Cost of Goods Sold (COGS)

[SimplyEspresso]

Hello Everyone,

I am in the process of finalizing my business plan and am figuring my Cost of Goods Sold (COGS). I have my menu set and am breaking down every ingredient, cup, lid, etc. that goes into each product. Can anyone help with this. Also, in order to be profitable, do coffee shops have to sell some sort of food (salad, soup, sandwiches, etc.)? Thanks.

 

[cafemakers]

Coffee and espresso profit margins hover somewhere around 75%; food products at 50% or so. I advise shop owners to sell food products only as complimentary items intended to increase your coffee or related beverage sales; this makes a substantial impact on your bottom line.

Aside from reducing profitability, there are three other concerns that you should consider when adding food to your menu:

1) Are there additional health department restrictions and requirements necessary as you expand your food offerings that can increase labor costs?

2) Will food products attract sort of recurring coffee customers that will be most profitable for your products or just a lunch crowd?

3) Will the preparation or storage of food items on your premsis negatively affect the ambiance of your location and deter your ideal customers (will it make your coffee shop smell like a deli)? Will people really know what your business focus is?

There are exceptions for a retail coffee shop where serving food can be helpful based on the location and business case; I find them to be few and far between. Such a decision is more likely based on the personal interests of the owner (i.e. "I always wanted to be a chef") rather than the business case.

You may want to avoid straying too far from your core business, which based on your name, I would expect to be "simply espresso."

 

[javahill]

Some of the advice we give to business people who resell our coffee is to think in terms of traffic items and margin items.

For example, for a long time Dunkin Donuts was selling about 13 donuts for every cup of coffee (a few years ago I worked that out based on information on their web site - it might have changed). But they made about 80 percent of their contirbution margin on coffee. Donuts brought the people in, but they made the money on coffee.

Do you have special items to bring people in? Sure, your coffee. But lots of people have coffee. Can you differentiate yourself with baked goods or signature sandwich?