Those who fail to plan, plan to fail…
Or something to that effect, right? Yes, it is true that failure to plan will definitely affect your future success, but what do we plan and in what order?
I’m aiming this post for those at the beginning; my favorite place to find people. Before they’ve had a chance to screw up, build it wrong, order the wrong machine or otherwise set themselves on a path toward…well, frustration at best, failure at worst. I love finding people who say, “I want to serve the absolute best coffee”, but are ready to pull the trigger on a super-automatic espresso machine. You get the picture…or at least you soon will.
So, let’s put together a 30,000 foot view checklist to coffeeshop ownership. This is not so much a checklist to getting open as it is a self-assessment on keys to opening correctly. And opening correctly means understanding yourself and your project at a philosophical level as much as does the step-by-step process of opening any retail store.
1. Tell me your story – Typically when I work with people who are in the “dream stage” of their business planning I ask them to close their eyes, “see” their business when it is open and then describe it to me. From that story everything else flows. What level of quality they are going for, how big a store, and whom they will serve all flow from the vision inside their head. And when they describe to me what they see I can answer all their questions and give them advice, accurate to what they want to create. I need to know what they want to create: a specialty coffee store, a coffee cafe serving food, a drive thru or kiosk, or other variation on a coffee business. We humans tend to follow our heart in our actions, even when our head tries to send us in a different direction, so helping people connect the real story in their heart to a tangible brick and mortar reality is, in my opinion, one of the most important things I can do to ensure the best chance for success.
2. Menu – your menu will determine everything else in your business. Where you are going to locate your store, how big it will be, how much it will cost to create, what equipment you need, how much storage, how much and what kind of seating – everything comes from the menu. I don’t need to know specifically how many flavorings you’ll serve or exactly how many varieties of soup, but a category listing and ballpark figure for each is essential. Will you serve tea, smoothies, chai, milkshakes, granita or fresh squeezed juices? What about baked goods: muffins, scones, Danishes and more? What about bagels, Panini sandwiches, wraps or soup? How about ice cream or gelato? And we haven’t even addressed your coffee or espresso menu. And one thing I’ll add here – and this is free – the consistency and quality of your coffee and espresso beverages will decrease in direct correlation to the increase in other menu items. I’m just saying. That alone was worth the price you paid for this read! One last thought on menu is this – to say “menu is critical” is an understatement. This one topic deserves much thought, much planning and accurate, consistent, quality execution. Restaurants are everywhere today and consumers are savvy, educated and have options. You must get this right!
3. Location – you may have lots of choices or few or you may already own your building. But, where your business is located will be a determining factor in the creation of your business. If you will be roasting coffee at your store, a downtown location may not be the best selection. If a drive thru is important to you, your options will be limited to locations with an end-of-the-building setup or stand alone building with proper driveway access. If you want a community coffee shop, a social gathering place, you’ll benefit most from a downtown location or a place where the people in your demographic congregate. Location is more than “this one leases for $2,000 a month compared with that one for $4,000 a month”. Occupancy as a percent of your overall gross revenues is important (less than 10% is the target, 6-8% is good, under 6% is very good and below 5% is great. Over 10% is either a death-knell or puts you in the “difficult to prosper” category), but cost cannot drive the decision.
4. Square footage – creating a coffee shop with the idea of being the “Cheers” of your community requires more than 25 seats. Whereas being a coffee-only place where the focus is purely coffee (no food, salads, sandwiches, etc.) 25 seats may be perfect. The larger your space, the more it costs to build it out, equip it and then once you are open, to clean it. On the other hand, 40 actual seating spots in a business will never equal 40 people in a store. With 40 seats a “full” or “packed” store will still leave a few unoccupied seats and even normal busy would be an average 20-25 people. If you have a lot of food options, your table size will need to be bigger than if you are “coffee only” or coffee and a few snacks/baked goods. Too big a store can leave customers feeling like the place is always empty, where a smaller space, if done well, can be efficient and have the “it” factor if it is typically packed.
5. Finances – This is really kinda number one, but not really. It is more of an overriding critical factor to the whole notion that you are going be able to do anything at all. See, I’m a debt-free kind of guy. Doesn’t mean I haven’t used it, doesn’t mean I don’t think anyone else should. Entrepreneurs are risk takers by nature. But, it is easy to get in trouble by overextending one’s self. I say it this way; debt adds risk. The more debt you take on, the more risk of failure there is. 100% cash has only one risk – loss of capital. And even at that, the business or assets can be sold and the overall loss minimized. But, investing 10% your money and 90% bank money (if that is even possible) leaves you in a nasty position if failure occurs, as well as a lengthy and painful repayment process. Taking on a large percent of your project in debt means more of what will eventually be operational money being initially diverted to debt service. If this goes on too long, it will make it hard to remodel, update, refresh and replace equipment when you need to 5 years down the line. One of the best services we offer at On Track Coffee Consulting is our Pre-Opening Financial Evaluation. Simply, it is a service to help you create an accurate financial plan for your project. To this day it still amazes me how many current coffeeshop owners have little or no financial understanding of their business. You better know what your BS, P&L and COGS are and know how to use them – and it all starts before your project does.
You really didn’t think that?
5 steps to a coffee shop? Of course not. There are hundreds and even thousands of steps to get from dream stage to serving customers. But, these 5 steps are certainly critical and often missed items that set the stage for all that is to follow. I could go on and on about the steps to getting open, but to get those you’ll have to either attend our 5-Day New Business Owner Class, or wait till I post them (hint – I probably never will ☺︎).