There is something about a coffee shop that captivates you. Whether it be the precision of the brewing process, the burst of aromas or the mix of customers that come through the door, you’re eager to take the plunge and learn how to start a coffee shop.
Table of contents
Create a business plan
Determine legal obligations
Define your startup costs
Marketing for your coffee shop
Choose the right location
Finding coffee suppliers
Take payments at your coffee shop
Reach your customer base
There is something captivating about a coffee shop - whether it be the precision of the brewing process, the burst of aromas or the mix of customers that come through your door. So, it’s no wonder the UK coffee shop market has almost doubled between 2009 and 2019.
But as you know, a coffee shop requires more than a few talented baristas making latte art in a trendy location. In this step-by-step guide, we’ll show you how to open a coffee shop in the UK and the key things you need to consider at each stage.
How to write a business plan
The first stage of setting up a coffee shop is write a business plan that lays out your business objectives and the strategies you’ll use to achieve them. Key sections of your business plan might include the below:
Executive summary. Your executive summary should provide a top-line synopsis of your small business, such as (location, size and company ownership), as well as your objectives and how you plan to meet them. You may also want to include an overview of startup costs and forecasted revenue growth, that can then be explained in detail (later in the business plan).
Market analysis. According to the British Coffee Association, 80% of Brits visit a coffee shop once a week, with 16% doing so every day. Use your market analysis to uncover these trends and breakdown the data, so you can find a unique cafe concept that will set you apart and any gaps in the industry. For example, you could appeal to Millennial buyers that make up 16% of the market, capitalising on their preference for ground coffee, signature blends and at-home coffee pods.
Competitor analysis. Your competitor analysis should focus on your local environment and highlight any potential current or future competitors. Determine the strengths and weaknesses of your competition to uncover opportunities that give your coffee shop the edge.
Product line. This section describes the coffee products you’re going to sell at your store. Here you can include your plan to procure the coffee beans, any suppliers you want to use for additional materials and the specific drinks (and snacks) to be served.
Sales strategy. Use insights from your market and competitor analysis to outline a strategy for promoting your coffee products and your business as a whole. This may include traditional sales techniques as well as marketing tactics.
Management plan. Managing your coffee shop is key to growing your business, so take the time to create a management summary, which includes a layout of your management team, personnel responsibilities and employee costs – such as, (wages, payroll, and training).
Financial considerations. Now is the time to think about the cash flow at your coffee shop. You need to define your costs and how to finance your small business in order to determine the average profits for your coffee shop.
Create a revenue forecast based on your sales strategy that includes your projected profit and loss over a three-year time frame. This will help you determine your break-even point, as well as your net profitability once the shop is established in the local market.
Legal considerations for your coffee shop
Now your business plan is in order, it’s time to consider the legal parameters. Alongside registering your business, you’ll need to research and consider the various licenses you might require for opening a coffee shop.
The types of license you need will greatly depend on where and how you plan to operate. You may want to start with the essential licenses to prepare food for public consumption and health and safety compliance.You can then add extra licenses for playing music or placing chairs on the pavement outside your cafe.
You should also consider insurance coverage to protect you from unforeseen accidents at your coffee shop. Here are a few types of insurance to investigate:
- Public liability insurance
- Product liability insurance
- Business contents insurance
- Employer’s liability insurance
- Stock insurance
How much does it cost to open a coffee shop?
The cost to start a coffee shop can be a major barrier for some aspiring owners. But if you understand what you need to budget for — what is necessary and what is not — you can make it happen. Here are several cost factors to consider when opening a coffee shop:
Physical space. The location of your coffee shop is absolutely crucial. While you may think you need plenty of room for plush sofas and even space to sit outside, the modern consumer is more fussed with the coffee than the couches. So, if you can’t afford a larger space, consider a coffee kiosk, a coffee truck or Italian-style cafe that has a bar for people to perch at. Once you’ve narrowed down the style of your space, you’ll need to evaluate the cost factors, such as the building deposit, monthly rent, and utilities. These are determined by the popularity of the location and the foot traffic potential.
Interior design. Your coffee shop’s aesthetic says a lot about your brand and it can cost you a pretty penny without some strategic planning. Revisit your original vision for the shop before you buy anything; and think about what you really want to spend money on. Research, compare prices and purchase coffee mugs, seating, artwork and additional interior decor based on your desired style.
Your menu. How many products you offer is another cost driver when you open a coffee shop. You might want to stick to the basics, with a small selection of signature blend coffee or you might want gourmet coffee and yummy treats. Our coffee guide is a great place to start. Use your market and competitive analysis to decide which products are worth putting on your menu. You want to follow industry trends, but make sure you are providing products that your customers actually want.
Labour. You might think that paying baristas and servers at your coffee shop is simple — just pay them an hourly wage. But there’s a lot more that goes into the cost of labour. Aside from wages, you have to think about training costs, benefits, insurance and technology that can help you with things like employee management and payroll.
Coffee shop equipment to get you started
When it comes to choosing your coffee shop equipment, the selection can be overwhelming. There are a lot of options and the costs can quickly add up. As you’re just getting started, it’s a good idea to stick to the essentials so you don’t exceed your budget.
Below you’ll find a list of the most important equipment for any cafe:
Coffee bean grinder – the first step in the brewing process is grinding your beans, so you’d be lost without this tool. You can choose between a blade or burr grinder, depending on your preference.
Coffee brewer – opt for an automated brewer to keep up with multiple orders or a manual pour-over style that celebrates the traditional art of coffee. Whichever you choose, make sure you also purchase the relevant cleaning supplies.
Coffee mugs – from minimalist glass to sturdy ceramics, your coffee mugs should be affordable yet aesthetic to coordinate with the rest of your shop.
Countertop condiments and storage – think organised preparation stations that offer milk, sugar, cinnamon, plus takeaway essentials like lids, cup holders, sleeves and stirrers.
Display board – showcase your menu with an eye-catching display board outside the shop, above the counter or printed out on the tables.
Once you’re on your way and turning over some profit, you can gradually start to upgrade or expand your equipment collection to include toasters, grills, blenders and more.
Marketing for your coffee shop
When you first open a coffee shop, it’s important that you have a strategy in place to attract and encourage customers to venture inside. To do this, you can create a bespoke marketing plan for your coffee shop.
This way you can schedule campaigns that appeal to your target market and calculate the cost of these initial promotional efforts.
While there is no one-size-fits-all marketing plan, there is a general outline you can use to get you started:
Establish your market goals – from increasing coffee sales to driving consumer traffic, your business objectives should be at the heart of your marketing plan.
Analyse your customer – the optimal coffee marketing strategy and how much it costs depends upon your target customers, so find out where they obtain their information and create campaigns that will reach them. For example, setting up a social media account might be an affordable way to attract a younger audience, while a soft opening could create hype in the local community.
Create a calendar of activity – keep the buzz going with a calendar of
campaigns and promotions, for both instore and online. Don’t forget to make the most of national holidays and local celebrations.
Review and reinvent – as your business grows and consumer habits
change, so should your marketing strategy. Keep track of what has and hasn’t worked, monitor your competitors and stay alert for upcoming trends.
For more marketing ideas and inspiration, check out our guide on how small businesses can use social media to grow.
Choosing the right location
When you’re looking for the optimal location for your coffee shop, cost might be your biggest driver. Cheaper rent and lowered utilities might sound great when you are first starting a coffee shop, but choosing a location solely on price can be detrimental in the long term.
The location of your coffee shop can make or break your business, and there are specific factors that determine the best location for your coffee shop. Aside from costs, consider foot traffic, your target market and competitors, among other things.
So, to make sure you are choosing the best coffee shop location, you need to ask a lot of questions:
What types of businesses have operated here in the past?
Finding out the building’s history can help you calculate potential costs for maintenance, renovations or any required removals. If it was previously a coffee shop, then this may actually save you some money.
What are the restrictions on remodelling?
Some commercial landlords prohibit renovations of any kind, so if the space hasn’t operated as a coffee shop in the past, it may not be permitted.
What is the minimum lease requirement?
Landlords have different duration requirements when it comes to leasing commercial space – some, a year, some longer. Figure out which one is best for you (for example, when you’re first starting out, a long lease could be risky).
What insurance coverage does the lease require?
Commercial landlords require certain insurance, such as property insurance, so make sure you find out what types are expected before you commit to the property. While it sounds tedious, you should always take time to ask lots of questions about any potential coffee shop location – no matter how small.
Finding your coffee suppliers
Delicious and flavorful coffee is at the heart of any independent coffee shop. And the first step to great-tasting coffee is having the right beans.
Here are some things to consider when choosing your coffee bean supplier:
Taste the coffee first-hand. It’s a good idea to ask for multiple samples from a range of suppliers, so you can get a taste for the different strengths and flavours. You can then purchase a selection of dark and light roasts to appeal to a wider range of customers, or even find a signature blend.
Go local. Using a local supplier can be a huge selling point for your coffee shop and it can also be a great way to build strong relationships within the community.
Visit the supplier’s warehouse. Find out what equipment they use to roast the beans, how they are stored and packaged, and check the standard of cleanliness. You can also use this opportunity to find out about their history.
Talk to their existing customers. This way you can hear their personal experiences of the coffee bean quality, as well as the supplier’s track record for delivery times and service.
Ask about their minimum orders and capacity. When you’re starting up your coffee shop business, low minimums mean you can start small and build your coffee supply in line with demand. However, you also need to make sure your supplier will be able to handle large quantity orders as your business starts to grow.
Your coffee supplier sets the tone and taste for your business, so always
ensure you are making a well-informed decision.
Taking payments at your coffee shop
Guests expect a swift, personal experience when they walk through your doors. Long lines due to a poor payment system can taint a customer’s perception and even result in the loss of business. So, when you start a coffee shop, it’s important to invest in a robust POS system.
Your electronic point-of-sale system should be integrated with a payment processor and you should make sure that it can take any form of payment — chip & PIN, contactless or mobile payments (like Apple Pay or Google Pay).
Your point-of-sale system should be integrated with a payment processor and you should make sure that it can take any form of payment — chip & PIN, contactless or mobile payments (like Apple Pay).
To ensure that your coffee POS system improves daily processes in your coffee shop, look for:
An all-in-one till system. Choose a fully integrated POS system, like Square Register, that can manage payments, online sales, click-and-collect and deliveries, all in one place. The register is sleek, stylish and customer facing, so they can track their purchase as you put it through. Plus, it has a touchscreen display for easy use.
A system that is aesthetically pleasing and simple. Coffee shops tend to be quaint, with the counter being the focal point to a customer’s eyes. Cords and bulky systems can turn off customers, so look for a POS system that essentially blends into your decor.
A built-in tipping system that’s easy for customers to use. The best way to increase tips at your store is to provide exceptional customer service. With tipping built into your POS, customers are presented with a screen that suggests a tip amount, which allows them to easily add a tip in just one click.
Inventory management that allows you to set up your menu on your POS and track products being sold and materials being used. Look for software thatlets you set stock alerts when inventory gets low as a way to effectively manage your inventory.
Data capabilities to collect insight on what’s being sold. With data analytics integrated into your POS, you can see what menu items are popular and gain sales insights that help you improve your business strategy.
Reaching your customers
The feeling of opening your coffee shop is truly rewarding, but now the daily grind begins. When you’re figuring out how to run your coffee shop, you might prioritise managing employees and optimising the ordering process. But one of your most important day-to-day jobs is to make sure that customers come through your doors again, and again, and again. The best way to do this is to develop a customer retention strategy.
Invest in a customer engagement tool to stay connected with your customers, understand their behaviour and develop a relationship with them. Feedback software that is integrated into your POS system so can encourage customers to tell you about their experience at your shop. It also provides one-on-one communication with your customer, so you can get a direct response about a particular service. You can then use positive feedback to motivate employees and constructive criticism to tweak business processes.
To stay connected with your customers and develop a relationship with them, you should invest in a customer engagement tool (or customer relationship manager) that allows you to reach your customers and understand their behaviour. CRM software for your coffee shop might include:
An email marketing tool that allows you to email campaigns to keep your customers informed about what is happening in your store, whether it’s a promotion or an event. Sending personalised messages to loyal customers, like birthday emails or holiday notes, actually generates higher engagement and greater redemption rates on average than one-off email campaigns.
A customer loyalty programme that incentivises customers to spend. It can help boost sales and keeps your customers returning for your coffee.
Opening your very own coffee shop is sure to be an exciting time and hopefully this guide has provided a useful breakdown of the different steps involved.
From building a business plan and planning a budget, to choosing a location and finding the right coffee suppliers, there are tons of decisions you’ll need to make in the process of setting up your own cafe. But, with the help of Square, you’ll feel more confident taking these steps and be on your way to becoming a coffee shop owner.