The coffee shop business in the U.S. is big news. The industry’s combined yearly income rakes in a whopping $11 billion in revenue. The number of establishments in active business countrywide exceeds a staggering 20,000 stores.
Some of the leading coffee shop companies in operation include the highly successful Starbucks, Tea Leaf, Caribou, Dunkin’ Donuts, Coffee Bea, and Diedrich (Gloria Jean’s).
Interestingly, the coffee industry in the U.S. is concentrated more at the top and is somewhat fragmented at the bottom. To illustrate this, the top 50 companies control more than 70 percent of the overall industry sales.
Many people have asked the big question: What is the secret to running a highly successful coffee shop business regardless of your location? We have the answers here.
What is the Secret of Success?
1. Understand Your Business
Many businesses don’t quite understand that they satisfy a critical need for their customers. Sadly, this includes a good number of coffee shop owners. Due to this, most businesses often concentrate on the wrong segments of their offer.
You should know that customers visit your coffee shop for plenty of reasons. They don’t do that just to assuage thirst and hunger. Many customers want to get an escape away from the stresses of the office. Others want to get the right environment to grow or maintain a relationship.
Many other customers seek the right environment to do reflective work, an opportunity to engage with the staff of a familiar coffee shop during lonely times, or a place to make business deals and reach well-thought-out agreements.
As a coffee shop owner, it is essential to understand these unique needs of customers that you are privileged to cater to. Once you do this, you can now construct your offer in a better way, making decisions that will keep your customers returning. Ultimately, you will maintain the success of your coffee shop.
2. Serve the Finest Espresso in Town
Consistently serve the finest espresso to customers. Of course, in business, it is quite rare to discover a single product where offering 100% consistent quality is the best commercial decision to make.
Regardless, espresso coffee is one of the rare products where offering a consistent 100% quality really matters. Indeed, customers will readily walk past several other shops just to get the best espresso.
The sweet thing is: This single factor means you don’t have to set up business in the most expensive, highly visible location. Go ahead and buy the best espresso coffee machine. Install it, complete with a demineralizer and a water purifier. Make sure you use a conical grinder. Buy only the top quality Arabica. Essentially, this means 10 % freshly roasted Robusta beans or Arabica 90%. Ensure each cup is prepared by a fully trained barista who knows his game inside out
3. Set the Pricing Right
Set the pricing on your products according to the perceived customer value. Avoid accounting- determined-markups. Set the price for some popular items at the coffee price or below. Make up for this potential loss by setting higher margins on items that you offer exclusively or that appeal to the don’t-care or addictive mindset of the customers.
Be careful to avoid adding a blanket markup to the entire assortment. Instead, price the items line-by-line, following what the market can bear and customer expectations.
4. Promote Multiple Sales
You can take this to the bank: Your coffee shop can never make enough money to pay all the bills that must be cared for. Yes, this is not possible from merely selling coffee alone. Granted, most customers may be coming to your shop with just one motivation: To take a cup of coffee. They must, however, make some multiple buys if you are going to make a success of your business. Promote these multiple sales.
As a sensible target, coffee sales should make a maximum of just 40% of your weekly sales. If you make a two-item sales for every customer transaction, you would be moving on the right track. Make sure the traditional accompaniments for coffee, including muffins, cakes, and cookies, are placed quite close, at the sales point. The shop should also offer some cold drinks, cold food, and hot food. This gives you a great chance to make multiple sales.
5. Utilize Loyalty Card Magic
Loyalty cards work quite well. Ensure you are using a quality card. This should brave the wear and tear and still look good in a customer’s wallet. Indeed, nothing compares with the delight of a café owner seeing a new face light up among the customers when they receive a loyalty card for a ‘buy seven get one free’ type of deal.
Remember to tick off six of these so that the customer can get one free the next time they purchase. Yes, this is one of the cheapest methods ever to win over new customers to your shop.
6. Target Takeaway Customers
You may have in your coffee shop useful accessories like free Wi-Fi, plenty of in-house entertainment, table service, and comfortable lounges. Can you imagine the customers sitting in the shop for hours on end, enjoying all these benefits while drinking one cup of coffee? Of course, this will not pay your rent.
Some highly successful coffee shops have just a few not-so-comfortable bar stools and benches. This makes the shop look bustling and loved. Others simply concentrate on building the takeaway section of the business, a brilliant move.
Remember that, the takeaway customer actually pays the same as the sit-down patron. The advantage of the former is that there are no occupancy costs. Indeed, by the time the sit-down customer finishes sipping on their cup of coffee, you can even serve ten takeaways.
Meanwhile, the sit-down customer is probably hovering around, happily chatting with friends on Facebook, and using your free Wi-Fi to the maximum. He is not paying an extra penny. And he is not in a hurry to order another cup of drink.
7. Be Present on the Front Line
Just like restaurants, coffee shops are more of a people/service than a goods/transactional business. A goods or transactional business can actually succeed when the owner is away.
A coffee shop, on its part, usually needs the owner’s attention, care, and engagement. Customers expect you to be there. The staff is often far bubblier when the owner is on hand, making coffee or taking orders. It helps a lot if he is busily hovering around and actively caring for the shop.
8. Use the Right Strategies
It is vital to quickly gain traction in a competitive business like running a coffee shop. You must have a precise angle on how to get the customers to give you a go in the initial stages. You must also have a plan for keeping customers returning and even refer you to others, especially their friends.
9. Embrace Counter Service
Counter service happens to be the cheapest, most efficient service system that any coffee shop can employ. Happily, it is entirely accepted by customers these days, thanks to the phenomenal global success of McDonald’s coffee shop. Actually, Counter service is hassle-free, both for you and your customers as well. Why? There are many good reasons.
For one, it helps to reduce your wage-bill significantly. Without delay, get the customers ordering and paying upfront. Assign them a number with their drinks. Deliver the drinks or better still, when the food is ready, make a buzzer call them up to the counter.
Embracing counter service means that you can manage the peak demands that naturally occur in coffee shops during breakfast and lunch hours. Moreover, it is less stressful for all. Further, it ensures that the friendly banter between customers and the staff is retained as an essential segment of your offer.
10. Pre-Make Food
Many custom-made assortments generally assume that every customer knows precisely what he wants. They don’t. Instead, customers usually consider you as the ultimate expert in this matter. They typically hope that you will suggest what combination of foods or drinks that they should try.
In the context of a coffee shop, it is often best to pre-make the food. Leave the matter of custom- making strictly to coffee. Moreover, custom food is a relatively high-cost option because you cannot accurately get the economies of scale. It also limits your turnover in peak periods.
There is no single secret to running a successful coffee shop. Overall, the biggest secrets in running any business boil down to varied factors like hard work, considerable experience in the industry, sheer luck or a combination of these.
Primarily, success in running a coffee shop may be defined as managing a financially sustainable business, and that results in an appropriate ROI for its owner. It does not necessarily mean giving your customers everything that they wish to get. Try the 10 secrets for success in running your own coffee shop. Like many others, you might get there, at the pinnacle.