What are the reasons why coffee shops fail and how to avoid these?
Stats say you have a 50% to 74% chance to fail in the first five years.
A coffee shop is not a get-rich-quick hustle.
Take a look at eight main reasons why coffee shops fail.
By Jozo Salmanić – Croatian barista with 15 years of experience.
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Usual Eight Reasons Why Coffee Shops Fail And How To Avoid These To Be Successful
This article is a handy checklist for anybody who wants to open their own coffee shop.
Opening a franchise coffee shop is easier, to be honest.
If you want to open your own place, it’s a pool of sharks, and you are a fresh fish.
Let’s teach you how to swim!
We have 8 usual reasons why coffee shops fail. And we offer perfect solutions to these problems.
Ready?
You Underestimated What It Takes To Be A Coffee Shop Owner
Problem: You thought love for coffee and a couple of thousand bucks would be enough to launch you to coffee shop glory.
Now you realize it’s hard.
According to this survey by FoodTruckEmpire, lack of preparation is the top reason coffee shops fail.
Solution: The coffee shop is a business, like any other.
You must have a business plan, preparation, industry knowledge, and constant practice.
As a coffee shop owner, your job is never over, and perfection is the only thing acceptable.
Be ready for a lot of work.
Competition Is Reckless When You Are A New Coffee Shop
Problem: You are entering a large market. It’s still far from saturated, but you must convince people to drink coffee at your place, not your neighbor’s.
More than 37,000 independent shops exist in the US, claims Sky Ariella from Zippia.
Solution: Don’t open near large coffee shop chains, as they can sell similar drinks at lower prices.
Try to find a location with not too many shops around.
Also, don’t try to rip off your competition. That just looks sad and creates extra confusion. Customers hate copycats.
Location Is Why Coffee Shops Fail – Or One Of The Main Reasons
Problem 1: You chose a magnificent site, but nobody is coming to your coffee shop, and the rent you pay is scary.
“Rent… should not exceed 15% of sales”, says Jesse Neugarten from Investopedia.
Problem 2: You chose a secluded, cheaper location. You haven’t seen a human being for the last two weeks.
Solution: Think again about your target market. Is it students, business people, the IT crowd, or truck drivers?
These customers are usually mutually exclusive.
Pick a location near the nodal point of your target market – be it schools, business neighborhoods, malls, or beaches.
A place for everybody is a place for nobody.
Don’t forget that.
Who Will Work At Your Coffee Shop?
Problem 1: New generations seem to be entitled, and nobody wants to put in some elbow grease and work hard.
Problem 2: Your team lacks some skills.
Solution: If people don’t want to work for you, you are probably the issue, not the other way around.
Try offering competitive salaries, benefits, and barista training.
You will have a pile of job applications on your desk in no time.
As a small coffee shop owner, you should also work there and lead by example.
Don’t be a boss, be a leader.
You don’t have workers, but you have team members.
Start acting like that.
Training and certification of your team is not an expense.
Consider it an investment in better service and, as a result, higher customer satisfaction.
Money Is The Root Of Almost All Coffee Shop Problems And Solutions
Problem: You just don’t have enough money for expenses.
Lack of capital is why most shops fail in year one – according to Patricia M. Johnson and Richard F. Outcalt from ROI.
Solution: You need a business plan and help from professionals with more experience in the HoReCa field.
When planning, take a pessimistic approach and assume you won’t make any profit in the first year.
If you don’t have enough money for rainy days, don’t try to open a coffee shop.
Failing To Build A Unique Brand For Your Coffee Shop
Problem: You don’t have a brand.
You are one of the thousands of places in your town that sells coffee. It can be the best one, but it is doomed to fail if people can’t remember the shop‘s name.
Solution: Build a brand that can be recognized everywhere. Good branding includes, but is not limited to:
- Catchy name
- Logo
- Moto
- Social media
- News coverage
- Web page with blog
If your budget is tight, and you have to choose one thing, hire a professional to do your logo.
That’s the crucial part of your brand — along with making helluva good coffee.
Selling Only Coffee
Problem: You fell in love with seducingly high coffee margins and decided to sell only coffee.
Now you break your back making coffee the whole day, and you still can’t make any profit.
Solution: Upselling and cross-selling are the basics of the coffee trade. Pair your coffee with bagels, cakes, sandwiches – anything that goes well and has a decent margin.
Selling only coffee is a sure way to fail.
However, don’t overspread your menu.
Quality Of Products And Service Are Common Problems Of Coffee Shops
Problem 1: Good beans and good ingredients cost a lot. It’s easy to get tempted and try to use low-quality stuff.
Problem 2: Complaints about your staff member(s) performance are getting frequent.
Solution: Never compromise on quality.
It’s always better to shorten your menu than to sell bad coffee or food. You don’t need that kind of reputation.
If your staff is underperforming, hold a meeting to see what seems to be the issue and if you can deal with it.
If the problems persist, don’t hesitate to let the underperforming staff find other opportunities in the job market.
That is also a part of the owner’s duties.
Other Reasons Why Coffee Shops Fail And How To Avoid These
I didn’t list all the reasons why coffee shops fail.
Not even close.
Other reasons include the following:
- Supply chain issue
- Not having a backup plan
- Burning out
- Unforeseen expenses
- Inflation and rising costs of rent
As you see, there are plenty of reasons why coffee shops might not succeed.
However, most are avoidable with proper planning, industry experience/knowledge, and help from people more skilled than you are.
Work hard, never stop learning and lead by example.
Don’t be stubborn, listen to good advice, and never underestimate the power of word of mouth and social media channels.
That’s the only way you can succeed.
Photos by Oman and Lisa Fotios
