Owning a coffee shop is a dream of many coffee lovers. Unfortunately, in most cases, it remains a dream. However, there are also those who are determined to make it a reality.
But opening a coffee shop, especially if you want it to be successful, is not that simple – it requires quite a bit of preparation, starting from creating a good coffee shop business plan, finding the perfect location and staff, to purchasing all the necessary equipment.
You might be asking yourself – How much money do I actually need to open a coffee shop? And while we cannot give you an exact number, as many factors influence it, we can give you a pretty good estimate. So, here’s the answer to the question – How much does it cost to open a coffee shop?
Types of Coffee Shop Costs
As far as coffee shops are concerned, there are two main types of costs:
- Fixed costs – those are costs that don’t change from month to month. A great example of that would be your monthly rent, business insurance premiums, workers’ compensation insurance and salary, etc.
- Variable costs – those are costs that change depending on the number of customers you have, so they would include things like cups, coffee sleeves, napkins, coffee, milk or milk alternatives, your worker’s wages if they have an hourly pay, etc.
Both fixed and variable costs are operating costs, which, explained simply, are costs that you need to bear for your coffee shop to operate.
Then, there are build-out costs, which are one-time costs that you need to incur when improving the space – so, for example, if you want to freshen up your coffee shop by painting the walls or changing the floors, that would be your build-out costs. They can vary depending on how many changes to the space you want to implement, as well as the workers you hire and the materials you use.
Now that you know what the costs of owning a coffee shop are, let’s look at the specific cost categories and go into detail about how much more or less you need to dedicate to them.
The first thing we need to mention when talking about costs associated with owning a coffee shop is the space you will use for it. The coffee shop’s location is an important factor that will not only influence how much you’ll have to pay for the space monthly but also things such as the number of customers you can expect or even what kind of products you’ll serve.
So, what is the perfect location for a coffee shop? Ideally, you should find a location that gets a lot of traffic, such as somewhere close to the city center or offices. However, you should be careful about not choosing a place where there already is one or more coffee shops. That’s because people tend to stick with things they know, so it will be easier for you to attract customers if you’re the only coffee shop in the vicinity.
What’s more, because of the pandemic, many companies switched from office work to remote work. Plenty of employees tend to take their laptops and work in public spaces, such as coffee shops, so choosing a commercial space that has lots of space for tables people can use for working would be a great idea.
With that being said, how much you will have to pay in rent depends on so many factors, including the city you live in or its square meterage, that we cannot provide you with a number. However, we can tell you that your annual rent shouldn’t exceed 15 percent of your annual turnover.
Of course, you can always decide that instead of renting a space you want to either build a completely new building, or you want to purchase an already existing space and turn it into a coffee shop.
This isn’t something that all future coffee shop owners will have to take into consideration – only those who are either building a new space or transforming the one they already have. If the design of the place you rented is up to your standard and has all the necessary systems and amenities, you can skip this.
First things first – the design. You need to choose what design you want to go with for your coffee shop business. Minimalism? Bohemianism? Rustic? It’s all up to you. Depending on what you want to do, you probably need to dedicate around $10,000 for it.
Some other things you should take into account here are the signage (those cost roughly about $1,000), as well as other things that will make the cafe and working there more comfortable, such as a music system, a mop sink, a dishwasher, a sanitizer and so on.
Another thing that will definitely be quite of an investment is the coffee shop equipment – and we’re not only talking about things like coffee machines, chairs or tables. The coffee shop equipment also includes things you will be serving to customers, such as coffee, milk, ingredients for pastries if you’re planning on selling those, as well as cups, plates, and so on. So, how much would you need to pay for all of that? Let’s take a closer look.
First, let’s talk about things that you will be using the most, such as food, beverages and ingredients you will need to make them. Keep in mind that all of the average prices are in accordance with the data at the time of writing this article:
- Coffee – on average, a pound of ground coffee costs $8.50. Roasted specialty coffees are more expensive, coming in at almost $29 per pound on average. Ideally, you should budget about $1,000 for the coffee for the first month your coffee shop will operate – once you have an idea of how many clients you can expect, you can increase that budget.
- Milk or milk alternatives – on average, a gallon of conventional whole milk costs $4.40. Milk alternatives (we’re talking about soy and almond milk here) are a bit more expensive, averaging $4.29 for half a gallon. Consider starting by purchasing 15 gallons of whole milk, and budgeting about $100 for the purchase of milk alternatives.
- Sugar packets – some people like it when their coffee is sweet, so you should have some sugar packets available for your customers. A big pack of them, usually containing 2000 packets, costs about $30. So, depending on how many of them you want to buy, you should probably budget around $100 for them – even if you won’t use them all in the first month, they have quite a long shelf life, so you don’t need to worry about them going to waste.
- Coffee syrups – you should expect to pay about $4.50 for a bottle containing 25.4 ounces of syrup. How much you have to budget depends on how many different flavors you would like to purchase – a standard coffee shop would probably have about five different ones to choose from, with the most popular ones being vanilla, chocolate and caramel. Budgeting about $100 for coffee syrups should do you just fine.
- Teas – not everyone likes coffee, and that’s completely fine. To make your coffee shop more attractive even to those who don’t drink coffee, you should have a selection of different teas available – and there are plenty to choose from. English Breakfast, Earl Gray, Jasmine, Chamomile or Peppermint are just a few names worth mentioning. What’s more, you can go a step further, and instead of only offering teas, you can also incorporate tea-based drinks into your offer. How much you pay depends on the supplier you find, but you can probably find some for about $2-$3 per ounce.
- Pastries ingredients – that’s a tough one, as we don’t know if, and if so which, pastries you’d like to have in your coffee shop. However, budgeting about $500 to $1000 (depending on how many pastries you want to make daily) for the ingredients such as butter, flour, baking powder, and whatever else you might need for your baked goods should do you just fine.
Now that we talked about the food and drink aspect of the initial startup costs of a coffee shop, let’s move on to the next thing – the serving items. This includes things like paper cups, coffee sleeves, plates, cutlery, and so on.
- Paper cups – the price you’ll have to pay depends mostly on whether you want to purchase simple paper cups or ones that are personalized. As far as simple ones go, you can expect to pay between $80 and $150 for a case of cups, which is 1000 pieces. Once you buy the cups, you also have to purchase the lids so that your customers won’t spill the drink on themselves – that should also cost around $100.
- Coffee sleeves – coffee sleeves are a great way of advertising your coffee shop and attracting customers without having to spend a fortune on marketing. When it comes to the cost, it all depends on the manufacturer. You can check how much you will pay for the coffee sleeves design you want on this page.
- Reusable serving items – by reusable serving items, we mean things like ceramic mugs, cups, plates, as well as glasses and cutlery. Setting aside about $1000 should do you just fine.
- An espresso machine – an espresso machine is probably one of the most important things you will have to buy for your coffee shop – after all, how can you serve coffee if you don’t have anything to make it with? As far as the pricing is concerned, this is a tough one – that’s because there’s a huge pricing gap. A good coffee shop espresso machine can cost you anywhere between $2,000 and $40,000 – it all depends on whether you want a small and simple one, or you prefer to invest more money from the start and have an espresso machine that will stand the test of time and will be working just fine once your business takes off.
- A coffee maker – aside from an espresso machine, you should also have an industrial drip coffee maker, so that when you get a morning rush, you can easily accommodate all the customers. Depending on how advanced you want your coffee maker to be, you can expect to pay anywhere between $50 and $2,500 for it.
- A coffee grinder – if you decide to purchase coffee beans instead of already ground coffee, then you also need to purchase a coffee grinder. After all, you won’t serve your customers whole coffee beans. On average, a coffee grinder dedicated to a coffee shop will cost you anywhere between $500 and $2500.
- A dishwasher – if you’re planning on having space for people to sit and enjoy their coffee rather than just sell them as take-away, then you need to invest in a dishwasher. It might seem useless in the beginning, especially since it might take some time before you get a loyal customer base, but once your business becomes more popular, you will thank the heavens you decided to make this investment. A commercial dishwasher can cost anywhere between $3,000 and $120,000, but, to be fair, you’d probably be just fine with sticking to the lower price point. Once your business grows significantly, you can think about upgrading – but there’s probably no point in paying that much at the beginning of your business journey.
- A POS system – A point of sales system is an essential part of the equipment. Thanks to it, you can collect all the data about how many customers you have, what products were sold, for how much, and more. It also provides you with reports so that you don’t have to calculate anything manually. When budgeting for a POS system for your coffee shop business, you need to take into account both hardware and software. Hardware will probably cost you between $800 and $1500. Software, on the other hand, can range anywhere between $30 and $200. It all depends on which provider you’ll choose.
- A refrigeration system – before you buy milk and other products that need to be refrigerated, you need to think about where you will store them. For that reason, you will need a refrigeration system. Depending on its size, you can expect to pay between $500 and $12,000. Again though, you don’t have to invest in a walk-in fridge right away – you can start with a small one that will fit under your counter so that you and/or your employees have easy access to it.
- A water filtration system – it is no secret that tap water and filtered water taste differently, which might affect the taste of coffee – especially when it comes to espresso and water that a customer receives along with it. That’s why you should consider investing in a water filtration system from the very beginning. While it can cost you between $1,500 and $10,000, it’s definitely one of those things that are worth spending money on.
Licensing, Insurance and Other Costs
As far as the inside of your coffee shop is concerned, the things we mentioned above are the most important initial costs of opening a successful coffee shop business. However, they aren’t the only ones – you also have to put aside some money for the formal things, including licensing and insurance.
- Forming a business – we haven’t mentioned that before, but the first step to opening a new coffee shop is business formation. There are a few different business structures you can choose from, but definitely the most popular one is LLC (limited liability company). How much it will cost to establish depends on the state you want to operate in, but generally speaking, you can expect to pay between $40 and $500.
- Business license – the first thing you need to do if you want to start a coffee shop is to register a business – that would cost you $50. Then, you will have to pay for a business license, which could be anywhere between $25 and $7,000 – how much you’ll pay depends mostly on the type of business you want to open. Also, keep in mind that you’ll have to renew it every year. When it comes to how you can get it, your local government is responsible for that.
- Food service license – this license is issued by your local health department. Its cost will depend on factors such as the type of food business you own and the number of employees you have, but it generally costs between $100 and $1000.
- Music license – In order to play music in your coffee shop without risking a copyright infringement lawsuit, you will need to invest in a music license. This could cost you anywhere between $250 and $500 per year.
- Sign permit – if you want to attract customers, you should probably put up a sign so they know where they should come. However, this is associated with additional costs, as you have to get a sign permit – you’ll probably have to pay between $20 and $50 per year for it.
- Liquor license – this one isn’t obligatory. Whether you’ll get it or not will depend on whether, aside from coffee, tea and other non-alcoholic beverages, you also want to sell alcoholic ones (many coffee shops turn into a bar in the evening). A liquor license costs $3,000 and up if you only want to serve wine and/or beer, while a full liquor license costs between $12,000 and $400,000.
- Hiring/employees – in many independent coffee shops, the owners do all the work themselves instead of hiring people for it, especially in the beginning, before they reach a break-even point. If you decide that you want to hire staff from the very beginning of your coffee shop business journey, then you need to include payroll costs in your cost breakdown.
- Taxes – being a coffee shop owner means that you will have to deal with the bureaucracy associated with it, such as taxes. Unfortunately, we cannot tell you how much that will be, as there are too many factors playing a part in it, but it is something to keep in mind when calculating your startup costs.
The Bottom Line
Opening a coffee shop is not as easy as some people might think, and it actually involves a fair bit of business planning. There’s a lot that goes into it – first, you have to write a solid business plan, especially if you want someone to invest in your coffee shop business.
The coffee shop business plan you write needs to include a detailed cost breakdown, as well as target market research, competitor analysis, and more. To do it, you really need to invest your time, looking for the right coffee shop equipment so that you know how much money you need exactly and a good coffee shop location, among other things.
Not to mention, being a coffee shop owner is associated with many costs. You will probably need about $25,000, provided you don’t buy any fancy equipment and don’t hire anyone else. Depending on your choices, the cost can go as high as $300,000. This might form a question – Is owning a coffee shop worth it? Definitely! But the final decision about whether you want to do it or not is only yours to make. Either way, we wish you good luck!