google-site-verification=b7aBkrAXjuwhs4pjVzYwhvnOTZG52sbV5lOmky-XhdA The Single Coffee Shop's Survival Guide

©2019 Tomas Lee All Rights Reserved.

The Single Coffee Shop's Survival Guide

Tuesday, March 14, 2017

Coffee (ICEUS) is a BIG business.

 

The National Coffee Association published a study on the economic impact of coffee in the U.S., discovering that coffee’s impact on the economy in 2015 was $225 billion, or approximately 1.6 percent of the U.S. Gross Domestic Product (GDP). Even though the majority of consumers drink coffee at home, but 94% of them also drink coffee at a coffee shop.

 

Per Statista, there is a total of 55,246 coffee and snack shops in the U.S. 2016 and around 37K of them are established since 2002. The Coffee and Snack Shop Industry is estimated generating US $32B revenue (Coffee Market: est. $48B revenue) in 2016 and 1/3 of the domestic market is holding by Starbucks (SBUX), reported $21.3B FY16 net revenues globally and has 25,085 stores in 75 countries worldwide. Among all single and multiple coffee shops (including chain stores), "the Specialty Coffee Shops play a key role in shaping the customer experience." The number of specialty coffee shops in 2015 was est. 31,490 grown 50% from 2000, per Specialty Coffee Association of America research.

 

Los Angeles, be no stranger to a coffee chaser, sighted for many famous cafes like Alfred Coffee & Kitchen, Blue Bottle CoffeeIntelligentsia Coffee & Tea, Stumptown Coffee Roasters and Verve Coffee Roasters, has the highest number coffee shops beat the origin of coffee shop culture, Seattle, WA. If by just looking at the statistic, opening a coffee shop is a scary business because of the stiff competition. You can instantly be able to imagine the tough challenges/obstacles facing everyday in business model, supply chain management, R&D, cash flow management, personnel management and brand marketing. As stated in earlier, supply stability and quality consistency of coffee products you sell are the top priority of this business. First of all, coffee beans are a publicly traded commodity on the stock market, and therefore, its pricing is transparent and foreseeable. For sourcing, there are a couple good options to a small scale single shop: buying the beans from a wholesaler/distributor (e.g. Bodhi Lead Coffee Traders) and roasting them with your own distinctive recipe to differentiate. Of course, with limited investment and roasting skill sets, you may instead choose to purchase your bean supply from big roasters. Or else, you can alliance with another single shop in the neighbor cities (non-competition) for a group purchase. The latter may be the best option, to begin with. Not only both companies can share their cost and effectively increase the purchasing power, but also able to learn and resolve business problems together. Many other business benefits, as well, comes along in this form of partnership. 

 

Doesn't matter what type of business you are in, it's very important to have your own unique products to serve the designated customer groups/segment, especially for coffee. Every person has his/her own taste bud reacting to your coffee discordantly. Even for the same person, your very same coffee may not taste identical in each day. It's a trial and error process every startup has to walk thru. Once you identify/reassure a right secret recipe catering to your customer demographic, you have a good 'Specialty' story with its origin to tell for branding. If decided your business model solely serving coffee and tea (e.g. ARK Coffee Co), you have to determine whether your model's capable of generating very high traffic and keeping turnover to be profitable. Even so, that doesn't mean your business can't be survived by selling only coffee or tea. Due to your revenue per headcount will be kept in a lower dollar range, your business risk become slightly higher than those serving multiple products attain higher customer retention rate (e.g. Kape Republik). That's also the reason why you see many coffee shops have delights, pastries, and desserts on their menu to increase revenue stream. The concurrent business model will affect the number of your hires, cash flow, profitability and other business variables in the future. In regardless, your entree (coffee products) infinitely required more superior quality and experience than your appetizers (by-products/supplements like pastries); otherwise, your business shouldn't be called a 'Coffee Shop' at all. Like in ARK Coffee Co., their espresso menu strictly follows the conventional methods of coffee brewing and fixture, but not Americanized; Their Doppio is really just a double shot espresso extraction, not a full cup of coffee with a stronger dose of caffeine. Therefore, it's vital for you to explain and share the information ahead while customers make their orders.

 

Notorious interior design or expensive machinery wouldn't gain you more loyalty from customers, so don't waste money on renovation. After all, touching the heart of your customers is by your devotion, passion to coffee and quality control. On the other hand, an exclusive character (Acidic Tone/Aroma) of your coffee products is essential to your success, especially on the quality of beans used, brewing method, the milk foam, temperature, proper container (coffee mug) - Consistency. About the latter art presentation, it's good to have for attracting customer's attention and being the context to allure social vibe, but not a key business pillar. Also, keep in mind that customers are there for your coffee, not your art presentation (I have to admit that there are a proportion of customers does and they'll only come visiting once a while that you may not spare too much energy on).

 

To strengthen your cash flow, you can consider setting up a reward program for the frequent customers or selling your store's gift cards with incentive. Of course, the best solution is always to increase your business turnover and precise inventory management (Limit your supply not necessary a bad thing at the very beginning - called "Soft Opening"). To the new entrepreneurs, you oneself can't be a superman brewing and serving coffee thru-out the entire store hours. You'll be exhausted very easily, which may consequentially seed negatives to your business growth. Hiring the right staffs is a must. They could be professional baristas seeking part-time jobs to earn a few extra dollars, and I wouldn't recommend hiring any newbie to be trained by yourself because of the potential threat to the quality consistency of product and service unless your business already became sustainable.

 

Last, but not least telling a compelling story to your customers is a champion formula. Spending advertisement dollars is your very last resort (Don't waste on Ads unless very desperate; Growth Hacking and Bootstrapping as long as you can). Below is a serious of recommendations in branding your single coffee shop to stand out from the crowd, which proved by many well-known specialty coffee shops and roasters. Hope this quick overview could help growing your business.

 

Branding Strategy Recommendations:

1. Social Networking Events - Eventbrite.com

2. Company Web Site (Preferably, but FB Page otherwise) - WIX.com

3. Social Media:

∙ Yelp (YELP)

∙ Foursquare (FSQ)

∙ Facebook (FB)

∙ Instagram (IG)

∙ Snapchat (SNAP)

∙ Pinterest (PIN)

4. SEO: Google Search Optimization

5. SEM Advertising: Pay Per Click (PPC) - Last resort to boost your business.

6. Presence at Food Festivals, e.g. Smorgasburg (the weekly Sunday specialty food and shopping festival)

7. Join Barista/Brewing Contest and Competition

8. Personalization: Build Each Customer a Profile

9. Promote Your Baristas' Professional Profile

10. Loyalty Program: FiveStars

 

Coffee Everyday, Happy Life!

 

**Strongly recommend Almond Milk unless you're allergic; Homogenized Milk is NOT good for health. And please follow me on Instagram for more photos of my Coffee Tour.

 

 

 

Kape Republik | Cerritos, CA

Products Score: 80
Service Score: 80
Store Score: 70

Final {verdict}: ⭐️⭐️ 2/5

 

 

 

ARK Coffee Co | La Miranda, CA 

Products Score: 85
Service Score: 80
Store Score: 85

Final {verdict}: ⭐️⭐️⭐️ 3/5

 

 

 

Thanks for reading! :) Please leave me a message and press ⭐️ below if you liked this article. Your feedback would mean a lot to me and other readers. 

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