Coffee Shop Business Plan
A Coffee shop is a specialty beverage retailer and offer high-quality option to the fast-food, gas station, or institutional coffee.
Starting and running your own coffee shop is an exciting and satisfying challenge and can give you a good income, providing you are prepared to invest a lot of time and energy into making it successful.
Many people dream about starting their own business and once you have done it you wonít want to go back to working for anyone else. You can get started in business with a relatively small investment and realize a good profit if you make a success of your enterprise.
However, to have a good idea is one thing; being able to turn your idea into a business is quite another. Before you decide to go into business it is essential that you consider very carefully the advantages and disadvantages of owning your own business.
Pride in owning and running your own coffee shop. Potential to earn more than you would if you were employed. Flexible working hours. You make all the decisions regarding your business.
First discovered in 850, coffee is the world’s most popular drink with more than 400 billion cups being drunk a year. The first coffee shop was opened in Constantinople in the 15th century, with coffee entering Europe through Venice 100 years later. London’s first coffee house opened in 1652.
Landmarks in coffee’s increasing popularity include the production of the first commercial espresso machine, in the early 1900s and the development of the Gaggia machine – the first mechanical process for making espresso and cappuccino in the post war years.
Coffee shops offer comfort food based upon time-honored recipes from around the world.
Since you would be running a predominantly cash business, the initial cost is significantly less than many start-ups these days so it is quite a promising business. The process is labour intensive. The financial investment in your employees will be one of the greatest investments in making your Coffee Shop a success.
Your mission should be to provide accessible and affordable high quality food, coffee-based products, and entertainment to the thousands of residents within a 10 kilometer radius of your Coffee Shop.
You will be successful operating a Coffee Shop by providing quality food, and coffee-based beverages.
Your keys to success in your coffee shop business are:
- Product quality: Food, coffee-based beverages, and entertainment are your products. They must be of the high quality and value.
- Service: Your patrons are paying to have a good time. Their experience will suffer if service is not of the highest calibre. Each member of the staff will be courteous, efficient, and attentive.
- Marketing: You will need to target your audience early and often. While the business is located in a central and accessible location, many people will have to be reintroduced to the neighborhood.
- Management: You will need to have a firm grasp on food, beverage, and labour costs. The coffee shop experience must be delivered in a fashion that will not only inspire repeat business, but also encourage word-of-mouth recommendations to others.
- Proper inventory, employee management, and quality control are key.
Your Coffee Shop will offer a food / leisure venue that sells a range of specialist coffees, e.g. cappuccinos, latte, espresso, mocha and flavored coffees. It will also sell other beverages, e.g. tea, hot chocolate and soft drinks, as well as a range of foods.
Your Coffee Shop will likely be located on the main street in your city catering for impulse buyers and passing trade.
The location of your coffee shop can be a major contribution to its success or failure. Choosing the most suitable location may therefore be your single most important decision. It requires a great deal of thought and planning. Don’t just decide to rent or buy a shop because it is inexpensive; if you choose the wrong location you could be setting yourself up to fail. A poor location is one of the major causes of failure for a business whereas a good location is sometimes all it takes to make your business thrive.
The best way to choose a location for your coffee shop is by doing research. This allows you to build up a picture of potential areas and also allows you to look at the pros and cons of each area so that you can choose a location that gives your business the most advantage.
You should consider the following points before making your decision on a location.
- What competition is there in the area?
- Is there adequate parking?
- How close is it to your customer base?
- Is there a steady flow of foot traffic which will guarantee walk-in customers?
- What image do you want your coffee shop to project?
The most desirable location for a coffee shop would be situated on a main shopping street which has a steady flow of foot traffic as most of your business will come from people walking past. However, this is not absolutely necessary and if you can rent space in a large retail outlet you can make it just as successful.
You could choose a shop in a popular busy area of town which may be a student area or consist of other shops, businesses and offices. You would then benefit from a stable customer base and would have constant passing foot traffic.
Good visibility and easy access are beneficial because the more people who know that your coffee shop exists, the better. There is no use in having the most fantastic coffee shop up a lane or above another shop or business because that is putting you at an immediate disadvantage.
The benefit of opening a coffee shop on a prime site in a busy town is, if you can afford it, huge. You just have to concentrate on making your coffee shop better than the competition and somewhere that people will want to return to again and again.
The downside of opening a coffee shop in a prime area is the high price you will have to pay for rent and rates. You will have to make enough money to cover these expenses before you make any profit.
- Phase One: Establish Rapport with Customer - by agreeing to discuss what the customer wants.
- Phase Two: Determine Customer Objective and Situational Factors - by agreeing on what the customer wants and those factors in your coffee shop that will influence these results.
- Phase Three: Recommend a Customer Action Plan - by agreeing that using your coffee shop will indeed give the customer what they want.
- Phase Four: Obtaining Customer Commitment - By agreeing that the customer will acquire your products.
Emphasize Customer Advantage
Must be Read: When a competitive advantage can not be demonstrated, it will not translate into a benefit.
- Must be Important to the Customer: When the perception of competitive advantage varies between supplier and customer, the customer wins.
- Must be Specific: When a competitive advantage lacks specificity, it translates into mere puffery and is ignored.
- Must be Promotable: When a competitive advantage is proven, it is essential that your customer know it, lest it not exist at all.
Benefits vs. Features
The six "O's" of organizing Customer Buying Behavior
- Origins of purchase: Who buys it?
- Objectives of purchase: What do they need/buy?
- Occasions of purchase: When do they buy it?
- Outlets of purchase: Where do they buy it?
- Objectives of purchase: Why do they buy it?
- Operations of purchase: How do they buy it?
Convert features to benefits using the "Which Means" Transition
- Sales Maxim: "Unless the proposition appeals to their INTEREST, unless it satisfies their DESIRES, and unless it shows them a GAIN-then they will not buy!"
- Quality Customer Leads:
- Level of need Ability to pay
- Authority to pay Accessibility
- Sympathetic attitude Business history
- One-source buyer Reputation (price or quality buyer)
A popular and critical question posed to coffee shop owners by lenders and investors is "Who is your customer?" It's such a simple question, yet the inability to answer it has possibly caused more ‘going out of business' sales than any other.
Why can failing to answer such a simple question have such a devastating impact on your coffee shop? Unfortunately, because many your coffee shop owners place too much emphasis on their products and services, and too little on what the customer truly wants and needs. You may have great coffee, with more neat features and benefits that your competition offers, but does your customer care?
And how do you know they care?
The first place to start is by defining exactly who would be interested in coming to your coffee shop. This is your target market, defined as the group of the population sharing a common set of traits, which distinguish them from everyone else. These characteristics define a target market - and a central set of characteristics for potential customers for coffee shops. If you're in the start-up phase, your target market may be less tangible than the target market for a coffee shop with years of operational history and customer files. But as you gain experience running your coffee shop, and you maintain accurate records of who actually purchases your product or service, your understanding of your ideal customer will improve.
So why focus on your target customer?
First, if you don't understand who they are, how can you tailor your coffee shop to best meet their needs? One key to success is the ability to provide products and services that meet the needs and wants of your customers. If your customer believes that the speed of your service is more important than its quality, isn't that information you need to know?
Second, when you understand who your customers is, you can determine with more accuracy which marketing mediums and channels will be most effective in reaching them. If your potential customer only listens to FM stations, and you advertise on an AM station, your marketing efforts will be unsuccessful. The more narrowly you can define your customer, the more focused your marketing efforts become, and the more your marketing dollars will work for you.
Here are suggestions on how to breakdown your customer profile, on both the business and consumer level.
Demographic characteristics are specific, objective, and observable characteristics that your target customers share. Most marketing mediums, such as newspapers, magazines, radio stations and television stations can provide excellent demographic characteristics on their audience. General demographic characteristics include:
- Income Level
- Family Life Cycle
- Race/Ethnic Group
- Social Class
- Product/Service Sold
- SIC Code
- Years in Business
- Number of Employees
Geographic characteristics are based on the location(s) where your target customer can be reached. Are they in the urban areas or do they reside in the rural areas? Try to identify your customer based on the following geographic characteristics:
- Country / Region
- City / Town
- Size of Population
- Population Density
Psychographic characteristics, though less tangible, are still important to identify and understand. These traits have more to do with a person's psychological characteristics such as attitudes, beliefs, hopes, fears, prejudices, needs or desires, and are highly dependent on your customers' self-image and their perceptions of your industry or product. Psychographic traits include such things as:
- Social Class
- Leader / Follower
- Extrovert / Introvert
- Independent / Dependent
- Conservative / Liberal
- Traditional / Experimental
- Socially conscious / Self-centered
Consumer / Behavioral characteristics are those relating to the purchasing and usage traits of your customers. Do they use similar products such as yours, and how often do they use them? What are the benefits people desire in your service, and how does this translate into sales? Consider these consumer / behavioral traits for your target customer:
- Usage Ratio
- Benefits Sought
- Method of Usage
- Frequency of Usage
- Frequency of Purchase
Once you determine who your customer is, it's important to identify the size of your customer base. Is it large or is it small? If it's too large, consider narrowing it down and focusing on a particular niche. Trying to reach and sell a large target market is difficult and costly, especially if it's populated by well-financed competitors who will force you to incur significant costs to achieve a sizable market share. If too small, will you be able to capture enough customers to make a sufficient profit?
Once you define your customer, and determine their total numbers in the population, it's a good idea to research the trends of your market. Over the next few years, what growth rate can be expected for your target market? What changes are taking place in the makeup of your market, and how will they change in the future? How are, and how will, customers change their use of your product or service?
So you ask, "How do I find all this information?"
First, talk to as many of the people in your target market as possible. Seriously - just talk to them and ask questions. Conduct surveys. Discover what they like and dislike, and what they want and need. What is the most important factor in their purchase decision? Facilitate a focus group, or if you have the money, consider working with a market research firm.
Second, don't forget the local library. It's rich with books, magazines, research journals, reference guides, and computer databases to help you find the information you need. Ask the librarian for help, we always find them extremely helpful in locating specific sources quickly.
Lastly, use your own eyes and ears to discover valuable details about your target market and their buying habits. Visit your competitors disguised as a consumer. Hang out in a store related to the product or service you sell and take it all in. Request annual reports and marketing information to find out about the financial, operational, and marketing factors that are important in your industry. Essentially, look around, collect information, get organized, and figure out who your target customer is, and how you will reach them effectively.
Coffee Shop Analysis:
Every coffee shop operates within the larger classification of the cafe industry. Your Coffee shop Business Plan must address the forces at work in your industry, the basic trends and growth over time, and where your coffee shop fits in. Demonstrating to outsiders that you understand and have anticipated the important factors of your industry builds a case for your coffee shops success.
Think of your industry as those cafes providing products and services similar to yours. This includes those cafes selling similar products and services, as well as complementary or supplementary products or services.
The following are the some of the most common mistakes:
- Not demonstrating a solid understanding of how your sector functions.
- Appearing unaware about the companies that form your sector.
- Lacking understanding as to where your coffee shop fits into the distribution channel of your sector.
- Omitting growth trends, revenue size, and significant statistics for the cafe industry
Business plans are required for Coffee Shops whenever money is to be raised, whether from a bank, a finance house, or a provider of equity capital. To you, your coffee shopis of supreme interest and importance; to the bank or fund manager, your plan is but one of many that are received. So you must win this personís approval and keep his or her interest.
To do this:
- be clear;
- be brief;
- be logical;
- be truthful;
- back up words with figures wherever possible.
Coffee Shop Business Plan
Coffee Shop Business Plan
Coffee Shop Business Plan Outline
- Executive Summary
- Company Description
- Description of Product and Services
- Web Site Description (if applicable)
- Market Analysis
- Marketing Plan
- Financial Plan
Coffee Shop Executive Summary
- Coffee Industry and Market Overview
- Mission and Purpose
- Product and Service Features & Benefits
- The Market Opportunity
- Analysis of Our Competition
- Management Profiles
- Revenue Projections
- Capital Requirements
- Purpose and Use of Funding
- Return on Investment (ROI)
- Payback/Exit Strategy
- Marketing Plan
- Critical Elements for Success
- Key Factors for Investment Consideration
Coffee Shop Description
- Company Background
- Legal Description and Location
- Organizational Structure
- Advisory Board Membership & Function
- Strategic Alliance Partnerships
- Critical Target Milestones
- Future Goals and Objectives
Description of Products and Services
- Product and Services Overview
- Product and Service Features
- Product and service Benefits to Our Customers
- Comparison to Competitors Products and Services
- Customer Service & Support
- Future Product and Service Enhancements / Additions
Web Site Description (if applicable)
- Web Site Features
- Description of Products and Services to be Offered
- Order Processing Features
- Customer Service & Support
- Future Web Site Enhancements
Coffee Shop Market Analysis
- Industry & Market Overview
- Current Market Trends
- Identification of Our Market Niche
- Customer Profile
- Market Demographics
- Analysis of Our Competition
- Barriers to Entry
Coffee Shop Marketing Plan
- Marketing Plan Overview
- Marketing Strategies
- Sales Projections
- Maintaining Our Competitive Edge
- Expanding Our Market Share
Coffee Shop Financial Plan
- Company Financial Position
- Financial Assumptions
- Break-even Analysis
- Risk Analysis
- Financial Statements
- Management Team Resumes
- Financial Statements (budget projections, etc.)
- Other Supporting Documents (charts, brochures, etc.)
- Glossary (if necessary to explain abbreviations, and acronyms)
Great Coffee Shops do not happen by accident
They are planned that way!
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