If you’re thinking about opening a coffee shop — or are already in the process of opening one — you’ve probably got one big question on your mind.
“How much do coffee shops actually make?”
Like most things to do with business, the answer to how much coffee shops make is “it depends.” Tons of different factors impact how profitable your coffee shop is, including:
Traffic:
- How much foot traffic do you attract?
- What’s your customer retention like?
Pricing:
- What pricing strategy are you using?
- Does it support your profitability goals?
Location:
- Is your location in a high-traffic area?
- If not, are you marketing it properly?
Branding:
- Does your branding help you stand out?
- Does it make you unforgettable?
Efficiency:
- Is your menu as profitable as possible?
- Have you tried menu engineering?
But, no matter how many profit-impacting factors you do (or don’t) face, there’s an elephant in the room we need to address…
And that’s the fact that opening a coffee shop probably won’t make you a millionaire.
It only takes a few minutes of chatting with folks on public forums or hearing the stories of other owners and operators to understand just how hard it is for coffee shops to turn a meaningful profit.
Luckily, “hard” doesn’t mean “impossible.”
Coffee shops can be profitable — if you’re determined, make smart, data-driven moves, and leverage the technology you need to succeed.
But how many coffee shops actually do what they need to succeed?
You’ll be happy to know it’s more than you think.
What is the success rate of coffee shops?
If you Google the success rate of coffee shops, you’ll find articles saying it’s very, very low.
In fact, some pieces state very matter-of-factly that only 25% of coffee shops will see their second year of business — which a pretty dismal statistic, no matter how you slice it.
But here’s the truth about coffee shop success rates:
Nobody really knows them.
Not us. Not you. And not even the people saying it’s 25%, no questions asked.
There isn’t much reliable (or recent) industry data about how many coffee shops succeed or fail per year…
But here’s some stuff we do know about coffee shop success.
- Most coffee shops become profitable in their first two years of business
- The global coffee shop market is projected to reach 237.6B USD this year
- The public has ordered more and more from coffee shops over the past few years
And, while community discourse isn’t quite the same as industry-level research, reaching out to other coffee shop owners and operators about their success rates never hurts — especially since crowdsourcing info has gotten so much easier thanks to public forums like Reddit.
(P.S. If you want to explore some restaurant industry insights while we wait for more coffee shop studies, check out our article on restaurant failure rates!)
Why some coffee shops struggle to make money
Now, while the “lower-than-you-thought” failure rate is a massive win for prospective owners and operators, it doesn’t mean opening a coffee shop is without any risk — there’s always the potential that things might not go as planned.
Here are several common reasons a coffee shop might struggle to make money.
Not enough sales
The more customers your coffee shop has, the more revenue you’ll make. That’s why knowing how to set the right prices is so important.
Low profit margins
No coffee shop wants a low profit margin, but poor menu pricing and too many discounts are two ways to get there fast.
High overhead costs
All coffee shops have overhead costs like rent, staffing, and supply costs… but it’ll hurt your profit if they get too high.
Lack of differentiation
Making your coffee shop stand out on price alone is a race to the bottom. Branding is the real MVP for differentiation.
Poor marketing and retention
Marketing your coffee shop to your ideal customers is just half the battle — making them want to stick around is the other.
And remember, potential risks are just that — potential.
Lots of things can make it difficult for your coffee shop to turn a profit, but the more aware you are of them, the more prepared you can be to prevent them!
How to increase your coffee shop’s profit
Now, it’s time to look at the silver lining:
No matter how much your coffee shop currently makes, you can always try something new that helps you make more!
Here are three strategies to boost your coffee shop’s profitability.
1 — Take charge of your slow seasons
If you own or operate a coffee shop, you’re going to have to deal with slow seasons. But how effectively you deal with them, and whether you make the most of them? Well, that’s entirely up to you!
- See how other businesses go from “surviving” to “thriving” during slow seasons
2 — Diversify your revenue streams
Your coffee shop doesn’t have to sell only coffee… and it shouldn’t if you want to ramp up your earnings! Start exploring ways to diversify your revenue streams in ways that work for you and your guests.
- Catering has a bunch of new tech-powered solutions that make it easier to adopt
- Coffee shop subscriptions have a ton of potential to boost revenue (and retention)
3 — Try out some new strategies
Finding ways to boost your coffee shop’s profits can feel isolating — but this isn’t the industry’s first rodeo. There are years (if not decades) worth of proven, profit-boosting strategies to explore and experiment with.
- Try out one of these tried-and-true strategies to increase your profit margin
- Encourage your guests to come back (and spend more) with a loyalty program
Craver’s Free Profit Margin Calculator
Want to see how much your coffee shop makes?
Our free Profit Margin Calculator has everything you need to crunch the numbers and find out.
Our calculator has everything you need to evaluate (and eventually improve) your coffee shop’s profit margin, including calculators for:
- COGS
- Gross profit margin
- Operating profit margin
- Net profit margin
And did we mention the calculations are already programmed so you don’t have to do any manual math?
It’s a pretty sweet deal if we say so ourselves… but don’t just take our word for it.
Download a copy and see for yourself!
Easier profit margin calculations are just a few clicks away.
