Is a Coffee Shop a Good Investment? These 4 Branding Strategies Can Help

Is a Coffee Shop a Good Investment? These 4 Branding Strategies Can Help

is a coffee shop a good investment?

Updated June 4, 2020

Is a coffee shop a good investment? Creating a successful coffee shop isn’t easy. For one, coffee shop branding is competitive. There are a lot of players in the coffee shop game, from multinational brands to local coffee shops. There are, however, some coffee shop marketing tricks that can help you stand out. Here’s everything you need to know about whether starting a coffee shop is a smart financial move and how to help your coffee shop make money through savvy marketing techniques.

Is a coffee shop a good investment?

There are many elements that go into deciding if a coffee shop is a good investment for you. Typically, there are two types of coffee shops that a business owner can pursue:

  • Franchise: Some large brands offer the opportunity to purchase a franchise and start your own location of well-known coffee shop. An example of this is the well-known Canadian coffee brand Tim Hortons, which has some franchised locations. In this version of coffee shop ownership, you’d pay a franchise fee and in exchange be supported to start your business with help from corporate headquarters. Each company approaches franchises slightly differently, so the amount of personal leeway to be creative, and corporate support you get, vary depending on your situation.
  • Independent coffee shop: In this scenario you would either start your own coffee shop or purchase a coffee shop that is already operational from a small business owner.

The Bureau of Labour Statistics show that many small business fail within their first year, which can make starting a coffee shop a risky investment. However, there are some people who are successful at starting coffee shops consider a coffee shop a good investment. Those people take a very measured approach to all the elements that go into determining a coffee shop return on investment.

Calculating your coffee shop return on investment (ROI)

Knowing how much it will cost to start a coffee shop, and operate one, is a large part of deciding if a coffee shop is a good investment. Here’s a very simple way to understand how coffee shops make money.

Example: Let’s say you have an average of 200 customers a day, with an average sale amount of $5. When you multiply this by 52 weeks (assuming you stay open 6 days a week, with no holidays), that’d bring you to an average gross revenue of $312, 000.

You need to subtract from this amount the total startup costs of your coffee shop and the daily operational costs, including rent, supplies and staffing. Because of this, coffee shops typically have small margins. Expenses add up, and the average total sale from each customer is typically not that high. You need a high volume of customers to make owning a coffee shop a good investment.

However, even though each individual coffee shop might have small margins, several coffee shops added together can start to translate into significant earnings for an owner. That’s why creating several locations, or a small chain, can turn a coffee shop business into a good investment.

Managing coffee shop expenses and profits for a better investment

Turning your coffee shop into a good investment is going to require you to decrease expenses and increase profits.

  • Carefully monitor waste: Tracking and reducing your waste is going to be crucial when it comes to turning your coffee shop into a good investment. You’ll need to be diligent about managing your inventory. Know the shelf life of your products. If you end up with coffee that’s too old to brew, you’ll have to either donate it, give it away or dump it in the garbage. This is money wasted that will have a significant impact on your investment over time.
  • Prepare for staffing costs: The cost of hiring staff is more than just about paying wages — you’ll need to invest in staff training, uniforms and morale boosting events. If you don’t, you might end up with staff that are sloppy and cost you more in the long run. Staff who are ill-trained could waste food or coffee. Staff with poor morale could slack on the job or be rude to customers. Look after your staff so they’ll look after your business.
  • Manage pricing: Make sure you’re pricing your food and beverages so that you have both an exciting menu for customers and a decent profit margin on your offerings. Also, consider incremental annual price increases and more expensive seasonal items or pricing up best sellers.

Creating a cafe branding strategy

A large part of improving your coffee shop profits and making sure your coffee shop is a good investment will be dependent on your coffee shop branding strategy. Since there’s a lot of competition for coffee shops, the most important order of business for any local coffee shop hoping to create a reasonable return on investment is to focus on what makes you different, and how to create brand evangelists out of your customers. Here’s how to get started.

1. Building a customer base

One way to start building a customer base is to use mobile marketing — such as mass texting marketing — to start engaging with your customers. Many coffee shops create an initial wave of excitement by running a text-to-win contest and then continue to offer VIP discounts to people on their text list to establish a healthy customer base that keeps returning for more. Marketers have used this tool to increase the size of their overall customer base. This process does not take much time and you don’t have to be technologically savvy to get started. Once the marketing messages are circulated customers automatically join in.

2. Keep customers informed

As you add menu items, change your hours, host events and participate in your community, you’re going to want your customers to stay informed. Keeping your customers excited about what you’re doing is crucial to a successful coffee shop branding strategy. You can do this through a number of strategies such as social media, an email newsletter, an in store bulletin board or in store advertising, and SMS marketing. At a minimum you should consider providing regular menu updates through your communication channels. Also, give customers a reason to visit your shop by offering daily discounted deals of some sort.

3. Strategically timed updates

Since we all carry our cell phones with us all the time it is easier to get in touch through messaging. Coffee shops are taking advantage of this fact by providing timely updates. These updates may be sent in the morning encouraging customers to come in and have breakfast or perhaps during a slow period throughout the afternoon. In such times, mobile coupons can be used by coffee shops to give more incentive to customers to visit. All these measures add up to deliver a comprehensive marketing campaign.

4. Engage customers

Small coffee shops in particular thrive on customer engagement. Many people frequent their local coffee shop several times throughout the week and see the people who work there (and fellow customers) as part of their community. Having fun “Easter eggs” throughout your coffee shop branding strategy can help turn casual customers into regulars. For example, you could have a quiz contest or a special sale on holidays to get the customers attention. Be creative and think of ways to surprise and delight your customers when building your brand.

 

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