How to open a coffee shop?

If you’ve always been thinking of becoming your own boss and you love making coffee, there’s an attractive industry in the UK that may be the right choice for you. We talk about coffee shops. 

Coffee is among the most popular foods and beverages in the world. It undoubtedly creates opportunity-rich markets for business enthusiasts.

In the following sections, we explain in detail how to open a coffee shop. We cover some key topics related to this market and provide a step-by-step process for starting as a business owner.

What is a coffee shop?

It may surprise some readers to find out that coffee shops, sometimes called cafés or coffeehouses, are classified as restaurants that sell coffee drinks, tea, cakes, and even food, like sandwiches and light meals. 

Most coffee shops have various menus that include drinks like lattes, cappuccinos, etc. They often provide cosy and inviting atmospheres and offer the perfect space for relaxing with friends, studying, working, or enjoying your free time.

How profitable is a coffee shop?

If you plan to open a coffee shop, one of the first things to consider is the current market’s state and profitability. 

Overall, the café business is popular worldwide. It enables coffee shop owners to enjoy fruitful financial gains.

The UK coffee shop market is explicitly a dynamic and profitable environment. In 2023, research revealed more than 9,500 coffee shops, showing a 4.16% industry growth from 2022. 

Valued at £15 billion annually, this industry consists of more than 30,000 cafe or coffee shop locations and other venues serving coffee as part of their offering. 

In the UK, the most popular profit margins in the coffee shop business range between 5% and 15%, with an average of 10%. Of course, these margins are highly affected by factors like operating costs, staffing costs, ingredient costs, and other expenses. 

While many coffee shops are branded and well-known, other smaller local competitors are achieving extraordinary success. 

This proves that the industry has a healthy level of competition that allows space for new business ventures.

What makes coffee shops successful?

The rise of the café culture in the UK undoubtedly influences the popularity of coffee shops. But what are the components that shape a successful cafe?

The following things usually define a successful coffee shop.

Free Wi-Fi 

Many coffee shop owners provide free Wi-Fi to potential customers. That is an excellent strategic decision, as most cafe-goers seek more than just coffee when they visit a coffee shop. 

Many people change their working locations with the rise of remote work and home office employees. 

Among other convenient destinations are coffee shops – a much-preferred option. 

Free Wi-Fi provides a reliable and convenient working environment for these digital nomads, encouraging them to spend more time with your business.

A diverse coffee menu 

Another element that shapes a successful cafe is the wide coffee menu.

Providing a broader range of options for customers to choose from creates new opportunities for exploration. It also increases your chances of attracting new customers and establishing strong bonds with existing consumers. 

While serving the classics, like espresso, latte, flat white, cold-brewed coffee, and café macchiato, is essential, there are plenty of other coffee products to explore. 

In addition, as a coffee shop owner, you don’t have to limit your offering to strictly coffee. You could consider preparing food and complementary dishes or desserts that might encourage shoppers to increase their spending with you, positively influencing your cash flow.

Great coffee with great margins 

Next, it is crucial to ensure you provide an exceptional experience with great coffee. However, you should also take into account the other side of the equation – profit margins. 

The quality of the coffee you offer attracts customers from the beginning. You will ensure that customers return for more when you provide an excellent taste. That will lead to more regular clients and the growth of your business. 

At the same time, achieving satisfactory margins means that coffee shop owners can invest in different parts of the business. For example, this could be a high-quality espresso machine or something else.

A convenient location 

Last but not least, a convenient location can dramatically influence how many customers you can reach daily.

Whether you choose to open your coffee shop in a central location or in a neighbourhood with low competition, convenience is key.

This factor will impact your foot traffic, sales, and overall profitability.

How to start a coffee shop business? 

Starting a coffee shop requires a strategic approach and a step-by-step plan.

To help you confidently tackle this journey, we offer a detailed guide on starting a coffee shop business in the UK.

Conduct research

Market research is the first and most important part of creating a coffee shop business.

Data is one of the most essential things in the world, and this is no exception when it comes to the coffee shop industry. 

Before you start, invest time and resources into uncovering all the essential details surrounding the coffee shop space. 

Some key things to look for throughout your research include:

• The level of competition in the market: How many other coffee shops are there in the area where you plan to open your coffee shop? Is there enough room in the industry for new market entrants? 
• Renting or buying: What type of premises will you need to open a potentially successful coffee shop? Will you need to rent out a space, or is it more reasonable to invest in purchasing land or an already established place?
• Start-up costs: What are the start-up costs associated with opening a coffee shop like the one you want to set up? Will you be able to afford this business, or will you need to borrow from friends or family, banks, or other institutions?
• Profitability expectations: How profitable are other coffee shops in the area? Can you expect to accumulate similar sales volumes, or will you need to gradually improve their performance over time? 
• Target audience: What identifies the perfect coffee shop customer in your area? What’s the purchasing impact of different customer groups, and how much are they willing to spend for coffee?
• Coffee-specific research: What types of coffee will you need to invest in, and what makes a good cup of coffee? Will you have to roast your coffee beans, and if so, what does this process look like?
• Investment in machinery: What types of coffee machines will you need to make high-quality coffee for your customers? How much do you expect to invest in machinery?
• Legal restrictions: Are there any legal restrictions that may create burdens when opening a coffee shop? What licences and certificates will you need to obtain to run your business? 

You can get access to this information via various methods and channels. 

For example, you could establish communication with other coffee shops that have been operating for several years. If the owners are open to sharing, you can ask for recommendations on educational resources that have helped them get started. 

Alternatively, you can sign up for online courses specifically targeted at the coffee shop business space or provide general business skills.

Moreover, you can discover plenty of free online resources on statistics, case studies, and other valuable data. For some points, you’ll also need to contact official authorities in the UK to gather details related to the legal aspects of running this business.

Choose a concept

When opening a coffee shop, it’s crucial to select a concept before proceeding to the other steps of the process is crucial. 

During this phase, one of the first things to establish is whether it’s better to open an independent coffee shop or a franchise.

Independent coffee shops

Managing an independent business goes hand in hand with multiple advantages and disadvantages.

For instance, independent coffee shops are free to make their own decisions. They can create a unique brand identity, style their decor and interior as desired, and establish an atmosphere that fully reflects the owner’s coffee shop ideas. 

This means greater flexibility in menu selections, ingredient sources, and others. 

However, perhaps the greatest benefit of independent coffee shops is their ability to offer unique coffee blends and products. 

On the other hand, opening an independent coffee shop is usually more challenging in financing a business that competes with other, larger ventures. That’s why you must carefully analyse all the risks of running a small business. 

In addition, opening an independent coffee shop means you’ll need to invest heavily in marketing, as your brand won’t be recognised from the start.

Franchise coffee shops 

In the case of franchise coffee shops, avoiding some of the negative aspects mentioned above is recommended. 

For example, owners can instantly take advantage of the brand’s established recognition and reputation. It means quick access to customers without much marketing.

Furthermore, franchise businesses can enjoy training and different kinds of support, which makes the learning curve easier to handle. 

Most importantly, franchise coffee shops work with a result-proven business model that has already been validated and enhanced to give maximum results.

However, in this scenario, owners must make all decisions based on strict operational standards, which include specific requirements for menu options, branding, and more. 

Moreover, franchise coffee shops must pay taxes and marketing fees, which affect the owners’ final profits. 

Once you’ve decided which type of coffee shop is most appropriate for your goals, you can further specify your concept. If you plan to open an independent coffee shop, this is the stage at which you can plan your shop’s theme, interior, menu, additional products or services offered, name, and more.

Find a source for your coffee beans

Above, we mentioned some key factors that make a coffee shop successful.

However, the quality of your coffee is perhaps one of the most important ones. 

With this in mind, discovering great sources of high-quality beans is extremely important.

Many cafes shop for wholesale coffee beans from a coffee roaster. We recommend considering a few factors if you choose to explore this option.

For starters, make sure you are fond of the coffee provided by the roaster. This is a sure indicator that your customers will also appreciate the quality. 

In addition, keep in mind that expensive beans will result in higher-cost coffee drinks for your customers. Consider the price ranges that best suit your audience and make strategic decisions based on this information.

Research the coffee roaster’s complete offering and check whether it can provide the flavours you are looking for. 

Last, don’t forget to research where the roaster is located and whether they are fair trade-certified.

Write a business plan

Next, you’re ready to start creating your business plan, which is a central part of starting any business. 

A business plan is crucial both for the business owner and for any potential investors in the business. 

If you’re hoping to attract funding, you’ll need to present your business idea via a solid business plan with data-backed arguments as to why the investor may be interested in your proposition.

To create a coffee shop business plan, you’ll need the following:

• Basic business concept – this is the introductory part of your business plan. It aims to summarise what the business is, what it offers, and how it’s different from others in the area;
• Target market – a detailed description of your target customers. Briefly explain the demographics of your ideal client, what type of products they’re interested in, what coffee flavours they’re most likely to prefer, their spending patterns, and more; 
• Marketing plan – business plans feature a section describing the marketing strategy of the venture. In this part of your plan, outline the marketing channels and techniques you plan to use to promote your coffee shop and attract more customers to your business. For example, consider providing loyalty cards with different benefits. One idea is to offer free coffee after a certain purchase amount has been reached or after the fifth or tenth purchased coffee;  
• Competitor analysis – include information on local competitors, such as how many other coffee shops are in your area, what types of products they serve, what their prices are, and other important details; 
• Expenses – a section dedicated to overhead costs, including staff, location, utilities, and other variable or fixed expenses; 
• Revenue projections – an outline of the financial forecasts based on the above information.

You can use these main points to create your business plan. Alternatively, there are plenty of free online business plan templates available. You can personalise them based on your specific needs.

File for permits and licences

Regardless of the type of coffee shop you plan to open, you’ll need to register your business. 

In addition to this basic step, you’ll need to consider any further licences and permits you may be required to obtain. 

For instance, if you plan on serving food, it’s key to familiarise yourself with the Food Standards Agency (FSA) – a UK government body that regulates food safety. The FSA provides in-depth guidance on establishing a food business (coffee shops included). 

It’s also essential to read and understand all the details and requirements outlined in the Safer Food, Better Business leaflets created by the FSA. 

One of the most important things to remember is that it’s mandatory to register with the environmental health service at your local authority a minimum of 28 days prior to commencing your coffee shop business. The registration can be done for free online via Gov.uk.

Find a commercial space

Another key factor for success is location. 

A good location will guarantee more foot traffic, a higher customer flow, and, most importantly – more sales. 

Ideally, the main goal is to choose a convenient location for your customers and provide enough space for you to unfold your creative ideas. 

When evaluating different location options, familiarise yourself with the area’s population density. Based on your market research and this information, you can predict the number of customers you can expect to see in your coffee shop daily and monthly. 

In addition, don’t forget to consider the space’s properties in terms of convenience for you and your staff. 

Will your employees have enough room to comfortably work with espresso machines or coffee grinders? Will there be enough space to store your machinery, ingredients, accessories, and other physical items?

It’s also crucial to carefully calculate the costs of renting or purchasing your premises. Explore your options for business loans and ensure that you have enough financial resources to cover operating expenses.

Find the best payment solutions

The next stage of creating your coffee shop business is discovering the best payment solutions to make paying convenient and stress-free for you and your customers. 

In most cases, coffee shops prefer to work with POS (point-of-sale) systems that handle sales and payment transactions at the point of purchase. We talk especially about card machines.

The advantage of this type of solution is that it’s digital and makes paying extremely convenient. With an easy-to-use touchscreen and interface, POS systems are a popular substitute for the classic cash register. 

When you partner with a POS provider, you can also offer your customers the convenience of different payment types. When you accept a wide range of payment methods in your coffee shops, you will increase purchases and happier consumers.

Hire and train your staff

Customer service can make or break any business, including coffee shops.

To provide excellent customer service to your consumers, you must hire wisely and train your staff to serve the best coffee, create outstanding latte art, and leave a smile on every customer’s face. 

If you’re not prepared to invest in extensive barista training, consider hiring professionals with more experience. However, in most cases, these specialists will require a higher salary in return for their work. 

Regardless of your staff’s experience level, regular training is essential to ensure everyone understands your expectations. 

For example, show your staff how to make coffee beverages according to your standards, help them learn more about the coffee itself, and ensure they know all the flavours offered in your coffee shop.

This approach guarantees they’ll be well-prepared to answer customers’ questions and provide added value during every conversation.

Open your coffee shop when you’re ready

Although the steps outlined above may seem simple, they may sometimes take longer than expected to complete. 

If you’re struggling with a certain stage of the process or you have doubts, don’t rush. Take all of the time you need to make the right decisions. This will help you prevent undesired situations and guarantee that you’re on the right path to success.

Conclusion 

Opening your own coffee shop requires a step-by-step process and informed decision-making. 

By following the tips and guidance provided above, you can enjoy peace of mind knowing that you’re on the road to establishing a profitable, reputable, and quality coffee shop in the UK.

Frequently Asked Questions

How much does it cost to start а new coffee shop in the UK?

Start-up costs in the coffee shop industry range between £20,000 and £100,000. These expenses will vary depending on the size of your coffee shop, location, the value of your investment in ingredients, employees, machinery, and other factors.

What is the best location for a coffee shop?

The best location for your coffee shop will depend on your concept, target audience, prices, and other factors. However, in most cases, the perfect location guarantees high foot traffic, increasing your chances of winning new customers and generating sales.

What types of products should coffee shops sell?

This depends on the coffee shop concept. However, most coffee shops provide diverse menus featuring flavoured lattes, cappuccinos, macchiatos, brewed coffee, and more.