Having a business plan for your new coffee shop business is critical. It will highlight the strengths and weaknesses of your business concept and provide a framework for you to start planning the launch of your coffee shop enterprise.
Specific aspects of your coffee shop business set up Business Plan should include:
- An overall vision for your coffee shop concept
- Goals short/medium/long-term for your coffee shop business
- Financial projections for the new coffee shop business including the all-important ‘break even’ point
- Potential threats and opportunities to your coffee shop business model
- Identifying key metrics for the business to measure its success and failure
- Business Plans can be a vital document to persuade investors or banks to invest in your new coffee shop business
High margins don’t make big coffee shop profits
There is no denying that hot drinks such as tea and coffee have a fabulous gross profit margin. A cup of tea might cost as little as 10p but then can be sold for £2. The average cost of the coffee going into a cup of coffee is between 6-8p depending on the quality of the artisan coffee. This represents a gross profit margin of 90 to 95% depending on whether a takeaway coffee cup is used. This is much higher than food where the target margin is perhaps 60%. However, despite the fabulous margin on your coffee sales the problem is that coffee even specialist artisan coffees are still fairly low value items. You therefore have to sell an awful lot of coffee or tea to make much money. This highlights the importance of food sales in any coffee shop business. For instance the average cup of coffee in the UK is £2.45 but if you can sell food with every drink then the average spend in UK coffee shops leaps to £4 but where there is an emphasis of food that could be much higher. Whilst your gross profit margin is greatest on your drinks you will more than double up on your total profit by successfully selling food with each coffee, whether this is a cake, tray bake, sandwich or other food item.
How many cups of coffee can I get out of a standard 1kg bag of coffee?
The number of cups of coffee you can get out of a standard 1kg bag of coffee for a 135-140 cups of coffee. If you then charge an average of £2.50 for each cup of coffee this equates to a profit per 1kg of coffee of £326.70 per bag. The cost of coffee for each cup is just 8p. This equates to a gross profit margin on each cup of coffee of 96.8%! Obviously, there will be many other costs attributable to the production of each costs of coffee. These will include: staffing, hot water, cost of the cup or washing of the cup but to suffice to say a cup of coffee is intrinsically a very profitable drink item. Just ask Starbucks!