Although a lot of new coffee shops have popped up over the past 3-5 years, the coffee shop business still has growth potential as long as the shop management and marketing are done well. Today, MHA invites you to learn what you need to know if you want to open a successful coffee shop as you please customers, generate good profit and make your business survive long-term. The main topics are divided as follows:
- Know Your Target Group: You need to understand that coffee shops in different locations have different customer groups. For example:
- Coffee shops near academic institutions. Your customers include students who tend to show up in groups of friends. They have the buying power. Although some of the items are a bit pricey, they can split the costs of the coffee or snacks. Coffee shops in these locations need a well-diversified menu because these customers like to order items other than coffee, or cocoa, or chocolate smoothies. You can do this by adding cakes, pies, ice cream or bingsu to your menu. If you’re located near a university, free electrical outlets and Wi-Fi or a conference room should be provided because students tend to sit and read books while ordering a lot of coffee during exams.
- Coffee Shops near Offices: Your customers include working age-office workers. Shops in these locations need to emphasize coffee because these customers mainly order coffee. There’ll be a lot of customers walking in and out of your shop. A lot of them will choose shops based on how fast they are or how short their line is rather than the taste of the coffee, because they need to hurry up and go to work. Therefore, the big question is how to make coffee as fast, and as good, as possible. Great snacks for this customer group include things they can eat with their coffee or at their desks like croissants, sandwiches, cookies, etc. Your shop can add special menu items like cold brew coffee that can be made in advance and stored in the fridge to boost your shop’s income. Free electrical outlets and Wi-Fi should also be offered.
- Coffee shops at gas stations. Drivers make up the majority of this customer group, so the coffee needs to be strong and a bit high in caffeine. This group is in a rush to buy and go. They won’t sit long in your shop, so the coffee needs to be served quickly. It’s not necessary to provide an electrical outlet or Wi-Fi. Your shop would need to open early and close late to catch the early customers. You can sell coffee along with snacks they can conveniently eat in their workplace or car. Customers in this group can become regulars, because they drive by your shop daily.
There are still many other locations where you need to understand the customer groups, but the first thing you ultimately need to know is who your customers are, what their age range is, when they drink coffee and what they like to drink or eat, so you can plan your menu and arrange your shop to suit their needs as well as possible.
- Know your competition, especially other coffee shops in the same area within a 5-km radius. Of course, you need to analyze your competition’s selling points first and then plan to make your shop stand out. Analyze the shop’s components as follows:
- What kinds of coffee does the competition offer? Check the shop’s beverage and snack menu. What are their best recommended menu items? What snacks are there? You could sample some of them to see what their signature menu items are really like.
- What is the price range for each menu item? Premium or medium? And which customer group does the shop attract?
- What’s the shop’s decoration style? Coffee shops usually have their own character which is reflected in their internal and outdoor decorations as well as their employees’ uniforms.
- What promotions do they offer? What have they got other than the discounts, exchanges and freebies?
Basically, you have to not fear your competition, but completely analyze them instead. However successful your competition is, your shop has to be even better.
- Know Your Coffees: Each type of coffee has its own unique flavor and caffeine content suitable for different groups of customers. For example:
- Arabica stands out for its fragrance, smooth sweet flavor with a hint of sourness, round body and low caffeine content. It likes cold temperatures of 15 – 24 °C and must be grown at high altitudes of 800 – 1,000 meters above sea level and higher. That’s why, in Thailand, it’s mostly grown in the northern region on hills in provinces like Chiang Rai, Chiang Mai, Lampang, etc. The flavor varies with the location and roasting method used.
- Robusta is on the pungent side. The flavor is also stronger and bitterer. Robusta is grown at lower altitudes of only 500 – 600 meters above sea level. It likes a humid environment with a temperature of 24 – 36 °C. In Thailand, robusta is mostly grown in southern provinces like Chumphon, Ranong, Suratthani, etc., with the majority being made into instant coffee because of the higher caffeine content than arabica.
The different characteristics of coffee beans also affect each customer group’s coffee preferences. For example, students don’t like coffee that’s too strong or bitter, so you might choose to use medium-roasted arabica. For the gas station customer group, you could use robusta or a strong-roasted arabica for a stronger, more concentrated flavor that’s great for driving. Office workers tend to prefer coffee with a lot of caffeine, so they can stay alert all day long. For this, you could use a robusta/arabica blend for a nice fragrance but with a bitterer flavor.
- Know Your Equipment: The top coffee shop equipment we usually think about includes the following:
- Brewer – There are lots of brewer models within a wide price range; some of them costs six figures which will affectively drive the price per cup of coffee up. For a new coffee shop, we recommend that you mainly look at your own budget and target groups. If your calculated sales are over 100 cups per day, you should check out large brewers with a boiler of 7 liters and over and 2 spouts, so you can keep up with the rush-hour orders and keep the coffee brewing all day.
- Coffee grinder – This, too, needs stability. The ground coffee needs to be consistent. You shouldn’t increase the heat for the coffee or it’ll be less fragrant. Beginners should try an automatic grinder first, because it’ll reduce loss and let you brew coffee faster with a consistent flavor.
- Tamper for Packing and Evening the Ground Coffee before it Goes into the Brewer – You could say it’s an essential piece of equipment for a barista. It’s usually given as a freebie with the brewer or you could try looking for a macaron tamper, because it’s great for controlling the flavor, no matter who uses it.
- Blender for making smoothies – You need a size that can blend ice and has a good speed for making each cup. You should choose one with high wattage or at least 1,500 watts and up.
Moreover, there is measuring equipment like shot glasses, measuring cups and scales to consider. You should choose standardized ones, because it’ll affect the coffee flavor in every cup if the amount or measurement is off. The fridges and freezers you choose should be the right ones for your shop, too.
In conclusion, choose standardized equipment or trusted brands and, most importantly, consider the post-sale services for the equipment.
- Know Your Coffee Recipes: At the very least, you first need to know the following 5 basic coffee recipes:
–Espresso, Latte, Iced Cappuccino, Iced Espresso, Mocha Smoothies
There are many institutes that offer courses on brewing coffee that you can join. Or you can try learning some basic coffee recipes and brewing methods for free in our “Open a Coffee Shop to Make Money” course! (Click to sign up in the upper-right corner.)
- Know Marketing for the Coffee Business: You can’t start a coffee shop on passion alone. It won’t help your shop survive in the current business system. So, you’ve got to first understand coffee shop marketing. You could start by performing a feasibility study for your business. You need to know who your coffee shop is selling to. Where are your customers? And what are they willing to pay? Are there other distribution channels? How do you operate? What are the operation costs? What is the total investment amount? Try thinking up some scenarios first and then find some information to back up the ideas for your coffee shop and you’ll see whether you’ll make or lose money.
Once you recognize the possibilities, try making a business plan first because it’s like trying out your business on paper before the actual investment. It can help you choose the right strategies for your business management, so you can make as much profit as possible. The business plan requires you to collect real data or to research the market before collecting the data. In any case, this business plan can also be used in your loan application at financial institutions.
Although the business management aspect of it makes all of this sound complicated, it’s essential that you understand the details first. And if you want to learn more about the feasibility of a coffee shop, try out our free “Restaurant Business Feasibility Study” course (click to sign up in the upper-right corner) taught by Ajarn Sethaphong “Seth” Phadungpisuth, Managing Director of Gnosis Co., Ltd. and restaurant and franchise business consultant.
These 6 topics are only the basics. Before you decide to open your own coffee shop, if you’re not yet satisfied, try out our free “=> Open a Coffee Shop to Make Money” course by Ajarn Benyapa Naowan, brewing instructor and 4-time barista champion, owner of the nickname Coffee Witch and owner of the Benyapa Coffee Academy. You might get some ideas for your own coffee shop. Come back for some more restaurant management tricks from MHA in our next article!