Starting a coffee shop might be your dream. With the right planning, that dream of running a coffee shop can turn into a reality in the near future.
In fact, cafes are one of the fastest-growing business concepts in the food services and restaurant industry. One of the questions you might have right now is, “How much does it cost to open a cafe or coffee shop?”
The truth is that getting a quick estimate of the costs to open a coffee shop and become a coffee shop owner can be tricky. This is due to all the factors that are involved in the investment and the type of business it is. It’s crucial to think about the big factors from the beginning in order to stay within your budget.
Key Takeaway: Every business owner needs a plan, and you’ll need to make one for your café, similar to an eCommerce business plan. Before you jump into the process of opening a successful coffee shop, let’s get into the cost of starting a café and get you a step closer to opening day.
Average Cost of Opening a Coffee Shop
Startup costs for a coffee shop can vary based on the local rent prices, the location you choose, potential renovations, furniture, and décor choices. On average, the cost to open a cafe can range from $100,000 to $1 million.
Making realistic estimates is crucial during this process. This includes estimating the cost of the lease, building renovations, interior and exterior designs, front of house and back of house equipment, employee payroll, business licenses and permits, the cost of high quality food and merchandise inventory, and your restaurant menus. Even the best coffee roasters and cafes started with limited resources.
Keep in mind that the actual cost of each factor will vary depending on your location and the concept of your cafe, for instance, if you want to serve specialty coffee drinks. You can choose to have a co-working cafe or a grab-and-go concept.
If you decide to open a coffee shop with seating, the average cost can range between $80,000 and $300,000. A coffee kiosk or truck can end up costing you around $60,000. If you wish to have a cafe with seating and a drive-thru option, the cost can start at $300,000.
Coffee Shop Startup Costs
The key to business planning is mapping out your expected costs and cash flow. This can help you figure out what you have to pay for and how you’re going to pay for it. Keep in mind that these costs can be covered with loans, grants, and rentals, not just liquid cash.
Most restaurants, cafes included, have tight profit margins (see Margin definition). That’s why it’s crucial to set your business up for success with a solid location, sufficient business plan, and an effective cafe layout. Familiarizing yourself with the startup costs ahead of time will allow you to understand how to open a cafe of your own.
Here are some coffee shop startup costs that you can expect:
Location
The ideal location for a coffee shop is somewhere with heavy traffic. It’s also best to choose an area around office buildings or business hubs. Many cafes are also successful because of their drive-thru options. This is especially true in the suburbs where driving is more popular.
The COVID-19 pandemic caused many people to start working remotely and have flexible schedules. This increased the demand for coffee shops to offer workspaces and comfortable settings to take business meetings in.
When it comes to finding real estate for your new cafe, you’ll have to decide whether you want to lease, buy, or build. In most cases, converting an existing restaurant or coffee shop can be easier and more cost-effective than starting from scratch.
Utilities
During the building and renovating process, you’re going to need all utilities up and running. These include gas, electricity, water, and internet connection.
On average, utility costs can range from $1,000 to $1,300 per month for restaurant spaces or cafes under 4,000 square feet. Larger spaces can end up costing the latter.
Cafe Equipment
Your coffee shop will need equipment and this can end up being a significant portion of your startup costs. However, the final cost will depend on your machinery.
These days, more cafes are choosing to use single-serve coffee makers, but others stick to the top-of-the-line Italian espresso machines. Restaurant furniture and kitchen equipment can end up costing between $20,000 and $40,000 based on the complexity and size of your business.
Some of the best coffee machines for cafes in 2022 include:
- La Marzocco GB5 S AV - 2 Group: This is ideal for high-volume cafes.
- Ascaso Baby T Plus: Best for small cafes.
- La Spaziale S2 EK Spazio 2-Group: Best overall value.
- Bezzera Magica: Great for coffee kiosks and trucks.
The coffee products you choose will also be a huge factor in the type of equipment you'll need. Keep in mind food supply chain. Look into, "what is the food supply chain?" for more information. Keep in mind white label vs. private label products.
Inventory Expenses
Inventory is a big part of a restaurant and cafe. In order to get your cafe up and running, you’re going to need to have all your essential items in stock. A good inventory management process is to always have some safety stock.
The wait staff should be properly trained and inventory like cups, coffee beans, to-go cups, sleeves, and lids should be fully stocked. Depending on the size and concept of your cafe, these costs can run between $20,000 and $120,000.
A cafe with a well-stocked inventory stands out from the competition. It’s likely that your monthly budget for food costs will be between $5,000 and $25,000 depending on what you plan to offer. Shopping from wholesale food suppliers and paying a wholesale price reduces costs.
Marketing
Your coffee shop business plan should include a section for marketing. The marketing plan and costs will depend on how you’re starting the business. Brand new establishments are likely to cost more to market whereas new locations of existing restaurants can use existing brand recognition.
Marketing tactics like social media (see Social Media ROI), public relations, O2O marketing, website marketing, and email marketing can be useful. You might even consider selling coffee online to increase buzz and boost sales. This can be done by selling the best coffee subscription boxes and other online coffee subscription options on your coffee eCommerce website. Don't forget to create a privacy policy.
The average cafe’s marketing costs are about 3-6% of its total sales. For small businesses, it’s best to start small and grow through brand awareness.
Interior and Exterior Decor
The interior decor of a cafe or restaurant can make or break the space. Think of some of the most iconic coffee shops, like Central Perk from Friends or your local Starbucks. The interior is iconic and memorable.
Even if you don’t have a seating area for your coffee shop, you’re going to want to make the interior of your cafe cozy and inviting.
Be sure to include the following for your decor budget:
- Lights
- Signage
- Displays
- Music speakers
- Furniture
- Landscaping
Restaurant Technology
These days, customers expect coffee shops to utilize the latest technology. Restaurant technology allows customers to order ahead of time online, use contactless payments, and scan a restaurant QR code menu.
Restaurant tech can improve customer service by providing them with quick and efficient services. It also provides customers with an option on how they want to order and pay.
Staffing
Understaffed and underfunded establishments are likely to fail. During your planning process, be sure to hire the right amount of staff. This includes bar staff for the coffees and a cafe or restaurant manager.
Having the right restaurant industry professionals can help you avoid making rookie mistakes. It also helps ensure that the guests and staff have a positive experience. On average, restaurant labor will cost about 30% of your total revenue.
Frequently Asked Questions About the Cost of Opening a Cafe
What Is the Average Cost to Open a Cafe or Coffee Shop?
The average cost to open a cafe or coffee shop can range from $100,000 to $1 million. However, this number varies based on a number of factors including the lease, building renovations, the size of the business, decor, type of equipment, business concept, and payroll.
What Are the Standard Coffee Shop Startup Costs?
The standard coffee shop startup costs include:
- Location
- Utilities
- Cafe equipment
- Inventory expenses
- Marketing
- Interior and exterior decor
- Restaurant technology
- Staffing
What Is Common Coffee Shop Equipment?
Common coffee shop equipment includes:
- Coffee makers and espresso machines
- Coffee bean grinders
- Cafe or bar POS system
- Blenders
- Toasters and ovens
What are the Typical Costs Involved in Opening a Cafe?
The cost of opening a cafe can vary widely depending on factors such as location, size of the space, equipment needs, staffing requirements, and marketing costs. However, common expenses include rent or mortgage payments, equipment purchases, inventory and supply costs, staffing costs, wholesale license and permit fees, insurance premiums, and marketing expenses.
How Much Does it Cost to Rent or Buy a Space for a Cafe?
The cost of renting or buying a space for a cafe can vary greatly depending on the location and size of the space. In a popular urban area, rent can range from a few thousand dollars to tens of thousands of dollars per month. Purchasing a space can also range from a few hundred thousand dollars to several million dollars.
What are the Equipment Costs for Opening a Café?
Equipment costs for opening a cafe can also vary depending on the type of cafe and the equipment needed. Common equipment includes espresso machines, refrigerators, ovens, blenders, grinders, and tables and chairs. The total cost for equipment can range from several thousand dollars to tens of thousands of dollars.
How Much Does it Cost to Stock a Café with Inventory and Supplies?
The cost of inventory and supplies for a café can also vary depending on the size and type of café. Common items include wholesale coffee beans, wholesale dairy and milk, pastries, utensils, cups, and cleaning supplies. The total cost can range from a few thousand dollars to tens of thousands of dollars.
Is Opening a Coffee Shop Profitable?
Yes. Cafes have good profit margins ranging between 15% to 25%. If you’re searching for how much does it cost to open a coffee shop, you might want to look at the potential profit of this business.
Cafes can increase their revenue and profits if they start offering additional products and services. Here are some examples:
- Coffee subscriptions. A cafe that offers specialty coffee or unique blends can also invest in becoming a coffee subscription business.
- Offer food. Coffee combines really well with quick bites such as muffins, cookies, baked goods, or savory products.
- Organize events. Coffee is one of the most popular beverages in the world. As such, there are many coffee enthusiasts. They might be interested in attending coffee brewing workshops or educational courses on coffee. That way, a cafe will increase its ROI and better utilize the initial cafe setup costs.
What Are the Hidden Costs of Coffee Shops?
Reducing costs can be a great way to minimize losses and optimize the cost of goods sold. In addition to cafe setup costs and regular costs like utilities and salaries, there are some hidden expenses that can be avoided.
- Waste. Any business in the food and beverage industry knows that waste of food or other perishable products can lead to large losses.
- Over-staffing. Make sure to always optimize the staff schedule. Over-staffing can lead to increased labor costs in the coffee shop cost breakdown.
- Loss of inventory. It’s normal for employees of a coffee shop to also enjoy the beverage. But some employees might enjoy it a little too often. This will lead to inventory losses and additional costs.
What Is the Cost of Obtaining Licenses and Permits for a Cafe?
The cost of licenses and permits can vary, typically ranging from $500 to $2,000. This includes health department permits, business licenses, and food handler certifications. Additional costs may be incurred for alcohol licenses if the cafe plans to serve alcohol.
How Much Should Be Allocated for Initial Inventory?
Initial inventory costs generally range from $5,000 to $15,000. This includes coffee beans, food supplies, beverages, and disposable items like cups and napkins.
What Are the Ongoing Monthly Expenses of Running a Cafe?
Ongoing monthly expenses include:
- Rent/Lease: Varies by location, typically between $1,000 and $10,000.
- Utilities: Electricity, water, and gas, costing around $500 to $1,500.
- Salaries: Wages for employees, which can range from $10,000 to $20,000 depending on staff size and location.
- Inventory: Ongoing supply of coffee, food, and beverages, around $5,000 to $10,000.
- Marketing: Continued promotional activities, typically $500 to $2,000