Updated: Feb 18, 2020
This is a guest post written by Wilson Hailey of Tezpresso
My wife and I opened our first coffee shop fully expecting it to be a fun and insightful failure.
She had studied under the WBC Shanghai Champion, and I was unfulfilled in a business consulting role. She had a dream of opening a cafe. I was fully aware coffee shops are rarely successful. Luckily, we did our research, had an amazing group of friends that helped, and it grew beyond what we ever imagined.
Despite a background in business consulting, there’s one thing I wish I had factored in from the beginning: location.
Don’t get me wrong -- we ran the numbers on a ton of different spots. We camped out and counted foot traffic, negotiated with real estate agents until our lips turned blue, and made poor estimates for how long it would take at any given spot to become operationally stable.
But we didn’t consider the type of coffee shop that would attract our ideal clientele.
We also got very lucky.
There are 3 main types of coffee shops that work. They are largely determined by where they are -- both in terms of accessibility and demographics. While every coffee shop needs to develop a well designed space, a quality product, and a high production capacity, individual shops will favor one aspect over the others in most cases.
Volume-Focused Coffee Shop
These are the kind of shops that most people are familiar with. Imagine your classic Starbucks (Tim Horton’s, Costa Coffee, Peet’s -- whatever your regional flavor is). They’re loud, almost always filled with people coming and going, and usually in the busiest areas where people already hang out or commute.
The drinks they serve are reliable and consistent (for the most part), but never spectacular. You may go in for an hour or two of work in a shop like this, but they’re uncomfortable for longer than that.
The hallmarks of a volume coffee shop are:
Located in the busiest areas (foot traffic or drive-thru traffic)
Spacial design focuses on fast ticket times (uncomfortable seating, no outlets, etc.)
Quantity over quality (standardization of flavor)
From a business perspective, if you can afford to set up shop in a busy area, this is the way to go. And franchising is certainly a good option. If you’re considering opening a coffee shop though, my guess is you’ll want something more intimate. Independent coffee shops almost always fall somewhere between the next two types.
Community Focused Coffee Shop
This type of coffee shop takes many different forms and business models (I did some consulting recently for a model I really like -- coffee, coworking, and childcare. Awesome!).
Community focused coffee shops are usually located slightly off the beaten path and rely on drawing people to them. They feature large, open floor plans with comfy couches and chairs, plenty of outlets, and maybe even several different rooms.
The quintessential example is Central Perk, but I’m sure you can think of one (or several) near and dear to you. When you imagine them, you imagine the space. The people. The atmosphere. The memories you’ve made there. When you imagine the coffee, it’s almost an afterthought, and the quality has little to do with whether you like the business or not.
The main signs of a community focused coffee shop are:
Located in tucked-away areas or off the main roads
Spacial design focuses on keeping people there (free infused water, comfy seating, free wifi, games, snacks, events, etc.)
Quality of coffee is all over the place
The biggest pitfall for community focused coffee shops is that -- by necessity -- they exclude potential customers who don’t fit the demographic they cater to through their brand, design, and other services. For example, the coffee, coworking, and childcare shop I mentioned above has a narrow focus -- work-from-home moms and dads. If you have no overlap with that demographic, you may not go often, if at all. As a new coffee shop owner, you want to be very selective about which demographic you cultivate, because they will be supporting your business.
Also worth noting, if you don’t target your demographic and relentlessly woo them, there’s the potential a different demographic could move in and push others out. I have run into several coffee shop owners over the years who bemoan the local student population. They’ll come in, set up camp, and stay for hours studying in groups, often without buying anything. Their biggest gripe isn’t that the students don’t buy enough -- oftentimes they’re able to scrape by earning business from the student population -- but rather, it’s that once a coffee shop becomes known as a “student hangout” or a “freelancer work spot” or a “business meeting spot” all the other customers slowly go elsewhere. Then they’re stuck with a community, but not one they developed and not one that has any loyalty to their business.
Quality Focused Coffee Shop
The last type of coffee shop is the most difficult to operate successfully. However, if done well, it can generate a huge amount of opportunity and growth.
These are the coffee shops that are hard to find, have the smallest footprint, and are “oh so” hip. If you’re lucky, their baristas will enthusiastically educate you about the various projects, science experiments, and competitions they are working on. If you’re unlucky, they will look down their noses at you for ordering something outside their narrow scope of what coffee is.
These are the coffee shops that people talk about. Where a wide variety of coffees from roasters around the world sit on the shelves, and where too many people who want to be seen as cool and cultured hang out.
You know a quality focused coffee shop when you see:
Far enough off the beaten path that you have to seek it out
Striking spacial design, usually in a very limited space
Intimidating array of coffee equipment (that likely cost more than a year’s rent)
Tattoos and leather aprons and beards and -- wait, no, that’s stereotyping, definitely not an indicator of quality
This model is attractive because of the low overhead and initial investment (aside from equipment). But you really have to know your stuff. It’s competitive. Although, if you can get others in the industry talking, your marketing is done. Having a good reputation will also help attract high-quality staff.
I’m not gonna give you any of this wishy-washy “pick any of these and run with it” nonsense.
I’ll tell it to you straight: If you are thinking about opening a coffee shop, you should absolutely open a community focused one.
Figure out the market you want to serve. Narrow it down. Narrow it again. Build a space and design service offerings that cater to them. Build relationships within that community. Do good work. Do it consistently.
That’s how you open a lasting coffee shop business.
Or do what I’ve chosen to do and forego the location altogether (actually don’t -- it’s crazy). My current coffee business experiment is Tezpresso: a mobile espresso bar pop-up company that caters to offices on a rotating weekly schedule.
It’s cheaper to scale than a coffee shop and more intimate than a food truck. It’s more convenient than a drive-thru, and, in terms of quality, it’s echelons above your average coffee spot.
Best of all? It’s only operational in the morning, so me and my staff can focus on generating revenue during the only hours coffee is actually sold. And we have most of the afternoons off!
- Wilson Hailey, Chief Espresso Officer -- Tezpresso
This was a guest post written by Wilson Hailey of Tezpresso