Are Coffee shops profitable?

Discussion in 'Professional Chefs' started by chefwriter, Jan 19, 2016.

  1. chefwriter

    chefwriter

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    A coffee shop/cafe just opened in my neighborhood about two months ago. Small, about twenty seats, mostly coffee and pastry with a lethargic attempt to add sandwiches.  

         The entrepreneurial itch has started up again and I'm thinking perhaps I should buy the place. The building houses other businesses so this would be strictly rent with no possibility of ownership of the property and there is no room to expand. What you see is all there will ever be. 

     I live nearby and frequent this place several times a week.  I know I can improve the food offerings. 

    I know typical restaurant profit margins.  Is a coffee house any different? 
     
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  2. meezenplaz

    meezenplaz

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    Hey CW. 20 seats aint a lot. However, I personally, I think the money would be in the coffee. 

    Somewhere between a standard cafe, and say, a Starbucks or Koffee Klatch wannabe. 

    If you could get a reputation as a great coffee-hut with some great food too, rather than a cafe with 

    great coffee, it may work better.

    You can also work in a better profit margin on the coffee that way too, and from what I've seen, specialty 

    coffee carries a pretty healthy profit margin inherent.

    Also emphasis on the take-out (take-away) aspect--again, I see that working, around here anyway, I 

    dont remember where bouts you are. 

    If you're a regular, you might start by just talking to peeps who go there a lot and find out what changes

    THEY would consider big improvements--determine if the bulk of the existig patronage is more 

    focused on food...or on coffee. Or even on something not yet thought of. 
     
    Last edited: Jan 19, 2016
  3. chefwriter

    chefwriter

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    Thanks, Meez. That's exactly what I was trying to convey. I'm in upstate NY.

    This place sells lots of coffee, not much food.

    I'd like to offer creative, quickly made food items but the focus is on coffee.

    So you come in for coffee but can also get a quality bite to eat.

    While the seating is limited, I think this neighborhood would appreciate a place to stop in and get a quick coffee and bite to eat on the go. Those with time can find a pleasant place to sit but leaving with their purchase is the intended outcome. 

    Starbucks seems to do well and I don't think it's just economies of scale at work. I'm curious as to the profit margin to be expected on a cup of coffee so I can extrapolate the potential income on the place. 
     
  4. chefbuba

    chefbuba

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    A 16oz iced latte for the drive home cost me $5, there's a lot of profit in there. Two shots of coffee, a lot of ice and maybe 4oz of milk in a plastic cup.
     
  5. flipflopgirl

    flipflopgirl

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    To go window?

    mimi
     
  6. chefbillyb

    chefbillyb

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    I wouldn't want people sitting around drinking coffee. Right now its a coffee and pastry joint, that's a nickel and dime operation. I would make it a breakfast place short order fast out of the kitchen diner. In fact I would call it a diner. I would make my own breakfast country sausage, country gravy, homemade CFS, hot off the grill home fried potatoes sitting on the back of the grill ( Like they do in upper state NY).......Keep the menu fast, good and simple. Turn the tables over as fast as possible......
     
  7. meezenplaz

    meezenplaz

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    Theres a Starbucks local here with a drive thru winder. (which arent that common)

    Ever since the day they opened, cars have been backed up thru the entire parking lot

    (blocking it) from about 6am to 10 am. Theyre like In n Out, theyre always busy. 

    I dont know the numbers, but by my crude observations, I'd say theyre making a

    crapload o' money. 

    Chefwriter, a lot of quick coffee places like that around here, including quick mart type 

    sell a lot of packaged food items along with their coffee. The question is, are your 

    potential clientelle going to actually appreciate fresh made foods with their cofee

    to go, or would it yield a poor return on your time/labor etc? I know I would, but 

    I am definitely not everyone. But then again, I'm in LA, not NY. /img/vbsmilies/smilies/smile.gif
     
    Last edited: Jan 19, 2016
  8. chefbuba

    chefbuba

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    I was peeved when I was in LA last year, no drive through coffee. I'd spot a bucks, but there would be no meters open for blocks around or there was a pay lot and would cost me $5 to park for my daily coffee.

    I'm spoiled up here in the PNW, coffee drive through's are EVERYWHERE. I don't remember when that last time I had to get out of the car for coffee.
     
  9. meezenplaz

    meezenplaz

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    Yeah theyre scarce even in the suburbs, the closer you get to the city the worse it gets. 

    Pasadena is just about as bad, no free parking there either. 

    The one I mentioned is doing great, maybe it will catch on....likely not. 

    Meanwhile, every fast food joint everywhere around (and there are LOTS) has a drive through. 

    Go figger. 
     
  10. cerise

    cerise Banned

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    Is your heart set on coffee? If so, do it differently than what is already out there.

    Food for thought...years ago, there was a hole-in-the-wall Italian butcher/grocery store also offering homemade pasta, potato, marinated mushrooms etc., and imported canned goods.

    The owner started making sandwiches/subs for his son and friends. Word of mouth caught on, and there was standing room only (no tables) at lunch time. Studio folks and locals lined up for a sandwich to go.

    The bread/baguettes were freshly-baked from a local bakery, A whole can of imported tuna was used with fresh tomatoes, olive oil and vinegar, topped w fresh parm. Similarly for the Italian subs - all with fresh ingredients. Later he added a small grille and added hot sandwiches - homemade meatballs, sausage and peppers and on and on. He added another helper/employee to fulfill the large and growing lunch crowd.

    The biz grew, and he purchased a larger store down the street. It grew even bigger, so then he bought an actual restaurant w tables and chairs. It was never quite the same for me. It lost its' charm and the prices went way up.

    Not a big coffee fan, and think it's been done -unless you have a unique idea. Just some food for thought. Wish you much success.
     
    Last edited: Jan 20, 2016
  11. chefwriter

    chefwriter

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    Thank you everyone for all your replies.  A bit more information.

         This shop is adjacent to a small local movie theatre. So far as I have been able to determine, the majority of business takes place according to the movie schedules I hope to be witnessing the activity this afternoon. (I haven't had an appropriate afternoon off thus far.) 

         There is no possibility of a drive thru window as the storefront is in the middle of the building housing several businesses.  My thinking at the moment is to arrange the coffee and food prep systems to serve movie goers as quickly and efficiently as possible so they can grab a coffee and/or a bite to eat and get to the theatre asap or be able to stop by after the movie for a more leisurely bite. As it is in a larger building, there is no hope of installing a grill or other heavy duty food preparation equipment.  A few electric devices is about it. 

         I have not yet figured out what the cafe's draw would be without the theatre but naturally I'd like to attract as much of that demographic as possible as well. The street is a long mix of residential and commercial, both renters and homeowners with attendant flow of traffic. Parking for the cafe itself is limited to street parking but the theatre has quite a bit of parking and of course there is foot traffic from the neighborhood. As I said, I'd like to find ways to draw in more of the foot and neighborhood traffic, especially during non theater times. 

        In the bigger picture,I"m curious about the profitability of coffee shops in general. As has been noted, Starbucks and others seem to do well.  if this location isn't everything it's cracked up to be, my thinking was to open a coffee shop elsewhere. 

         As for opening a diner, been there, done that. Nickel and dime operation indeed. Coffee, pastry and simple eats seems much easier and I'm hoping more profitable. 
     
  12. foodpump

    foodpump

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    I come from a city that is coffee crazy-- Vancouver.  Not only is there a stah-buhks on every corner, but there are the "Waves" chains, the "second cup" chains, "Tim Hortons" of course, but local chains such as JJ beans (15 locations) "take 5" (over 25 locations) as well as the indie shops.  Were not even talking about the stah-buhks kiosks in the malls, supermarkets, and bookstores, or the gas stations.

    Brewed coffee is a loss leader.  Yes, it's cheap to brew a pot and dispense 10- 16 oz cups, at what--$2.00 a cup?  Disposable cup costs you, the lid, the sleeve, the stir sticks, the sugar and cream that the customer helps themselves to, and napkins.  Watch people, they love to throw out half of their coffee in the garbage, top up with sugar and cream, make a mess, grab a buck's worth of napkins to mop up, and then leave.

    The espresso drinks make money. A shot of espresso, milk-which is dispensed by you and the customer pays for, syrups, etc. which is dispensed by you and the customer pays for.  But you can charge better, over $3.00 a cup, up charge with whipped cream, syrups, ice cream, and all that stuff

    Without variation, every coffee shop here has b'fast pastries, cold beverages/pop, usually salads or sandwiches and impulse stuff like chocolate bars, snacks, etc.  Oh, and free Wi-Fi.  You need the other stuff to bring up the cheque average, and you curse and hate the free Wi-Fi.  Because without variation, every coffee shop here has tables with solitary figures hunched over their device, a deuce or 4-top with one person and  their stuff, nursing their $3.50 latte for hours.  The only thing that gets them out is 3 people peering over their shoulder asking them if they're ready to leave.....

    You need the volume to make money, but if you have the volume, you can make money.  
     
  13. cerise

    cerise Banned

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    How about coffee and croissant?

    There's a small place I like that sells croissant sandwiches of every kind - from chicken, tuna, egg, ham and cheese salad to breakfast and dessert croissant (chocolate.filled, etc.). You can get a burger, as well. A fresh fruit cup and hot chocolate could be some other additions. I used to mix half a cup of hot chocolate with half a cup of coffee. Delish.
     
  14. cheflayne

    cheflayne

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    Gross profit on coffee is good, $1.50 per cup is not out of line, but that is gross not net. Also it takes a lot of cups sold to translate any discernible amount of cash in owners pocket. Starbucks and the likes probably make more of their money on bulk sales, mugs, machines, accessories, shirts, music collections, etc than on cups of coffee sold, basically selling the brand rather than the product.
     
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  15. cerise

    cerise Banned

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    N/a
     
    Last edited: Jan 21, 2016
  16. mattm

    mattm

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    If you do not have the magic (shitty) recipes of a starbucks, you would rather focus on high end customers, and that requires good barista machines, good coffee, and skills. It would be expensive but I have to say that people are often growing more and more demanding when it comes to coffee.
     
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  17. Iceman

    Iceman

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    It continues to amaze me how so many people, whether it's in casual conversation or bulletin board forums, trash .

    They're a giant company. Over 23,000 world-wide locations, over $16,000,000,000 (sixteen freakin' billion $$$) in revenue. THEY SELL COFFEE. My goodness, if they made a cat-piss latte ... people would be in line for the stuff. If their coffee was so bad ... nobody would be there in the first place.

    For reference ... Micky D's has over 36,000 world-wide locations with revenue of over $25-billion. Micky D's started in 1940, Micky D's corporation was 1955. Starbucks started in 1971, they're pretty big.
     
    Last edited: Feb 29, 2016
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  18. brianshaw

    brianshaw

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    That's a great post, Iceman. Folks seem to not have the right perspective at times. Coffee, chain restaurants, fast food, or mass market knives... Money talks and all else walks. Success is measured in money. Thanks for a shot of reality!
     
  19. Iceman

    Iceman

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    Thank You.

    Just this afternoon I sat in a Starbucks waiting for a friend as I watched The Chicago BLACKHAWKS beat the Washington Capitals. In less than one(1)-hour I counted more than $100 worth of $7 drinks (I stopped at 15). There were never less than two(2) people at the counter. This was a Sunday afternoon. I think that is pretty good business. There are three(3) SBs within two(2)-miles of my house. This is not the biggest SB either.
     
  20. flipflopgirl

    flipflopgirl

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    For those of you envious of the seemingly golden touch of the Starbucks logo....

    http://www.houstoniamag.com/articles/2016/2/5/largest-starbucks-in-texas-houston-february-2016

    I guess someone read and believed the fable about Houston (and Texas in general) not being touched by the wicked finger of the current "slow economy" (why cant they just rip the band aid off and say recession?) and rubberstamped this project.

    The location of this hotel is a big draw for the downtown convention trade but if someone would have thought this thru a huge fiscal disaster could have been avoided.

    Hey financial wizards you can get all the beverages and snacks you want in convention hospitality rooms .... for free!

    But then again... who woulda thunk that oil would drop to a historic (> $25 per barrel) low and deplete the coffers of all the execs who pay the salaries and ok the expense reports of the very ones who would have made the above concept a success?

    The downtown gentrification is proceeding (at a snails pace but still...) and will eventually catch up but prolly not nearly fast enuf to save this massive financial blunder.

    mimi