How profitable is a coffee shop?
Many reports indicate that the average coffee shop has a net operating income of 2 to 3% after paying the owner. By comparison, an average Starbucks location may expect a profit margin of 15%, so as your coffee shop grows sales and improves efficiency it is possible to increase your profit margin over the industry average of 2 to 3%.
How long does it take for a coffee shop to be profitable?
The breakeven for a coffee shop is a function of your fixed monthly expenses, your sales, and your cost of goods sold. In order to calculate when your coffee shop will breakeven you can take your fixed monthly expenses and divide by your gross profit margin to determine what dollar amount of sales you will need to reach in order to breakeven. Our coffee shop financial projection template will help you visualize exactly which month you are expected to reach profitability.
Why do coffee shops fail?
There can be a number of reasons why a coffee shop fails, but typically we see coffee shops fail when they overestimate their sales projections. For example, a coffee shop owner might think they can sell $20,000 per month, so they take on debt and other fixed expenses that might be sustainable if their sales were $20,000 per month, but can become unsustainable if sales only reach $15,000 per month. In order to avoid this pitfall you should carefully build out your sales projection assumptions based on industry standards, your location and your potential market.
Is a coffee shop a good investment?
With an average net operating income of just 2.5%, a coffee shop might not be the best investment from an ROI perspective; however, you can make a good living and enjoy your work if you own a successful coffee shop.
What are the risks of opening a coffee shop?
There are a number of risks associated with opening a coffee shop, but the primary risk is establishing a fixed cost and debt repayment structure that is too large for your customer base to support. I have seen coffee shops start for as little as $50,000 in startup costs to as high as $500,000 in startup costs. If you spend too much on startup costs and establish a fixed cost structure that requires you to sell more coffee than you are able to secure, your coffee shop will become financially unsustainable.
How many coffees per day does a coffee shop sell?
According to the National Coffee Association a large corporate coffee shop like Starbucks could sell up to 700 cups of coffee per day, while the average independent coffee shop will sell between 200 and 300 cups per day.