Opening a coffee shop is an alluring prospect due to the large, consistent market and potential for success. Coffee franchises are increasingly sought after because of their affordable rates and reliability in making money – but just how profitable can they be?
Is Owning a Coffee Shop Profitable?
The popularity of coffee isn’t going away any time soon, and with so many of us relying on local coffee shops for our caffeine fix, it’s no surprise that, in the right hands, this popularity can translate into impressive profitability.
Coffee Shop Profit Margins
Coffee shops are incredibly profitable thanks to their high profit margin and low cost of stock. With effective cost management and market expertise, there is a lot of potential for success.
For example, a wholesale bag of beans will cost between £10-18 per kilo, which will hold 120-140 servings per bag. One cup of coffee will cost around 10p to produce, with an extra 6p for the milk.
Gross Profit For Average UK Coffee Shop
The average cost of a cup of coffee in the UK is £2.45, so in total, you will have earned £2.29 per cup, a 93.5% gross profit.
What is the Average Profit Margin For a Coffee Shop?
A UK coffee shop’s profit margin can vary depending on a number of things – size, location, brand – but the typical range is between 5 and 15% with the average being around 12%. This means each cup of coffee sold allows for 12% of the money to remain after expenses.
How Much Profit Does a Coffee Shop Make?
The World Coffee Portal’s 2024 Project Cafe UK report estimates that the UK branded coffee shop market is valued at around £5.3 billion – an 9.2% increase over the previous 12 months. Outlet growth and steady sales continue to show the enduring profitability and desirability of opening a coffee shop.
The average turnover of a small independent coffee is between £100,000-£150,000. Around 22% of all cafes and coffee shops achieve this, while 5% have a turnover of £25,000, and only 12% will make more than £250,000.
These numbers can increase significantly with the help of a franchise. Coffee shop franchises provide support, market expertise and valuable resources that help you find success with far fewer risks than going it alone.
Why Do Some Coffee Shops Fail?
Around 60% of small independent coffee shops fail within the first five years of operation. Even with such potential for profitability, new coffee shops are not guaranteed success.
Some of the most common reasons coffee shops fail include:
- Owners being unprepared
- Lack of a business plan
- Unprepared rental lease
- Overspending on equipment
- Overestimating the cash flow
Even if you have a willing customer base primed to love your products, this needs to be supported by reliable business plans and entrepreneurial expertise.
Franchise Vs Independent Coffee Shop Success
Again, opting for a franchise rather than a start-up can dramatically increase your likelihood of success. When you’re backed by an established brand that already has a robust operational model and great products in place, you’ve instantly got a competitive edge.
Is it a Good Idea to Open a Coffee Shop?
When done right, opening your own coffee shop can be incredibly rewarding. Our overview of how much it costs to open a coffee shop provides a good indication of the kind of investment you'll have to put in to enjoy this profitability.
If you’re concerned about the risks associated with investing in an independent, franchising might just offer the perfect path for you. Here at Esquires, we help each of our franchisees get their store off the ground and provide ongoing support to ensure you can reach your full potential.
Think you’ve got what it takes to become an Esquires franchise partner? Apply today and become one step closer to enjoying the profitability of a coffee shop!
