How Much Does it Cost to Open a Coffee Shop in 2023?April 20, 2023 (Published: April 19, 2023)
If you’re thinking of opening a coffee shop, the first question you probably ask is, “How much does it cost to open a coffee shop?” The second is, “How can I calculate coffee shop startup costs for a business in my local community?”
We’ve got answers! Our team of coffee shop startup consultants has taught over 300 entrepreneurs in 30 states, most with little or no coffee shop experience, how to open a coffee shop. Many have been successful coffee shop owners for 20 years or more!
Read on to learn how determining your startup costs is crucial to a strong coffee shop business plan that leads to a successful business.
The Total Cost to Open a Coffee Shop*
The average cost to open your coffee business will depend on your location, the type of coffee shop you want to open, the price of commercial real estate in your community, and other variables.
With that in mind, here are the cost ranges for opening a coffee shop or expanding an existing one:
- Coffee shop with seating only: $80,000 to $330,000
- Coffee shop with a drive-thru only: $80,000 to $230,000.
- Coffee shop with both seating and a drive-thru: $80,000 to $400,000
- Coffee kiosk/coffee stand/mobile coffee cart: $60,000 to $125,000
- Mobile coffee food truck: $50,000 to $175,00
- Adding a brew bar to an existing coffee shop: $1,500 to $30,00. The lower price is for buying equipment only.
- Adding specialty coffee service to a bakery or cafe: $25,000 to $80,000
Your startup costs may fall within these ranges, but you won’t know until you calculate startup costs for your unique shop. So let’s get started!
*Based on proprietary research of independent coffee shops opened using the 7 Steps to Success coffee shop success program and are current as of April 2023.’
How to Calculate Coffee Shop Startup Costs
Starting a coffee shop can be a rewarding and exciting venture, but it’s essential to consider all the costs involved before deciding to open your doors.
There are many expenses to consider, from renting or purchasing a space to buying equipment and supplies, hiring and training baristas, and more. Read on for insights into how much your coffee shop can cost.
Three Keys to Coffee Shop Success: Location, Location, and Location
Location is essential for any business, and independent coffee shops are no exception.
Finding the right coffee shop location can make or break your business, directly affecting the number of customers your coffee shop attracts.
Choosing the right location can help establish your café as a go-to destination for locals and tourists alike, leading to increased brand awareness and loyalty.
A visible location in a busy and popular area can help increase dive-by and foot traffic. A convenient location also can help to keep regular customers since it makes it easier for them to stop by for their favorite drinks and treats.
So what’s the best location for an independent coffee shop? In most cases, these businesses should be on the drive side of a road with heavy morning traffic.
Tailor your location search to the type of business you want to open. For example:
- A coffeehouse with a drive-thru needs up to 1,500 square feet in a retail strip or standalone building.
- For a walk-in coffee shop, you may need as little as 300 square feet in a high-density location of up to 1,800 square feet with easy access to an automobile or walk-up traffic.
- For a coffee drive-thru, 100-300 square feet will usually suffice.
As a rule, rent or mortgage should take up only 15 percent of monthly sales for your startup business. For example, a location generating $21,000 in monthly sales means a maximum of $3,150 in rent.
You must also account for build-out and equipment costs, which will be depreciated over time. Keep in mind that the more square footage, the higher the cost of your build-out.
Hiring an architect or contractor for the build-out is a good idea. These professionals can estimate the costs of plumbing, electrical, heating, and air conditioning systems. They can also help you negotiate to determine whether the landlord will finance any remodeling expenses.
Estimate Projected Sales
Once you’ve found potential locations, it’s time to run some numbers. Calculating projected sales weans out unprofitable options.
Count the number of cars passing during peak morning hours.
In a good location, you can expect about 1.5 percent of cars on the drive side to stop at your shop.
You can also expect visits by five percent of those passing by on foot. So if 10,000 cars and 500 pedestrians pass each morning, expect visits from 175.
For this blog post, we’ll use $4 as a conservative estimate for each purchase. (In reality, this figure varies by market.) Daily sales would be $700, with monthly sales averaging $21,000.
Choose Top-of-the-Line Coffee Shop Equipment
Don’t be tempted to cut startup costs by buying cheap or used equipment. Instead, your espresso machine and coffee grinders are the workhorse of your business, so invest in high-quality, reliable coffee shop equipment.
While high-quality equipment costs more, it will pay off in the long run with less downtime and higher-quality drinks.
Add a drip coffee maker and air pots if you plan to serve plain drip coffee. You’ll need a refrigerator, ice machine, and blenders to serve cold or frozen coffee drinks.
Since the quality of coffee depends on the water quality, you will want to test your water and purchase water filtration if needed.
Buy the best you can find, learn how to use it, and follow the suggested maintenance schedules rigorously.
Customers who sign up for our 7 Steps to Success coffee shop startup program can save time and money with our recommended equipment packages.
Note: Never buy used Coffee Shop equipment. Any money you save upfront will dribble away in repair costs and downtime over time. If you can’t make drinks, your business grinds to a halt.
Source the Best Drink Ingredients, Which Make Up Your Largest Operating Expense
Drink ingredients such as fresh-roasted coffee beans, milk, and syrups will be your most significant operating expense. In the scenario above, they will account for up to 40 percent of sales, or up to $8,400 each month.
Never scrimp on ingredients! Serving the best is the only way to attract and keep specialty coffee customers.
You can keep inventory costs low by partnering with a supplier that makes frequent deliveries.
Budget for Training
Unless you have previous experience running a coffee shop, you should invest in comprehensive, hands-on training and ongoing support.
In our experience, it’s not enough to take a class lasting only a few days, download an online coffee shop startup kit, or watch videos on YouTube or Instagram!
There’s no substitute for hands-on training in your coffee shop using your espresso machine, grinder, blender, and other equipment. Plus, having training come to you is often more economical, especially when you add in your travel expenses.
When choosing a training package, consider the following:
- Your trainer should have extensive experience in coffee shop management, drink preparation, and all aspects of running an independent coffee shop.
- You and all your team should train together, so you can all prepare drinks of consistent quality.
- Training should take place over several days leading up to your opening day.
- Your trainer should stay to support you on opening day to ensure all goes well and help you iron out any issues.
Hands-on training is one of the best investments you can make in opening a coffee shop. Over time, it can mean the difference between a successful coffee shop and going out of business.
At Crimson Cup, we believe hands-on training is so vital that we include it in every agreement with a new coffee shop owner. After one of our customers opens a shop, they can take advantage of additional training at the Crimson Cup Innovation Lab, an SCA-certified Premier Training Campus in Columbus, Ohio.
Estimate Payroll Expenses
Keep payroll costs, your next-largest operating expense, to 30 percent or less of sales.
These include wages, benefits, payroll taxes, worker’s compensation, and payroll processing costs.
For our scenario, you would budget no more than $6,300 – including your salary – if you plan to work in the shop.
Add Up “Other” Costs
Rent, drink ingredients, and payroll costs can account for 85 percent of expenses in the beginning coffee shop. This leaves 15 percent to cover all other costs, including:
- Professional fees for architects, attorneys, accountants, and business consultants
- Training costs
- Borrowing costs: Repaying principal and interest (if you plan to borrow money)
- Income taxes (usually about 35 percent of operating profit) and other local taxes such as property tax.
- Other expenses, including business insurance, supplies (cups, napkins, stir sticks, etc.), baked goods and other food, food service and business licenses and permits, office supplies, utilities, advertising, and repairs and maintenance
- Your profit
After you’ve done your homework, add up all these projected expenses. It would be best if you had cash on hand to cover your initial build-out and operating expenses for the first six months. So that’s what it will cost to open your coffee shop!
Cash on Hand and Variable Expenses
No two coffee shops are the same. Remember that startup costs will depend on your location – including the region, state, city, or area in which you operate.
If you already own a suitable building or have a complementary business, such as a bakery, your costs might be much lower.
Besides startup costs, plan to have cash on hand to cover your operating expenses for the first six months after opening.
Sources of Funding for Opening a Coffee Shop
There are almost as many ways to fund coffee shop startup costs as there are coffee shops! Current 7 Steps coffee shop customers have told us that the most common are:
1. Checking/savings and investment accounts (cash on hand or readily available).
2. Lines of credit and credit cards.
3. Business loans from a bank, including loans backed by the U.S. Small Business Administration. (Bonus: Learn how to wow your banker when you apply.)
4. Loans from family or friends.
5. Crowdfunding sources (Kickstarter, GoFundMe, etc.)
6. Partners or silent investors.
Learn More About Coffee Shop Startup Costs
You’ll find a more detailed explanation of how to calculate coffee shop startup costs in the coffee shop startup guide written by Crimson Cup Founder and President Greg Ubert.
Seven Steps to Success: a Common-Sense Guide to Succeed in the Specialty Coffee Industry also includes a detailed business plan template.
Hundreds of independent business owners across the country use this book as the basis for profitable coffee shop operations. An average of 20 new shops open through our 7 Steps program each year!
Read a few of their success stories. And check out the latest news on coffee shop openings and anniversaries.
Questions about Opening a Coffee Shop?
Our experienced coffee shop startup team is here to help! Call us at 1-888-800-9224 or fill out this form, and we’ll get back to you within one business day.