While a cup of coffee may not be for all, it is certainly for most, with around 95 million cups of coffee consumed in one day in the United Kingdom!
And while Britons love a good cup of tea, the United Kingdom is one of the largest European markets when it comes to coffee consumption. The coffee industry brings great opportunities (and challenges) for aspiring entrepreneurs, so let’s run through practical advice on how to start your coffee shop in the UK.
Setting Up Your Coffee Shop
What is your niche?
It is no surprise that large coffee shop chains dominate the market. They have the resources and capital to offer better prices, so it is integral that you develop a niche that will not only attract consumers but offer them an experience that high-street coffee brands might not.
How can you overtake your competitors and differentiate yourself through unique selling propositions? Think about personalised experiences, sustainable packaging, vegan options, mouthwatering treats, or loyalty schemes and rewards.
Why you need industry knowledge and training
Owning a coffee shop can be profitable, but it does require effective cost management and industry knowledge.
An important point is that coffee shops have a high-profit margin but low unit pricing. This means you need to sell multiple cups of coffee a day to achieve a profit. A bag of coffee beans will cost between £6 to £25 per kilogram at wholesale cost. This will usually give you between 120 and 140 servings.
According to Esquire Coffees, one cup of coffee costs 16p to make (including milk). The average cost for a coffee is £2.45, which means you’ll earn £2.29 per cup, equating to a more than 90% profit margin.
Likewise, Esquire states that the average turnover for a small coffee shop can range between £100,000 - £150,000. This turnover will likely increase if you consider a coffee franchise.
As an entrepreneur, you’ll need to decide if this income can support your lifestyle, responsibilities, and goals.
You don’t need a qualification to start your coffee shop, but if you have never worked in the hospitality industry or brewed a cup of coffee, we recommend receiving some form of training. Courses on coffee production, general business skills and marketing strategies would be an excellent first step!
Where can you register your coffee shop?
Before you register your coffee shop, you need to understand regulations pertaining to food-related businesses in the United Kingdom. Here are some essential points:
- You can get fined or imprisoned for up two years if you do not register a food-related business!
- You’ll need to register with your local authority
- Your business must be inspected by your local authority. This means you’ll get a Food Hygiene Rating Scheme (aim for 5).
- Read important information from the Food Standards Agency on other legal requirements.
The costs involved in starting your coffee shop
Starting a coffee shop will not be a cheap pursuit. Your investment will depend on your shop’s size, location, and style. A quick Google search will tell you that start-up costs for a coffee shop range from £20,000 to £225,000.
You’ll need capital for equipment and furniture, rent, food and coffee production and much more. Let’s run through some of these elements and their cost:
Equipment:
- Industrial espresso machine: £1,500 - £10,000
- Refrigerator (from small fridges to large cooling units): £100 - £4,000
- Dishwasher: £1,000 - £17,500
- Crockery: £500 - £1,000 (this will vary depending on the size of your coffee shop)
- POS system: £1,000 - £5,000
Renting a space:
Your rent costs will largely depend on where you’re setting up your coffee shop and what size it will be. Giving an exact cost is not possible, so you will need to conduct research and compare pricing.
As you may be aware, London is notoriously known for its exorbitant rental prices. Renting a property in London can cost you anywhere between £1,500 and £140,000 per month. Renting a pop-up shop can be much cheaper, ranging between £10 and £1,000 a day.
Hiring employees:
- Barista: £9.90 an hour
- Shop manager: £21,968 a year
- Shop assistant: £9.42 an hour
- Accountant: £35,159 a year
Getting funding
While starting any business can be a fulfilling pursuit, it is important that you are realistic about the challenges that lie ahead.
The truth is that some coffee shops do fail. While the coffee shop market can be profitable and has lower barriers to entry than other markets, you need to have working capital to sustain your daily operations. It is essential that you do not underestimate how much you’ll need to start and run your coffee shop.
Apart from small business loans and angel investments, you can also consider small business grants. When applying for funding, your business plan will be incremental. It should include:
- Your proof of concept
- Target customers
- A detailed menu with pricing
- How much investment you’ll need
- An analysis of your competitors
- A detailed outline of your marketing plan
- Your overheads
- Financial predictions
Find out more: Need funding? Check out our guide on small business grants.
The Nuances of Starting Your Coffee Shop
Location
Your location is just as integral as your concept. Without footfall, you might struggle to keep your coffee shop running. Think about areas that are likely to have heavy footfall: train and bus stations, office blocks, community hubs or even playgrounds.
According to British Business Bank, if your rent is going to be more than 15% of your anticipated sales, you will struggle to make a profit.
Suppliers and quality control
You certainly won’t struggle to find coffee bean suppliers in the United Kingdom.
Finding a supplier who offers quality coffee beans at a great value is important, but you should also be looking for suppliers who are responsible, ethical, and sustainable. As a coffee shop owner, you should know where and how your beans are sourced.
We believe it is important for you to choose a supplier that has a Fairtrade certification. This guarantees that farmers and employees are paid fairly, including fair and equal working conditions.
There is increasing consumer demand for Fairtrade products, as people become more conscious of sustainably and ethically sourced goods.
Your team
If you are planning on hiring a team of staff, you’ll need to ensure they have qualities that represent and uphold your concept and brand.
While friendliness and approachability are characteristics your staff should have, being able to work under pressure, receive criticism from tired customers and multitask are qualities they should be familiar with too.
Personalisation is something consumers love, regardless of the industry, so it may be worthwhile investing in latte art training for your staff. Starting someone’s day with a heart on top of their flat white and excellent customer service sounds like a profitable morning!
Marketing Your Coffee Shop
When planning to start your coffee shop, devising a solid marketing strategy is crucial. You should avoid relying solely on footfall and word of mouth, and rather integrate both your offline and online marketing efforts.
Instead of throwing around acronyms like SEO and ROI and telling you they’re important, let’s run through the foundations and details of an effective coffee shop marketing strategy.
Your audience and branding
While most people drink coffee, you still need to understand who you’re selling your product to. Demographics and consumer behaviours will play an important role here.
Will you be marketing your coffee to millennials that are looking for a quiet spot to decompress? Or will you be targeting environmentalists that will only consume ethically and sustainably sourced coffee beans?
Understanding who your target market is will help you create personalised campaigns that will bring you a return on your investment (ROI).
Branding is a significant element you need to consider. Branding is not only about design, colour palettes, and logos. It is also about your coffee shop’s personality and values. Ensure that your branding is consistent. From business cards to Google Ads, your branding should be authentic and harmonious.
Social media and digital marketing
We strongly recommend establishing a social media presence to boost your brand recognition and social proof (testimonials, industry awards, reviews, case studies). Creating a website is not difficult, with multiple free website builders available.
While you may not be an expert in SEO (search engine optimisation), it is a fundamental element of modern marketing. Footfall entering your coffee shop is not the only traffic you should concentrate on. Digital traffic is just as important. A strong SEO strategy supports this digital traffic, helping consumers find your brand when they type ‘best coffee shops in London’ in a search engine (like Google). There is a plethora of information on the importance of SEO, so make sure you are familiar with it.
Rewards to boost customer loyalty
Offering your customers rewards is an effective way to encourage repeat customers and recommendations. Some ideas you can consider are:
- A typical point system, where a customer receives a free coffee (or snack) after a few purchases
- Discounts for loyal customers, senior citizens, or key workers
- A free coffee for a Google or Trustpilot review
Trade shows
Trade shows are a great way to boost your offline marketing efforts. You can gain important industry knowledge from business owners and coffee experts and get your brand out there. Some trade shows you should consider attending are:
- The Coffee Shop Innovation Expo
- The London Coffee Festival
- Caffè Culture Show
- Tea & Coffee World Cup
Find out more: Need more advice on this sector? Read our sector-specific articles.
Starting a Coffee Shop Is Not Your Only Option
As we end off this guide, it is important to note that you have other options as a coffee-loving entrepreneur. While we strongly encourage you to start your own business, buying an existing coffee shop is also an option.
Buying a business can be a safer route to starting a new one, as you’ll gain access to an existing business structure, and an established cashflow and customer base – amongst other advantages.
There are hundreds of verified coffee shops for sale on our site, so if this route sounds appealing, take your time browsing through some of them.
We also have a helpful article on how to run a coffee shop in the United Kingdom, which offers practical tips you might find useful.
As you pursue this venture into business ownership, we wish you every success and encourage you to face challenging days with resilience! If you’d like to speak to someone from our team, don’t hesitate to contact us.