When you set out to start a coffee shop, you generally have three options:
- Invest in a coffee franchise
- Buy an existing coffee shop
- Start a new coffee shop from scratch.
Each of these has its advantages and disadvantages. We discuss coffee shop franchises in another article. In this article, we will be looking at the pros and cons of purchasing an existing coffee shop rather than setting up a new one from the beginning.
Should You Buy a Coffee Shop or Set up a New Coffee Shop?
The answer always depends on your situation. It may be beneficial for you to purchase the existing coffee shop that you have been managing if the owner wants to get rid of it. If you have an original and special idea for a coffee shop, it might be best to launch it from the beginning.
Mostly, the decision to purchase is based on the money involved, agreement conditions, when it is happening and how well the premises is suited to your coffee shop idea.
Before purchasing an existing coffee shop, the following elements need to feel right:
- Price
- Timing
- Location
- Terms
- Current Sales
You have to be confident in all of these factors before you make your choice about starting a coffee business. You should not buy a coffee shop just because you like one or two of its features.
Prioritizing contentment with the elements noted above should be a personal priority before you invest in an already established coffee business.
This article will explore the pros and cons of different approaches to launching a coffee business.
The choice should be determined by what appears most logical for you at present. Included in your considerations should be your money and welfare, physical and mental health, the present state of the market, details of the expenditure, and the financial limits for your roast house.
The Advantages and Disadvantages
Buying a coffee shop enterprise that is already running may be the right decision for you. It could be very enticing to buy an already existing coffee shop and begin selling coffee straight away.
Alternatively, you may choose to begin with a tabula rasa, and form a coffee shop company from scratch without the complexities and quandaries accompanying the acquisition of an operational business.
To figure out if it would be a wise decision to purchase a coffee shop, it is essential to compose a business plan for the coffee shop. An effective business strategy will allow you to evaluate if an existing business (including premises, modified building, and customer numbers) can accommodate the aspirations of your coffee shop.
The PROS of buying a coffee shop business
Creating an enterprise from nothing necessitates huge labor, duration, and money.
Securing a suitable spot, haggling over a rental agreement, pouring several thousand dollars into renovations, and taking care of any necessary paperwork can be a huge nuisance!
Hence, acquiring an already established coffee shop business may give you the opportunity to begin right away. A coffee business that is fully functional from the start could be the ideal solution for some situations.
Make sure you purchase a coffee shop that is doing well financially, not one that is on the brink of collapse. If the coffee shop is having difficulty financially, you might want to move on regardless of how reasonable the cost is. Even the most experienced managers may not be able to produce miraculously positive outcomes for a business in difficulty, despite optimistic thinking and careful planning.
Let’s pretend for a second that a coffee shop is making money. Let’s look at some advantages of buying it.
You have an established customer base.
Residents in the area are probably already familiar with the coffee shop. Having a business that already has an established reputation and a loyal customer base that visits daily can be extremely beneficial for a new entrepreneur.
The coffee shop build-out is complete.
The plumbing, electricity, design, and structure are all finished and functioning properly. The coffee shop has fulfilled all of the essential needs necessary to operate in accordance with the local building department, the health department, the fire department, and other bodies in the area, but it is recommended to double check and make sure before any action is taken.
Coffee equipment may be included in the package.
Your coffee shop equipment matters – a lot. When purchasing a coffee shop, make sure to haggle for the current apparatus – if it is the type of equipment you require. Utilizing the correct tools in the present area can save time. The type of coffee equipment needed is contingent on the items that are included in your cafe’s menu. Will you keep the menu the same? Will you use the same vendors?
The location is perfect for you
At times, choices that are made in business can have an effect on your daily life. It may be advantageous for you to be at the spot due to its close proximity to your house, the school which your kids attend, or other beneficial factors.
The Cons of buying an existing business:
Although highly praised, coffee shops may come with some downsides that need to be taken into account. Take into account that buying a caffeine shop business, even if it seems great, might not be the best decision for you presently.
In addition, the most attractive cafe or coffee house may be weighed down by responsibilities (fiscal commitments, legalities, problems with close-by companies, etc.) that you would rather not take on while launching your coffee organisation.
Poor Reputation
The long-standing coffee shop might have garnered a poor opinion among its patrons or have low prestige in the locality. They have gained a reputation for providing poor quality service and coffee. It may be hard to change a well-known image in some areas. It is notably accurate if a good portion of the status has been published digitally on various evaluation websites, like Yelp or Google Reviews.
Remodeling Might Be Expensive
The layout of the space has to be shifted significantly for your coffee shop idea to be put into action. In certain municipalities and counties, modifications may need to be made when a fresh business opens or a transfer of ownership is announced. A business that has been around for a while may be exempt from certain policies, bypassing the need for costly renovations. You want to check with your local building department.
Tips on Opening a Coffee Shop
To launch your own coffee shop, you should initially answer the major questions concerning your business, and then continue by following the necessary steps.
Decide Whether to Franchise, Acquire, or Start From Scratch
To start a coffee shop business, you have the option to:
- Buy a franchise from an existing coffee shop business, such as Dunkin’, Tim Hortons, or a popular local/regional coffee brand
- Acquire an existing local coffee shop from the owner
- Start your coffee shop from scratch
Franchising a Coffee Shop
The pros and cons of franchising a business are plentiful.
The advantages of purchasing a franchise include the fact that all of the infrastructure is already set up, the brand is already known in the marketplace, and the initial outlay is mainly just the cost of buying the franchise. Buying a franchise requires minimal creativity and low danger provided that you pick a suitable spot and supply excellent service.
Downsides of the agreement include having to provide recurrent royalty payments as well as abiding by the company’s branding rules. No matter what choice a big parent business takes, your shop will be influenced by it. For example, Dunkin’ recently changed its loyalty program. Many people are dissatisfied, and though Dunkin’ franchise owners have no control over it, the switch may negatively influence them.
If you deem to have more advantages than disadvantages, have a look at our article about getting a franchise and the most suitable loans to enable you to establish a coffee shop franchise without any money.
Acquiring an Existing Coffee Shop
Purchasing an already established coffee shop might be the answer if you are seeking a distinctive method to begin a café with limited construction costs.
Acquiring a current spot ordinarily implies that you will already possess the machines you require, an educated group, and an entrenched clientele. If you pick to do so, you’ll be able to alter things and begin your business ventures.
Nevertheless, if you chose to purchase a coffee shop that is already established, you are limited in your location selection, and you may not be privy to any potential issues that the business may be facing. It is also possible that modifications may not be successful, based on how much commitment customers have to the existing business.
Starting Your Coffee Shop Business From Scratch
Beginning with nothing but a goal (and possibly the finest espresso formulas ever.) is what “starting from scratch” fundamentally implies.
If you begin your business from the ground up, you can pick your spot (within reasonable boundaries and with carefully thought-out plans), craft your brand, and decide everything related to your business. Investigating thoroughly and using wise judgement can help you assemble a thriving business starting from nothing.
Nonetheless, beginning a completely novel physical enterprise entails much more individual jeopardy and effort. Additionally, you will most likely require additional funds to initiate a whole new business. If you make an effort to do something fresh but it does not yield a favorable result, you could potentially find yourself shutting down your business before truly establishing it in the surrounding area.
If you wish to take hold of the full range of liberty to establish the business of your dreams and you’re ready to suffer the financial challenge and labour connected to implementing your ambition, create your own business from the beginning.
Do Competitor Research
It is commonly thought that if you create a product people will automatically purchase it, but this is not the case with starting a business.
Nevertheless, if there is great rivalry in an area, absent a superior product than the neighboring stores or an area where people do not have the fiscal means to pursue buying coffee, an individual’s shop will be unlikely to draw business.
Failing to look into what your opponents are offering and who their customers are will spell disaster for your business before it can even open.
It is essential to do a thorough examination of both direct rivals (coffeehouses within your area) and indirect foes (places that serve coffee, grocery stores, and people who prepare it at home) for your competitive investigation.
Your research should answer these questions about your competitors, at the very least:
- What types of customers do they serve? Are they students, professionals, locals who want a central gathering place, or another type of person entirely?
- What does the business offer? Can customers get breakfast or lunch there, or just pastries? Are there any unique or designer things it offers?
- How are the items priced (high, mid-tier, low)?
- What are their strengths and weaknesses?
That last question is very important. Instead of trying to rival your competition’s strengths, prioritize working on their weak points. If a rival business has an attractive lunch special but charges a lot for its coffee, promote your business as an economical source of caffeine.
Determine What You’ll Sell
Unless you buy a franchise that requires a particular menu, you are free to decide what to offer in your shop. Answer questions like the following to start building your menu and other sale items:
- Do you want to sell quick-to-go items like coffee and pre-made pastries, or do you want to offer food that would require an on-site kitchen?
- Will you sell coffee grounds in-store?
- Do you want to sell merch like t-shirts and mugs?
- Are there any custom items you want to sell that go with your shop’s theme (e.g. selling imported Italian kitchen staples at an Italian cafe)?
Your offering should be tailored, to some degree, to what your rivals do not provide, which could take the form of certain products, a more sophisticated selection of beverages, more budget-friendly options, or something akin to a more environmentally-conscious supplier.
It’s essential to think about the product or service you will be offering before deciding on business space and developing a vision for your business.
You could investigate in depth where you will get your coffee beans, baked goods (if you don’t make them in your own establishment), and cooking items (if necessary).
Find Small Business Grants
Grants from different sources, based on where you live, grants from companies, and grants based on factors such as age, race, and gender, may be available for you.
Check out our article that lists grants for minorities and our other post that has grants specifically for businesses owned by women if any of these descriptions appeal to you.