Coffee shops can be very attractive options for entrepreneurs interested in entering the competitive food service industry. After all, there seems to be at least one coffee shop on every other corner in busy urban areas, and there’s always someone walking out with a cardboard-wrapped cup of joe in hand.
Of course, the reality isn’t quite that simple, and cafes can struggle just like any other small business if they’re run poorly or face serious economic downturns. But, it is safe to say that coffee isn’t likely to fall out of style anytime soon. As long as there are coffee beans grown, there will be coffee shop customers. In fact, on average in 2015, the U.S. per capita consumption of coffee was about 10.2 pounds.
There are a number of ways that boutique and independent coffee shops can become financially sustainable and deliver a satisfactory return on investment, with the right tools in place.
Here are the top five ways to grow your coffee business:
1. Always put quality first
Serve the best
This should go without saying, but in a competitive space like the coffee business, you must be consistently serving the best coffee and espresso.
This means investing in the right equipment and using the highest quality coffee beans and products. People go out of their way for great coffee and if you are one of five coffee shops in your vicinity, you can’t afford to skimp.
Tell people why your coffee is unique
If you’re sourcing from a specific small farm that uses sustainable growing techniques or serving exclusively fair trade coffee, or if there’s something else that makes you stand out from your competitors, make sure you’re telling people about it.
Educate your baristas so they can easily reinforce what makes your drinks unique when they interact with customers, and also share that kind of information on your website. It will help make your shop more memorable.
Hire the right people
Quality also means hiring the right people to work in your coffee shop. This can be the difference between success and failure.
Although it can be tempting to hire the cheapest help, in the long run, you must ensure that your front line is positioned to promote repeat business and growth by word of mouth. Your employees are your customer service force, and you need a top-notch team.
Don’t shortchange your training program
Don’t underestimate the importance of a good, consistent training program. Larry Alton, a pro with 10 years of experience training baristas in a high volume espresso chain, shares some best practices on barista training in this article.
2. Start a loyalty or rewards program
You won’t lose money
Smaller businesses often shy away from this because they think it will lose money. But according to a study conducted by Manta and BIA/Kelsey, 64 percent of small businesses that started a loyalty program said such programs made their business more money than it cost them to run it.
You’ll profit more from repeat customers
If your product quality is where it should be, then you need to start looking to other differentiators to help you stand out from the competition. The same study also found that repeat customers spend 67 percent more on purchases than first-time customers.
No matter how you slice it, you can only stand to benefit by offering customer loyalty incentives.
3. Add wine or beer to your menu
If your coffee shop is open in the evening, serving wine and beer can be a great way to take a slice of the happy hour crowd.
When Starbucks launched its Evenings program—adding craft beer, wine, and small-plate food items to its after 4 p.m. menu at some locations—the company projected it would add $1 billion to its annual revenue by 2019. Adding just wine and beer to your menu can give your business a boost during hours where you might typically expect to see a lull in customers.
4. Consider buying an existing shop if you’re ready to expand
It might be quicker
If you are looking to expand to a second location, consider acquiring a coffee shop for sale in your area. If you started your original location from the ground up, then you know how challenging and time-consuming it can be to build and start a brand-new shop.
You might save on startup costs
By acquiring an existing location you can save yourself time, and even some equipment purchases, depending on the deal you negotiate. Acquiring an existing shop that has invested in quality coffee and espresso makers and other equipment can save you both time and money.
There could be a built-in customer base
If the shop you purchase has an established clientele, less marketing capital might be required.
Of course, you’ll still want to market, especially if there were negative associations with the existing shop, or if you are changing the shop’s name. In those cases, you’ll want to let people know it’s under new ownership and offer deals and incentives for customers to come in.
5. Understand that you’re selling more than coffee
Be an oasis
While quality is the top priority, it’s also important to understand that you’re selling more than coffee. If it were as simple as a need for caffeine then everyone would buy their own Italian espresso machine and make their daily cup of joe at home.
There are many reasons customers frequent a coffee shop, from needing to escape the stress of the office, to the basic need to connect with others. You can capitalize on that by encouraging customers to stay in your shop.
But, think through whether you want people to linger
While you’re certainly going to offer free Wi-Fi at your cafe, do you need to augment that with plentiful access to power outlets? The combination encourages people to stick around, even setting up their little workspace and spending a bulk of the day plugged in while their empty $4 purchase sits on the table next to them.
“Free” amenities are costing you money, and if non-paying or low-paying customers take advantage, it can create a difficult situation. On the other hand, if you don’t offer them, you might lose business right out of the gate.
Help people relax and have fun
You should also capitalize on people’s desire to connect with others by having board games, puzzles, or other interactive activities available in your shop. Coffee is more than a drink people love—it is a reason for people to come together and connect. Understanding the variety of needs your shop is catering to will increase your chances of success and consistent growth.
There are a number of strategies that can help you grow a food and beverage businesses, but coffee shops offer many unique opportunities. Following the tips above will help you grow your business sustainably.
If you’re looking for resources on how to start your coffee shop, check out this guide. And don’t forget, one of the best things you can do to encourage the continued growth and profitability of your coffee shop business is to keep a close eye on your financials and use your business plan as a tool to help you stay on top of opportunities and challenges.