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Evaluating locations for a coffee shop


Real estate agents got it right: Location, location, location


In the intricate process of launching a successful coffee shop, there’s one move that you absolutely must nail: picking the right location.

 

It's easy to fall into the trap of thinking, "Hey, a spot off the beaten path could save me a ton on rent."

 

But, let’s break down the reality of this decision with the precision of a perfectly dialed-in espresso shot.


Evaluating a Location for a Coffee Shop by the Numbers


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I recently responded to a question about whether a coworking space would be a "good" location for a mobile coffee business.

 

The coffee business owner said the owner of the coworking space would discount the space for coffee business and that there were 60 people coming in the space every day.

 

~ I took a look at the numbers ~

 

With a bit of napkin math, I would guess that fewer than 1/3 of folks coming into the coworking space would purchase coffee while there – especially if they're there every day, the expenses add up.

 

1/3 of the coworkers equates to 20 customers per day. If the coffee business owner doesn't have additional upsell items (they didn't in this case), they could expect a reasonable average ticket of $5.50.

 

Alright, 20 customers x $5.50 = $110 / day. Not too bad for a start!

 

Buuuut it's not over.

 

Five days per week and four week per month = $2,200 in monthly revenue.

 

Minus COGS (assume 50%) = $1,100

 

Minus rent ($300) = $800

 

Let's say 4 hours of work per day (not open all hours), so that's 80 hours of work per week which means that the effective rate of pay is $10.

 

Which is not a good sign, because it would be difficult (read:unwise) to find someone skilled and responsible enough to work this business for that rate (in the US).

 

On the upside, it could be a launching point for a brick and mortar store. Get customers, build brand loyalty, scrape by, and then develop a solid business plan and funding strategy to finance a permanent location.

 

On the downside, the coworking space has very little organic foot traffic, so it would be near impossible to grow much bigger at that location, discovery would be challenging, and the basic economics are not sustainable for most people (after factoring the initial expense and any loan repayment).


Coffee Shop on a Street Corner



There’s a certain magic to main streets and bustling urban centers.

 

These places are more than just collections of businesses; they're ecosystems where each establishment contributes to and benefits from the communal buzz. "The whole is greater than the sum of its parts" sort of thing.

 

Placing your coffee shop here isn’t just about joining a neighborhood; it’s about becoming a pivotal part of someone's daily life.

 

This is where the foot traffic isn't just hoped for—it’s guaranteed.

 

Strategic Placements Along Daily Routes



Consider this: proximity to public transportation hubs, bustling business districts, or educational institutions isn't just convenient; it's strategic.

 

 

The goal is to transform your establishment from a mere option to an integral part of their day.

 

This isn't merely about geography; it's about becoming a ritualistic presence in the lives of your community.

 

Even better if it's a place they go every day, and spend time waiting.

 

Panera knows how important creating a habit is. That's why they created a (super cheap) coffee subscription – to get customers coming in more often. To make a habit out of it, rather than simply relying on "when they feel like it."


Focus on Your 2-Mile Radius



Let's get real for a moment: if reaching your coffee shop is like to embarking on a quest, you’ve already lost.

 

Accessibility is non-negotiable.

 

The fact is, the majority of your clientele will come from within a two-mile radius.

 

That’s not just a nice-to-have; it’s a fundamental pillar of your business’s potential for success.

 

 

So, consider how many folks are in this two-mile radius and what sort of coffee drinkers they are.

 

Are they suburban, expecting a St*rbucks-like menu?

 

Are they hipster, desiring exotic pour over options?

 

Are they businesspeople, looking for fast and simple drip and espresso shots?

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