Coffee Shop Business

alexthecheese · 2 Aug 2013 at 14:53

OK, humour me.

Mate has just said they're starting a coffee shop up north, which got me thinking. I'd love to do something like that.

Where I live I can rent a property 23x28 foot commercial property for £19k per annum. Business rates are £8.2k per annum, so £27.2k rent.

If I started a coffee shop, say I needed £20k to fit it out. Coffee machines, tables, chairs, all that shiz. Say I got a loan for £20k over 2 years at 13.8% APR (using his figures) that's around £11.4k a year for the loan (I know that's not calculated properly).

That means that it totals, before anything else, £38.6k a year to get things to going.

Right, say I sell coffees for £2.40 a pop, and it costs me 48p to make each one (haven't a clue how much it costs to make a coffee, but I'm putting down 48p/20%). So, I have to sell 20,104 coffees a year to break even. Before staff costs. That's 386 a week, 55 a day average.

My opening hours are 8am-6pm, 10 hours. I have to employ 3 staff across those ten hours, minimum, and they're pay would be £6.31 an hour. 30 hours a day at £6.31 = £189.30 a day in staff costs. 6 days a week that's £1,135.8, and on Sundays I'm only open from 10am to 4pm. Sunday costs me £113.58 and in total my wages cost £1249.38.

So, I've got £65k of wages to fork out each year, plus other costs of £38.6k = £103.6k costs.

That then means I'd need to sell coffees, each making £1.92 profit, 53,958 every year. 1037 a week, 148 a day. Really I have to sell 157 a day Monday to Friday, then 94 on a Sunday.

That's 15 coffees an hour on a Monday > Saturday, or one every 4 minutes.

Plus food - I could either make our own, or ship it in, sell sandwiches, hot food, lunches, salads. That would need working out, but could help the profit come in. Coffees to pay the bills, food for the profit.

What else am I missing? Where are the millions?

EDIT: The missing list:

Water rates
Cleaning costs
National Insurance & Tax contributions
Profit
Cheap coffee - 20p per cup?

Edrof · 2 Aug 2013 at 14:54

I'll have a decaf mocha and my wife would like a carrot cake.

The Dread Pirate · 2 Aug 2013 at 14:54

Most coffee shops do have a theme to them and can sell their own branded merch too.

randomshenans · 2 Aug 2013 at 14:57

Why would anyone come to your new place, over any other place around?

ince · 2 Aug 2013 at 14:57

you can not do this with coffee alone.

d_brennen · 2 Aug 2013 at 14:58

alexthecheese said:
What else am I missing? Where are the millions?

Where are your utility and ancillary costs? Electric is going to be a biggie, not to mention water and cleaning products

isonomicjedi · 2 Aug 2013 at 14:59

I don't understand the coffe shop business.

Starbucks, Costa, Nero etc sell **** coffee and get loads of customers yet smaller independents that sell very nice coffee don't do nearly as well.

Idiot consumer syndrome.

Unless you are selling a decent amount of decent food (more costs involved) I reckon it would be virtually impossible to make a decent return.

Bennie-Mac · 2 Aug 2013 at 15:00

You need to make sure all your money goes through your "International Trading Office" in your selected tax haven to make your millions.

GravyMonster · 2 Aug 2013 at 15:01

alexthecheese said:
What else am I missing? Where are the millions?

You mention getting a £20k loan, but you're unlikely to get that unless you're putting in a fair few £K yourself.

manic111 · 2 Aug 2013 at 15:01

isonomicjedi said:
I don't understand the coffe shop business.

Starbucks, Costa, Nero etc sell **** coffee and get loads of customers yet smaller independents that sell very nice coffee don't do nearly as well.

Idiot consumer syndrome.

Unless you are selling a decent amount of decent food (more costs involved) I reckon it would be virtually impossible to make a decent return.

That's not true, there are a couple of really nice independents near me and they're always rammed.

isonomicjedi · 2 Aug 2013 at 15:02

You're also missing your contribution for employees National Insurance and Public Liability Insurance.

isonomicjedi · 2 Aug 2013 at 15:02

manic111 said:
That's not true, there are a couple of really nice independents near me and they're always rammed.

Maybe they are selling decent food?

Cosimo · 2 Aug 2013 at 15:02

The Dread Pirate said:
Most coffee shops do have a theme to them and can sell their own branded merch too.

"Overclockers Coffee"

Might lure a few housewives in.

alexthecheese · 2 Aug 2013 at 15:03

OK - please bear with Captain Numpty here - ancillary cost and cleaning products. Yes. Would have to work that out.

Food would make some money.

There is no 'juicing' trade around here, so that could work nicely. Coffees, juices, sandwiches, veggie crap. If the food is good and the juices flow, the coffee is hot - surely there is profit.

Need to get a brand sorted, signage and all that. I have a name in mind.

How would I get an idea of what water rates I'd need? People don't tend to share stuff like that, do they?

shauncr91 · 2 Aug 2013 at 15:03

Your coffee should be costing much less than 48p/cup.

d_brennen · 2 Aug 2013 at 15:05

As the high street is in such bad shape at the moment, getting 6 months to a year rent free or a vastly reduced rent isn't impossible. You never pay the asking price for rental space, unless it's at the top of the Burj

isonomicjedi · 2 Aug 2013 at 15:05

alexthecheese said:
OK - please bear with Captain Numpty here - ancillary cost and cleaning products. Yes. Would have to work that out.

Food would make some money.

There is no 'juicing' trade around here, so that could work nicely. Coffees, juices, sandwiches, veggie crap. If the food is good and the juices flow, the coffee is hot - surely there is profit.

Need to get a brand sorted, signage and all that. I have a name in mind.

How would I get an idea of what water rates I'd need? People don't tend to share stuff like that, do they?

The most important thing would be location and for a decent location large enough to house kitchen toilets service area and customers you might be wrong with the rent

Robertnpmk · 2 Aug 2013 at 15:07

Or you do what A guy locally does and have a coffee van and go and serve all the business around the area. No rent to Pay. No Wages to pay apart from your own. Winner.

alexthecheese · 2 Aug 2013 at 15:10

d_brennen said:
As the high street is in such bad shape at the moment, getting 6 months to a year rent free or a vastly reduced rent isn't impossible. You never pay the asking price for rental space, unless it's at the top of the Burj

Really? Wow - that is... exciting.

The place I am looking at has been closed for ages and is right next to the train station - literally about 10 shops down from the entrance. It's the slightly grubbier side, littered with kebab shops and suit cleaners - but it's otherwise ideal.

AJK · 2 Aug 2013 at 15:10

alexthecheese said:
What else am I missing? Where are the millions?

You're not going to make millions from an independent coffee shop unless you've got an incredible hook to get people in the door.

As others have said, you haven't factored in all your costs, for example utility bills, insurance, advertising, etc. You're paying your staff minimum wage but you're unlikely to get a decent barista (or three as you'll actually need to cover the week) for that price, which you'll need because the quality of your coffee has to be good if you're going to stand out as an independent.

You'll need to sell some kind of food or snack IMO, but you might have trouble making the margin on food when you start up (and of course you'll need a display fridge or similar).

Coffee shops can make good money, but you need the right location, the right hook, and preferably someone who knows about the industry!