6 reasons to NOT Open a Coffee Shop

It seems that almost everyone wants to open a Coffee Shop. And why not? Imagine walking into your store daily to pick up your bag of money - the barista smiling as he brews while the smell of fresh roast and sounds of happy customers delight your senses. Coffee must be a great way to fill your pockets with money - right? Today we're going to take a critical look at opening a coffee shop on Franchise City.

Coffee is another business that carries a lot of emotional momentum. It's kind of the go-to retirement dream or, a business that is the exact opposite of the rat race. No board meetings, no fighting traffic, no stress and no pressure. Or so they think.
So let's get that misconception out of the way first. Owning a coffee shop is operationally no different from most service based food businesses. You'll be dealing with employee theft, spoilage, sourcing issues, high attrition levels and ongoing difficulty in finding quality employees at reasonable hourly rates. It is not rare to see new owners putting in 80 hour workweeks to try and make things happen. if you think there is no pressure running a coffee shop try a vision of payroll coming up tomorrow as well as your rent and you are once again $2800 in the red with no way of paying. Your best selling coffee roast is on back order, your manager just quit, the washroom is plugged again and you just got 4 bad reviews because your washroom is plugged again.

In the coffee business you'll also be at the mercy of very "passionate" customer sentiment. This industry has a fickle and demanding customer base who expect you to be better than their last shop. You will be very hard hit if any of your employees give bad service, or if your coffee is not up to these very high standards of local coffee drinkers. If you receive enough bad online reviews when you first open it can literally turn your coffee shop into a ghost town. Social media has a massive impact on buyer decisions these days and you have to ask yourself are you, as a new entrepreneur savvy enough to understand how to train your staff in great customer service? Because it doesnt just happen. Are you able to source coffee and to have it prepared in such a fashion it blows customers away? Can you source it at rates low enough to make money?

And here is the problem with most prospective coffee shop investors. They have no idea about coffee, no idea about customer service. They just noticed a local coffee shop is often busy and see this as a quick way to make money. If money is your primary focus, and you have no previous skills in food service or customer service this can actually be a very difficult business to operate despite the glorious visions you have in your mind.

Now even if you do happen to have a handle on good coffee, a good handle on running a business and hiring and managing employees the industry itself right now is still tough.

In fact Starbucks, arguably the most successful coffee brand in the world, will be closing 150 stores this year. That's three times as many as it usually closes. Do you hear that? 3 times more than it usually closes. Closing stores is an ongoing, regular event with Starbucks. Closing stores - not opening stores.
A quick search for "coffee shop closed" reveals hundreds of these results, local shops all over the country closing their doors for various reasons, mostly monetary. This owner was quoted as saying "The business hasn't made itself sustainable yet and it's been almost 3 years. Can you imagine struggling for 3 years only to have to close the doors? Prospective investors should take time to click through some of these stories, most of these independent shops were trendy, cool, had pretty solid reviews. Everything was in place and yet they had to close down. Some had been open for up to 30 years.

If we do a search at BizBuySell -which is a listing website for selling businesses we see there are almost 1200 coffee shops and cafes for sale. Are they selling because they are making too much money? Let's take a look. We see locations for sale at $15,000, $19,000, $20,000 with seller financing.

Tim Hortons, arguably the most successful Canadian coffee shop, had owners recently hit with a $250,000 reduction in annual earnings just due to minimum wage increases. Tim Horton's is also seemingly struggling with their rollout and expansion into the US market and even they are closing stores.
There are many businesses and franchise options out there - not just coffee, don't let your emotions guide you as always do your research in a critical fashion. If you are considering the franchise route and need help finding a franchise give the experts a call at franchise city. Our services are free to qualified buyers you can learn more about us here.

#FRANCHISECITY #COFFEESHOP

As a previous coffee shop owner who worked 80 hour weeks I'll add a 7th reason you might not want to open a coffee shop. When looking at Franchises or even doing your own, the focus always seems to be on the profit margins. You'll hear numbers like "Coffee Shops make 50-75% profit" and for some drinks that's true. However lets look at that in closer detail.

If I'm selling a 12oz coffee at $2 (about the going StarBucks rate) I've just made a whooping $1 - $1.50. How many cups of coffee do you have to sell to pay your rent or to pay your employees? A lot that's how many! Plus those margins go down when you add milk to the equation or if you are doing worker intensive brews like Pour Overs. When you are pulling in just a few dollars per customer in profit you need a lot of customers. A lot of customers require a lot of work. Work = Staff =

So don't get fooled when you hear about those super high profit margins. Ignore that and calculate how many dollars of profit you will average per customer. Then add up all those other expenses (rent, employees, utilities, etc) you have and figure out how many customers you'll need per day to break even. It will be a lot.

[MariahRose]

is it weird that this video motivated me even more?

[jae_yt]

"Even starbucks is closing stores"
Welp, that's good! by the time I established my own coffee shop it will be easier to beat them

[edbrown]

I have a dream, and this is where I go to get it pooped on.

In all seriousness, thanks for injecting some reality into our fantasies.

[Hyuck]

its my dream to open a cafe and this is the first thing that comes up when i looked for tips-

[ToroMateo]

Most of these things have nothing to do with coffee shops, they apply to any business and it is the beauty of doing business. The long hours, the risks, the management, the surprises, that's the whole point!! If you're an entrepreneur, this guy is actually very motivational! If you just want to own an "easy business"
Then no business is for you, even coffee.

[blueman]

The number 1 reason why I wouldn't open a coffee shop is that it looks like an oversaturated market.

[danjenkins]

I've been a restaurant franchisee for over 12 years, and you provide the most honest and relevant information of anyone I've ever seen in regards to the franchise industry. I wish I would have come across this information 12 years ago. It would have saved me a ton of money and made me a much more informed business person. Great content, and I would recommend anyone looking to get into the franchising business to subscribe to your channel and to use your services.

[lll.l-kq]

The guy looks like he is in a fog cloud.

[Viperever]

You should change your channel name from Franchise City to Reality Check.

[janinepolanco]

Sorry, but like any other business you will have challenges. This was all negative, low vibrational talk. If it's God's will and I work hard towards it, I'm good!!

[jellyfishy]

I've been wanting to open a coffee shop for about 5 years since I've been in the industry. I don't have money but this is my dream. What I hate more than anything is when a money hungry person opens a coffee business with little to no expertise and zero passion for coffee and watches it drown. This is not a get rich quick business. I've made it a goal to study coffee from every angle and I encourage this video as it guides the right people to open this kind of business. Thank you for sharing!

[gcoffeecroissantbaker]

I'm opening up a specialty cafe real soon and ironically, this video has gotten me so much more pumped up than ever. Thanks!

[thething]

Thanks for your content. I have a pest control operation and I can see this myself first hand. About 90% of the customers who goes under are on the restaurant-coffee shop food industry. It is so bad that now I required to get paid on spot (no credit issued for restaurants).

I see so many bright enthusiastic people of all ages pursuing their dreams of making so much money that forget that running a business have nothing to do with how good you brew coffee or how amazing you cater somebody . It is all about supply and demand, stamina, perseverance ( and owning the place and pay no rent helps a lot).

The more people are on a specific industry the smaller the piece of the cake will be...

I see many business owners who believe that because they own a shop (or any type of business) they can delegate a "supervisor" to RUN their daily operations, and guess what happens few months later??? the business is under and the owner spends 100 hour a week trying to get the business back to life

I have learn a few things about this industry and I can tell you without fear of being wrong that the food service industry is by far the MOST stressed, competitive- labor-intensive industry out there. And if in top of that you plan for hiring people at minimum wage and pretend they will outperform well, I wish you good luck in your endeavor.

[chadly]

Man you do great at capturing my attention. I saw the title of the video. I reacted with the emotions of the stereotypical "yeah how cool would that be imagine how chill!" and then you hit me with the scenario of the toilet being plugged the manager quitting payroll due tomorrow and I'm in the red. Then your comment about how I know better than Starbucks right? Dang that hit home. And then a rational conclusion of how it is possible. If I had several hundred thousand I would be calling right now because this is it chief

[jugfhj]

One of the rare people on youtube that actually knows what he's talking about not like most "entrepreneur motivational speakers" these days.

[lsour]

I helped a group of friends open and start an independent coffee shop at a town center after the local cafe Franchise shut down and there was no longer a place for people to socialize and work in the area. It's exhausting for the founders, but they were passionate, dedicated and experienced. We got the whole town on a mailing list and one of the founders had a huge friend network that brought in business.
A trend that seemed to work for us is that originally the place is a restaurant at night, and a cafe in the morning. Since the venue is already rented out, the cafe has less bills to worry about. The restaurant owners are shrewd business people and very savvy (They hired a full-time artist to work as a barista and restaurant server while he worked on advanced pieces to decorate the restaurant). Each person had a role to play.
I had a background in art as well, so I did the menu boards while working as a barista.
My advice on starting a coffee shop is not to start from scratch, and find employees that could invest themselves and their talents into your business that could keep them around. And find a venue that has a lot of things already set up. If you're looking for someone quick to pay cheaply, you're probably going to get more turnover.

[JackBingham]

Couldn’t disagree more, my wife and I started a coffee shop last year and have loved every second of it.
I really enjoyed hearing your perspective though, very interesting 😁

[FrankFilms-hnci]

I wish my brother knew this before opening a coffee shop only to close it 2 years later.Love your honest professional advice.👍

[stockloc]

I know this entire channel is an ad, but this is my new favourite YouTube channel.