Pixar Studio’s John Lassetter has a favorite motto: “Quality is the best business plan.”
As the Chief Creative Officer, Lassetter helped turn Pixar into one of the most successful studios in history, whose hits include Finding Nemo, The Incredibles, and the Toy Story series. They have grossed over $9 billion of worldwide box office revenue, all the while setting a new standard for animated films. If quality is at the heart of Pixar’s business plan, then other companies should consider taking their advice and make quality their number one priority as well.
The Pixar business model is particularly relevant in the world of specialty coffee, where “quality” reigns supreme above all other factors. We know this because people told us; we partnered with Barista Magazine to survey over 1,200 coffee shop professionals and customers who loudly declared “quality coffee” as the most important factor in running a successful coffee shop.
Specifically we found:
- Quality coffee is the number one reason why customers decide to visit a coffee shop
- It plays the biggest role in customers having a positive experience at a coffee shop
- Quality coffee is why customers decide to become loyal to one coffee shop and not another
Serving quality products is critical in the coffee world, which is why opening a new coffee shop should be focused on one thing above the rest: the menu.
Focusing on the core business
There are hundreds of decisions to make when opening a coffee shop. The most critical decisions revolve around the coffee shop’s core business: coffee, food, and other drinks. Deciding what to offer can be difficult, but new coffee shop should only offer those items they can create with quality.
The best way to start a coffee shop is to learn from the people who have done it. We asked coffee shop professionals for advice on core business questions and list the results below. We also asked coffee shop customers what menu items were most important to them.
Together, we developed six tips to help you start a coffee shop with quality as the main focus.
(Also, don’t miss the extra resources at the end of the article for starting a coffee shop based on the other data we collected from the Barista Magazine survey.)
1. What drinks do consumers buy most?
Manually brewed coffee is the most popular drink ordered at specialty coffee shops, despite the numerous espresso-based options typically available.
There has been an explosion in manually brewing methods like pour over coffee and is now becoming a norm in specialty coffee shops. We’ll see later on just how prevalent manually brewing methods have become.
The second most popular drink option for customers is a latte, followed by espresso. These three drinks should be at the top priority for those who start a coffee shop. Mastering these items is the first step to running a successful shop.
Average price of drinks
Customers taking the Barista Magazine survey said they pay on average $3.71 for their favorite drink.
This is much higher than the national average price for a cup of coffee, which is $1.38 for filter coffee and $2.45 for espresso-based drinks. If you want to start a specialty coffee shop, rest assured high prices won’t scare away customers. Quality is the most important factor for customers and they are willing to pay for it.
2. What brew methods do coffee shops offer?
Customers are becoming more educated about how brew methods impact the flavor of coffee. In fact, “brew methods” are the second most important factor for customers when considering whether or not to visit a coffee shop. The most important, of course, is “quality of coffee”.
Espresso and drip coffee are still the two most common brew methods offered in coffee shops, but almost 70% of surveyed coffee shops offer pour over coffees as well. Interestingly, cold brew coffee has become the third most popular coffee offering, with almost 80% of shops now serving it.
The diversity of brew methods in specialty coffee shops is impressive. 67% of shops serve coffee at least four different ways, and 34% of shops offer six different brewing methods. The question is, how many brewing methods should a new coffee shop offer?
The correct answer is, only as many as a new coffee shop staff can master before opening day. While multiple brew methods are in vogue, coffee shops must remember that quality is still more important to customers. Start a coffee shop with the focus of doing a few brew methods exceptionally well before offering other methods.
3. How does a coffee shop earn its revenue?
Even though manually brewed coffee is the most popular drink ordered by customers, it does not mean it makes up the largest percentage of overall sales for a coffee shop.
In fact, the higher priced espresso drinks like lattes and cappuccinos make up the largest piece of sales, according to the coffee shop professionals who took the survey.
How much do these drinks go for? Coffee shop professionals say the average price of a double shot of espresso is $3.04, which puts espresso-based drinks in the $4.00-7.00 range.
Espresso also has the advantage of making higher margins due to its highly-concentrated form. However, higher margins will not make ends meet for a coffee shop. Selling a high volume of drinks is critical when opening a coffee shop because all coffee drinks are relatively cheap no matter the margin.
That’s why food plays such a big role in coffee shop success. As the second largest percentage of overall sales, food helps bump up revenue in a coffee shop by encouraging customers to spend more.
Again though, quality must be top of mind when starting a coffee shop. Adding food to the menu will not help if it is below average. Coffee shop customers expect excellence in everything they order. Which leads us to the next tip:
4. What types of food, pastries, and alternative drink options do customers want?
Food does not only help the bottom line, but it’s in high demand from customers. However we found from the Barista Magazine survey that different types of food and alternative drink options vary in importance to customers.
A majority of coffee shop customers want pastries and baked good at a coffee shop. Another 30% thought hot food options were important, too. Starting a coffee shop without a plan to serve quality could mean trouble when hungry customers show up looking for a snack.
Most coffee shops seem to grasp the importance of food and have made it a priority to serve. We found 60% of coffee shops serve hot food options, and while we didn’t ask about it in the survey, we assume an even larger percentage serve pastries and baked goods.
We also asked about a growing trend in specialty coffee: alcohol. About 25% of coffee shops say they serve alcohol, which is a great way to make a coffee shop an “all day” hangout destination.
However, coffee shop customers still ranked alcohol as the least important menu item behind pastries and hot food items. This doesn’t mean customers don’t want it, but if a new shop has to choose, food still wins out over booze.
Many coffee shops build their food and drink programs by bringing in treats from local eateries and breweries. This is a great strategy to ensure that quality food and drink is being served from the beginning. New coffee shop owners often have another question on their minds as well: should they roast their own coffee?
5. Should coffee shops roast their own coffee beans?
Coffee roasting is not a simple add-on business for a coffee shop; aside from the tens of thousands of dollars in extra equipment needed, roasting is a skill that takes years to master. When starting a coffee shop, we suggest sticking to your strengths and letting a seasoned roaster handle the coffee beans.
Many coffee companies evolve to bring both businesses under one roof. In the survey of coffee shop professionals, we found 42% of the companies were both coffee shops and roasters. While we did not ask, we assume the majority of those companies started as either a roaster or a coffee shop first and then added the other side of the business later.
Open a coffee shop by focusing on brewing and serving while buying coffee beans from a local roaster. This also allows coffee shops to offer a variety of coffee beans for customers. Coffee shop professionals who took the Barista Magazine survey said they offer an average of 7 different coffees at any one time, and we found customers love to be surprised by new coffees.
6. What are the average annuals sales of a coffee shop?
Most business plans recommend that new business owners project sales for the first 3-5 years of business. This can be difficult without any real coffee shop data to reference. We asked coffee shop professionals to share their sales information so new owners can estimate their revenue when they open a coffee shop. We broke down the sales data year-by-year.
Coffee shops that were less than one year old have made an average of $163,000 in annual sales so far in their first year. We then see a steady increase in annual sales for older businesses, with coffee shops open for 9+ years earning the most on average.
The true numbers for annual sales are likely higher. We asked coffee shops to choose an annual sales category they fit into (i.e. $200,000-$299,000) and capped the options at $1,000,000+. This means every coffee shop that chose the $1,000,000+ made at least that much last year, and likely more. We calculated these numbers into the average as just $1,000,000, so our answers are probably a bit deflated.
Quality-focused shops might have higher starting costs due to more expensive equipment and ingredients. Knowing what type of revenue to expect in the first few years will keep investors and employees happy while the shop develops quality business practices.
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Bonus Tips
Time to make good on the bonus tips promise! Thanks to the survey we conducted with Barista Magazine, we’ve collected thousands of data points from customers and coffee shop owners. We created a series of articles that will be incredibly valuable when opening a coffee shop.
Bonus Tip #1: What is “quality coffee” and how do coffee shops create it?
We’ve already said that the key to a successful coffee shop is quality. But what does that mean? We found the definition of quality differs slightly between coffee shop customers and professionals. Additionally, we discovered one common trait among coffee shops that consistently create quality coffee.
Read “How Customers and Coffee Shops Define Quality Differently”
Bonus Tip #2: Coffee shop marketing for under $100 a month
We uncovered a fascinating trend about coffee shop marketing through the survey: almost 70% of coffee shops spend less than $100 per month on marketing. So how do coffee shops market to new customers?
We received dozens of pieces of advice from coffee shop professionals and compiled them in this article.
Read “6 Coffee Shop Marketing Strategies That Cost Less Than $100 a Month”
Bonus Tip #3: How to provide over-the-top customer service
Customer service is critical to coffee shop success. Customers said that “attitude of the staff” is the second most important factor in creating a positive coffee shop experience, right behind “quality of coffee”. We collected 48 different ways how coffee shops can create “surprise and delight” for their customers.
Read “Surprise and Delight: 48 Simple Ideas to Create the Ultimate Coffee Shops Experience"
