How to Start a Coffee Shop: A Guide to Success (2025)

If you’re looking to open a coffee shop, you probably know it takes more than great beans and a trendy location. You need a plan. But what’s involved in setting up your own coffee shop? From writing up a business plan and acquiring funding to buying equipment and building a customer base, here’s everything you need to know about how to open a coffee shop.

Choose a coffee shop concept

So you’re wondering how to start a coffee shop? It all begins with a concept. Your coffee shop concept is the foundation of your business: It defines your brand identity, menu, atmosphere, and target audience. As you develop your concept, consider the following:

• Your shop’s aesthetic (modern, rustic, minimalist) 
• Specialty drinks you want to offer (artisan espresso, nitro cold brew, and flavored lattes)
• Food offerings you’d like to provide (pastries, light bites, vegan options)

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Since your concept is what makes customers choose you over competitors, be sure to align it with both your personal passion and local demand. Conduct thorough market research to understand your target demographic, be it students, professionals, or families, and evaluate what kind of foot traffic they can provide you in your chosen coffee shop location. 

You’ll also want to choose a coffee shop business model based on your goals for the business, your funding capabilities, and personal preference. Here are some options for how to set up a coffee shop:

• Franchise: If you don’t mind giving up some creative control to join an established brand, like Starbucks or Caribou Coffee, in exchange for built-in name recognition and support, this might be the way to go. 
• Standalone business: For full creative freedom to create your own unique coffee shop experience, develop your own independent café.
• Mobile coffee cart/truck: Enjoy lower startup costs with the ability to easily locate near special events, offices, or high-foot-traffic areas.
• Bookstore or hybrid café: Combine coffee with a niche, whether bookstore, art gallery, or chocolate shop, to attract a specific crowd.
• Specialty coffee roastery: Grab coffee enthusiasts with a laser focus on premium, small-batch beans.

Create 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 start your coffee shop business. Key sections of a business plan include:

• Executive summary. Your executive summary should provide a top-line synopsis of your business — location, size, company ownership — as well as your coffee shop’s objectives (or mission statement) and how you plan to meet them.
• Industry overview. The coffee market continuously evolves due to shifts in consumer trends, so it’s important to conduct some industry research to ensure you understand your local market, coffee industry growth as a whole, the demand for specialty coffee in your planned location, and the habits of your target customer. Your industry overview should also provide an assessment of key competitors in your market and what market gaps your shop could fill or emerging trends in coffee that your shop could take advantage of.
• Market analysis. The coffee shop game is changing, and so are the food and retail spaces that house them. To succeed, you’ll need a sound understanding of your market. Your market analysis should describe your target market, highlight your target market’s buying patterns, identify key factors that encourage (or limit) coffee consumption, and address any gaps in the industry that your coffee shop can capitalize on. Organizing this will give you strong objectives out of the gate and give you something to refer back to as your business grows. 
• Competitive analysis. Your competitive analysis should hone in on your local environment and highlight any current competitors, along with potential competitors who might enter the market. Determine your competitors’ strengths and weaknesses to uncover opportunities that give your coffee shop a competitive advantage.
• Product line. Your product line includes the coffee products you intend to sell when you open a coffee shop. Here you can take into account your plan to procure your coffee beans, the vendors you want to use for additional materials, and the specific drinks and snacks you’ll prioritize at your coffee house.
• Sales strategy. Use insights from your market and competitive analyses to outline a strategy to promote your coffee products and your business as a whole. This section of your business plan may include traditional sales techniques and marketing tactics. It’s important to identify which sales data to track in order to determine whether your business is growing. Then focus on revenue forecasting from your sales. Most forecasting should be done three years out so you can get a clear picture of your break-even point and profit potential. This can help you budget effectively when you start your coffee shop.
• Management plan. Managing your coffee shop is key to growing your business, so take the time to create a management summary. It should include 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 how to manage cash flow when opening a coffee shop. You need to define your costs and how to finance your business in order to determine your average profits. A cash flow analysis can be extremely helpful with this part of the business plan.

Obtain licenses and permits for your coffee shop

After your coffee shop business plan is in order, it’s time to consider the regulatory parameters of your business. Regulatory requirements will vary depending on where you operate, but here are compliance obligations you’ll definitely need to meet:

• Register your business with the IRS.
• Obtain a business license from your city or county government. 
• Obtain a food and beverage preparation and handling permit from your community’s local health department.
• Schedule a pre-opening inspection with your local health department. 

Research any state licenses and permits you may need before you start a coffee shop. Many of these will be unique to your business and location, so make sure you consult an attorney to ensure you’ve covered all the bases.

You should also consider insurance coverage to protect you from unforeseen accidents at your coffee shop. Here are a few types of insurance to look into:

• General liability insurance will cover the costs of a claim or lawsuit if a customer is injured on your property.
• Product liability insurance will protect you in the event a customer becomes ill due to consumption of your food or coffee.
• Health insurance will provide medical coverage for you and your employees and can be a valuable benefit for attracting and retaining talent.
• Kitchen insurance will cover specialized risks, which might include equipment breakdown, grease fires, or food spoilage.
• Workers’ compensation protects both your business and your employees in the event one of your staff gets hurt while working, covering both medical expenses and lost wages.

Create a coffee shop menu

A well-crafted coffee shop menu balances variety and quality, ensuring your customers find their favorite drinks and snacks while discovering new options. Here are key categories to consider when designing your coffee shop menu.

Beverage selection

• Espresso drinks, such as classic lattes, cappuccinos, and mochas, along with flavored options (vanilla, caramel, hazelnut). Offer alternative milk choices (oat, almond, soy) for customization.
• Cold coffee, including cold brew, iced lattes, and nitro coffee for a smooth, creamy texture. Offer seasonal iced specialties, like pumpkin spice or peppermint mocha, to boost sales.
• Decaf options, like decaf espresso or drip coffee, for those who prefer to avoid caffeine.
• Teas and specialty drinks like hot and iced teas (black, green, herbal) as well as non-coffee alternatives like matcha lattes, hot chocolate, and chai.

Food selection

• Pastries, including fresh croissants, muffins, scones, and cookies pair perfectly with coffee. Consider gluten-free or vegan options to cater to dietary preferences.
• Sandwiches and savory items offer grab-and-go convenience for customers on their way to work or on a quick lunch break. Options you can offer include paninis, avocado toast, or breakfast wraps.
• Yogurt and granola pots offer a healthy, easy-to-serve choice for those wanting a lighter snack.

Obtain funding for your coffee shop

One of the biggest things to consider about how to start a coffee shop business is funding. The costs of opening a coffee can be a major barrier to entry for some aspiring owners. However, even if you don’t have funds of your own, you may be able to take advantage of a variety of business loans: 

• Bank loans are a traditional route, where you borrow money from a financial institution and pay it back over time with interest. 
• Square Loans offer another option outside a traditional bank, where you can obtain a loan of $100K to $350K with quick and easy approval, repayment based on a fixed percentage of your daily sales, no hidden fees, and the ability to set up automatic payments deducted from your Square sales. 
• A business line of credit offers a flexible financing option where you can borrow funds up to a predetermined limit, repay, and reuse the credit as needed, typically with interest only on the amount you withdraw.
• Crowdfunding for your business allows you to raise capital by collecting small contributions from a large number of people, typically via online platforms.

How much does it cost to open a coffee shop?

Startup costs for a coffee shop can vary depending on your location, rent, and the concept you choose. According to the Independent Restaurant Cost to Open Survey Report, the median cost to open a restaurant is $375,000, with most owners spending between $175,000 on the low end and $750,000 on the high end. While coffee shops typically cost less to start than full-service restaurants, it’s important to budget for the costs associated with starting a coffee shop, such as equipment, permits, staffing, and other expenses.

Here are six cost factors to consider when evaluating how to start a coffee shop:

• Coffee shop equipment: From espresso machines to condiment organizers, there are a lot of options to consider when it comes to coffee shop equipment. Review the best coffee shop equipment and figure out which equipment you absolutely must have to open a coffee shop.

• Location: The location of your coffee shop is crucial and depends on whether you plan to operate a coffee kiosk, coffee truck, coffee shop with seating, or coffee shop with seating and a drive-thru. Cost factors of location include the building deposit, monthly rent, and utilities.
• Utilities: Utility costs for a coffee shop are generally lower than those of full-service restaurants. Your expenses will depend on factors like the size of your space, how many espresso machines or refrigerators you run, and your local electricity and water rates. 
• Interior design and furniture: The design of your coffee shop could be a significant expense without some advanced planning. Determine the kind of environment you want to cultivate before you start buying anything, and be strategic about where you spend money, prioritizing items like coffee mugs and seating, for example.  
• Marketing: Promoting your coffee shop costs money, too. You may want to invest in a soft opening that showcases your coffee and creates hype, or you may want to launch a social media campaign to reach new customers. The optimal coffee shop marketing plan and how much it costs depend on your target customers.
• Technology: Technology is a key investment for modern coffee shops. At a minimum, you’ll need a reliable POS system to process payments and track sales. Additional expenses might include WiFi for customers, online ordering tools, and loyalty program software.
• Staffing and management: You might think that paying baristas and servers at your coffee shop is simple, but there’s more that goes into the cost of labor. Aside from wages, you have to consider training costs, benefits, insurance, and technology that can help you with things like employee management and payroll.
• Permits and licenses: To open a coffee shop, you may need a business license, food service permit, health department approval, and signage permit at a minimum. Be sure to research local requirements. 

Create a coffee shop pricing strategy

Choosing the right pricing strategy is crucial. Your pricing must attract customers while also ensuring profitability.

Factors to be aware of with cafe pricing

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

• Markups: Pricing markups can be quite modest in the coffee shop industry: You typically need 25% to 30% percent to turn a profit. However, not all your products will have the same markup margin percentage. It’s vital to price each product properly to ensure that you still make a profit to grow your cafe.
• Customer demographics: Your pricing strategy should factor in customer demographics. Will you cater to office workers, or is your customer likely to be a college student? Different demographics will have different expectations and price sensitivities.
• Competitors’ strategies: Pay attention to your competitors’ pricing strategies. The key is to stay competitive without pricing yourself out of the market. Try using a competitor analysis tool to find the right balance.

How to set a pricing strategy for a cafe

Once you understand customer insights and data, you can determine the pricing strategy for your coffee shop:

• Decide what you’ll offer on your menu, taking competitors, demographics, and the value your cafe offers into account. 
• Calculate 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. 
• Understand that different menu items may require different cost approaches since pricing coffee drinks often differs from non-caffeinated beverages or food items.
• Consider your other café-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. 

Methods to set coffee shop prices

Here are some common pricing methods:

• Food–cost percentage pricing calculates the price of your coffee based on the cost of the ingredients used to make it. Simply add up the cost of all the ingredients used to make a cup of coffee, then multiply it by your desired markup percentage.
• Markup (or factor) pricing involves adding a certain amount or percentage to the cost of your coffee. For example, if the cost of a cup of coffee is $1.00, and you want to have a 50% markup, the price would be $1.00 plus 50 cents, so $1.50.
• Cost and pricing takes into account all the costs associated with running your coffee shop, including rent, utilities, labor costs, and ingredients, and adds a certain percentage to cover these costs.
• Gross–profit–margin pricing involves setting your prices based on the gross profit margin you aim to achieve. You essentially divide the cost of the coffee (or other menu item) by one, minus the desired gross profit margin percentage. So, if selling a cup of coffee costs you $2 and you want a 50% gross profit margin, then you would divide the cost of the coffee by 1 and add 50%, for a sales price of $3.

What’s a healthy coffee shop margin?

According to the Specialty Coffee Association (SCA), non-roaster coffee retailers can make as much as a 6.9% profit margin. A boutique wholesale coffee roaster should have a profit margin of 10-15%, while the average coffee shop in the United States in 2024 had a 13.7% operating profit margin. 

Choose a coffee shop location

When you’re looking for the best location for opening a 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, and ask these questions:

• 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. While the exact requirements will vary from state to state, the most common types needed are general liability, commercial property, and workers’ compensation insurance. If your coffee shop provides alcohol of any kind, then you’ll need liquor liability insurance as well. 
• 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.

Design a coffee shop layout

An efficient coffee shop layout benefits both customers and staff, ensuring smooth operations and a welcoming atmosphere. Elements like seating, equipment placement, and workflow design all play key roles. A well-thought-out layout starts with understanding the basics of creating a coffee shop floor plan, then adapting it to your shop’s unique concept and customer needs.

Front of house layout

The front of house (FOH) shapes the customer experience, so it should balance comfort and functionality: 

• Offer varied seating, such as cozy sofas for relaxed guests and tables for remote workers or groups to cater to different preferences. 
• Make sure your colors, lighting, and décor align with your brand and target demographic. A modern minimalist look may appeal to young professionals, while warm, rustic tones could attract a more casual crowd. 
• Keep pathways clear to avoid congestion, especially near the counter where lines form.

Back of house layout

The back of house (BOH) must maximize efficiency, especially during peak hours when space is tight: 

• Organize workstations logically. Place the espresso machine near grinders and milk fridges to streamline drink preparation, for example. 
• Use technology, like POS systems and kitchen display screens, to speed up orders and reduce errors. 
• Store frequently used items, like mugs, syrups, and pastries, within easy reach. 
• Ensure there’s enough room for staff to move safely. 

Order equipment for your coffee shop

Stocking your coffee shop with the right equipment is key to running smoothly from day one. While every shop is different, most will need a mix of brewing tools, storage solutions, and front-of-house essentials. A well-prepared equipment list ensures your team can work efficiently and deliver the best customer experience. 

Here are some critical pieces of equipment you’ll require:

• Coffee-making equipment like brewers, coffee grinders, hot water dispensers, and reach-in refrigerators
• Supplies like mugs and cups, frothing pitchers, cups with lids, straw organizers, coffee filters, and syrup pumps
• Coffee beans, which you may purchase wholesale from a coffee roaster or other source
• Consumables, such as flavoring syrups, tea, hot chocolate, milk, dairy alternatives, and sugar 
• Disposables like to-go cups, cup sleeves, and napkins

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Choose a coffee shop point of sale (POS) system

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 regular members of your coffee shop community. 

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, automate processes, and increase overall operational efficiency.

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

Coffee shop POS must-haves

• Hardware features and integration capabilities: Ensuring integration between any current software or hardware is essential, so choose hardware that is reliable and simple to integrate with your other business needs. Square point of sale software offers a range of compatible hardware, such as Square Register, Square Stand, Square Handheld, and Square Terminal. You’ll also want to ensure that software integrations make the POS easy to use with platforms and systems you may already have in place.
• User-friendly features for baristas: To create a smooth experience for your customers, your staff will need to use the POS system successfully. Pay attention to how user-friendly the software and hardware are. Is the checkout functionality easy for your staff to use? Can you train your staff quickly on how to edit your item library? On how to operate the POS during rush hour or when customers place complex orders? This can save you and your employees time during training and increase productivity.
• Streamlined operations: Efficient operations and inventory management are crucial to the success of your coffee shop. Features such as advanced analytics and insights, stock alerts, and downloadable sales reports help create an efficient sales system with the necessary data to see which products are your biggest sellers. If you have back-of-house food or kitchen production, a kitchen display system helps streamline ordering, reduce errors in the kitchen, and improve overall back-of-house efficiency. 
• Customer loyalty and rewards: Loyalty programs are an excellent way to create repeat customers and increase sales. Look for a POS system that can support a loyalty program, such as Square Loyalty, and that can sell and accept gift cards or discounts.
• Effective staff management: A POS system that includes time tracking for employee shifts is essential for effective employee management. Automating repetitive tasks saves time and helps you track employee hours, create schedules, and manage payroll.
• Effective inventory control: This allows you to track products sold and materials used. Look for software that lets you set stock alerts when inventory gets low as a way to manage your inventory effectively.
• Aesthetically pleasing and simple design: Coffee shops tend to be quaint or modern, with the counter being the customer’s focus. Cords and bulky systems can turn off customers, so look for a POS system that blends in with your decor.

Payment features to look for

Guests expect a swift, personal experience when they walk through your doors. Long lines due to an inefficient payment system can taint a customer’s perception and result in the loss of business. Investing in a reliable POS to process payments is a big part of how to run a coffee shop efficiently.

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 — magnetic stripe, 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:

• Payment simplicity. Find a system that accepts various types of payment methods, such as contactless, credit cards, and online ordering or order-ahead features. Ensure that the payment processor is secure, reliable, and offers reasonable transaction fees. Remember that payment processing fees can add up quickly, so consider any fees or costs associated with the POS system. These include monthly fees, card processing fees, and any transaction fees. While some fees may be inevitable, choose a system that provides the right value for the cost.
• A built-in tipping system that’s easy for customers to use. There are several interesting findings that help improve tipping. With tipping built into your POS, customers are presented with a screen that suggests a tip amount, which allows them to add a tip with just one tap.
• Data capabilities to collect insight on what’s being sold. With data analytics integrated into your POS, you can see which menu items are popular and gain sales insights that help you improve your business strategy. Learn more ways analytics can help you grow your business.

Hire baristas for your coffee shop

Building a skilled and reliable team is essential for your coffee shop’s success. Experienced baristas bring speed, consistency, and expertise, but these qualities come with higher wages. Junior baristas, on the other hand, can be trained to match your shop’s standards and culture, often at a lower cost. A mix of both ensures efficiency and allows for mentorship within your team.

When hiring, prioritize passion for coffee, customer service skills, and adaptability. Don’t forget to follow proper hiring practices, including clear job descriptions and compliance with labor laws, to build a strong foundation for your business. For more guidance, explore our resources on hiring employees effectively.

Advertise your coffee shop

To attract customers and build buzz, leverage social media platforms like Instagram and Facebook to highlight your specialty drinks, promotions, and behind-the-scenes moments. Engaging visuals and local hashtags can boost visibility. Claim and optimize your Google Business Profile to appear in local searches, display key details (hours, location, and contact information), and encourage customer reviews.

For a strategic, long-term approach, develop a coffee shop marketing plan to align promotions, events, and digital outreach with your business goals. Consistent branding and community engagement will help your shop stand out.

Host a coffee shop soft opening

A soft opening is a great way to test operations, drive anticipation, and build excitement before your official launch. Invite local businesses, influencers, and non-competing owners to experience your shop, offering exclusive discounts or free samples to encourage engagement.

This low-pressure event allows you to refine service, gather feedback, and create word-of-mouth marketing. Promote it on social media and through community connections to maximize reach, setting the stage for a successful grand opening.

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Reach your customers

The feeling of opening a coffee shop is truly rewarding. But now the daily grind begins. When you’re figuring out how to start 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:

• An email marketing tool that allows you to send campaigns to keep your customers informed about what’s happening in your store, whether it’s a promotion or an event. Sending personalized messages to loyal customers, such as birthday emails or holiday notes, actually generates higher engagement and greater redemption rates on average than one-off email campaigns.
• A customer loyalty program that incentivizes customers to spend. Eighty-three percent of restaurant leaders with a loyalty program said it’s successful in driving increased order size, and 69% of consumers found personalized loyalty programs valuable, according to the 2025 Square Future of Restaurants report. Loyalty cards are a great way to gain repeat business. 
• Feedback software that is integrated into your POS so customers can tell you about their experience at your shop. Feedback software provides one-on-one communication with your customer, so you can get a direct response about a particular service. You can use positive feedback to motivate employees and constructive criticism to tweak business processes.

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 to make sure you’re getting the most out of your business. Learn more about the tips and tricks for strategically running a successful business.

How to start a coffee shop FAQs

How much does it cost to start a coffee shop?

The cost to open a coffee shop typically ranges from $80,000 to $300,000+, depending on size, location, and equipment. A small kiosk may cost less, while a full-service café with seating and high-end espresso machines requires a larger investment.

How profitable is a coffee shop?

A well-run coffee shop can achieve 10-15% profit margins, with high-volume locations potentially earning $50,000–$100,000+ annually. Profitability depends on factors like foot traffic, pricing, operational efficiency, and local competition.

How much money do I need to set up a coffee shop?

A small takeout stand might cost $50,000–$100,000, while a large café with seating could exceed $300,000. 

How can I take payments at my coffee shop?

You can take payments at your coffee shop using a point of sale (POS) designed specifically for coffee shops and cafes. Ensure your POS accepts credit and debit cards, contactless payments (like Apple Pay or Google Pay), and even cash with a secure till setup.

POS systems for coffee shops, like Square, also integrate effortlessly with online ordering platforms, so you can manage in-person and digital orders in one place. There is no clunky hardware or disconnected apps, just smooth, secure transactions that keep your line of coffee connoisseurs moving.