Our
Blog
Pro Tips for Running a Coffee Business
- December 31, 2024
- By Bernie Rosenstein
Many coffee business owners will face financial challenges in running their coffee business. These financial challenges may be indicative of foundational problems relating to how the business is operating or could be a result of the ups and downs experienced from seasonal trends or the general state of the economy whereby consumers decide to reduce their discretionary spending. In any case, whether you are an entrepreneur planning on starting a coffee business or an existing coffee business owner trying to improve your revenue and overall profitability, this guide will provide some tips and best practices that business owners can consider in running their businesses. Many of the topics in this guide are covered in further detail in coffee business education classes at the New Jersey Coffee School in Hoboken, New Jersey.
Efficient Coffee Bar Design
Efficient design of the coffee bar and employee workstation are of paramount importance in a coffee business. If done correctly, it can drive optimal productivity, reduce labor costs, and result in a superior customer experience. Ideally, baristas should have all the equipment and most of the ingredients (e.g., coffee, milk, syrups, ice) they need within arm’s length. Conversely, if a barista must take too many steps to get some of the ingredients needed to make a beverage, that is not optimal and over the course of a day will increase labor costs and slow down the customer line. It should also be noted that as the ratio of cold beverages to hot beverages has steadily increased over the years, many coffee business owners have had to retool their coffee bar design to accommodate the need for more ice to be readily available in the front-of-house bar. Business owners and their baristas should periodically review the efficiency of their coffee bar design and make adjustments accordingly.
Customer Flow
Business owners should review the flow of customers from the time they enter the shop, place their order, and pick up their order to ensure optimal flow and customer experience. Some best practices include:
- Allowing ample space from the entrance before forming the customer line
- Ensuring customers pass and can easily see any food cases and retail items for sale before getting to the counter to place their order
- Creating a designated area to pick up beverages and food apart from the initial customer line
Barista Training
Business owners should ensure that their baristas are properly trained. Some business owners will send their baristas to education classes or a comprehensive business training program such as the 2-Day Barista Training program offered by The New Jersey Coffee School. In many coffee shops, approximately 70%-80% of the revenue is derived from loyal customers. Baristas that can create consistent high-quality beverages and provide excellent customer service play a key role in securing those loyal repeatable customers. To be effective, baristas need the knowledge, skills, and tools to master their craft which requires much more than just knowing how to make beverages. Highly skilled baristas will be knowledgeable about the science of coffee, health department protocols, where coffee is sourced, each product on the menu, equipment handling and maintenance, and much more. They are responsible for engaging with the customer and providing exceptional customer service. And they can play a role in increasing sales and tips by upselling or cross-selling other items on the menu to customers.
Experimentation
Business owners can experiment and try new things that may help to increase their revenue. Some examples include:
- Testing or introducing new items on the menu (e.g., a signature drink or new food item) that may be unique, and customers cannot get from the competition.
- Changing the placement of the food cases or where retail goods are positioned. For example, just changing the position of the “Grab and Go” food case with salads, soups, and sandwiches so that customers must walk pass the case before they get to the counter to place their order can have a positive impact on sales.
Reduce Waste, Giveaways, and Potential Theft
Business owners should create a process to measure and identify causes of waste and take corrective action to reduce it. One way to measure the amount of waste is to take periodic beginning and ending physical inventory counts and compare it to the amount of product that was expected to be used for the customer purchases. Another approach is to review the cost of goods sold trends and look for unusual trends. These approaches will sometimes help identify other issues such as the number of giveaways to friends and family or theft of product. In any case, reducing waste can help improve your profit margin.
Review of Coffee Beverage Costs and Profit Margins
Business owners should periodically review the cost and profit margin of each beverage on their menu. As a general rule of thumb, the total cost of coffee beverages (including all ingredients and paper goods) should average approximately 15%-20% of the selling price. This review will help business owners reset their prices periodically. Additionally, it will highlight high-margin beverage items that business owners may want to push and low-margin items that owners may want to consider eliminating from their menu.
Optimize Labor Costs
Business owners need to review labor costs and trends on a granular level. The goal should be to match the labor required in any given shift to the sales cycle. To best control labor costs, staff shift schedules need to be created by projecting the labor hours/cost for each shift and day and comparing that to the expected sales to determine if the labor cost as a percentage of sales is reasonable. Successful business owners will review this every hour of every day to optimize labor.
Marketing Plans
Business owners should periodically review their marketing strategies and tactics. Strategies employed should appeal to the owner’s target market. They should review tactics and channels (e.g., social media, website, digital marketing) used to brand and market their business. They should also consider creating a loyalty program for their business to increase the number of visits and total spend of repeatable customers.
Utilize Technology and Automation
Business owners’ POS systems provide robust reporting and analytic reporting and tools to help manage their business including sales reports, labor reports, menu performance reports and much more. Business owners should review this information on a regular basis and use the data received to make strategic decisions and adjustments to their current operations. This includes using the data to help with staff and shift scheduling decisions. Additionally, many POS systems will help business owners effectively manage inventory. In summary, POS systems provide several powerful tools that can help business owners manage many aspects of their business.
Advancements in technology also continue to affect more of the equipment utilized in coffee shops and can have several benefits including increasing customer “speed to serve” times and streamlining the labor process. Examples include commercial grinders with built in scales, milk steaming automation equipment, and espresso machines that can produce consistent high-quality beverages without much barista involvement. While the use of this equipment may not be appropriate for all coffee businesses, the role of the barista in some of the environments that utilize this equipment is changing such that more time is spent on providing excellent customer service and helping the owner better manage the business.
Coffee Business Courses
Business owners can benefit by taking a coffee entrepreneurship class, specialized coffee business courses, or by seeking advanced coffee business training classes. At the New Jersey Coffee School, located in Hoboken New Jersey, our Professional Coffee Business Training classes go into much more detail about the topics and best practices mentioned in this guide and provide deeper knowledge, strategies, tools, and benchmarks that can further assist a business owner in running their business.
Our 3-Day Professional Coffee Business Class provides coffee and business knowledge, skills, and tools to help business owners understand what it takes to effectively market, brand, and profitably manage a coffee business. Our courses cover both coffee business growth tactics and strategies to help business owners better manage their business.
Summary
In summary, running a coffee shop is an exciting and rewarding endeavor as part of the coffee journey for any business owner. However, running a coffee business is no different than running any business – it requires constant review of business practices and trends, and the ability to make strategic and operational decisions and adjustments to deal with financial challenges or improve operating results.
This guide provides tips for running coffee businesses and may help mitigate some of the financial and operational challenges some owners face. While there are no guarantees, the coffee shop success tips and best practices herein can help business owners increase their chances for success in their business.