Opening a coffee shop is incredibly alluring 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.
Is Owning a Coffee Shop Profitable?
Coffee is an incredibly popular drink enjoyed throughout the day by millions of people. But just how much does this popularity translate into 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, you can ensure your coffee shop will be a 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.
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?
On average, a coffee shop’s profit margin is 12% of all the coffee products on sale, meaning each cup of coffee sold allows for 12% of the money to remain after expenses.
According to Project Café UK 2021, the branded coffee shop sector was valued at £3.06bn in revenue in 2020. With 9,159 outlets, each made more than £327,000 on average, which is impressive considering the impact the pandemic has had over the retail and hospitality sector.
How Much Profit Does a Coffee Shop Make?
The business platform Bizdaq states that the average turnover of a small independent coffee shop is between £100,000-£150,000, with 22% of all cafés and coffee shops achieving this. However, around 5% have a turnover of £25,000, and only 12% will make more than £250,000.
These numbers can increase drastically with the help of a franchise. Franchises can offer you support, advice and valuable resources such as a successful and established business model.
Why Do Some Coffee Shops Fail?
With all this enticing prospects, you might be wondering why some coffee shops don't finf the success they seem to be guaranteed.
The most common reasons a coffee shop fails include:
- Being unprepared
- Lack of business plan
- Unprepared rental lease
- Overspending on equipment
- Overestimating the cash flow
Starting any business requires research and preparation. Failure to do so can cause an array of issues to arise.
Coffee shops offer delicious delights and comforting drinks that can be enjoyed throughout every season, but these services still need to be supported by factors such as reliable business plans and an understanding of your enterprise.
Is it a Coffee Idea to Open a Coffee Shop?
When done right, opening your own coffee shop can be incredibly rewarding.
Starting up on your own will require a lot of perpetual leg work and can come with increased risk. Whereas investing in a franchise means you'll get more support and develop an in-depth understanding of the industry from the very start. The advantages provided by franchising and being set up with everything you need from the beginning could make the difference between success and failure in the long term.
Here at Esquires, we offer support that we know will help you to set up your coffee shop business to reach its fullest potential. Among other resources, all new franchise partners participate in a dedicated training program, which will fully prepare you to open a successful coffee shop. You can find out more below.