Hey! London Newbie...

[craig_pyro]

Hey guys!

I've been reading the board for a few weeks and found it really usefull. I'm thinking of opening a coffee shop in London and going through so much research at the moment.

My first question for you guys is about the importance of food. I can see that snacks are a good idea and that selling muffins etc brings up the average $$ per customer. What advice to you have to give on this area?

 

[topher]

What kind of advice do you want...I Think it is important to have "snacks" Biscotti, scones, bagels, ect.....The biggest thing is quality! Don't sell second day goods at a reduced price. Just don't get in over your head...I have seen many places start doing lunches and crash...they really do not understand food costs and what not...but if you can it does help your check average!

 

[javahill]

There are margin items and traffic items. Dunkin Donuts in the US sells 13 donuts per cup of coffee. But they make virtually all their profits on coffee. Dough brings the customers in, coffee empties their wallets.

If you make the best scones on planet earth and only adequate coffee, pull people in the door with fairly priced scones and laugh all the way to the bank with the money you make on coffee.

For Starbucks coffee is the traffic item and the margin item. They do more than most chains in the coffee arena - semi-automatic espresso machines, not fully automatic. A wide drink menu. A secret language to order (Starbonics?). They play up the coffee so it both draws people in and delivers high margins.

The other stuff, pastries etc., are margin items if you already have people in your store. How can you get customers to empty their wallets into your cash register. Crass? Yes. Cash? Yes.

At a local Starbucks, a 12 oz coffee is $1.60. A 12 oz bottled water is $1.70. So either adding their coffee destroys the value of bottled water or their are just shearing customers because they are standing in front of the counter waiting to be fleeced.

Cigarettes are a traffic item. Gasoline is a traffic item for gas stations - cofee is a margin item. Muffins are a margin item. Few people seek out muffins.

So, what is the role of coffee in your business? Nail that and the role of baked goods, or whatever becomes more obvious.

 

[Chelle]

What is the ideal relationship between the traffic item and the margin item, relative to price/cost?

 

[javahill]

I'm not sure than is an idea. The principle with traffic items is to deliver something inexpensive enough that people can do it once or more a day. If you think about donuts, pastries, cigarettes those all work to draw people in. Good bread works. Most of those are in the $3 to $5 range. I would recommend a target price of the two kinds of items together either under $5 or $10. The more important one is not to break $10. That's a major turn off for convenience trips.

If you have a restaurant, breakfast is the biggest coffee meal. Keep costs per person plus tip under $10. I'd target a 7 to 8 check so people, especially men, would round the tip up to an even 10. Keeps your wait staff happier so they give better service.

Maybe you meant your price/cost not from the consumer perspective. On coffee, you're going to make gross margins in the 85 to 90 percent range. Cigarettes run about 30 percent gross margin. Baked goods are in the 20 to 40 percent range. If you have an efficient operation you can run on thinner margins (donut shopes with central commissaries that serve 5-10 retail outlets can run on lower margins because of the volume, which in turn keeps volume high).

 

[jpscoffee]

Craig,
As a member of the "I love London" club I can say that a coffee shop in London can vary greatly. It is not much different than a coffee shop in the US.

I have been to London a half a dozen times and depending on your location a coffee shop there can vary from a "small city coffee shop" to a "Chicago coffee house".

The basics are going to be the same, but it depends on your location. And your vision. Do you want food? Do you want to roast? What do you want. (BTW, if you need a consultant I am available. I am always looking for a reason to get to London) :grin: