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Why do Coffee Shops Fail?

Updated: Mar 19

Do you wonder what the difference is between successful coffee shops and failures?

How can you make sure that yours is a success?

First of all, there are many, many reasons for any business to fail. I recently saw a coffee shop go under because they didn't have a non-compete clause in their contract with their landlord and they let a popular bakery and cafe open in the same retail strip.

But, the coffee shop owner couldn't have seen that coming.

No, what this post will cover is the predictable factors in why coffee shops fail. If you already have a coffee shop and find yourself guilty of some of these factors, turn them around now.

1. The owner only knows about coffee

I wrote about the three roles every small business owner plays at different times in their business here. Basically, knowing your way around coffee doesn't mean that you know anything about business. If you jump into a venture with only barista experience and don't learn how successful businesses work, you'll find yourself overwhelmed very quickly.

Pro tip: If you are opening a coffee shop as a former barista, learn as much about business as possible.

You can do this through the local Small Business Administration of your city, books (though finding useful ones can be difficult), YouTube videos, and subscribing to the Coffee Shop Keys blog (duh!).

When I was running my shop, my brother was in business school. I asked him to send me the case studies, slides, and notes he went through for class. I even read some of the (more digestible) books.

2. The owner knows nothing about coffee

Yup, just as bad as the first point, knowing nothing about coffee is incredibly detrimental to running a successful business. I've seen owners go into the coffee shop business with no experience, thinking that the business is simple and turnkey.

They may end up making poor judgments on menu, brand, equipment, staffing, training, coffee bean suppliers, etc.

Working in a coffee shop will teach you so much about how they run properly (or don't), what customers want, good customer service, and decisions on equipment and supplies. You don't to spend years in the biz, but any amount of time is helpful. Find a shop you're inspired by and try to get a job there.

3. They don't have a brand

Sure, you have a logo, but do you have a brand?

Many small business owners don't understand the subtle difference here. A logo is that little mark or symbol used to identify your business. A brand is the all the thoughts, feelings, and associations that go along with the business.

Quick example: if Nike opened a hotel, what would it look like?

Well, you're probably not imaging a Hilton with swooshes everywhere instead of the big H's. You're probably picturing a hotel with a sleek interior made for athletes with an incredible gym. Maybe even a basketball court on one floor. Workout gear you can borrow. And maybe even a wall of the lobby lined with their classic sneakers.

Nike doesn't have any hotels, but we all know what their brand stands for so it's easy for us to imagine what it would be like if they did.

Pro tip: Focus on customer service and your menu.

These are the things people will fall in love with and remember. Having a really cool logo or interior doesn't make up for bad service or a bad product.

One of the things I always say to my coaching clients is "Don't build someone else's brand."

The big green coffee giant is well-known for their flagship "Caramel Machiatto." Don't succumb to naming one of your drinks the same thing. Make your own, unique names, recipes, methods, etc. to make your brand stick out.

You wouldn't see Adidas releasing "Adidas Air Jordans" even if it was a nearly identical shoe. Nope, they're doing their own thing-and leaning hard into what makes them different, not why they're "just as good."

From the moment you have your coffee shop's grand opening, build on your brand.

4. They try to be all things to all people

Coffee shops that try to be all things to all people typically don't fail quickly. They have initial success because they're an exciting new business. Then they keep that success up for a while because they're the only option for a few people's very specific desires.

But eventually, they can't keep up. Too much mediocrity and not enough uniqueness slowly erodes their business.

What I mean by "trying to be all things for all people" is serving way too many options, spreading you, your staff, and your menu way too thin. When you try to make something for everyone, you end up making it for no one.

Why is this? Well, because of the bell curve.

The bell curve is too "middle of the road" to be worth talking about. It's too milquetoast to make an impact. Thus, it slowly fizzles out.

Stop offering a million different coffee flavors on the odd chance that one person who comes in once a month will order cotton candy flavored latte. Do less, but do it better.

Pro tip: Find your tribe.

Are you serving hipsters? The keto/Crossfit community? Animal activists?

Whoever it is, lean into that community. Not all your customers will or need to fall into that community, but having a business that says "we're for people like this" will create a positive identity for your shop in people's minds.

And for those who don't like the community? Well, that's okay.

5. They don't cater to enough people

While this may seem to contradict the previous point, there is a give and take. It's a balancing act.

Do as much as you can for your customers, but don't sacrifice your brand identity or morals.

However, make sure your brand and your coffee shop concept is attractive to enough people to make it worthwhile.

Often this issue comes about because the owner makes decisions based on what they like best, instead of considering the customers.

Do you think cotton candy lattes are just the best thing ever? Well, that's great, but it doesn't mean that's what everyone else wants. Know your people.

Pro tip: Do surveys.

I mean real surveys. Not just asking your buddy if they think your obscure coffee shop/arcade is a good idea. (You might not get honest feedback-don't blame them, they just don't want to crush your dreams!)

Instead, ask an impartial audience. If you have an email list already, ask them about your new name or logo or new menu. Take their feedback into consideration and make an informed decision, not a shot in the dark.

Don't have an audience already? Find someone who does. Do you have a friend or family member in marketing that can run ideas past their team? Do you know someone with an e-commerce business that could ask their email list to participate in a survey? Do you have the free time to sit around some other coffee shop asking random strangers for their opinion?

Set your shop up for success

Having a ton of input from trusted, credible sources is invaluable. Find mentors or business experts to toss around your ideas with, or just pick their brain to learn more about your weak areas.

Having a coffee shop coach that can help at every step of the way can save you headache, heartache, and wallet-ache. In addition, a coffee shop coach can help you set your coffee shop up for success instead of failure.

Interested in having a successful coffee shop? Contact me (Tom) at Coffee Shop Keys to get started. I can help with everything from business planning, menu planning, coffee sourcing, branding and marketing, staff training, and everything in between.

Get out there and make some incredible coffee!

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