23 data to include in the business plan of your coffee shop

This article was written by our expert who is surveying the industry and constantly updating the business plan for a coffee shop.

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Ever pondered what the ideal cost of goods sold (COGS) percentage should be to ensure your coffee shop remains profitable?

Or how many cups of coffee you need to sell per hour during the morning rush to meet your daily revenue goals?

And do you know the optimal barista-to-customer ratio to maintain exceptional service without overspending on labor?

These aren’t just trivial figures; they’re the metrics that can determine the success or failure of your coffee shop.

If you’re crafting a business plan, investors and lenders will scrutinize these numbers to gauge your business acumen and potential for success.

In this article, we’ll explore 23 crucial data points every coffee shop business plan should include to demonstrate your readiness and capability to thrive.

Coffee shops should aim to keep coffee bean costs below 15% of revenue

Coffee shops should aim to keep coffee bean costs below 15% of revenue to maintain a healthy profit margin.

By keeping these costs low, coffee shops can allocate more resources to other essential areas like staff wages and store maintenance, which are crucial for providing a great customer experience. Additionally, maintaining a lower percentage for coffee bean costs allows for more flexibility in pricing strategies, helping to attract and retain customers.

However, this percentage can vary depending on the type of coffee shop and its target market.

For instance, a specialty coffee shop that focuses on high-quality, rare beans might have a higher percentage of revenue dedicated to coffee bean costs, as their customers are willing to pay a premium for unique flavors. On the other hand, a shop that prioritizes high volume sales over specialty offerings might aim for an even lower percentage to maximize profits through economies of scale.

Staffing costs should ideally range between 25-35% of total sales to maintain profitability

In a coffee shop, keeping staffing costs between 25-35% of total sales is crucial for maintaining profitability.

This range ensures that you have enough staff to provide excellent customer service without overspending on labor, which can eat into your profits. If staffing costs are too high, it can be difficult to cover other expenses like rent, utilities, and supplies, ultimately affecting the financial health of the business.

However, this percentage can vary depending on factors like location, size, and the specific business model of the coffee shop.

For instance, a shop in a high-traffic area might need more staff to handle the volume, potentially pushing staffing costs higher, but this can be offset by increased sales. Conversely, a smaller shop with fewer customers might aim for the lower end of the range to stay profitable while still providing quality service.

The average turnover rate for baristas is 65%, so plan for ongoing recruitment and training expenses

The average turnover rate for baristas is 65%, which means coffee shop owners should anticipate ongoing recruitment and training expenses.

This high turnover rate can be attributed to factors such as the typically low wages and the physically demanding nature of the job. Additionally, many baristas are students or part-time workers, leading to frequent changes in availability and commitment.

In some cases, turnover rates may vary depending on the location and size of the coffee shop.

For instance, a small, locally-owned shop might experience lower turnover due to a stronger community connection and a more personalized work environment. Conversely, larger chain coffee shops might see higher turnover due to less flexible schedules and a more impersonal atmosphere.

60% of coffee shops fail within the first three years, often due to cash flow challenges

Many coffee shops struggle to survive beyond the first three years, with about 60% failing, primarily due to cash flow challenges.

One major issue is the high initial investment required for equipment, rent, and inventory, which can strain finances from the start. Additionally, coffee shops often face fluctuating customer demand, making it difficult to maintain a steady income stream.

Without a consistent cash flow, it becomes challenging to cover ongoing expenses like wages, utilities, and supplies.

However, the success rate can vary depending on factors such as location and competition. Coffee shops in areas with high foot traffic or unique offerings may have a better chance of thriving, as they can attract a loyal customer base and generate more consistent revenue.

Coffee shops should aim to reach a break-even point within 12 months to be considered viable

Coffee shops should aim to reach a break-even point within 12 months to be considered viable because this timeframe aligns with typical business expectations and financial planning.

Reaching this point within a year helps ensure that the business can cover its operational costs and start generating profit, which is crucial for long-term sustainability. Additionally, investors and lenders often view a 12-month break-even as a sign of a well-managed business, making it easier to secure funding or support.

However, this timeframe can vary depending on factors such as location, competition, and initial investment.

For instance, a coffee shop in a high-traffic urban area might reach break-even faster due to higher customer volume, while one in a less populated area might take longer. Ultimately, each coffee shop must assess its unique circumstances and adjust its financial goals accordingly.

Beverage profit margins, especially for specialty drinks, can reach 70-80%, making them key to profitability

Beverage profit margins, especially for specialty drinks, can reach 70-80% because the cost of ingredients is relatively low compared to the price customers are willing to pay.

In a coffee shop, the base ingredients like coffee, milk, and syrups are inexpensive, allowing for a significant markup. Additionally, customers often pay a premium for the experience and customization that specialty drinks offer, further boosting profitability.

However, these margins can vary depending on factors such as location and competition.

In areas with high rent or where there are many coffee shops, prices might need to be adjusted, potentially lowering margins. Conversely, in a unique or high-demand location, a coffee shop can maintain higher prices and thus maximize profit margins.

Prime cost (coffee beans and labor) should stay below 55% of revenue for financial health

In a coffee shop, keeping the prime cost—which includes coffee beans and labor—below 55% of revenue is crucial for maintaining financial health.

This percentage ensures that there is enough revenue left to cover other essential expenses like rent, utilities, and marketing, which are vital for the business's sustainability. If the prime cost exceeds 55%, it can squeeze the profit margins and make it difficult to reinvest in the business or handle unexpected costs.

However, this benchmark can vary depending on factors like location, shop size, and customer base.

For instance, a coffee shop in a high-rent area might need to keep its prime cost even lower to accommodate higher fixed expenses. Conversely, a shop with a loyal customer base and high sales volume might afford a slightly higher prime cost while still maintaining healthy profits.

Coffee shops should allocate 1-2% of revenue annually for equipment maintenance and replacement

Coffee shops should allocate 1-2% of revenue annually for equipment maintenance and replacement because it ensures the longevity and efficiency of their essential tools.

Regular maintenance helps prevent unexpected breakdowns that can disrupt service and lead to lost sales. By setting aside a small percentage of revenue, coffee shops can plan for future equipment upgrades without financial strain.

This proactive approach also helps maintain the quality of beverages, which is crucial for customer satisfaction and retention.

However, the exact percentage may vary depending on factors such as the age of equipment and the volume of business. For instance, a high-traffic coffee shop with older machines might need to allocate more funds, while a smaller shop with newer equipment might require less.

A successful coffee shop should aim for a table turnover rate of at least 2 times during peak hours

A successful coffee shop should aim for a table turnover rate of at least 2 times during peak hours because it maximizes revenue potential.

When tables turn over quickly, more customers can be served, which increases sales volume and helps cover fixed costs like rent and utilities. Additionally, a higher turnover rate can enhance the customer experience by reducing wait times, making the shop more appealing to potential patrons.

However, the ideal turnover rate can vary depending on the shop's business model and target audience.

For instance, a coffee shop that focuses on providing a cozy, relaxed atmosphere might prioritize customer comfort over rapid turnover, accepting a lower rate. Conversely, a shop located in a busy urban area with a high foot traffic might aim for an even higher turnover rate to capitalize on the constant flow of potential customers.

Inventory turnover for perishable items like milk should occur every 3-5 days to ensure freshness and reduce waste

Inventory turnover for perishable items like milk should occur every 3-5 days in a coffee shop to ensure freshness and reduce waste.

Milk is a key ingredient in many coffee shop offerings, such as lattes and cappuccinos, and using fresh milk is crucial for maintaining high-quality beverages. If milk is not used within this timeframe, it risks spoiling, which can lead to unpleasant flavors and potential health risks for customers.

Additionally, frequent turnover helps minimize waste, as expired milk must be discarded, which can be costly for the business.

However, the ideal turnover rate can vary depending on factors such as the shop's customer volume and the specific types of milk used, like whole milk or non-dairy alternatives. Shops with higher customer traffic may need to replenish their milk supply more frequently, while those with lower traffic might adjust their inventory practices to avoid overstocking.

It's common for coffee shops to lose 2-4% of revenue due to theft or inventory shrinkage

It's common for coffee shops to lose 2-4% of revenue due to theft or inventory shrinkage because of the nature of their operations.

With a high volume of small transactions and numerous employees handling cash and products, there are many opportunities for petty theft or inventory mismanagement. Additionally, coffee shops often have perishable goods that can spoil or be wasted, contributing to shrinkage.

These losses can vary significantly depending on factors like the size of the shop, the effectiveness of management, and the location.

For instance, a shop in a high-crime area might experience more theft, while a well-managed shop with strict inventory controls might see less shrinkage. Ultimately, each coffee shop's unique circumstances will influence the extent of their revenue loss due to these issues.

Rent should not exceed 8-12% of total revenue to avoid financial strain

In the coffee shop business, it's generally advised that rent costs should not exceed 8-12% of total revenue to prevent financial strain.

This percentage ensures that a significant portion of revenue is available for other essential expenses like staff wages and ingredient costs. If rent takes up too much of the revenue, it can lead to cash flow issues, making it difficult to cover these other necessary expenses.

However, this percentage can vary depending on the location and size of the coffee shop.

For instance, a coffee shop in a high-traffic area might justify a higher rent percentage due to increased sales potential. Conversely, a shop in a less busy area might need to keep rent costs lower to maintain profitability.

Upselling pastries or add-ons during peak hours can increase average ticket size by 15-25%

Upselling pastries or add-ons during peak hours can significantly boost a coffee shop's average ticket size by 15-25% because customers are often more receptive to suggestions when they're already in a buying mindset.

During peak hours, the shop is bustling, and customers are usually in a hurry, making them more likely to agree to quick, convenient add-ons like a pastry or an extra shot of espresso. This is especially true if the barista makes a friendly suggestion, as it feels like a personalized recommendation rather than a sales pitch.

However, the effectiveness of upselling can vary depending on factors like the time of day and the specific customer demographic.

For instance, morning customers might be more inclined to add a breakfast item, while afternoon patrons might prefer a sweet treat. Additionally, regular customers might be less responsive to upselling if they already have a set routine, whereas new visitors might be more open to trying something new, especially if it's presented as a limited-time offer or a special deal.

The average profit margin for a coffee shop is 5-8%, with higher margins for drive-thru models

The average profit margin for a coffee shop is typically between 5-8% because of the high costs associated with running a physical location.

These costs include rent, utilities, and labor, which can significantly eat into profits. In contrast, drive-thru models often have higher margins due to lower overhead costs and the ability to serve more customers quickly.

Drive-thrus can operate in smaller spaces and require fewer staff, which helps reduce expenses.

However, profit margins can vary depending on factors like location, brand recognition, and menu pricing. For instance, a coffee shop in a high-traffic area with a strong brand might enjoy higher margins, while a new shop in a less busy area might struggle to reach the average.

Average ticket size should grow by at least 4-6% year-over-year to counteract rising costs

In a coffee shop, the average ticket size needs to grow by at least 4-6% annually to keep up with rising costs.

These costs include everything from increased prices for coffee beans and milk to higher wages for staff. If the average ticket size doesn't grow, the shop might struggle to maintain its profit margins.

However, the required growth rate can vary depending on the specific circumstances of the coffee shop.

For instance, a shop in a high-rent area might need a higher increase in ticket size compared to one in a lower-cost location. Additionally, if a shop is investing in premium ingredients or new technology, it might need to aim for an even higher growth rate to cover these additional expenses.

A coffee shop should maintain a current ratio (assets to liabilities) of 1.5:1

A coffee shop should maintain a current ratio of 1.5:1 to ensure it has enough liquidity to cover its short-term obligations.

This ratio indicates that for every dollar of liability, the shop has $1.50 in assets, providing a cushion against unexpected expenses. It helps the business manage its cash flow effectively, ensuring it can pay suppliers and employees on time.

However, the ideal ratio can vary depending on the specific circumstances of the coffee shop.

For instance, a shop with steady sales and predictable expenses might operate comfortably with a lower ratio. Conversely, a shop facing seasonal fluctuations or planning for expansion might aim for a higher ratio to safeguard against potential financial strain.

Effective menu design can boost revenue by 8-12% by promoting high-margin items

Effective menu design can boost revenue by 8-12% in a coffee shop by strategically promoting high-margin items.

By highlighting these items through visual cues like bold fonts or boxes, customers are subtly encouraged to choose them, which increases the shop's profitability. Additionally, placing high-margin items in the prime spots on the menu, such as the top right corner, can draw more attention and lead to higher sales.

However, the impact of menu design can vary depending on factors like customer demographics and preferences.

For instance, a coffee shop in a business district might benefit more from promoting quick, high-margin breakfast items, while a shop in a college town might see better results by highlighting specialty drinks. Ultimately, understanding the target audience and tailoring the menu to their tastes is crucial for maximizing the benefits of effective menu design.

A coffee shop should have 0.3-0.5 square meters of counter space per seat to ensure efficiency

A coffee shop should have 0.3-0.5 square meters of counter space per seat to ensure efficiency because this ratio helps balance customer service and operational flow.

With this amount of counter space, baristas can efficiently prepare and serve drinks without feeling cramped, which is crucial during peak hours. Additionally, it allows customers to comfortably place their orders and pick up their drinks without causing congestion.

However, this guideline can vary depending on the specific layout and concept of the coffee shop.

For instance, a shop focusing on quick takeaways might require less counter space per seat, as customers spend less time inside. Conversely, a coffee shop that encourages customers to linger and enjoy their drinks might need more counter space to accommodate additional service elements like pastries or merchandise.

Health inspection scores can directly impact customer loyalty and should stay above 92%

Health inspection scores are crucial for a coffee shop because they directly influence customer trust and loyalty.

When a coffee shop maintains a score above 92%, it signals to customers that the establishment prioritizes cleanliness and safety. This reassurance can lead to repeat business and positive word-of-mouth, which are essential for sustaining a loyal customer base.

Conversely, a score below 92% might raise red flags for potential patrons, causing them to question the shop's hygiene standards.

However, the impact of health inspection scores can vary depending on the location and clientele of the coffee shop. In areas where customers are particularly health-conscious, even a slight dip in scores could significantly affect loyalty, whereas in other regions, customers might be more forgiving if the shop has a strong reputation or unique offerings.

Coffee shops in urban areas often allocate 2-4% of revenue for delivery and mobile order partnerships

Coffee shops in urban areas often allocate 2-4% of revenue for delivery and mobile order partnerships because these services are crucial for reaching a broader customer base.

In bustling cities, the demand for convenience and speed is high, and customers increasingly prefer ordering through apps or delivery services. By partnering with these platforms, coffee shops can tap into a larger market that might not visit the store physically.

However, the percentage of revenue allocated can vary depending on the size and location of the coffee shop.

For instance, a small, independent coffee shop might allocate a higher percentage to these services to compete with larger chains. Conversely, a well-established chain might have negotiated better rates with delivery partners, allowing them to allocate a smaller percentage of their revenue.

Digital marketing should take up about 4-6% of revenue, especially for new or expanding locations

Digital marketing should take up about 4-6% of revenue for a coffee shop, especially when opening new or expanding locations, because it helps build brand awareness and attract customers.

For new or expanding coffee shops, investing in digital marketing is crucial to establish a presence in the community and compete with established brands. Allocating 4-6% of revenue ensures that the shop can effectively use tools like social media advertising and search engine optimization to reach potential customers.

This percentage can vary depending on factors such as the shop's location, target audience, and competition level.

For instance, a coffee shop in a highly competitive urban area might need to spend more to stand out, while one in a smaller town might require less. Additionally, if a shop has a strong local following, it might focus more on engagement strategies rather than broad outreach, adjusting the budget accordingly.

Seasonal drink offerings can increase sales by up to 20% by attracting repeat customers

Seasonal drink offerings can boost sales by up to 20% in a coffee shop by enticing customers to return for unique, limited-time experiences.

These special drinks create a sense of urgency and exclusivity, encouraging customers to visit more frequently to enjoy them before they're gone. Additionally, seasonal offerings often tap into festive moods and traditions, making them more appealing during certain times of the year.

For instance, a pumpkin spice latte in the fall can evoke feelings of warmth and nostalgia, drawing in customers who associate it with the season.

However, the impact of seasonal drinks can vary depending on factors like location and demographics. In areas with a strong preference for traditional coffee, the effect might be less pronounced, whereas in urban settings with a younger crowd, the novelty of seasonal drinks can be a significant draw.

Establishing a coffee cost variance below 3% month-to-month is a sign of strong management and control.

Establishing a coffee cost variance below 3% month-to-month is a sign of strong management and control because it indicates that the coffee shop is effectively managing its expenses and maintaining consistency in its operations.

When a coffee shop can keep its cost variance low, it shows that the management has a good handle on factors like supplier pricing and inventory management. This level of control helps in minimizing waste and ensuring that the shop is not overspending on its primary product, which is crucial for maintaining profitability.

However, the acceptable level of cost variance can vary depending on specific circumstances such as seasonal demand or changes in supplier costs.

For instance, during peak seasons, a slightly higher variance might be acceptable due to increased sales volume and potential supply chain disruptions. Conversely, in a stable market environment, a variance above 3% might indicate inefficiencies or issues that need to be addressed promptly.