How to Start a Coffee Shop in the United States

The idea of bringing friends and business associates together for a delicious cup of coffee (while making a profit) makes starting a coffee shop sound like a lucrative and positive business opportunity.

The most popular beverage in the US is coffee, and according to recent coffee data, close to 400 million cups of coffee are consumed daily, making America one of the world's top coffee consumers.

Making your ambition of running a coffee business come true requires a solid understanding of its economics. The initial, constant, and variable costs, as well as the ergonomics of the business, are the most crucial factors to consider.

Nonetheless, the essence of this guide is to encourage you to make your dream of starting a coffee shop a reality, offering pragmatic advice on how to do it.

Setting Up Your Coffee Shop

For the successful running of any business, sticking to the basics is vital. Before venturing into running a coffee company, there are certain things to know.

Unique Selling Proposition

Your Unique Selling Proposition (USP) sets you apart from competing companies and is an essential component of your marketing.

With a USP, you can differentiate yourself from the competition by providing a service or product that they do not. So, you must be ready to niche down in this business.

By highlighting your unique selling propositions, you have the chance to draw in both potential and current customers, strengthening the appeal of your brand.

Here are a few examples of a coffee shop's USP:

• Atmosphere
• Outstanding coffee
• Vegan substitutes
• Individualized experience
• Swift response
• Enticing loyalty program
• Affordable prices
• Reassurance of satisfaction

Do You Need Any Training or Industry Knowledge?

The success of your new coffee business depends on your wealth of industry knowledge. There are boxes you must tick as a business owner. You can easily delegate these responsibilities to experts or consider your management style and preference for teaching new hires.

It is important to remember that you can teach tasks, but employees need to own the personality. These five skills are major for coffee education:

• Barista skills: these programs typically start with the fundamentals before expanding into more complex options for seasoned baristas who wish to further their knowledge.
• Coffee roasting: new roasters should have some training or background before starting their business.
• Management skills: strong management abilities are necessary for any field of employment. This includes your knowledge of planning, ordering, developing a menu, and other critical aspects of running a coffee company.
• Cupping: this includes knowledge about the coffee taste wheel, processing, and how to execute cupping properly.
• Coffee purchasing: new purchasers frequently have many concerns about purchasing a coffee through an importer or directly from a farm. You need the essentials of making picking, purchasing, and importing the ideal coffee for your cafe simpler.

You can take courses related to these, along with these training programs:

• Specialty Coffee Association’s Coffee Skills Program
• Bellissimo’s American Barista and Coffee Workshops

Where Can You Register Your Coffee Shop?

State-by-state differences exist in the specifics of business registration. Just ensure you’re well informed about the requirements. You'll also need to submit your plans to your local government and pass the ServSafe food safety certification process.

Use the resources below to learn how to get the federal, state, and local business licenses and permits for your LLC, or hire a service to handle it for you:

Federal: Use the U.S. Small Business Administration (SBA) guidance for federal law.

State: Use USAGov to have a view of different state license searches.

Local: For information on business licenses and permits in your area, speak with the county clerk in your area.

The Costs Involved to Start Your Coffee Shop

Deciding on what you need and how much of it to purchase is the most challenging element of purchasing equipment for a coffee shop business.

The following equipment is essential for every coffee shop:

• Water filtration system - $1,600
• The espresso machine - $12,000
• Drip coffee maker - $5,000
• Commercial coffee grinder - $12,000

The cost of the premium equipment required to create your customers' preferred drinks alone can range from $6,000 to $15,000 or more. Just ensure you start modestly and build up as your budget permits.

Other supplies include:

• Coffee beans - $2,000
• Containers and Napkins - $2,000
• POS System - $1,000 - $4,000

Meet varying demands by including tea, bottled water, salads, juices, ice cream, baked goods, etc. Supplies include syrups, creams, low-calorie substitutes, cinnamon, and nutmeg.

Cost of Renting a Shop

Rent averages around $150 per square foot, depending on location. Plan on paying between $3,000 and $10,000 monthly for your coffee shop. However, ensure your rent doesn't exceed 15% of your sales.

Cost of Hiring

The cost of hiring depends on the establishment and the shop's location. The average nationwide hourly rate of the most popular coffee shops include:

Baristas: $10-$12/hour

General manager: $13-$16/hour

Assistant manager: $12-$14/hour

Cashier: $7-$9/hour

Baker: $7-$10/hour

Again, before setting out your cost analytics, understand that initial costs will vary depending on the size, location, and equipment needs. Here are some rough estimates:

• The average cost to open a sit-down coffee shop is between $90,000 and $280,000.
• Costs for a drive-thru coffee shop range from $70,000 to $210,000.
• A small coffee kiosk may cost between $70,000 and $110,000.

Getting Funding

Starting a coffee shop is expensive. It usually takes a new business 6 to 12 months to turn a profit, so your first capital should be sufficient to pay running expenses until your company can sustain itself. If you lack the personal savings necessary to launch your business, you'll need to think outside the box to get funding.

Family and Friends

People you know personally or professionally who could be interested in making minor investments in your company. You could even hire an attorney to draft a loan agreement.

Startup Loan

A startup loan is designed for new businesses that have been open for less than six months. A startup lender will look at your credit history and personal track record.

However, a government-supported program called the Small Business Administration helps business owners in the US start or expand their businesses.

There are other loan options you could choose from depending on your objectives. And when it comes to grants, you can read our small business grants guide to understand the nuances of the application process.

Writing a Business Plan

A business plan is more than a funding proposal. It will involve business branding, sales strategy, marketing components, and growth concepts. It's a way to list the steps you'll need to take to kick-start your business.

Hence, you must have these critical components when developing your business plan.

• Summary: What the business stands for, and how does it plan to differentiate itself?
• Local market research: Who are your dependable clients? Who are your competitors?
• Team: What will you do, and who will you hire to do the rest?
• A marketing strategy: What sets you apart from the competition? How are you going to tell people about this?
• Financial plan: How much money will you need to start, and where will it come from? Projected cash flow, profit & loss.
• A plan for the location and lease.

The Nuances of Starting Your Coffee Shop

Location

There are many factors to consider when choosing the ideal location to launch your coffee business. Visibility is the main component that you’ll need to pursue. Think about areas that will have a high level of foot traffic, including parks or public transportation areas, or office blocks.

Suppliers and Quality Control

Coffee and tea enthusiasts expect more than a regular mug of coffee, so keep that in mind when starting a coffee shop. Consumers place greater value on sustainability, which translates to fair trade beans and environmentally friendly packaging and processes in the coffee business.

You must be ready to continuously deliver high-quality products and stay on top of evolving trends and customer values. You must always get your coffee beans from the best, serve up delectable nibbles and pastries, and maintain industry culture.

Also, be ready to invest in reliable tools, maintain a skilled and trained crew, and even create your own originals.

Your Team

According to a survey, most customers see a café's comfort, familiarity, and general atmosphere as its major attractions. And any successful business must provide excellent customer service.

Most coffee businesses use counter service. Your labor costs are reduced, and you can better manage busy periods when consumers order and pay beforehand and are contacted when their order is available.

Also, table service is typically slower, more labor-intensive, and better suited to restaurants where customers spend more time. Nonetheless, table service can increase your upsell opportunities and may work with your business plan.

Aside from expertise, creating an ideal atmosphere must be at the forefront of your team selection.

Marketing Your Coffee Shop

The benefit of marketing your new brand is that it engages consumers and helps them decide whether to purchase from you. Your business plan's marketing strategy also creates and maintains demand, reputation, relevance, and competition.

Coffee shops offer a highly social experience that depends heavily on word-of-mouth marketing and individualized recommendations from previous customers. But this is not to say that digital and social media marketing are not crucial to the survival of your coffee shop – they definitely are!

Incentive and Loyalty Programs

For regular coffee drinkers, loyalty programs might be as straightforward as punch cards that promise to give a cup of coffee for free after several purchases.

To outperform your rivals:

• Think about upgrading your incentive programs.
• Provide free products for a particular amount of money customers spend.
• Implement a more intricate system that keeps track of the amount of money each client spends.
• Providing laptop electrical outlets at each table and free Wi-Fi at your store can also be advantageous!
• Regularly schedule live entertainment in your store. You could hold poetry readings and other community-oriented events.

Advertising and Promotions

Occasionally, combine advertising and sales promotions to increase the number of new customers entering your coffee shop. Place coupons in regional publications and promote weekly deals. Promote live performances, literary events, or group gatherings with offline and online ads.

You can also attend coffee trade fairs in the US to get more exposure for your business.

Social Media

Use social media to establish your reputation because that’s how many will learn about you. Also, use it to inform clients about store events and sales while being active and engaging.

Use social media to your advantage by sharing printable discounts on Facebook and Twitter or by distributing coupons to nearby internet users via a site like Groupon. Make use of Instagram, too, because café lovers adore Instagram.

You may also want to promote products, events, or specials through targeted display ads.

Is Starting a Coffee Shop Your Only Option?

While starting a business from the ground up can be very rewarding, you do have other options that may reduce some risk and be more affordable.

You can consider coffee franchise opportunities, a business model that can give you a taste of business ownership with the support of a franchisor. Other benefits of franchising include:

• The brand is already market tested
• You will have access to an existing customer base
• You can easily secure business financing

Alternatively, you can browse coffee shops for sale on our site if you're interested in buying one. Buying a business instead of starting one offers you access to an existing location and services, equipment, and other elements.

You can read our business buying guide for a more comprehensive insight into buying a business with confidence.

Regardless of the route you take, your dedication and passion will be the determining factors of your success! While you may face many challenges, you will also come across exciting opportunities.

We also have an article that details how to run a coffee shop, if you’d like to give that a read.

Please contact us if you need support or assistance. We're always happy to help. We wish you nothing but success on your new business journey!