There’s no hard and fast answer, because every specialty coffee business is different. Your costs will depend upon the type of coffee business you want to open, the costs of retail space in your community and many other variables. You might need only $25,000 to $75,000 to open a coffee cart or freestanding kiosk or up to $250,000 or more for a standalone coffee house with drive-thru. With some coffee franchises, you might need as much as $500,000.
If you already own a suitable building or have a complementary business such as a bakery, your costs might be much lower. In addition to start-up costs, you should have cash on hand to cover all of your operating expenses for the first six months.
Here is a brief list of costs to consider, and some recommended maximums:
- Rent and build-out costs for your chosen location. As a rule, rent should be no more than 15 percent of projected sales.
- Equipment, including a top-of-the-line espresso machine, espresso and coffee grinders, blenders, gourmet drip coffee brewers, refrigerator, etc.
- Coffee, milk, chocolate, syrups and other drink ingredients as well as pastries, muffins and other baked goods, which should be no more than 40 percent of projected sales.
- Professional fees for architects, attorneys, accountants and business consultants.
- Payroll costs, including wages, benefits, payroll taxes, worker’s compensation and costs of payroll processing. As a rule of thumb, payroll costs should be 35 percent or less of sales.
- Principal and interest costs (if you plan to borrow money).
- Income taxes (usually about 35 percent of operating profit).
- Other expenses, including business insurance, supplies (napkins, stir sticks, porcelain cups, etc.), licenses and permits, office supplies, utilities, advertising, and repairs and maintenance.
You’ll find a more detailed discussion of start-up costs, including an entire coffee shop business plan, in Greg’s book, Seven Steps to Success in the Specialty Coffee Industry.
Questions about opening a coffee shop? We’re here to help! Give us a call at 888-800-9224 or fill out this form, and we’ll get right back to you.
Since 1991, Crimson Cup Coffee & Tea has hand-roasted great-tasting specialty coffee in Columbus, Ohio. We’ve also taught more than 250 independent business owners how to open a coffee shop through our coffee shop franchise alternative program.
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