If you want to be your own boss and start your own business, there are a lot of great options out there to help make this a reality. However, before you jump right in on this great dream, you need to have a plan in place to make sure that you have the money and the resources to get it done.
There are a lot of expenses that come with opening a coffee shop. From the outside, it may look like this is a simple business model that should not take a lot of money, but like any other successful business, it takes time and effort from a lot of people to make it work. And money is a big part of that as well.
Knowing how much it costs to start the coffee business and how much it will cost for the company to run that coffee shop in the future will all help determine whether this is a good endeavor for the business owner to start. Let’s take a closer look now at some of the expenses you can expect when running a coffee shop.
How Much Does It Cost to Open a Coffee Shop?
The first thing that we need to look at is some of the costs that you will incur just to get the business off the ground. The exact costs will depend on the business you want to run. If you want a full coffee shop with seating, the overall costs will be more than just setting up a coffee kiosk.
You will also have to factor in some of the equipment that you want to get, the size of the building, the number of employees, and even the location of your new business. These can drive the costs of your business up or down.
For example, if you plan to open up a large coffee shop that has a lot of seating present, then you should expect to pay somewhere closer to $300,000 to get the business open. If your coffee shop only has a drive-thru, the costs can be lower but may reach a maximum of $200,000.
It may be more worth your time to do a coffee shop with a drive-thru and seating because these are also close to $300,000 maximum. If you are looking at a more affordable option, the maximum estimated cost for a coffee stand or kiosk is close to $105,000 and a mobile coffee food truck is $25,000.
What are the Start-Up Costs of a Coffee Shop?
As we mentioned, there are many costs that come from starting your own coffee shop. The exact amount that you will spend does depend on the type of business you want to run. Some of the expenses that you need to consider include:
- The building or rent costs for a certain area. Your goal is to keep the rent no higher than 2 to 20% of your projected sales.
- The equipment: You will need some equipment to get the business off the ground. Things like a good espresso machine, coffee grinders, and an oven if you plan to do the baking on your own will be critical. Think about the equipment that you need and factor those into the cost. Stay away from used equipment if you are looking for warranties.
- Ingredients for the drinks and food: You will need to have everything for the baked goods you want to sell, chocolates, syrups, milk, and coffee available to sell to your customers.
- Professional fees: As you get the business set up, you will need to work with a number of different professionals along the way. This includes business consultants, accountants, attorneys, and architects to get the work done.
- Payroll costs: This will include the wages and benefits you give the employees, worker’s compensation, taxes, and the costs you pay to help with the payroll processing.
- If you plan to borrow money, you will need to factor in costs for paying that money back.
- Income taxes: A good rule of thumb for this is 21% of the operating profit, but you can work with your accountant to figure out the right amount.
- Other types of expenses: This will include all of the other things that you need for the business like any repairs, advertising, utilities, supplies for the offices, napkins, insurance, and permits and licenses.
- Training: Invest in good training for your employees. This will help make sure that they know the right steps to making drinks and helping the customers, which will pay for itself in no time.
All of these expenses add up and many of them you will need to pay before the business can even open. Most will need to keep being paid after you get the shop up and running. With a good budget in place and management of your system, you will be able to open a coffee shop with great success.
Operating Costs of Running a Coffee Shop
Once your coffee shop is open, it is time to keep up with many of the costs that you will encounter with an open business. You will still have a lot of continuing costs that you will need to handle to make sure that your employees get paid, you have the right equipment, and so much more. Some of the operating costs for your coffee shop include:
What are the Costs of the Equipment I Need in My Coffee Shop?
You will also need to consider the costs for some of the equipment you will need for running your coffee shop. Each coffee shop will need different equipment based on what you would like to provide to the customer, but being prepared for these amounts will make a difference. Some costs to look for include:
- Espresso machine at $500 to $2500 for a new one.
- Coffee maker at $500 to $2500 per one you want to have
- Coffee roasters starting at $3000
- Refrigeration system at $500 to $12,000 depending on the size that you need.
- Water filtration system at $1500 to $10,000
If you want to offer some specialty drinks or other items to the customers, you will need to take a look at the costs for the equipment to get all of that done. This will help you to budget and figure out what you need to get started.
What are the Costs of Hiring Workers for a Coffee Business?
You will not be able to run the coffee shop on your own. If it is successful, there will be way too many customers to do it on your own and you will need time off and a break sometimes. This means that you will need to hire the right team to get the work done.
Having a team who is skilled and ready to go is so crucial to how successful your business sill bd. Hiring the right staff will help you get the best results for your business, but you need to pay them a good wage to entice some of the best and to keep them around.
It is estimated that the average yearly wage for a barista in most coffee shops in America will fall around $18,300. You will also need some managers and this higher level of expertise and responsibilities will need to be paid a bit higher than the baristas. The average yearly salary for these professionals will be between $20,600 and $42,000
You may also want to consider the costs of training your employees properly. This will help them get a chance to learn the ways that you want them to do things and prevent any issues along the way. This improves customer satisfaction while allowing the customer to get the best service around.
What are the Costs of Coffee Shop Vendors?
You will need supplies to provide the best coffee and baked goods to your customers. Things like coffee beans, cups, napkins, straws, lids, condiments, food and drink, and anything else that you will need to make your business successful will fit in with the expenses that you have with your vendors.
Without these ingredients, your customers will miss out on some of the things they want and need when they go into a coffee shop. You need to make sure those supplies are always present.
Check the prices that you pay to your vendors along the way. You want to always get the best deal or you will end up not making enough profit on each item. The higher the return on investment for the item, the more that you should promote it to those who come to your store. If prices go up too much, consider what alternatives are available.
How Much Does Coffee Shop Rent or a Mortgage Cost?
You will either need to pay the balance on the mortgage that you owe on the building or pay rent to a landlord. These can be substantial expenses that you will need to deal with to make sure that the coffee shop will do well. The exact amount will depend on the area that you are in and other factors like the size and more.
It is important that you do not take out too much in a mortgage or rental along the way. Work with an advisor to determine the correct amount. Everything from the amount you have saved to the property tax rate in your area will come into play when determining the ideal range for your budget.
All the Paperwork
As a new business owner, you will need to take some time to sort out the paperwork and make sure that all of that is in order. To start, there are permits that each business owner will need to get. Some are just the cost of doing business and others are more specific to running your own coffee shop. Some of these include:
You need to have a method in place so your customers are able to pay you properly. It would be nice if everyone could just hand you cash and you would not need to put another system in place, but this is not practical and will isolate a lot of your potential customers.
Your coffee shop will need a Point of Sale, or POS, system. You will need to spend some money to get this POS system and it will cost between $50 to $200 each month to utilize the services that you have. It is also possible that you will need to pay for any of the hardware that comes with your chosen system.
This provides more convenience to your customers who want to pay with different methods, but it is an additional cost that you will need to factor into the fees each month that you pay. You can research a little bit to see if you can find the right POS system that can serve your customers while keeping your costs down.
While looking for a good POS system, you should look for a payment provider that has worked with a new business account and has a range of supporting extras. You need to know what services are important to you before starting. Find one that only has the items you want, rather than forcing you to pay extra for things that you will never use.
In addition to helping you accept more payment methods, the right POS system will help you to learn more about your customers. This provides a wealth of knowledge that you can use for marketing and to make sure that you are able to reach your customer the way that you want.
What Marketing Expenses Are Associated With a Coffee Shop?
Every small business will need to do some marketing to make sure that they are able to reach their customers and beat out the competition. You will need to come up with a budget to help you get the most out of your marketing money and so you can reach all of your customers.
It is recommended that many small businesses will spend somewhere between 7 to 8% of their revenue on marketing to bring in some more of the customers that they need. This is a significant amount of your budget, but it is possible to spend less, with some small businesses spending a lower amount if they are smart with some of their marketing ideas.
The good thing about the coffee shop industry is that you will not need to put as much into the marketing budget compared to some of the other types of businesses out there. If you do some targeted advertising and plan things out with your social media accounts, you may be able to utilize a very small budget to get things done.
Make sure that you have a good marketing plan in place from the start. Social media and some of the other digital avenues will help you to get the most out of your marketing budget without spending too much money in the process.
Insurance Costs
There are going to be different types of insurances that a coffee shop owner will need to consider. Knowing how these work will help you determine which ones you need and can make it easier to budget for what you need. Some of the insurance policies that you can consider include:
Business Owner’s Policy
You need to have a business owner’s policy to make sure that you are protected if something goes wrong with your business. If something breaks, someone gets hurt, or you have something else occur with the business, the insurance policy will help you save a lot of money.
The average cost for one of these policies is $99 a month, meaning that the business owner is going to pay almost $1200 a year for this. This is an affordable way to save you a lot of hassle if something does happen with the business.
This policy is often going to bundle together the property insurance with general liability, often giving the customer a discount on the rate. Pricing is going to be determined on the value of the equipment and business property and the location of the company. It can also cover something known as business interruption insurance, which can cover any income that you lose as well.
Workers’ Compensation
When you have employees, you will need to have Workers’ Compensation in place to keep your employees safe as well. If someone is hurt while working on your property, this insurance can help pay for their pain and suffering, time off work, and more.
The typical policy is going to cost about $40 a month for the business owner. This cost will depend on the policy, the requirements in the state, and how your business operates. You will need to have this insurance in place as a requirement in most states, but you can shop around in order to find one of the best deals on this too.
Liquor Liability Costs
This is one that you may not need depending on how you operate the business. If you do not plan to do any specialty drinks that need this beverage, then you will not need the insurance. But for those who do need it, a liquor liability insurance policy will be a good way to give your business more of the protection that it needs.
The average cost of this policy can range from a couple hundred dollars to several thousand dollars a year. This will protect your business from any liability when you serve alcohol at all on the premises. Most coffee shops will not need it, but it is something to consider when deciding if you would like to serve alcoholic beverages.
General Liability Costs
Your coffee shop may also have the need for a general liability cost. The median premium for this kind of policy is going to be close to $60 to $170 a month, which comes out to be $750 to $2000 a year to keep this. This is a policy that is going to protect the coffee shop against customer property damage, advertising injuries, and even customer injuries on the property.
This is something that you can choose to add to the business owner’s policy, which is going to bundle together with some of the other insurance that you want while getting a discount. You can also do it separately if that works better with some of your budgeting needs.
You do not need to get all of these licenses and it will depend on some of the different things that your business would like to do. Make sure to shop around and check out a few different types of policies and companies to ensure that you are getting the best deal on the best policy for your needs.
Unexpected Costs of Running a Coffee Shop
Along with some of the fixed costs that we talked about above, there are also some unexpected costs that come up when you run a coffee shop. You need to be prepared for some of these costs and have good insurance and some emergency fund saved up to help keep you safe along the way. Some of the unexpected costs that may show up in your coffee shop include:
A Customer Gets Hurt
It is possible that one of your customers will get hurt when they come into your business. They can slip on the ice outside, slip when the floor has been mopped, or another accident that happens on the premises. If it is determined that you or an employee is the one at fault for the accident, you will need to pay for the injuries.
The good news is that there is some insurance that you are able to get that provides some protection when this kind of accident happens. This can be included with your general liability or some of the other insurance options that we talked about above. Check the policy to make sure that you are getting the coverage you need.
Equipment Breaks
Make sure that you purchase new equipment when it is time to get your coffee shop off the ground. This costs a little more, but the equipment will last a long time and will often have warranties that ensure it will work for a certain number of years. This will save you a lot of money along the way.
When you choose to go with a type of equipment that is second-hand, it may seem like you are getting a good deal. Before long though, it will start to fall apart or break and you will need to wait for someone to come and fix it for you. This will cost you money for the repairs, as well as money in lost revenue when the machine can’t be used.
You should set aside a bit of your budget each month in case something major does break around the coffee shop. This will take some of the worry away if something does break.
A Worker Gets Hurt
With the right training and a good maintenance program to fix anything that gets broken in the company, you hopefully will not have any employees who get hurt on the job. But accidents do happen and it is possible that one of your workers can get hurt while doing their job.
When an employee is hurt on the worksite, they are able to claim Workers’ Compensation to help with medical bills, lost wages, and even pain and suffering if it was something that the owner of the property is negligent about. You need to have this type of insurance in place to keep you and your employees safe.
Your state will determine the exact type and amount of worker’s compensation that you will need to provide. But you do get some say in the provider that you use. Shop around for a product that will be affordable while also making sure that your employees are safe while at work.
Vendor Costs Go Up
At some point, your vendors will need to increase their costs and they will pass that down to you. Costs for getting you the supplies, employees, and inflation will all change the prices that you pay to your vendors, which can make your monthly fees go up. While you may be able to increase prices and transfer some of the costs over to the customers, you want to be careful of doing this too much.
Any time a vendor is going to raise the amount they charge you, take some time to research and see what other vendors are offering. It may be possible to find the items you need for better costs or better service compared to your current vendor. This can keep costs down while still providing great service to your customers.
A Weather Event
It is possible that bad weather will happen near your coffee shop and you need to be prepared for some of the damage that could occur during that time. The weather can range from flooding through a lot of storms, ice and snow, and even high winds and tornados that can take roofing materials off.
When these weather events happen, you will need to do some of the necessary repairs along the way. If you have insurance, this can help with some of the issues that occur, but you do need to consider the deductible too. Check your policy often to ensure that you are getting the coverage that you need and deserve.
Someone Destroys Property
Hopefully, your store will stay safe and no one will try to cause any damage to the location at all. But if a customer or someone else does cause damage to the property, such as breaking a window, you will have repair bills to get it fixed. A good general liability policy will help to protect the property without you needing to spend as much more along the way.
How Can I Save Money Running a Coffee Shop Without Cutting Corners?
As a coffee shop owner, you want to make sure that you are creating a high-quality product for your customers while also maintaining a good budget. Many coffee shop owners want to be able to find ways to cut out extra expenses, but they worry that they are going to cut corners and will drive customers away.
The good news is that there are a lot of ways that a coffee shop owner can save money without cutting the corners or scaring all of their customers away. Some of these include:
- Eliminate the waste: Any time you throw a product out, you are going to throw money out. Have a good inventory processing system to help make sure that you are not excessively throwing away things that you need.
- Focus on the training: Good employees will be worth their weight in gold. This will save you time and energy hiring and finding new employees because the originals quit. Help the employees have the right training they need and this will bring more customers in and makes you more efficient.
- Pay attention to transaction fees: Most coffee shop owners work with a POS system that helps them to take credit cards and other payment methods. You may need to look into the one that you use to see how much in fees they are taking from you and see if there is a better option.
- Automate the marketing: So much of your marketing can be done automatically, helping you get a good return on investment without spending a lot of money. Send out emails and social media posts on time, and only work on it one day a week.
- Check vendors on occasion: You need to check with your vendors to see that you are getting the best deal. Take advantage of some of their deals if they have them. Check out other vendors to make sure you are still getting the best price.
- Look at labor costs: This does not mean that you need to get rid of everyone, but you do need to place them on the right shifts at the right time. If you have five employees standing around with no customers, but only one or two when it is busy, this is not efficient. Use your POS system to check when times are busy and use that for scheduling.
- Cut out expensive items that do not sell: There may be some items that you love in the coffee shop, but if they are costing you too much and others are not really buying them, then it is time to kick them off the menu. This frees up more space for some of the items that your customers will actually like.
By making just a few simple changes to the way that you run your coffee shop, you will be able to cut out some of the costs and keep your coffee shop doing well for a long time.
Coffee Shop Operation Expenses FAQ
What drives up the cost of a coffee shop?
There are a number of things that are going to cost your coffee shop quite a bit. You need to be prepared to avoid some of these costs as much as possible to ensure that your business will stay afloat.
First, you need to look at the amount of waste that goes through the company. If you are constantly throwing away baked goods and old coffee, then this is a sign that your costs will be too high.
Learn more about what sells and what does not. If you have some items that sell out by eight in the morning and some that are always getting thrown out, this is poor management of your time and money. Consider if you should make If there are some specialty coffees that you would like to do that are specifically for adults, then you may need to also consider whether a liquor license will be necessary for your business or not. All of these will cost money too, so make sure that you balance these out if you do need them.
Since you are serving food and coffee at the establishment, you will need to get a food license. This often includes classes that you will need to take to help ensure you know how to handle food properly without anyone getting sick. Depending on your location, you will need to pay between $100 to $1000 for this license.
Then you will need to work on a certificate of occupancy and have all the necessary permits in order to do this. Each locality will do this in a different way, but the average cost to get one of these is $250.
Your Employer Identification Number is an important option to utilize to make sure that you get all of your taxes done right. You can usually get this for a lower cost, with some businesses not having to pay anything. If you want to register an LLC with the IRS, then it can cost between $30 to $280 to get it done.
Depending on the type of business license that you need to get, you will pay a different amount. These costs will range from $50 to $550. These costs can include the processing and filing fees that you will need to pay. This is a one-time expense so should not be too hard to maintain and keep up.
Your Payment Solution
more of the popular item and stop baking the one that does not sell well at all.
Bad scheduling practices can pull you down as well. You need to learn the ebb and flow of your business so you have the right number of employees there at the right time each day. This will ensure that the customer gets the best service and prevents you from spending more money on customer service in the process.
The cost of rent and utilities can drive up some of the costs too. You need to carefully choose the building you are going to use. After a few years, if you notice that the owner of the building wants to raise rents too high, you may need to consider whether it is time for a new location to keep costs down.
Is a coffee shop business worth the costs?
Most coffee shop owners agree that opening this business was worth the costs. It does matter how well you are able to manage it. If you do not take good inventory and are not careful with some of the costs that you incur, you will never make any money and the costs will not be worth it.
You need to consider the costs of every step of the process. From signing the rental or purchase agreement on the shop to how much you will pay your employees and even to the inventory that you want to bring in, you need to calculate the costs and see if it makes sense to you. This may sound like a lot of work, but it is the only way to ensure that your coffee shop sees profits.
How much money can you make with a coffee shop?
The exact amount of money that you are able to make with your coffee shop will depend on the exact type that you open and where it is located. You will need to also consider the business concept, some of the initial startup costs, the operational costs, and any menu price points that are important.
Each coffee shop is different and unique and it often depends on what you put into the whole endeavor for how much you will get out of it. Some of the estimates for how much a coffee shop can make includes:
- Coffee shop, kitchen, or bar: Makes between $400,000 to $430,000.
- Café and bar: Makes between $330,000 to $350,000
- Full coffee shop and bakery: Makes between $310,000 to $330,000.
- A brick and mortar coffee shop: Makes between $220,000 to $260,000.
- A coffee stand that has a drive-thru: Makes between $155,000 to $185,000
- A mobile coffee truck: Makes between $145,000 to $165,000.
- A coffee kiosk: Makes between $75,000 to $95,000
- Small catering business with coffee: Makes between $35,500 to $55,000.
A newer shop is often going to make less for the first year or so until they are able to build up the customer base and start to cut down on their costs. These are good estimates on the amount that the coffee shop owner will be able to make with their coffee.
What monthly expenses should you expect?
There are several monthly expenses that a coffee shop owner should expect just to run their business. you will not be able to avoid these because they are part of running your business and helping the customer.
To start, you will need to pay for the rent and utilities on the building. If you stop paying these, the landlord will kick you out and all your lights will go out, making it hard to help the customers in the first place. This is often a large expense that needs to be factored in from the start.
You will need to pay the wages for all employees in the business. You do have a bit of control over this and can determine how many hours each employee is going to work. But since you do have employees, you can expect to have some expenses to pay them for the hard work they do in your business.
All of the inventory that you keep around the business will need to count into your monthly expenses. These can vary a bit, though you will probably get into a routine with them outside of holidays and special occasions. This will make it a little easier to manage and predict how much you will need to spend on them.
If your coffee shop has any special services that are done like pest prevention, snow and ice removal, cleaning services, or anything else done on a regular basis, then this needs to be counted into some of the monthly expenses that you have as well.
The Costs of Operationg Your Own Coffee Shop Business
Owning a coffee shop is a big deal, one that takes a lot of time and planning to get done. Luckily, customers love to have a lot of good coffee so if you are able and willing to provide a high-quality product to them, you will see the lines out the door.
There are going to be costs and expenses, both to opening up the coffee shop and to running and maintaining it in the long term. Having a good idea of these expenses and what you can expect with them along the way will help you to better manage the coffee shop overall.
This article worked to help explain more about the costs of a coffee shop and what may take away from the profits that you earn in the business. With some careful planning and budgeting, you will be able to run the coffee shop of your dreams.
