New Coffee Shop - Words of Wisdom?

[Sparton05]

So, From my intense amounts of reading of these forums, i know i am about to ask a question that has already been asked several times before. None the less, i want to hear some words of encouragement, or realism, or anything really.

My situation:
I very badly want to open a coffee shop. I have tons of ideas, and one im very fond of that i think can work. I have a commercial strip that has a university of about 16,000 as its backyard. The general area itself have a decent bit of competition(chain restaurants/ a coffee-bar mix/ and a starbucks), but i think i have a unique enough approach that it wont be too bad. Not to mention the other places either close very early, are more of a bar, or doesnt cater to people who want to hang out and study/converse and relax. The foot traffic is pretty decent, lots of morning walkers going to and from class/work. I dont have a lot of personal cash to start it up with, but i have great credit, a business degree, and the makings of what i think to be a pretty solid business plan. I have most my furniture free as well as logo designs and art. My biggest expense for basic set up with be the espresso machine. How much should i expect to pay for a decent espresso machine? I want to make a cool hang out, but i also want to make sure i can serve the best coffee/espresso i can. Will i be able to get a loan that will allow me to get moving? Will i lose out for so long that the loan will melt into nothing.

The lease is triple net. Is this really bad? and how much can i expect to pay for the taxes/insurance/maintenance? What are some expenses that i might easily overlook? I have heard about FOG, how much can i expect that to run me? I keep hearing that i should expect to spend LOTS AND LOTS of money. But beyond rent(including taxes/insurance), salary, utilities, and product(COGS), What expenditures are going to blindside me?

Obviously theres a lot to digest here, but my basic question is basically: What are the hidden expenses i may not realize? What are some things to consider? Is this feasible? Any tips to someone who might be starting out in something like this. I realize its not all stars and rainbows, and its gonna be a lot of work, but im very passionate about this and i am ready to bleed for this place.

 

[John P]

First find ONE idea that speaks to the soul of who you are, and communicate it clearly to yourself and anyone who is a potential partner or employee. Once you define who and what you are all about, don't stray from your path.

While locating near a university can be good, it's not necessarily the goldmine many think it would be. It really comes down to how you position your shop.

Students have limited funds, don't tip well, and are only loyal to the proximity, if at all. Now if the location, setting, etc. is targeted at the surrounding population as well as professors, faculty, and upper classmen, then the students who frequent are likely to come longer term, and be a better caliber of customer, which will attract a more appreciative base. Also, don't pick one spot and say, "This is it!" You don't have enough information to be leasing or thinking of leasing a location at this juncture. Find three or four or five that can work, and negotiate to find the best deal in terms of location, cost, size, shape, etc.

The business degree won't do much for you in the real world beyond understanding financials, hopefully you gained experience with management, customer service, food service, etc, in whatever it is you have done with your life so far.

You need at least 30 to 40% total project investment of your own money in order to secure any SBA or similar loan. Anything else would be from people who love you, or an investor who will have a stake in ownership of the business. SBA loans require 100% collateral, of which only a certain percentage can be from shop fixtures... depends on how much you ask for in comparison to total project cost. Figure out total project costs, add 15%, then figure out necessary costs to keep your doors open - rent, utilities, COGS, and have that for three to six months in addition to maybe $15-$20K extra "just in case".

Don't rush into things, spend a good year at a minimum traveling the trade show circuit, hit at least one SCAA and one CoffeeFest. Also visit shops that you see as ideal just to understand what it really is they are doing. Know who potential coffee suppliers are, test all of them, understand the various espresso machines out there. Don't skimp, the difference between a six thousand and a twelve thousand dollar espresso machine is vast, but in the scheme of opening a shop it's nickels and dimes. Educate yourself on the ins and outs of the business to give you more of an idea if this is really for you or not.

You have a LOT of work to do before you should even approach the idea of opening. Get to it!

 

[shadow745]

You do sound quite eager... first thing I will ask is if you love all things coffee? Not saying it's a must, well yes I will say it's a MUST to do so. If you don't have the passion for coffee you probably will never achieve nirvana in this business. I have met many coffeeshop owners that are just that... owners that don't even drink their own product. I ask "how the hell do you know what you're serving if you don't dial it all in by your sense of taste, smell, etc???" Simply put you can't!

Not trying to dog you too much, but lots of people think coffee is fast/easy money, but that is hardly the case. To put out great product consistently, keep all customers happy, etc. takes alot of time, effort and devotion. I just think you have to really have a passion for something to give it your best.

Espresso machine choice... Get at least a 2 group, maybe 3 if you anticipate large volume. Go for a good brand name and something that can be easily serviced locally if possible. That is if you're not really handy and have equipment knowledge. My daily driver is a Nuova Simonelli Aurelia and wouldn't trade it for anything I've seen/used yet. It it a fantastic machine with lots of great features and can keep up all day long regardless of volume. Don't forget a few proper grinders, commercial grade of course. One dedicated espresso grinder minimum, one for decaf espresso and one bulk type grinder for drip, press, bulk grinding for customers, etc. Later!

 

[ElPugDiablo]

I have a commercial strip that has a university of about 16,000 as its backyard.

What it's like in the summer when you have 16,000 less people?

I have most my furniture free as well as logo designs and art. My biggest expense for basic set up with be the espresso machine. How much should i expect to pay for a decent espresso machine?

Your build out will be your biggest initial expenditure. Building the place will set you back a lot more than a top of the line espresso machine. And don't get too caught up on the espresso machine, get a good grinder first.

Will i be able to get a loan that will allow me to get moving? Will i lose out for so long that the loan will melt into nothing.

I'd would think now is very hard to get a loan.

I keep hearing that i should expect to spend LOTS AND LOTS of money. But beyond rent(including taxes/insurance), salary, utilities, and product(COGS), What expenditures are going to blindside me?

Maintenance and repairs. If you have used equipments you will need to figure about $400 a call. If you are buying new, the minute they went off warranty, they will start to break on you.

What are some things to consider? Is this feasible? Any tips to someone who might be starting out in something like this. I realize its not all stars and rainbows, and its gonna be a lot of work, but im very passionate about this and i am ready to bleed for this place.

Like John P suggested, I'd visit as many shops that are like what you have in mind as possible, see what works and what doesn't, better yet work full time in one or two of them for a year. You want to be pretty certain this is what you want to do before you try for money and sign a lease. Believe me after a few 80+ hours weeks you may not want to bleed all that much.

 

[GOLDENEAGLECOFFEEMAN]

The Information above is well taken, as we are learning from it our self.

Being from the Wholesale Industry, we suggest following the above, but also
finding a Quality wholesale vendor, who will be eager to help you grow,
and save you a ton of cash on Equipment Purchase.

As we have suggested in another Post, Pc Equipment is cheep wholesale refurb or used,
and easy to fasten down, to prevent theft or injury to Customers,
Games and pc study programs for kids and Adults are 5 bucks ea, and a ton in that range.

That might be something Starbucks and other do not offer, and put you out front.

Rick H

 

[jamesjonson143]

As an experienced coffee shop owner Don Clarke knows that excellent interior design
and comfortable surrounding will attract customers who are prepared to pay a little more for their coffee. Equally important is the volume of trade passing through your shop - your objective should be to move as many people as possible through your shop in the quickest time possible.

 

[Tophie2]

Lots of money. Have lots of money.

 

[John P]

Tophie2 wrote

Lots of money. Have lots of money.

Really? Money doesn't fix bad decisions like: bad coffee, bad design and layout, bad location, bad employees, and bad customer service.

Preparation trumps all. It's not the amount of money, it's knowing what the right amount of money is, and spending it wisely. It's about taking the time to know what you are doing as a purveyor of coffee and as a business professional. I know a lot of failed shops and not a one failed because of money. Lack of capital before and during is just a symptom. The real problem was always poor decision making both before and after opening and poor product afterwards.

 

[acish]

Coffee Shop Business

First create a coffee shop business plan in a snap, know the most profitable location for your cafe and get effective systems for running your daily business, including budgets & bookkeeping with awesome samples and checklists. Find financing, how to hire employees, get discounted equipment. Plus using customer feedback to grow your business, develop a "Frequent Customer" program and reach coffee customers through the internet. Do not entertain the idea of any shop which cannot provide space for at least 60 seats. Buy small tables for 2 people, which you can put together to form larger tables. Customers will often come to your shop in pairs, and the British reserve inhibits people from being willing to share tables. Look for external seating area - even more important now that smoking in public eating places has been banned. Beware of committing to a full repairing lease if you take on premises in an older building. You really only want to be responsible for the shell that houses your coffee shop. Whatever lease you finally agree to, make time to film the property before you move in. This will avoid future arguments with the landlord as to the state the building was in when you took over the lease.

 

[Tophie2]

Tophie2 wrote

Really? Money doesn't fix bad decisions like: bad coffee, bad design and layout, bad location, bad employees, and bad customer service.

Preparation trumps all. It's not the amount of money, it's knowing what the right amount of money is, and spending it wisely. It's about taking the time to know what you are doing as a purveyor of coffee and as a business professional. I know a lot of failed shops and not a one failed because of money. Lack of capital before and during is just a symptom. The real problem was always poor decision making both before and after opening and poor product afterwards.

Yes really. My bank recieved a 3.2B$ bailout. And I am sure they had a great location(s) good design great layout etc.

 

[alsterling]

Yes, what John and ElPugDiablo said !

 

[aobecksy]

The hidden costs I under estimated from the get-go was legal, accounting, license and cleaning

We plan for 33% in revenues for inventory and improvement; 33% for bills and 33% draw (???what the kids have to eat too!)

 

[John P]

33% for draw is far too much in the beginning.
And it should be on profits, not on revenue. That would be complete idiocy.
Reality should be 0% for first three months.
maybe 15% for three to six months...
and then see how it goes after that.

It's not that you shouldn't expect profits from the beginning....provide you've planned right, are efficient, have a great product, and REALLY understand the importance of internal marketing over external marketing -- it's that you should put as much back into the business ASAP and grow that. If you need to draw a paycheck from the beginning, you aren't planning wisely.