How To Start a Coffee Shop

How To Start a Coffee Shop
Here’s everything you need to know about starting a coffee shop, including cafe startup costs, choosing the best POS system, and taking payments at your coffee shop.
by Paige Newberry Apr 28, 2023 — 13 min read
How To Start a Coffee Shop

This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional.

When starting a coffee shop, your goal is to provide coffee connoisseurs a selection of complex beans that create unique flavors while delivering a superb customer experience. But as you know, a coffee shop requires more than a few talented latte artists in a trendy location. Here’s everything you need to know about how to open a coffee shop.

Write a coffee shop business plan.

In order to be successful when you start a coffee shop, you need to write a business plan that lays out your business objectives and the strategies you will use to achieve them. Key sections of a business plan include:

Once you have written your business plan, compute your projected cash flow to determine your break-even point. Include your projected profit and loss over a three-year time span to show the coffee shop’s net profitability as the store becomes established in the local market.

Regulatory considerations for your coffee shop

After your coffee shop business plan is in order, it’s time to consider the regulatory parameters of your business. The regulatory requirements of your particular business depend on where you operate. Aside from registering your business with the IRS and obtaining a business license, there are various state licenses and permits you may need to research before you start a coffee shop.

Outside of general business licensing, you will likely need to obtain industry-specific licenses and permits. For example, you may need a license to handle and prepare food and beverages, or licenses that certify compliance with restaurant health and safety practices. You’ll also likely need to pass other health safety inspections before your coffee shop can operate. Each of these is unique to your business and where you are located, so make sure you consult a legal expert on these matters.

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:

Identify coffee shop startup costs.

The cost to start a coffee shop can be a major barrier to entry 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. 

How much does it cost to open a coffee shop?

Here are six cost factors to consider when you open a coffee shop:


You may not have money on hand to fund the total cost of a coffee shop, but there are financing options available. You might look for investors to help with business funds, or you might look into small-business loans. Loans can help subsidize:


Here are some additional ways to use a business loan strategically to help your coffee shop grow.

Define a coffee shop pricing strategy.

Choosing the right pricing strategy is crucial. Your price needs to be competitive enough to attract customers, but profitable enough to keep your business running. A successful pricing strategy balances profitability and customer appeal. You can find this sweet spot through competitive analysis and data insights.

Factors to be aware of with cafe pricing

There are a few factors that matter when it comes to determining your cafe pricing:

How to set a pricing strategy for a cafe

Once you have a good understanding of customer insights and data, you can determine the pricing strategy for your coffee shop.

First, decide what you’ll offer on your menu, taking competitors, demographics, and the value your cafe offers into account.

Next, calculate any food costs. For each item you plan to offer, make a list of their ingredients and the prices of those ingredients. Figure out how much it costs to make each item on your menu by adding up the cost of the ingredients. Then consider your other cafe-related costs. These include all fixed and variable costs to determine your overhead, such as rent, utilities, payroll, and marketing.

To determine your break-even point, calculate how much revenue you need to generate each day, week, or month to cover your expenses. This will tell you the minimum price you’ll need to set for each item on your menu. Now that you know your break-even point, you can set coffee pricing intelligently.

Methods to set coffee shop prices

Here are some common pricing methods:

What’s a healthy coffee shop margin?

Based on numbers from the Specialty Coffee Association (SCA), non-roaster coffee retailers can make as much as a 6.86% profit margin, while coffee retailers that roast their own coffee can see a profit margin of 8.79%.

Find the right coffee shop location.

When you’re looking for the optimal location for your coffee shop, cost might be your biggest driver. Cheaper rent and utilities might sound great when you first start, 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 your competitors.

To make sure you choose the best coffee shop location, you need to ask a lot of questions. When you search for the perfect coffee shop location, here are some questions you can ask before you commit to a location:

What types of businesses have operated here in the past?

Find out whether coffee shops have ever operated in the space, and try to get a sense of the clientele that shops in the area.

What are the restrictions on remodeling?

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?

Typically commercial landlords require a year, which may be the right choice when you’re getting started. Long leases can be risky when you first open a coffee shop.

What insurance coverage does the lease require?

Commercial landlords require certain insurance.

Do I owe the landlord a share of my sales?

While this sounds obscure, your lease may require you to pay the landlord a percentage of your monthly sales. Make sure to inquire about this stipulation.

While it sounds tedious, it’s worth taking the time to ask lots of questions before you decide on an optimal coffee shop location.

Choose a coffee shop POS.

The right coffee shop POS software provides numerous benefits to your cafe. By streamlining your sales process and providing customer insights, a full-solution POS system helps increase revenue. Plus, with integrated loyalty programs, discounts, and marketing promotions, you can encourage customers to return and become regulars to your coffee shop.

Operational efficiency is another significant benefit of the right POS software solution. You can manage your inventory, track sales, and generate business reporting all in one place. Storing all your data in one POS solution can reduce errors, can automate processes, and can increase your overall operational efficiency.

When looking for the best POS system for your coffee shop, there are several factors to consider:

Take payments at your coffee shop.

Guests expect a swift, personal experience when they walk through your doors. Long lines due to a lousy payment system can taint a customer’s perception and result in the loss of business. So when you start a coffee shop, it’s important to invest in a reliable POS to process payments.

Your point-of-sale system should be integrated with a payments processor, and you should make sure that it can take any form of payment — magstripe, EMV, or mobile payments (such as Apple Pay).

To ensure that your coffee POS software improves the payment processes in your coffee shop, look for:

Reach 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 a successful coffee shop, you might prioritize managing employees and optimizing 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 — and that they don’t go to your competitor down the street. So developing a customer retention strategy is crucial.

To stay connected with your customers and develop a relationship with them, you should invest in a customer engagement tool — or customer relationship manager (CRM) — that allows you to reach your customers and understand their behaviors. CRM software for your coffee shop might include:


After you’ve developed a business plan, identified costs and a location, and are getting your coffee shop up and running, the next step is making sure you’re getting the most out of your business. Learn more about the tips and tricks for strategically running a successful business.

Paige Newberry
Paige Newberry is a content writer and marketing consultant and has had her work published in Forbes, BBC, CNN, and ABC News, among others. She works with The Glorious Company, a content marketing agency.


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