop

To open a coffee shop, you must follow certain steps to get your shop up and running. Below, we'll discuss the twelve steps to help you understand what is expected in the procedure.

1. Conduct Market Research

Using a laptop to search the internet for how to start a coffee shop business

Conducting research is an important first step toward opening a coffee shop.

Market research helps determine if your area needs quality coffee shops, your competition, and if you can afford the venture.

Focus on competitor research to understand if local coffee shops are franchises or independent.

This can help you find a competitive edge, though it varies with different independent shops.

2. Define Your Coffee Shop Concept

When opening a coffee shop and considering coffee business ideas, try to provide your customers with a welcoming and distinctive ambiance.

If you can make your guests feel complete by having every element match the overall concept, they will return and tell their friends about your coffee shop.

3. Create a Coffee Shop Business Plan

Businessmen having a discussion about the business plan

Any food service business must have a solid business plan to be successful.

With a coffee shop business plan, you may complete your concept, design your ownership structure, estimate your finances, develop your menu, and list your competitors' analysis.

A coffee shop business plan is also required to fund opening a café.

A standard business plan should have the following:

  • Executive summary
  • Company overview and description
  • Market analysis
  • Business offerings
  • Management plan and ownership structure
  • Marketing and advertising strategy
  • Financial plans

4. Choose a Business Structure

Drawing from my experience as a business advisor, I've witnessed the importance of selecting the right business structure firsthand.

It's crucial to choose the form that best supports both you and your company's future. This decision impacts your taxes, liability, and team management, making it a cornerstone for your business's foundation and growth.

You must complete this step before registering your company with the state.

It's best to carefully consider your business structure because it impacts both you and your company regarding personal liability, taxes, legal protection, bankruptcy, selling, and even ownership transfers.

You may set up your coffee shop as an LLC, corporation, partnership, or sole proprietorship. Corporations and LLCs offer protection from personal liability.

Therefore, your personal assets are off-limits to creditors if the shop fails to repay debt. Additionally, there are specific state filing fees that apply to LLC filings.

"To officially do business in a state, one must file certain formation documents with the secretary of state."

- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter

5. Identify Coffee Shop Startup Costs

Using a calculator to tally the startup cost

In determining your startup costs, consider that you're targeting a market where 75% of US adults, based on National Institutes of Health data, are coffee consumers, highlighting the potential for high customer demand and the importance of budgeting for quality coffee and a comfortable setting [1].

There will always be costs associated with opening a coffee shop, which is necessary for your business.

Starting a coffee shop business can range from $100,000 to $600,000, depending on size and location.

Your shop's equipment size affects how many seats you'll offer. For instance, a kiosk has different equipment requirements than a coffee establishment with 15 tables.

You can also establish your spending limit for the requirements, such as coffee shop equipment, repairs, furniture, products, and your budget.

There are a few typical initial expenses you'll incur:

  • Licenses and permits
  • Rental space
  • Insurance
  • Utilities
  • Staff wages
  • Furnishing and equipment
  • Advertising

From personal experience in advising startups, breaking down start-up costs into one-time and ongoing expenses has proven highly effective.

This approach helps in precise financial planning, distinguishing between one-time investments like equipment and continuous costs such as utilities and payroll.

We also recommend you overestimate rather than underestimate, and it is crucial to have extra money set aside to pay operating expenses before the company starts to profit.

Furthermore, the prices of machines, water systems, coffee grinders, and other expenses like renovations and build-outs may change.

Espresso makers and grinders are two examples of highly specialized coffee shop equipment. Therefore, it's important to estimate as accurately as possible and avoid underestimating.

6. Obtain Funding

After identifying your coffee shop startup costs, you must choose from which sources to obtain funding.

Your financial resources may include investors or self-funding, or you may need to ask banks and credit unions for a small LLC business loan [2].

Crowdfunding is another well-liked choice that enables other people to support and contribute to the business's success.

Whatever funding option you choose, you must know the financial implications.

7. Select Location and Commercial Space

Brewing coffee in a coffeemaker

When opening a coffee shop business, it's crucial to pick a site and a layout that offers your consumers a pleasant experience.

With that in mind, you'll also need to consider other elements that will decide your company's performance and legitimate profit potential.

Here's an idea of what you should do: 

  • Choose a location that caters to your target market. Ensure adequate foot traffic in the vicinity for your coffee shop to receive a consistent flow of frequent and ardent coffee drinkers, maintaining your revenue all year.
  • Get to know the neighborhood's coffee shop owners. It's smart to look at nearby coffee shops to see whether they offer similar goods and services to yours. Other coffee shops have limited hours of operation or cater to particular demographics.
  • Find an accessible coffee shop location. Customers are drawn to places that are simple to get to, whether by foot or car. Customers adore the ease of hassle-free parking and street visibility for people strolling between locations.
  • Locate a business location. Coffee shops need special facilities, like enough room to move about, space for espresso machines, couches, and tables, as well as access to kitchens, gas, water lines, and drains, to name a few.
  • Find an affordable space for a business. This fits into your budget as a continuous expense, making it a long-term commitment. The length of the lease, rent increases, renovations, insurance requirements, security deposit, maintenance, and repair costs should all be considered.

8. Register Permits and Licenses

Before operating a coffee shop, you must obtain state and local licenses and permits.

Ensure you are ready in advance and understand that obtaining these licenses and permits requires time.

"To completely operate in conformity with state laws and regulations, verify your locale of operation, as permits and license needs differ by state, city, and county."

-Jon Morgan, Co-Editor & Co-Founder of Venture Smarter

To operate a coffee business, you'll probably need the following licenses and permits:

  • EIN (Employee Identification Number)
  • Business License
  • "Doing Business As" License (DBA)
  • Retail Food Service License
  • Resale License for Sales Tax
  • Sign Permit
  • Insurance
  • Food Handler's Permit
  • Building Health Permit
  • Live Entertainment License

Once this essential paperwork is registered, you'll be on your way to finishing the steps to opening the shop [3].

9. Find the Right Coffee Beans Supplier

A successful coffee shop consistently produces high-quality coffee. Your consumers will keep returning for more if you serve them good coffee, making the whole experience delightful and worthwhile.

When sourcing coffee beans, you'll want to provide a product you can be proud of, so finding the appropriate provider is essential. Consider quality, quantity, and price before settling with a coffee supplier.

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10. Design a Layout

A cup of coffee on top of a coffee shop table

To draw people to your café, your coffee shop's layout and workflow matter. Here are a few things to consider when designing a layout:

  • Make a good first impression. Decide what impression you want to make on clients when they enter the door and what kind of experience you want to create. The small elements, like where your consumer will wait in line, get their coffee, and move smoothly from place to place, are just as important as the overall mood.
  • Make a productive workflow design. Remember that you'll want to offer your consumers outstanding service, and to deliver great service, you'll need to act promptly and efficiently. Coffee shops can become busy. Therefore, the design must enable baristas to move fluidly and quickly under pressure. Design the workspace so that the barista may work efficiently, from taking orders through brewing, grinding, steaming, and foaming.

Make sure the space can support a solid workflow and area design before you sign any leasing contracts.

Organize and position the necessities by thinking about the following:

  • Coffee machines, roasters, grinders, milk frothers, and kitchen equipment
  • Storage and supplies
  • Food display
  • Menus and signs
  • Outdoor and indoor seating
  • Food and coffee assembly
  • Customer and employee flow

11. Hire and Train Staff

A coffee shop staff using a tablet device

The staff members you choose will represent your café to the public, and they have the power to improve your clients' day.

Hiring individuals who understand the value of forming relationships and have excellent communication skills is crucial for providing excellent customer service.

Customers adore sincere conversation, which will strengthen the link between them and the coffee shop.

Additionally, you should properly train your staff so they can confidently brew a superb cup of coffee. Ensure the barista is prepared to learn and has all the necessary skills and expertise to succeed; even an experienced barista can use a refresher.

Below are a few essentials to look for when hiring and training a barista:

  • Excellent customer service
  • Strong communication skills
  • Ability to multitask
  • Pay attention to detail
  • Responsible and reliable
  • Cleanliness
  • Willingness to learn

12. Develop a Marketing Plan

Based on my experience, prioritizing a marketing strategy for your coffee shop is crucial, especially during the initial stages.

Gaining visibility can be challenging, and a well-crafted strategy can make a significant difference in attracting your first customers and establishing your brand presence in the market.

Here are a few strategies you can use to market your brand:

  • Create your coffee business website.
  • Work with other local businesses to offer free coffee in return for on-site advertising.
  • Use social media to communicate with your customers directly.
  • Participate in community gatherings and offer free samples of specialty coffee in the run-up to your grand opening.
  • Send coupons to nearby businesses or residents via email or direct mail.

FAQs

How Much Money Does a Coffee Shop Cost?

A coffee shop costs $100,000 to $600,000. Costs depend on the size, location, and type of coffee business you wish to start.

What Licenses Do You Need to Open a Coffee Shop?

The licenses you need to open a coffee shop are Retail Food Service License, Resale License for Sales Tax, Sign Permit, Food Handler's Permit, Building Health Permit, and Live Entertainment License.


References:

  1. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4997286/
  2. https://www.sba.gov/business-guide/plan-your-business/fund-your-business
  3. https://www.in.gov/core/business_guide.html

About The Author

Author
Delina Chantel Yasmeh, J.D./Tax LL.M, specializes in Mergers and Acquisitions at Deloitte and PwC, managing billion-dollar transactions. Educated in Accountancy at California State University and holding advanced degrees from Loyola Law School, she is highly skilled in tax law. Delina also dedicates time to pro bono work for women and children.
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Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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