Developing a Coffee Shop Business

Researching and Identifying Your Market

In this guide, you'll learn about developing your business in the following ways:

• Researching and Identifying your Market
• Developing your Coffee Company’s Brand
• Sourcing Product and Equipment
• Developing a Marketing Strategy

As you work through this guide, this information should be added to your business plan to continue building the structure for getting your business started.

When you’re doing market research, you’re really trying to find out who is in the market you’re trying to sell to and what they want, so that your business can give them what they want.

This is typically known as your Target Market.

Additionally, it’s good to know if there are already other businesses doing what you’re trying to do in your market. They’re known as your competition. They may do some or all of the things you’re trying to do, or you may find that you’re more equipped to do. Finally, you may something they’re not doing, or are not good at that you can compete with them on.

This Unique Selling Proposition, or USP is what makes you stand out in your market.

Without doing this you risk putting yourself out blindly into a market that might not have an audience for you, and unless you adapt quickly, this could doom your new business.

Target Market

Overall, you’re going to sell more coffee to more people if you treat them as special target markets than if you go in with the approach of “I’m just going to sell coffee to everyone.” This approach is too broad. Although it might bring some people through the door, you’ll struggle to develop a strong, consistent customer base that will be coming back for more.

Here’s an example: Say your business is located in a neighborhood. Depending on the composition of that neighborhood, you’ll want to cater to audiences like moms or knitting groups, and you may even want to have a kids menu.

Here’s another example: Say you’re located on or near a university campus. You'll want to focus on making your coffee house a friendly place for students, their parents, grandparents, and even teachers.

One last example: Say you want to start a coffee shop that sells only specialty espresso drinks. If your market only likes filtered coffee and milk-based drinks, you’re going to go out of business.

This doesn’t just apply to your drink menu either. Knowing your target market can influence the look and feel of your shop, how you approach community involvement and social media posts, and any aspect of your business that involves customer interaction.

One way you can get an idea of who is in your market is by looking up the demographics of who is in your area, like the age ranges, sex, education levels, and more. This will help give you a clue of who’s around.

Some of the best ways to get demographic data can be as easy as finding:

• A business database of information through your local library
• Demographic Census data through the US Government
• Looking at social media focused on your area
• Going out yourself to get a first-hand look at who frequents the areas you’re thinking of opening your business

Competition

Simply put, this is who you’re competing against in your market. This could be a coffee shop next door, down the street, or even in a nearby mall. While you’re researching into your target market, this is where you’ll find who’s already serving your audience.

While looking into competitors, you can figure out many things other than just their name and location. You should take a realistic look at the strengths and weaknesses of their business model, and also what apparent goals they have, like what kind of clientele they want to serve, and how aggressively they are trying to grow their business.

From their strengths, you can tell what you’ll have a hard time competing against. From their weaknesses, you’ll find out what opportunities you have to make a name for yourself in the market. You’ll also find out whether or not they’re trying to achieve the same goals as you. Maybe they’re doing it so well that there’s no space for your business in the market. This allows you to adjust your business plan to cater to an underserved part of the market.

Unique Selling Position - USP

Speaking of an underserved part of the market, if your specialized skills match what people are looking for, congratulations! This means you have something valuable that isn’t currently available and that people will actually pay you money for.

Alternatively, even if you offer a similar service as an existing competitor, you can differentiate yourself in meaningful ways, like speed of service, offering a drive-thru window, the friendliness of your staff, or anything you can think of that you know you can provide better than anyone else, and that your customers are also looking for.

Developing Your Coffee Business's Brand Identity

The first thing you might think of when you hear about a company’s brand is its name and logo.

While this is an important feature of a brand, there’s so much more to it.

A brand is a combination of many small, united things:

• Name, logo, and brand colors
• Your brand’s story
• The vibe of your business and how you communicate
• The type of shop it is
• Location
• Floor plan
• If you roast your own beans
• Menu

Your brand should come through when people first find you, whether it’s when they first land on your website, engage with you on social media, and even come through your front door, and then is reinforced by how they are treated, and feel while they’re in your space.

Name, Logo, & Colors

In many ways, your brand’s name, logo, and colors should be informed by the sections ahead, and are really the culmination and starting point of describing your brand. Each of these elements should have significance to you, be memorable, and express the feeling of your brand all at once.

Some people choose to name their business at least in-part after themselves, while others opt for a name that describes what they do. Some even choose to make up a name altogether, or repurpose a word or phrase.

Recommended: Read our How to Name Your Business Guide based on what you want for your brand, and any state requirements and restrictions.

After your name, your logo is one of the most prominent features of your brand. Again it should be significant and embody the story you want to tell with your brand. It should also be eye-grabbing and be able to work in many different sizes, like something as small as the corner of letterhead, a t-shirt, a coffee mug, or even blown up to the size of a banner. 

If you need help with getting a logo for your Coffee Shop, try branding your small business with our Free Coffee Shop Logo Maker. You get your logo in minutes so you can immediately start branding your small business.

Finally, the colors you choose for your brand — represented in everything like your logo, website, posters, merch, your storefront, and more — should evoke the feeling you want from your brand. Some brands go so far as picking out one specific color for themselves that they use across all of their channels to easily identify themselves.

Your Brand's Story

The story your brand tells should be one that talks about more than just: we identified a problem, we found a solution, and now we make money from it. People who encounter your brand should be able to relate to it, have it be a reflection of themselves, and show that you are like the people you’re selling to.

Your brand should align with your personal values too, otherwise, you won’t be doing it for very long, no matter how clever the brand idea is.

For example, one of our coffee experts, Maliesha Pullano founder of MamaLeelu Cold Brew told a story about a brand she wanted to pursue when first getting started. It would have used a unique package design paired with a catchy brand name to entice customers to buy her coffee at grocery stores.

However, when she told this plan to a marketer at the business incubator she was a part of, that marketer told her, “No, you should rethink your brand.” This wasn’t because her ideas weren’t good, but because they did not match up with her values the story she had to tell. These two elements were actually more important to her than the coffee she was selling. Her story and values were about the empowerment of women, single mothers, as well as her own personal story, all in addition to offering customers a great cold brew.

To hear Maliesha tell this story herself, watch our video on developing a coffee business.

The Vibe of Your Business and How You Communicate

What we mean by the vibe of your business is how people feel when they first interact with your brand, and what they continue to feel as they explore it further.

The first impression of your brand could come from someone visiting your website, your Instagram profile, walking by on the street, a sticker on someone’s laptop, or any number of experiences that will set the tone of their experience with you. This will let them know if you do or don’t resonate with who they are.

This can be everything from the language they use to describe themselves, the coffee they drink and talk about their community to the colors, imagery, and other graphical elements you use.

Beyond this first impression will be how a customer continues to interact with your brand, like how comfortable they are sitting in your shop if it’s convenient for them to get to where you are, how they interact with your staff, and so much more.

Coffee Business Type

A cafe is what most people think of when starting a coffee business. However, this is only one business type, and it happens to be one of the most expensive types of coffee businesses that can be opened.

For example, coffee businesses can be one of the following, or whatever concept you can think of:

• Coffee Shop
• Coffee Roaster
• Coffee Franchise Operator
• Mobile Coffee Cafe
• Wholesale Coffee Roaster
• Coffee Importer
• Coffee Cold Brew Brewery

Your choice to pursue one of these should line up with the brand you’d like to build, what your target audience is looking for, and what is financially feasible based on your budget.

Location

Now that you’re thinking of the type of shop you want to open, where are you going to open it?

There are many factors that go into finding the right location, and some will vary depending on the type of business you’re opening. For example, if you’re running a coffee cart or truck, you’ll want to know the locations where you can park to distribute or deliver your coffee. Brick-and-mortar locations have different considerations. Here are some of the things you should thing about:

• Does the location align with where your target market is?
• If you’re running a shop that’s open to the public, does the area you’re opening in have a lot of foot traffic?
• Alternatively, if you’re opening a drive-thru, does your location have a lot of car traffic coming through, and is there an easy way for them to pull into your shop?
• Is your space already rated for the amount of energy and volume of water you’ll need?
• What can you afford to do to the space, and can you afford the lease payments?
• What, if any, renovations, repairs, and other things need to happen to the space before you can operate a coffee business out of it?
• Can you work with the landlord to only start your lease payments when you occupy the space for business?

As you can see, there are many considerations that need to be accounted for when choosing a location for your business. Once these questions are answered, you will know a lot more about what’s going to happen, and what to plan for.

Floor Plan

Now that you have a location picked out, you’ll need to figure out how to organize your space, taking into account:

1. Equipment Placement
2. Counter Space
3. Employee Workflow
4. Menus and the Ordering Process
5. Brand Alignment

Will you roast your own beans?

When you open up your business, you’ll typically run it one of two ways: by roasting your beans in-house, either on-premises or at another location owned and operated by you, or by sourcing your coffee beans from a supplier. The second option is the most common scenario for coffee shops.

We’ll get into what it looks like to roast or buy your own beans a little later on in the Sourcing Product and Equipment section, but just note that it is a little rarer to find a cafe that also roasts their own beans.

Recommended: Still thinking about whether or not to roast your own coffee? Here are some guides to help your thought process:

• To Roast or Not To Roast: Deciding for Your Cafe
• Operating a Roastery: The Pros and Cons
• How to Start a Coffee Roasting Business

Menu

Now that you have all of these parts of the brand, location, product choice, and target market in mind, it’s time to formulate your menu. The products you choose to serve will directly influence how much and what type of equipment you’ll need to purchase.

For example, if you have an audience that isn’t into espresso drinks, but is really into milk-based coffee drinks, you’ll probably want to have most of your drink menu focused on drinks that contain milk, or other signature drinks that you’ve specially formulated to suit the tastes of your target market.

Sourcing Equipment and Product

All of the research you put into the last section, culminating in the menu items you plan to offer customers, now needs to be executed. You’ll need to choose what equipment you want to use on a day-to-day basis in operating your shop, and then you’ll need to find a place for it in the floorplan you started to think about in the last section.

Equipment

The equipment you purchase can be as high or low-tech as you like. However, as one of our experts said, if you can, you should spend more money on better equipment right away. This will save you in the long run on things like equipment breakdowns, inconsistencies, and other slowdowns that can affect your business.

Keep in mind, though, that if you can’t spend a ton of money on equipment right away, you can be creative and make do with whatever equipment you can get your hands on.

You should invest in carefully choosing a smart point-of-sale system. These POS systems can make it easy for you to plan your inventory and analyze your sales. 

Mamaleelu, who we mentioned before, didn’t start with much more than what she needed to brew her cold brew. She did, however, belong to a food business incubator attached to a grocery store that allowed her to use their coffee grinder until she could afford her own.

The main categories of equipment a coffee shop will spend the most money one are: the grinder, brewer, and water system.

Added together these pieces of equipment can cost up to more than $20,000 just by themselves.

According to Jess Harmon, Coffee Expert, the grinder is probably the most important piece of equipment decisions. It takes you from not being able to make a coffee drink to be able to, and not all grinders are created equal.

As Jess mentioned in the last guide about researching, it’s far better to talk to people in-person, rather than online. To get an idea of the pros and cons of the grinder they’re using, that they’ve likely been using for months or years. You can go ask at another coffee shop about their grinder too, you might even get the chance to pull a shot for yourself to see how you like it.

For some more in-depth, expert-written guides on coffee equipment:

• Best Practices for Renting an Espresso Machine
• Choosing Manual-Brew Methods for Your Specialty Cafe
• Finding the Right Equipment for Your Cafe
• The Best Scales, Tampers, and Kettles for Your Cafe
• Best POS Systems for Coffee Shops

Sourcing Beans

If you’re planning to buy already-roasted coffee, you should find out who is roasting coffee in your area and get to know them. Once you identify one or a few of these roasters, you can reach out to their sales rep and tell them you like their coffee, and would like to try and use their coffee in your shop.

You can also be a multi-roaster, selling coffee from multiple roasting brands, so you can continue to try different things, and also so you don’t get tied down to what just one roaster produces.

There are also other benefits to having a relationship with roasters. They’ve been in business longer and have experience with coffee, so they might be able to help recommend things like grinders, coffee brewers, and other equipment, while also potentially servicing the equipment you buy.

If you’d like to roast your own beans and source them from other countries, a few of our experts mentioned joining the Speciality Coffee Association. All you have to do is join and sign up to get access to:

• Training
• Expos (Global Trade Shows)
• People with the same questions and interests as you
• Information to keep you ahead of the wave
• Coffees from all over the world
• And a rich network of connections that you can build relationships with to do things like importing coffee

Recommended: We worked with an expert in sourcing coffee for advice around sourcing coffee from all over the world:

• Farm Direct vs. Importer Coffee Sourcing
• How to Source Coffee from an Importer
• How to Source Coffee from Brazil
• How to Source Coffee from Colombia
• How to Source Coffee from Ethiopia
• How to Source Coffee from Guatemala
• How to Source Coffee from Honduras

Flavors, Enhancers, and Unique Coffee Drinks

Read our guide: Choosing Flavors & Drink Enhancements for Your Cafe for more information on how to choose the best drink enhancers that will fit your menu. It covers topics like flavored syrups, milk, milk alternatives, and even tea.

Food & Pastries

Choosing the right food & pastries for your specialty cafe is important to round out your menu, and even make for opportunities to pair coffee with that food.

And unless you’re looking to bake or cook your own food and pastries, you’re going to want to find a local producer that can keep up with the demand of your shop.

Merchandise

Finally, getting branded merchandise for your coffee shop can be a good way to make a little bit more money, while also getting some of your most loyal customers to represent your brand.

From coffee mugs to hats, t-shirts, sweatshirts, coffee storage and at-home grinders, or even being the reseller of manual brewing methods, the possibilities are endless and can add a more interactive dimension to your brand.

Developing a Marketing Strategy

While you might think of a marketing strategy just as what you post on your website, social media, in the local newspaper, or any other tangible piece of action you take to promote your business, it’s so much more than that.

A marketing strategy really is the culmination of the research you’ve done so far, transforming your knowledge of your target market and brand into a tangible business plan that includes goals, objectives, strategies, and tactics.

Goals

This plan starts with broad business goals or a directional statement you’d like to accomplish. Your plan can have as many goals as it needs, and you can add or remove goals at any time.

For example, a goal when first opening a shop could be: Have a successful business opening.

Yes, it really can be that simple.

Objectives

Notice that there were no numbers or timelines attached to that goal?

That’s where objectives come into play. These objectives back up the goal and should be specific, measurable, achievable, relevant, and time-bound (See the references below to read more about SMART).

This is important because while goals can be broad, your objectives are going to help you determine whether or not you’ve achieved your goals by putting numbers and a time frame to them.

One example objective for the goal set above could be: Have 100 guests attend the shop on our grand opening day, Monday, November 2, 2020.

Again, a goal can have any number of objectives associated with it, however, you’ll probably want to stick to around 3-5, or you’ll have too many things to measure.

Strategies

So how do you achieve those objectives? The answer lies in strategies, specifically marketing strategies. This can be considered what you’re going to do to achieve the objectives and ultimately the goals your organization has set out to achieve.

So, for example, to achieve our objective, one strategy could be: Reach out and invite local coffee enthusiasts to attend the grand opening.

Notice that this doesn’t involve the nitty-gritty of how you’re going to achieve it — that comes next. A strategy defines the big picture of what you’re going to do to reach your goals.

Tactics

Now here’s where the tasks and specifics come in. A tactic is a specific action or set of actions you’re going to take to put your strategy in place.

We know we want to reach out and invite local coffee enthusiasts to attend our event, but how do we do that?

Here are some example tactics we could try out to achieve that strategy:

• Send a postcard invitation out to close friends, family, and acquaintances with an invitation to the event
• Create an event posting on Facebook
• Go to all the local coffee shop and invite them
• Post about the upcoming event on Facebook, Instagram, Twitter, and any other social media channels you have
• Ask others to share the event on their social media accounts
• Use your email newsletter to invite, inform, and remind people of the event
• Make a post on your website, or even make the whole homepage all about the event
• Taking out an ad in your local newspaper
• Or even paying for an ad on Google Adwords
• And so much more.

Marketing Channels

A marketing channel is any method — whether it’s digital, analog, human-powered, robot-run, paid, or free — that you use to market your business.

We’ll talk about a few of the most important ones below in-depth. However, it’s important to note that some of these might work better than others for you, based on your target market and other factors. Sometimes you’ll need to test multiple, or even unconventional, channels to see what works.

These can include, but is definitely not limited to:

• Your Business Website
• Social Media Accounts
  • Facebook
  • Instagram
  • Twitter
  • Pinterest
• A Youtube Channel
• Word of mouth
• Search Engines
  • SEO - Search engine optimization, this helps people find your business
  • SEM - Search Engine Marketing, doing things like paid marketing on Google
• A Yelp Page

Resources

• Goals, Objectives, Strategies, and Tactics
• SMART Goal Setting

Reminder: Update Your Business Plan

As you can see, there’s a lot that goes into developing your business. Along the way, the brainstorming and research you’ve done in this guide should end up on the business plan you started in the planning guide.

Starting a Coffee Business Series