7th birthday

[lizzy]

We have operated our coffee shop for 7 years now. We own our own location on 1/3 acre, right on edge of a charming historic town. Area is growing like crazy. we have between 7-9 employees, own all the equipment, owe no one money except the mortgage on the property. Business is good, we roast our own coffee and work like crazy to keep overhead down. Still, profit stays just a hair over expense.

can anyone share secrets to increasing profit margin?

 

[ElPugDiablo]

There aren't that many areas to look at, check you COGS, your labor cost and your mortgage plus property tax.

 

[lizzy]

after spending some time researching, I found some figures (some from this forum) that tell me we just need more business. maybe fewer employees too. we pay a higher wage than is usual, at least for our area.

 

[Coffee Guy]

Well those are good starts. When was the last time you had any price increases? As ElPugDiablo said check your COGS, your labor cost and your mortgage plus property tax. If those have been increasing and your pricing has not, then try announcing a small price increase.

 

[lizzy]

thanks for the input. we are updating our menu for some "fresh" ideas, and to print a take out menu for offices, etc. good time to add .10 here and there. it's true, the cost of so much has gone up, but not our prices for a while. we are open 7-9 every day but Sunday, then we close at 5. but several of those nites are dead. so maybe we could save $1200 or more a mo. payroll if we closed early on a few weeknights.

 

[ElPugDiablo]

Here are a few numbers that I review monthly if not weekly: percentage of COGS to sales, percentage of labor cost to sales, percentage of hourly sales to daily total, percentage of highest margin product sold. I am not saying you should use these, but you should have 3 or 4 numbers that are important to you and you need to know them dearly.

 

[lizzy]

thank you for the good advice, a couple of those figures I know, several I don't. New year, good time to start paying more attention.

 

[dant]

How many people do you have working during the evenings that are typically slow? Based on your estimated savings of 1200/month by closing early it seems like you have more than one. If so, why not go down to one employee during the evenings?

We're open rather late, till 11:00 pm. We don't do a lot of sales between 10:00 to 11:00. But we do have a lot of sales between 9:00-9:30 that I don't think we would have if we closed at 10:00. Because people know we're open late they just show up without worrying about whether or not we're open--they just know that we're open. If it were 9:15 and thought about heading over but realized we close at 10:00, I doubt they would make the effort to come by.

My point is that your last hour or two should be rather slow--if a shop was busy right up to closing it should be open later. On the other hand, if you're slow 2-3 hours before you close than maybe it would be okay to think about closing earlier.

-Dan

 

[lizzy]

Yes, it is slow for the last couple of hours before close. We keep hoping that it will catch on for people to come out in the evening for coffee, but it is an area that just doesn't see much night life. there are 2 bars and a theater further down the road, but still most of our business is in the daytime. Just up the street are RV resorts, condos and lots of new houses, 3-4 hotels. We are right on the town limits of an artsy old historic town, but not much goes on at night.

a few nights a week, when there is music, we have busy nights, and because of that, we stay open later.

I don't like to just have one employee, for safety's sake. and we have a list of things to do, so they aren't just sitting around. (at least they appear busy when I drive up) :roll:

 

[CafeBlue]

Thanks for posting more information.
You can look at the staffing hours on the slow nights as set-up for the next day's busy morning. Have the staff not only cleaning up for the day, but also setting up things for the next day, such as food prep and drink recipe prep that can be accomplished early and refrigerate to keep until morning. Re-stocking all the supplies, prepping cups/saucers, plates, food displays, brewing toddys, mixing toppings/ingredients/chai, chopping and freezing fruit, and similar things can be useful tasks that are less time sensitive.
Consider music on more nights, even every night. Perhaps close earlier on Sunday through Wednesday - and stay open with music Thursday through Saturday. A 'regular' schedule pattern is more customer friendly, but a lot of businesses have extended weekend hours.
Add other entertainment on non-music nights. Perhaps game night, trivia night, darts league, knitter's cafe, duplicate bridge tournaments, chess league, family boardgames, scrabble tournament, etc, etc.
Happy hour after 6:00 p.m. on the soft nights, until business picks up, then modify the margin-reducing promos.
Try buying advertising space in the hotel elevators, or at least flyers in the lobby. Perhaps you can get the hotel to trade your advertising in exchange for a bargain rate on their coffee, or guest room gift items, or chocolate covered coffee beans instead of "mints on the pillow."
Coupons in the theater playbills should work - try 2 for 1 specialty drinks to start. The hotels may even hand out similar coupons with their room keys. Sometimes they will do cross-promotions with no real $ exchange, and sometimes it simply takes a well-placed gift of product.
If you have not had a price increase inthe past 14 months, then I recommend you increase prices ASAP. It is worth price-checking your competition, but your own COGS/margin/market position should be your strongest guidelines. I usually suggest increasing 4 to 7% per year.
Diablo is right about picking a few benchmark business measures and tracking your performance. It does not matter much which measurements you track. Pick something you can measure daily and weekly and monthly, then have your management crew track the data and post the results in an employees only location. Just monitoring your success makes your team more successful. It helps to monitor performance of some key business attribute that you want to grow. For example pick sales per man-hour, then post scheduled man-hours and results daily/weekly/monthly with a target to strive for.
You did great to thrive for 7 years, let this 7 year itch spur you on toward even greater business viability and health and happiness.

 

[lizzy]

thank you for the good ideas! it is so hard sometimes, staying "excited". flyers and coupons for sure.

we have good kids working for us, they are working on starting game nights, singer songwriter night, slam poetry etc.

tonight the place was packed with kids, but the sales totaled $68. sigh. I feel we are a community service.

 

[lizzy]

business is booming. for now. We were featured in Sunset Magazine and the local paper. can't hurt!!
(the pretty blond is my business partner/daughter)

 

[Jackson]

Can you paste the article for all of us to read? Or maybe a link to the article.

 

[lizzy]

hope it's legal. delete if not.

http://www.sunset.com/sunset/travel/art ... 78,00.html
[/img]

 

[lizzy]

I'd like to paste the paper article, but don't know how.