COFFEE BUSINESS BULLETIN
The specialty coffee business is here to stay. There are many coffee bars across the country that gross over one million dollars a year, and dozens that gross over half a million. For a regular restaurant or fast food business that may not be much, as the cost of opening and operating such a business is high, but for a coffee bar, where the cost of development and product is much lower, this may represent a $100,000 income to the owner.
For instance, if an owner PROPERLY operated a coffee bar and made $30,000 a month in sales, which is not unusual, the owner would pocket close to $10,000 a month after operating expenses. OF COURSE, THIS SUM WILL GREATLY VARY DEPENDING ON WHAT IS SOLD THE MOST, FOOD, BEANS OR ESPRESSO BEVERAGES. While you will be lucky if you double your cost selling food or beans, you can multiply your espresso drink cost six or seven times!
And finally, if you serve a BETTER TASTING ESPRESSO BASED DRINK FASTER, and give your customer what he/she perceives to be a good value, that customer will have a compelling reason to return to you on a daily basis, as they won't be able to find such a product anywhere else! However you need to remember that a good product contributes only 50% to your success.
The other 50% is, as silly as it may sound, the personality of the owner! Your customers may eventually find a shot of espresso almost as good as yours but without your charisma it will mean little to them - so they will be drawn back to the uniqueness YOU have to offer them.
Don't you think that if you are going to invest your hard earned money in a coffee venture you should do EVERYTHING possible to maximize espresso sales to increase your chances of success and protect your investment?
Unfortunately, from what we have been able to observe all over the country, most of the places that serve espresso seem to do EVERYTHING POSSIBLE TO MINIMIZE those sales:
1. They lack an effective marketing strategy;
2. the menu is confusing;
3. the drinks are poor or neutral tasting due to faulty preparation techniques and/or low quality of coffee;
4. the equipment lay-out is not conducive for speed and efficiency of operation.
Why do they do that? Why don't they maximize the potential of every espresso operation? The answer is very simple: Most of them are not even aware that they may be doing something wrong!
HERE ARE SOME OF THE MOST COMMON MISTAKES MADE:
1. Choice of a poor location
2. Improper store design and equipment lay-out
3. Lack of effective marketing strategy
4. Poor or wrong kind of drink preparation training?
5. Low grade coffee beans used
6. Lack of understanding of espresso extraction process
7. Not having a true standard of product taste comparison quality control
8. Lack of focus on what your main product should be
9. Not being a daily espresso based drink consumer yourself
Any of the above mistakes may at best slow down your sales and growth, and at the worst result in the total loss of your investment.
Our job, should you engage our services as your "espresso guide", would be to minimize those mistakes and maximize the potential for success by implementing proven, tested and effective design, lay-out, training and marketing procedures acquired through our own trial and error.
START-UP: WHAT TO EXPECT.
Some espresso bars gross $2000-$3000 a day, 70% of this revenue coming from espresso based drinks, and the owners of these establishments put in their pocket (or purse) about $20,000 a month in profits! It is very possible to do that kind of business, but ONLY with the right location. But it is also possible, however, to mess up the business in a prime location and not make any money. I have seen countless examples of this.
Your sales and earnings will depend directly on your location. This is the single most important factor for the success or failure of this business. Some locations, like downtown heavy foot traffic areas, airports or student shopping streets right across from a major college will develop almost overnight, while many others, like neighborhood commercial streets or strip malls may take weeks or months to reach even the break even point.
INCOME & EXPENSE ANALYSIS OF A
COFFEE HOUSE WITH GROSS SALES OF approximately $15,000 A
MONTH:
based on cost/materials only profit margin of 75%, an average
ticket price of $7.33/customer and 75 customers/day (6 days/week,
10 hrs/day operation)
Opening costs: From $40,000 and up for a 1,000 sq feet self contained store with 40 seats.
MONTHLY OPERATING EXPENSES:
$1,750..... Rent/Utilities/Insurance
$3,500.....Wages/Benefits (two F/T, one P/T employees @ $7.00/hr)
$200........Office Expenses, Supplies
$400........Advertisement
$200........Phone Bill
$150........Maintenance & Rep
$300........Equipment Leases
$500.......Misc.
Total operating. exp. $7,000/month
Profit before depreciation, taxes, repayment on loans etc. $ 2,500/month
The number of customers can decrease by 7.5 for each F/T staff equivalent you don't need (i.e. if
you are willing to work F/T in your own store!)
This will GREATLY vary depending on what you sell. In the above example, 75% of the gross
sales was from espresso based drinks. THAT'S WHERE THE $$$$ IS!
IN ORDER TO SUCCEED IN THIS BUSINESS, HERE IS WHAT YOU WILL NEED, BESIDES START-UP CAPITAL:
1. A GOOD LOCATION. What is a good location? One that can be SEEN AND EASILY ACCESSED by a great number of "demographically correct" people. The lease of a location, and the improvements that will have to be made before you can open for business, will constitute the major part of your investment. If the location is not adequate, you may end up losing all your money and whatever opportunity that business would have provided. We will be happy to discuss with you, at no charge, a location that you may have in mind.
2. Once your shop is seen, you must have a MARKETING STRATEGY to induce people to enter your place. If they don't come in, you can't sell to them, can you?
3. Once they are inside, you must have a MARKETING STRATEGY TO INDUCE THEM TO ORDER AN ESPRESSO-BASED DRINK. If they order a regular brewed coffee which they can get in a thousand other places around town, there won't be a compelling reason for them to return tomorrow and you would not be making as much as you would if you served them an espresso based drink. This is one of the most important points, and learning how to do that will GREATLY increase your chances for success.
4. Once they order your espresso-based drink, you MUST SERVE THEM FAST and they MUST LIKE IT, OTHERWISE THEY WON'T ORDER IT AGAIN AND WON'T COME BACK. We will design the working environment of your store for speed of service and efficiency of operation. We will teach you how to make the best drinks in town and bring your customers back again and again! You will be amazed how the taste of a drink may vary by using different preparation techniques.
5. Contrary to what some espresso equipment sales people may tell you, the brand of espresso machine that you may use will have very little to do with the taste of your drinks or the speed of your service. The same to some degree will apply to the coffee you use. We had some excellent lattes made with a $5.00 lb espresso, and some awful drinks made with a $10.00 /lb beans.
STARTING POINT:
If you are SERIOUS about succeeding, want to save money and time, you should do the following, in this order:
1. Learn to appreciate espresso-based drinks yourself and develop a standard of taste comparison.
2. Get the financing:
REQUIRED CAPITAL TO OPEN YOUR COFFEE BUSINESS: $40,000 - minimum, depending on what you have in mind.
3. Identify a location that you want to lease. Approach the landlord or agent and ask what you have to do in order to get it.
4. Check with your county Restaurant Health Dept. and ask them what will you need in order to comply with their regulations. They usually have a booklet that will explain exactly what you must do before they allow you to open: Rest rooms, sinks, dishwashers, etc. etc.
5. BEFORE you commit to the location, CALL US to discuss its suitability. We will give you a good idea of how much it will cost you to develop it. This location analysis is without any cost or obligation.
6. If we decide that the location is suitable, then we will discuss further in detail what we can do to help you in the opening of your shop, and how much it is going to cost.
CAN YOU MAKE REAL MONEY IN THE ESPRESSO BUSINESS?
The espresso coffee business is one of the fastest growing concepts sweeping the country. More espresso coffee bars, carts, coffee houses, kiosks and espresso additions to existing businesses were started in the last four years than in the previous twenty years.
Seattle has over 600 espresso outlets and an end is not in sight. This trend is moving at an accelerated pace to the Midwest and the East.
Note: When we say espresso, we mean all the drinks prepared with espresso as its base.
Though the choice of location is important for the success of any retail business, there are many other reasons why an espresso bar may be serving over 1000 espresso based drinks a day, while another, just a few doors down the street, merely manages to serve 20 drinks:
1. The owner or the manager does not drink or believe in the espresso based drinks potential himself or herself. He/she never developed a taste for it and/or never had the "real thing" and therefore does not have a standard of comparison between what a well prepared drink should taste like, and what is being served.
2. The business does not know how to attract new customers in a non "espresso educated" area, or how to capture existing "espresso users" from the nearby expert competition, if there is one.
3. The work area is designed improperly, making it very hard to prepare drinks efficiently and promptly.
4. A menu that does not make any sense to a new customer.
5. Prices that have no relation to the perceived value of the product.
6. Poorly trained employees, with no clue on how to prepare a drink properly and efficiently.
7. Slow service.
8. Bad tasting drinks due to improper preparation techniques, wrong coffee grind or quality, poor equipment maintenance and lack of proper employee training.
9. Poor overall "espresso image" that does not lure new customers in and turns off the already experienced espresso drinkers.
10. Due to poor taste, overpricing, slow service and lack of effective marketing, espresso based drink sales remain below 25% of total sales in many coffee bars.
Unfortunately, most people going into this business believe that there is nothing to it, and are given this impression by the espresso equipment salespeople or the coffee roasters. After all, what is the big deal of pushing a button and making a cup of "latte"? When asked where they learned the espresso business, and how much they invested in actual training and in developing a marketing strategy, most of them will tell you that they did not spend any money on it, they either did it from observation or from their coffee/equipment distributor for free.
THIS "FREE" SERVICE MIGHT HAVE INITIALLY COST THEM COUNTLESS THOUSANDS OF DOLLARS IN POOR STORE DESIGN AND OVERPAYMENT FOR EQUIPMENT, AND LATER IN THE LOSS OF THOUSANDS OF DOLLARS IN POTENTIAL SALES DUE TO IMPROPER EMPLOYEE TRAINING, SLOW SERVICE, POOR TASTING DRINKS AND INEFFECTIVE MARKETING TECHNIQUES.
What IS successful marketing of espresso? It is to position your concept in such a way that it will attract first time espresso based beverage drinkers and induce the already "espresso educated" to change over to you from their usual place.
Yes, there are risks involved in starting a new business. You will have to step out of your comfort zone and initiate something you are not familiar with. What if you make mistakes? What if you lose your investment? What if.....? Then, this is precisely the reason you sent for this material, isn't it? You want to minimize those risk and do it right, don't you? That's where we come in. We have MADE ALREADY ALL THE MISTAKES SO YOU WON'T HAVE TO!
Our job, if you engage us as your guide, will be to show you how to prevent mistakes that would cost you much more than our consulting fee and to maximize your espresso sales. You won't be able to do that by selling mostly regular coffee, soups and sandwiches and 99 varieties of beans and only 15%-25% of espresso, like most coffee bars that don't understand the full potential of espresso.
HERE IS WHAT WE WILL DO TO SAVE YOU MONEY, TIME AND HEADACHES:
1. We will save you money in preventing start-up mistakes. The biggest mistake would be the choice in location, that may cost you tens or hundreds of thousands of dollars. Of course, no one can guarantee that a chosen location would or would not be successful, but by analyzing a site we can predict with a certain degree its potential, based on our experience from similar situations.
2. We will save you money by preventing store design and layout mistakes. We have seen many espresso bars that have been built seemingly without any consideration for the customer's service or employee's comfort. Such design faults not only hinder fast service and ease of operation, but they may cost needless thousands of extra dollars.
3. We will save you money by qualifying your contractor. Many of them will charge you thousands of extra dollars to build things that you do not need, or will overcharge you for the remodeling job..
4. We will save you money on equipment by preventing you from buying items/accessories that you won't need, and by choosing the right equipment for your needs. Just on the espresso equipment alone, through our sources, we may probably save you $2,000-$3,000.
HERE IS WHAT WE WILL DO TO MAKE YOU SUCCEED FASTER:
We will work with you in:
1. Designing the proper workstation for you, so your employees can work more efficiently and serve your customers faster.
2. Training you and your employees right from the start in the most efficient way to prepare drinks and serve your customers without using them as training tools.
3. Developing a menu that will make sense to your customers.
4. Pricing your products realistically, so your customers may return every day.
5. Using effective merchandising start-up techniques that will bring customers in.
6. Presenting the right "espresso image", that will retain the loyalty of your customers and help you to fend off your competition.
7. Being in your store just before you open, and up to five days after, training you and your employees in the proper conduct of your business.
Don't risk your hard earned money or your career by taking your first flight without an expert instructor. You may take off - but the landing may be painful!
FINAL WORDS OF ADVICE:
Though a good location is the single most important factor for the success of any coffee venture, it is not going to save it if it does not serve a good product or provide good service. The new shop may get away with anything in a new, non "espresso educated" area, where the customers have not developed a standard of comparison. However the moment an expertly operated store opens close by, it will capture its customers, and unless it manages to improve its "espresso image", that is, the quality of the product and service, it won't last long. The best way to retain the loyalty of your customers, protect and secure your investment and the future of your business is to provide an excellent product, service and DEVELOP A MARKETING STRATEGY from the beginning. Only then, will you be able to be worry free about losing customers and the encroaching competition.
Please call us NOW! Why wait?
We will be happy to provide you with more information upon a detailed e-mail message of your specific business situation, plans and goals
